Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) & Ors [2024] HCATrans 59 (5 September 2024)

Last Updated: 9 September 2024

[2024] HCATrans 059

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S169 of 2023

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Appellant

and

SANOFI (FORMERLY SANOFI‑AVENTIS)

First Respondent

SANOFI‑AVENTIS US LLC

Second Respondent

BRISTOL‑MYERS SQUIBB INVESTCO LLC

Third Respondent

GORDON A‑CJ
EDELMAN J
STEWARD J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON THURSDAY, 5 SEPTEMBER 2024, AT 9.59 AM

(Continued from 4/9/24)

Copyright in the High Court of Australia

____________________

GORDON A‑CJ: Mr Sheahan.

MR SHEAHAN: Your Honours, as a result of homework that I earned yesterday, we have sent through to the Court this morning, I think, an aide‑mémoire on submissions made at the trial regarding Mr Millichamp’s evidence, five pages.

GORDON A‑CJ: Would you mind speaking up a bit just so we can get every word.

MR SHEAHAN: Yes. We have sent through an aide‑mémoire of five pages dealing with the topic of our submissions regarding Mr Millichamp’s evidence at trial ‑ ‑ ‑

GORDON A‑CJ: Yes.

MR SHEAHAN: ‑ ‑ ‑ and identifying the issue, the Commonwealth’s submissions, ours, and the findings from the trial judge. In order to give to your Honours all the material – or I believe all the material – to which that refers, may we also hand up the respondents’ closing written submissions. The Commonwealth’s are already in the record at tab 106, but ours are not, and so what I am handing up are seven copies of the extract that deals with the launch at risk question.

We also need to supplement the record with extracts from their closing oral submissions dealing with the subject of launch at risk. We have tried to make this comprehensive, but I accept that our learned friends have not had our effort of making it comprehensive until very recently and it may be that they see some omissions that they think need to be corrected, and we will not object to that, of course.

GORDON A‑CJ: So, we have, as part of the Court record, already the Commonwealth’s written closing submissions and Sanofi’s written closing submissions, and these are now the oral submissions of ‑ ‑ ‑

MR SHEAHAN: Of both sides.

GORDON A‑CJ: Right.

MR SHEAHAN: But in each case confined to the launch at risk issue.

GORDON A‑CJ: Thank you.

MR SHEAHAN: It is that confining that might have led to some error of omission on our part and our learned friends will tell us if that has happened and we will correct it.

GORDON A‑CJ: Is that subject to objection, do you know?

MR SHEAHAN: I do not believe it is – well ‑ ‑ ‑

GORDON A‑CJ: Ms Roughley.

MS ROUGHLEY: May it please the Court. Your Honours, we have only had a short time to look through this and it is apparent to us that there are some parts of the Commonwealth’s oral closing at trial that are not included in the bundle or which are referred to which are critical.

GORDON A‑CJ: Well, that is all right. Why do we not give the document back to you and you can supplement it.

MS ROUGHLEY: Thank you, your Honour.

MR SHEAHAN: They are still looking at the aide‑mémoire, obviously.

GORDON A‑CJ: Of course. So, we will take it provisionally and then it can be subject to either amendment or supplementation.

MR SHEAHAN: Now, your Honours Justices Jagot and Beech‑Jones asked whether the primary judge was correct in the sequence of emails at paragraphs 245 and 246 – that is the “game on” email and the “further advice/approval” email. That issue is resolved by the joint chronology which is in tab 1 of the joint further materials. I can tell your Honours – and in particular your Honour the presiding judge – that that agreed chronology was prepared scrupulously with a view to taking into account any time differences.

GORDON A‑CJ: I speak only for my part, but I think that some of the confusion arises because – at least for my part, having gone through it – pages that are in the right‑hand column of the joint chronology are probably not the correct ones in the sense that they are the right emails, they are just part of a different email chain.

MR SHEAHAN: Yes.

GORDON A‑CJ: So, am I right that the chronology – if I can take, in particular, the fully redacted email of 27 June 2007 at 4.44 am, which is entry number 22, page 144 of the joint book of further materials, and that is the same email at 153, at the top.

MR SHEAHAN: Yes, I believe so.

GORDON A-CJ: Similarly, what entry 23 appears in two places: at 148 and 152.

MR SHEAHAN: I think that is right.

GORDON A‑CJ: Then, just so that I am clear, as I understand your submission, if one follows that chronology through – and I do not seek to diminish the submissions you made, I just want to make sure I understand, at least from my perspective – your argument is that the reference to “game on”, at 11.23 am – which appears on page 152 of the materials, is a response to the earlier emails which appear at the bottom in reverse order, and over the page, and that, critically, if starts at page 153, what is sought for advice from Barry Sherman is advice about legal strategy about revocation and if you wish to launch at risk.

MR SHEAHAN: Yes.

GORDON A-CJ: But what is redacted at the top of page 153 and, again, at the bottom of page 152, relates to that legal strategy with the two prongs – “revocation” and “launch at risk” – and the “game on” is what that is referring to, and one does not know whether it is just “launch at risk” – it might include application for revocation. Is that the way it is put?

MR SHEAHAN: So, that is part of it.

GORDON A-CJ: What is the other part?

MR SHEAHAN: The first part is, “game on” remains ambiguous, so nothing can be extracted from it. The other part is that in the sequence of emails, the “game on” email is followed by the we need “further advice/approval” from Barry email. So, the “game on” email does not represent some shift in the position about the need for further advice or approval. The further advice or approval is affirmed subsequently.

BEECH-JONES J: You are talking about your reading of the words “subject to Barry’s further advice/approval”.

MR SHEAHAN: Yes.

BEECH-JONES J: That is the bit you are saying comes later?

MR SHEAHAN: That comes after. Both those emails and the further email involving Mr Haas ‑ ‑ ‑

BEECH-JONES J: About Barry’s instructions about the plan?

MR SHEAHAN: Yes. They are all prompted by the redacted Barry Sherman email. There is no record of a communication for Dr Sherman between the “further advice/approval” email and this is the plan in general outline email. So, what governs – I will put it slightly differently. Nothing in the sequence of emails detracts from the apparent significance of “subject to Barry’s further advice/approval”.

BEECH-JONES J: That you attribute to those words?

MR SHEAHAN: Yes. In those words, the critical one is “approval”. It is not subject to any contra‑instruction – subject to a change of mind. It is not even just subject to further advice which might be equivocal. But the word “approval” in that context, in our respectful submission, supports the findings that the courts below made that further approval from Dr Sherman was required.

Your Honour Justice Beech‑Jones asked whether Mr Millichamp was cross‑examined on the “as per instructions from Barry” email, which I just mentioned – which is at page 156 of volume 1. The answer is, yes. The cross‑examination is in volume 4, tab 105, at page ‑ ‑ ‑

BEECH-JONES J: What was that page, sorry, Mr Sheahan?

MR SHEAHAN: Volume 4, tab 105, page 1499, at lines 15 to 20. Your Honours will see that there, Mr Millichamp says that the instructions from Barry that he is referring to were those from February 2007. He says:

Unless there were any interim instructions, which I can’t remember, I would be referring to the original ones, yes.

JAGOT J: I raised the question yesterday, what any of this matters, given the 28 June email.

MR SHEAHAN: This is the 28 June email.

JAGOT J: That does not have “subject to Barry’s . . . approval” in it, though, does it?

MR SHEAHAN: It does not have “subject to Barry’s . . . approval”, the email from the day before, 27 June ‑ ‑ ‑

JAGOT J: That is what I mean.

MR SHEAHAN: This is the 28th, and I am asking him: what is this approval? Where he says:

As per instructions –

What are the instructions? And the only instructions he can point to are the February instructions.

JAGOT J: Is that just about his memory, four years on?

BEECH‑JONES J: Ten years on.

MR SHEAHAN: Let me put it this way. There was no evidence – or, I think, any suggestion, really, but certainly no evidence of any oral instructions from Dr Sherman in the intervening period, and there is no evidence of any written instructions from Dr Sherman in the immediate period before this, and we know that the day before, Mr Millichamp is saying, subject to Dr Sherman’s further advice or approval.

All of this is by way of reinforcing the submission that we made yesterday that nothing can be taken from the fact that this email – the language of this email on the 28th does not include the qualification that he included the day before. Nothing can be taken from that.

Just by way of emphasising that Mr Millichamp’s position was tied to the February 2007 email, if we go to page 1502, at line 15, I suggested to him that even in late June 2007, his view was that he would need to:

go back to headquarters to confirm Dr Sherman’s approval –

And he says:

I’ve had Dr Sherman’s instructions in – on or around the end of February –

And similarly, on 1504 at lines 1 to 25, when – going back to your Honour Justice Jagot’s question – he refers to some discussions, but it turns out it was just:

The February instruction –

that:

we’ve covered off earlier this morning –

as your Honours see at line 18, in answer to a question from his Honour. So, in Mr Millichamp’s evidence, everything goes back to February, and as the trial judge and the Full Court agree, nothing subsequently helped the Commonwealth on that question.

Now, when asked about the “subject to . . . further advice/approval” email at 1502 and following, Mr Millichamp gave evidence that the trial judge described as “unsatisfactory”, but even then, at 1505, at about line 13, he accepted that it logically flows that he was:

referring to some further advice or approval to come from Mr Sherman –

He was not – I do not think – cross‑examined about the “game on” email but having regard to its position in the sequence of events, that is of no moment.

BEECH‑JONES J: Do you embrace the Full Court’s possibility that “game on” might be referring to gaming to obtain the benefit of an undertaking as to damages?

GORDON A-CJ: Goading.

BEECH‑JONES J: Goading. Sorry, it was “goading”.

MR SHEAHAN: If one were listing the possibilities, that would be a possibility. We never sought a finding that it was a mere gaming of the system. The burden of the proof in on the Commonwealth, we emphasise.

EDELMAN J: Did you raise it as a possibility?

MR SHEAHAN: Your Honour asks me about what we raised. As a bare possibility, I cannot recall whether we did or did not. We were not advancing the point that the Full Court took, in other words.

BEECH‑JONES J: Was Mr Millichamp ever cross‑examined to say, look you are actually just running through the injunction to try to get an interlocutory injunction?

MR SHEAHAN: No, we did not put that to Mr Millichamp. What was put to Mr Millichamp was what your Honours see here, that if they won on the injunction ‑ ‑ ‑

BEECH‑JONES J: They had to go back to Barry.

MR SHEAHAN: ‑ ‑ ‑ they needed to get Barry on the phone and find out if he still wanted to do this.

JAGOT J: I am not sure how it could be of no moment, given its position in the sequence, that there was no cross‑examination.

MR SHEAHAN: The “game on” email?

JAGOT J: Yes.

MR SHEAHAN: It is a no moment for two reasons. First, it is equivocal content, and secondly, because in the sequence it comes before the email that says “subject to Barry’s further advice/approval”, which means that whatever the game is, it is a game – in other words, even if it is, we are going to launch, as opposed to just commence revocation proceedings, for example, or send out notices that will excite Sanofi’s interest. Even if it means something like, we are heading down the path of launching, it is still “subject to Barry’s further advice/approval.”

JAGOT J: There are two totally different streams of activity happening in this company. One has to do with launch, one has to do with getting product, and the form of the product. Communications with Mr Haas, all of them are clearly about the latter, not the former. The former only feeds into them, obviously, but he is not involved in the launch decision at risk – Mr Hass, that is – at all, from any of the correspondence. He is involved in getting the blister packs and product.

MR SHEAHAN: Which are, the Commonwealth would say, ultimately a prerequisite to a launch. In other words, Mr Haas is not in the launch decision‑making chain, as your Honour rightly points out ‑ ‑ ‑

JAGOT J: Only for product purposes, because that is the whole point of his “Is Barry in the loop”. It is not, is Barry in the loop on the launch – that makes no sense whatsoever, as Justice Edelman pointed out. It is “Is Barry in the loop” – wherever that email is – on the need for certain blister packs to be in Australia by – whatever the date is – October or November.

MR SHEAHAN: Yes. What we would say, your Honour, is that there is no bright line between these two things – these two topics. I will put it this way. If one assumes that there had been, at this point in time, a final decision to launch at risk, then what you would be doing was certainly trying to make sure your ducks were in a row from production and packaging and so on in order to be able to launch at risk.

Some ducks are put in a row, as we have seen from this correspondence. As we have also seen from Mr Sherman’s responses – or the responses attributed to Mr Sherman – nothing that will cost money – real money.

JAGOT J: Until they know whether they are enjoined or not.

MR SHEAHAN: Until they knew what the outcome was. And that is sensible and, in a sense, a bit equivocal from the parties’ point of view. All we are submitting to your Honour is that our learned friends cannot take anything from the “game on” email since it comes before an email in which it is acknowledged that Dr Sherman’s further advice or approval was necessary.

Now, your Honour Justice Beech‑Jones asked whether the Commonwealth saw an inference at trial that Dr Sherman would have given instructions or would not have given instructions to launch at risk. We think those submissions were made. In the Commonwealth’s closing written submissions at trial at paragraph 208 – this in tab 106, page 1592, paragraph 208 – “Finally”, it says. Your Honours will note the subjunctive mood used twice.

BEECH-JONES J: What was the word, sorry?

MR SHEAHAN: The subjunctive:

would be “very unlikely” –

EDELMAN J: Is this 1592?

MR SHEAHAN: Page 1592. So, they are based on ‑ ‑ ‑

BEECH-JONES J: Yes. That is a submission about Dr Sherman bringing it to a halt, which is the way the Commonwealth framed its case, which was, you have instructions, go for it. Of course, there is a possibility Dr Sherman might change his mind with all the consequences – whereas your case was, they did not have those instructions, so they would need to get them.

MR SHEAHAN: Yes. Closer to the point is, in the oral submissions, in the trial transcript which we handed up, at page 1220 – this is in Mr Brereton’s reply. He is dealing with Jones v Dunkel and starts by dealing with a point that the value of the inference “degrades over time”. The judge says:

I’m not sure that would help here though. I mean, it’s a very straightforward question . . . you would expect him to say of course we would have launched.

Mr Brereton said:

Yes. And we do, and we submit that that is open on the material that in evidence.

And that must be an inference. Next, we were asked to inform the court about the extent to which the statements by Mr Catterns at the interlocutory hearing were part of the forensic contest about launch at trial. I think I am right in saying that nothing substantive was made of them in the written closings by either party. In oral closings, Mr Brereton did rely on them, at transcript 985 in the extract we handed up to your Honours, commencing at about line 20.

GORDON A-CJ: Is that the only reference to it?

MR SHEAHAN: No, your Honour, and then it was revisited at transcript 1007.

GORDON A-CJ: What about 986?

MR SHEAHAN: Transcript 986 accurately records that:

no one is suggesting that Mr Catterns has said anything that was inappropriate –

And to that extent, yes, it touches on the topic.

GORDON A-CJ: Sorry, what was the next page, Mr Sheahan?

MR SHEAHAN: Transcript 1007, at about line 27.

MR GLEESON: Your Honours, I hesitate to interrupt but the submission was put very squarely by Mr Brereton at page 975 of the transcript. You do not have it yet because it has been omitted from the material you got this morning, but if I could read it out, he said:

one of the things your Honour can take into account when analysing whether or not Apotex would have applied . . . is that counsel for Apotex, no doubt on instructions, was saying precisely that to Gyles J.

So, any suggestion we did not put that to the primary judge should be withdrawn.

MR SHEAHAN: I did not make any such suggestion. We are saying to your Honours that it was put by Mr Brereton in submissions and I apologise if this was left out.

GORDON A‑CJ: Are there any other pages you want to take us to, Mr Sheahan?

MR SHEAHAN: Transcript 1111 over to 1112, which is where we respond on this topic.

GORDON A‑CJ: Lines 14 and onwards?

MR SHEAHAN: Yes.

BEECH‑JONES J: What page again, sorry, was that, Mr Sheahan?

MR SHEAHAN: Page 1111, over to the next page.

JAGOT J: Well, that is inviting the second sense of “game”, is it not?

MR SHEAHAN: I am sorry, your Honour, that ‑ ‑ ‑

JAGOT J: That is a submission that is, in substance, the second sense of “game” in the sense, with a little bit of what has been called the “D‑word”, the deceit word, in it. It comes close to it.

MR SHEAHAN: It may come close to it, but our submission was not that a finding should be made, this is dealing with possibilities. We did not say that an inference should be made, that that was what was happening, that in the absence of evidence from the critical decision‑maker it is necessary to have regard to the range of possibilities in order to form an assessment.

JAGOT J: But did it not then have to be put to Mr Millichamp? That is what I am struggling with. I mean, it is raised, and it is put, and you have the “game on” and then you avoid putting anything about it. How do you get to an inference? I am just not following.

MR SHEAHAN: Well, our point is only that we were not asking for an inference that that was what they were doing, and so it was not necessary to put that to Mr Millichamp. We do not know what “game on” meant. We submit that the email has no significance, for reasons I have mentioned, and none of the judges below thought it had any significance.

JAGOT J: I do not know how else to read 1111 other than that you are asking for that inference, but that may be my problem.

MR SHEAHAN: No. Well, the question that is being responded to on 1111, at the top of the page, and it is not about the “game on” email, it is about why would you oppose the injunction if you had any doubt about whether you were going to launch at risk, and there are many reasons why that might be so. So, it is not saying that it is a game. I will come back to this topic, your Honour because, ultimately, our point is that it was perfectly natural, given Mr Millichamp’s position, that they would oppose this injunction, but the mere fact that they are opposing it does not mean that a final decision had been made to launch at risk.

BEECH-JONES J: So, effectively, you would oppose it to keep your options open?

MR SHEAHAN: At the very least. And, as people in commerce know, optionality has value. That is not to say – and we were not saying – that Apotex was treating this as merely an option.

EDELMAN J: Well, on any view, there could not have been a certainty that there would have been a launch at risk because, for example, the reasons for decision might have expressed injudiciously views about the strength of the patent argument that might have changed minds.

MR SHEAHAN: Exactly, your Honour. So, one of the things we put to Mr Millichamp was that it would be valuable to wait for the outcome of the interlocutory hearing before making a final decision because you might get reasons for judgment that are strong for Sanofi on prima facie case, but dismiss the application on the grounds of balance of convenience, and that might make you readjust your thinking about how good an idea it was to expose yourself to the massive damages potential on a launch at risk. So, yes.

EDELMAN J: Do you accept that the reasons for decision would have to be discounted or ignored for the purposes of engaging in the hypothetical exercise?

MS SHEAHAN: For the hypothetical, yes. There are two separate questions about that, I think. One is about what material has to be put out of account for the purposes of conducting the counterfactual exercise. The answer to that is less rather than more, in general terms. It would at least include getting rid of the reasons, but we would say that it might go further and also require getting rid of the application itself, because the application itself changes the world and is integrally bound up with the outcome, including the reasons.

There is a second question, which is what is the cut‑off point in time for an analysis, and that will depend upon the damages that are sought to be claimed. That will affect the counterfactual. In a case where the damages are just consequent upon being restrained from trading, then the cut‑off point in time would be the date of the injunction, the order. In a case like ours where it is for the Commonwealth’s loss listing in April, seven months later, the cut‑off time is going to be later. The first relevant cut‑off time is not the injunction; it is the time when something has to be done consequent upon or attributable to the orders made on that day, and that time is 28 days later when security has to be provided. So, you get a different answer depending upon the circumstances, but not earlier than the date of the actual order.

STEWARD J: Mr Sheahan, did you ask Mr Millichamp about what the proposed strategy would be if the injunction was refused, but there would then be an appeal?

MR SHEAHAN: Then be an appeal?

STEWARD J: Yes.

MR SHEAHAN: Appeal by Apotex? No, we did not.

STEWARD J: No, by Sanofi. If the injunction ‑ ‑ ‑

MR SHEAHAN: If the injunction were refused?

STEWARD J: Yes. I mean, these people seem to me to be fairly experienced litigators.

MR SHEAHAN: I cannot recall asking him that question but in the circumstances where – and by the time you got to the injunction being refused, the trial was only going to be a few months away. It does not create a materially different scenario than ‑ ‑ ‑

STEWARD J: My memory is that I think you said that they did not launch even after Justice Gyles’ decision was handed down because of the fear of the appeal.

MR SHEAHAN: I will come to that.

STEWARD J: Okay. All right.

MR SHEAHAN: I will come to that, your Honour.

JAGOT J: Can I just say, it could not possibly be the case, could it, that if there is any legal onus on the party with the benefit of the undertaking – this is bringing back kind of horrible resonances for me, I have to say – but it could not possibly be subject to any kind of onus to negative the future possibility of any change in circumstance, whether it be factories burning down or adverse reasons for interlocutory injunction. They are all irrelevant, in one sense, because once you have got to the point – if you get to the point – on the balance of probabilities, but for the interlocutory injunction, there would be launch – I mean, they cannot have to prove as part of that, surely, that no other material change of circumstance would ever have occurred? That cannot be right, can it? I mean, if in fact it did occur – the factory burned down – of course that would be relevant, too, but not if it did not.

MR SHEAHAN: For causation, we agree. We agree. And the only reason we mention the commercial value of not making a final decision about whether to launch at risk until you have the reasons on the application for the injunction is that it feeds into the fact that there is, absent Dr Sherman, a gap in the evidence, and it feeds into the likelihood – it supports a finding, as made by the trial judge and the Full Court, that he had not made a final decision, because commercially it made sense not to make the final decision.

EDELMAN J: In other words, you are not talking about the actual result of the factory burning down, or what the reasons might say, it is the anticipation of possibilities that might support an inference one way or the other.

MR SHEAHAN: Exactly. What people in commerce have to do is take account of risk in making their commercial decisions, and it makes sense with, as described by Mr Kay, making a decision that could have potentially ruinous outcomes that you do not finally commit until you have as much information about it as possible.

BEECH‑JONES J: So, it is known prior to the injunction that if it is fought, there will be reasons, so one reason why you would construe this as being always contingent on Dr Sherman’s approval, if the injunction is refused, is that Dr Sherman would know there would be reasons for the injunction that might reflect on the strength of the final case. Is that what you get to?

MR SHEAHAN: Yes.

BEECH‑JONES J: All right.

MR SHEAHAN: Now, all of this, in a sense, goes to ‑ ‑ ‑

GORDON A‑CJ: Well, it does not reflect on the strength of the final case, it affects the risk analysis.

MR SHEAHAN: Yes.

GORDON A‑CJ: It is not the final analysis, it is a question about the risk analysis at the time.

MR SHEAHAN: Yes.

GORDON A‑CJ: In other words, if one is looking at the risk matrix at that point, your argument is: these documents should be construed in a way in which, on their face, the primary judge and the Full Court did, because the risk matrix was not complete, or the jigsaw puzzle piece was alive.

MR SHEAHAN: Yes, and it was not necessary to make a decision until they had more pieces in the jigsaw. That is the critical thing. Now, our learned friends seek to answer that by saying, well, that point arrived – the Rubicon – was when the application was being heard before Justice Gyles. Now, can I say just a couple of things about that.

At the nub of it is the idea that supressing the fact that Mr Millichamp needed Dr Sherman’s final approval would have been some shameful deceit of the court by Mr Millichamp, and the consequence is that the whole idea for which we contend in this respect is, as they put it, absurd. They rely in this context, in part, on my client’s response to what it had been told by Apotex. Of course, my client took Apotex’s threats to launch at risk seriously, and acted on it.

It was threatening to launch at risk; they did not offer an undertaking not to do so; we applied for an interlocutory injunction. That is what you do. And I say that even though some of the threats to launch at risk were a little equivocal. So, at tab 42, for example, there is a Blake Dawson Waldron email.

STEWARD J: What page is that?

MR SHEAHAN: It is page 343.

STEWARD J: Thank you.

MR SHEAHAN: Your Honours were taken to this yesterday by our friends. On the second page, just before subparagraph (c):

Please be aware . . . our client is likely to progress an application –

It is not a commitment to. So, nothing ‑ ‑ ‑

STEWARD J: That goes back to the written submissions where what Apotex said was, we accept that we have threatened to launch.

MR SHEAHAN: Yes, yes.

STEWARD J: Very carefully chosen words, perhaps.

MR SHEAHAN: Yes. So, in that context, all the material that our learned friends rely on from Sanofi’s side of things in this debate is not to the point. We took their threats seriously and responded as one does. The second point ‑ ‑ ‑

EDELMAN J: It is to the point in the sense that it reveals what a reasonable person might take to have been their intention. If a reasonable person might have taken that to be their intention, that goes some way towards a conclusion that they did have that intention. I appreciate you say the intention was a likelihood or a possibility, subject to approval, or so on, but that seems to be the live issue.

MR SHEAHAN: That is the argument. We would say, logically, it is not relevant in an Evidence Act sense, but we understand how rhetorically, at least, it has some potential significance, but in the context, though, Sanofi only had the information that it had about Apotex’s motives, intentions and decision‑making processes, and that information was – by the time we got to trial in this case – much improved.

The second point is that, while the affidavits of Mr Millichamp made no reference to Dr Sherman, the trial judge found – as your Honour Justice Jagot correctly reminded me yesterday – at 332 that there was no particular need for Mr Millichamp to go into details of Apotex’s decision‑making before Justice Gyles. The premise there is – and that, in truth, as I have refreshed my memory overnight, was how we put it to the trial judge in oral submissions. The premise for that is, is there a threat to launch was common ground. There was no fight about that. There was a threat to launch.

It was also Mr Millichamp’s intention to launch at risk. It was, plainly, what he wanted to do, subject to final approval from Dr Sherman, we say. The mere fact that his determination to launch at risk if ultimately approved – that mere fact did not turn a threat to launch at risk into a non‑threat. It was far from disgraceful – as our learned friends put it – not to mention this possibility. Indeed, in responding to an application for an injunction, it would hardly even have been relevant to mention that there was this possibility. It would not be an answer to the application for an injunction to say, I should say I need final approval from Dr Sherman, so I will have to ask him.

BEECH-JONES J: What about when it came time to put up $50 million?

MR SHEAHAN: I am sorry, your Honour?

BEECH-JONES J: What about when it came time to put up $50 million?

MR SHEAHAN: So, at that point, things do change because they have to put money on the line.

BEECH-JONES J: The only other alternative is to go back to Justice Gyles and seek to be relieved from the – because the likely outcome if it had been refused would be on the undertaking ‑ ‑ ‑

MR SHEAHAN: Correct.

BEECH-JONES J: ‑ ‑ ‑ of Apotex. And they would have to go back and be relieved from that, would they not?

MR SHEAHAN: If they do not perform the undertaking – strictly speaking, your Honour, is right. You would go back to be relieved from it. You would go back and say, $50 million is too much, especially given we will only have four months’ trading, so we are not going to provide the 50 million.

BEECH-JONES J: And Justice Gyles would say, but you told me you were going to put up 50 million.

MR SHEAHAN: Your Honour, Justice Gyles was much more phlegmatic than our learned friends painted him out to be. It is interesting to see how he responded in the judgment to this very question of Apotex’s intention. His language ‑ ‑ ‑

BEECH-JONES J: All right. I have interrupted you, Mr Sheahan, so ‑ ‑ ‑

MR SHEAHAN: No, I was about to go to this. His language is at tab 57.

BEECH-JONES J: What page number?

MR SHEAHAN: Page 457 in tab 57.

GORDON A-CJ: It is in volume 2.

MR SHEAHAN: Yes, in paragraph 22 where his language is appropriately nuanced:

For present purposes, at least, the Applicant accepts that it threatens –

GORDON A-CJ: Are they not the applicant’s interlocutory submissions?

JAGOT J: Sorry, what volume are you in? I am behind the eight ball.

MR SHEAHAN: I am sorry, your Honour. So, this is volume 2, page 457, paragraph 22. This is Justice Gyles ‑ ‑ ‑

GORDON A-CJ: No, I do not think so, Mr Sheahan.

STEWARD J: These are Apotex’s submissions.

MR SHEAHAN: I am sorry, these are the applicant’s interlocutory submissions. Yes, that was my mistake. So, their position was quite nuanced:

For present purposes, at least, the Applicant accepts that it threatens to import –

STEWARD J: Could I ask you a question. For the purposes of your way of putting the counterfactual, what degree of commitment to launch was required? In other words, at the moment, the way you are putting your case is there is no commitment to launch because it was all subject to Dr Sherman’s approval. But what degree of certainty would you require from Dr Sherman in order for there to be a counterfactual in which there is a commitment to launch? How far do they have to go down the road?

The reason I am asking that is because you accept that there is a threat to launch, so we are going down some part of the road to launching, and sufficient to secure an injunction from Justice Gyles. You say that that falls short of the required commitment. What sort of commitment would justify a counterfactual which had them launching at risk?

MR SHEAHAN: What we would submit is that the question is perhaps not perfectly framed in that way. At the end of the day, there was only one inquiry in the counterfactual that affects this topic, and that is: had the Commonwealth proved on the balance of probabilities that Apotex would have launched at risk, if not restrained? Our submission, which was accepted below in the Full Court, was that the evidence did not permit a finding that a decision to launch at risk had been made by the time the interlocutory injunction was granted.

The counterfactual question needed to be grasped in the absence of a – in that situation; no decision had been made. And it could not be answered by the party bearing the burden of proof without, in this case, in these circumstances, adducing evidence from the person who would make that decision. Now, can I anticipate something.

STEWARD J: Just pausing there, when you say the need for evidence inferentially from Dr Sherman, you are not asking Dr Sherman, what would you have done, you are asking Dr Sherman, had you already made the decision?

MR SHEAHAN: There are a couple of ways of approaching it. We do not know what the facts are, but the Commonwealth could have adduced, if it was the case, evidence from him, yes, I had made up my mind in February, and there was no way I was going to change my mind. He might have said, I had not made up my mind, I would have waited to see the result, but this is what I would have done – that sort of simple interested counterfactual hypothesis.

Our learned friends say that sort of counterfactual hypothetical evidence is of very little weight from an interested person – and often that is so. But there is a third way Dr Sherman could have approached this, and that is to say, it was a long time ago now, I cannot be entirely sure what I would have done, but I can tell you what my decision‑making criteria for this sort of decision are – because they are objectively material business considerations – this is how I go about making these judgments. He gives you a framework, then a court can apply the framework.

JAGOT J: If all is so, why would you not, on the filing of the interlocutory application which contains the undertaking as to damages by your client, just accept it? I cannot find the interlocutory application, I might say, at this point – I know we were taken to it – but it had in it the offering of the undertaking. Why would you bother going ‑ ‑ ‑

MR SHEAHAN: Winning the interlocutory application, or having the chance of winning it, gave Mr Millichamp the chance of Dr Sherman saying yes. We know that Mr Millichamp wanted to launch at risk. That is clear on the evidence and the judge found it – he wanted to launch at risk. The only way he can get to the point of that being possible was by vigorously opposing the grant of the interlocutory injunction. At that point, he would need to get Dr Sherman’s approval, but getting Dr Sherman’s approval did not arise until he won.

JAGOT J: In this sense, it still does not make sense – I must be missing something about this case, because on your options, the first option is Apotex’s case: it had decided to launch at risk if it did not get enjoined, but it was obviously subject to unforeseen and not reasonably foreseeable circumstances. That is their case. Your case is: no, they deferred to see whether they got enjoined or not. I still do not understand how then the grant of the interlocutory injunction has not deprived them of the opportunity to make the decision if they are not enjoined. If they are not enjoined, then Dr Sherman would have had the opportunity to make the decision.

MR SHEAHAN: Yes.

JAGOT J: Was that not a valuable opportunity in itself? I am just not following this.

MR SHEAHAN: Yes, we agree with that. Not being enjoined is a valuable opportunity, therefore you oppose the grant of interlocutory injunctive relief. And the mere fact of the opposition does not support an inference that you have decided, come what may, to launch at risk.

JAGOT J: But the trial judge dismissed the application – compensation altogether. You never even got to your second stage.

MR SHEAHAN: He dismissed the application because the Commonwealth had not been able to satisfy him that if that decision point arose – had arisen in the counterfactual – he could not be affirmatively be satisfied that Dr Sherman would have said, yes, go ahead.

JAGOT J: Okay.

BEECH‑JONES J: That is because the Commonwealth, you say, was not running a loss of a chance case, at least to the extent, about listing. It was premised on – the Commonwealth had to prove on the balance of probabilities it would have been listed and sold.

MR SHEAHAN: Yes, they explicitly disavowed a loss of a chance case.

EDELMAN J: Is there any room for loss of a chance to operate in this area unless you prove that, on the balance of probabilities, the chance could have been exercised? Or could the loss of a chance operate in the abstract? I realise it is not this case ‑ ‑ ‑

MR SHEAHAN: It is not this case.

EDELMAN J: ‑ ‑ ‑ but it may inform the way one looks at the principles.

MR SHEAHAN: All I can say, your Honour, is I can see that there might be a vigorous debate about that.

BEECH‑JONES J: Mr Sheahan, I am sorry, I am a little but unclear as to how you factor in to the uncertain and inchoate state of decision‑making that you say Apotex were in to the likelihood that if the injunction was refused they would be stuck with an undertaking to come up with $50 million in security – and what would they do then?

MR SHEAHAN: So, that provides that the next decision‑making point in time. So, this is another reason why the Rubicon is not really the hearing before Justice Gyles. Once you know the outcome of that hearing, 28 days elapses, and at that point you have to stump up or go to court – or just simply not stump up, in which case Sanofi goes to court and says, the security has not been put up, we want our injunction, please.

BEECH‑JONES J: But you might have an undertaking to give it. So, then, it is not – you have to go to be relieved. It is more of a barbed‑wire fence than a Rubicon, is it not?

MR SHEAHAN: There are two possibilities, we think. One is that they simply do not put the money up, in which case Sanofi goes to court and says, they did not put up any undertaking, we would like to renew our application for an injunction, we offered the usual undertaking, and the order would have been made.

BEECH‑JONES J: Or punish them for contempt.

MR SHEAHAN: Or and in addition, they go to court and say, we do not want to put this money up, we have looked at the numbers again, it is only going to be four months’ trading, since your Honour told us on the day you gave us reasons that we would be having a trial in April, we have done the numbers, it is not worth the risk, we do not want to put up the 50 million, our learned friends are going to apply for an injunction, we have nothing more to say than we said the last time – but we are not offering an undertaking, we are not offering security. At that point the injunction is granted, an undertaking as to damages is required. That is the second alternative.

BEECH‑JONES J: Or Justice Gyles says, no, I am not very happy, you gave me an undertaking and you stick with it. That is high risk, is it not? That is a high risk, to do that.

MR SHEAHAN: In our submission, no. In our submission, no.

BEECH‑JONES J: All right.

MR SHEAHAN: This is an undertaking to avoid an injunction, so that, properly understood, the consequence of saying, I would like to be relieved from the undertaking, is that the injunction goes. There is nothing more to it than that. It is not making a moral commitment, and it is not an undertaking to do something that changes the world.

BEECH‑JONES J: It would just depend on how Justice Gyles frames it. In the event that the injunction was refused, Justice Gyles might say the price on the undertaking of Apotex to provide $50 million security within 28 days, injunction refused.

MR SHEAHAN: Yes.

BEECH‑JONES J: Now, if that was the form of the order and they did not put it up, they would be in contempt.

MR SHEAHAN: And if that was the form of the order, I accept that the proper course would be to apply to be relieved from it before the time arose, and our submission is simply that if they were to do that, it is almost inevitable that they would be relieved from it, but in the circumstances, the consequences of that relief would be that Sanofi would get its injunction.

GORDON A‑CJ: The other way, often, that trial judges do it, of course, is to give the option. That is to say, but for this, it is a matter for you, what you choose. That is, the person gets then to choose whether they are going to stump it up or not.

MR SHEAHAN: Yes. So, another way of framing the order would be, grant the injunction, it is stayed ‑ ‑ ‑

GORDON A‑CJ: Correct.

MR SHEAHAN: ‑ ‑ ‑ pending the provision of security. So, there are a number of ways this can be catered for.

GORDON A‑CJ: Can I just ask you to go back – I think it was where we started, and that is the way Justice Gyles dealt with what was the state of the facts. Am I right, if we look at tab 36 of the authorities, which are the reasons for decision of Justice Gyles, and go to page 504 of that authority, in paragraph [7], is that the paragraph that you wished ‑ ‑ ‑

MR SHEAHAN: That is the paragraph I wished to refer to, your Honour is quite right.

GORDON A‑CJ: Thank you.

MR SHEAHAN: Now, the other obvious reason for Apotex wanting to oppose the injunction, even if it is in some doubt as to whether it would take advantage of being free to launch, is that it had a program of wanting to be seen to be an aggressive opponent of originators in the marketplace, and vigorously opposing an injunction was on all fours with that program.

JAGOT J: Sure. I mean, in one sense, they did not want to be seen to be – it was obvious from Mr Millichamp’s email that is what it is about. That is its model – to be, and to be seen to be.

MR SHEAHAN: In particular, it wanted to be seen to be. As to whether it was, there are some findings, which I will come to shortly.

GORDON A-CJ: Mr Sheahan, I do not seek to move you on, but where are we in terms of the argument?

MR SHEAHAN: In terms of the list that we gave your Honours yesterday, we have departed from it substantially. Perhaps it would assist if I tell your Honours where I am going.

GORDON A-CJ: Yes, please.

MR SHEAHAN: I need to deal briefly with the change in circumstances – that will be very brief – then with the question of risk, which is a little longer. Then, we will make some submissions about findings of fact, which are coordinate, in this case. Then, a very brief submission on the mode of proof issue which our learned friends did not really address – and I have, in part, said what I wanted to say about it already.

GORDON A-CJ: Thank you.

MR SHEAHAN: The events and communications between June and September are also affected by the changed expectations, which crystallised finally on the day reasons were given by Justice Gyles. They were relevant because they went to the value of the Apotex opportunity, if it were to launch at risk. When it sent messages to the market, to pharmacists, in August, the expectation was the trial would be in 12 to 18 months; judgment, we do not know, sometime after that. So, a lengthy period of trading in which to make profits, that is the Apotex upside from a launch at risk.

By the time it is confirmed on the date that reasons are given, that there will be a trial in April, the consequence will be judgment four months after listing – so, after four months of trading – and a certainty of judgment of that in point in time, not a question about how long it will take the court to make a decision. That would, in the most mundane commercial terms, be a reason to rethink the risk equation at that point in time.

Now, the only other thing I wanted to say about that was that the email which deals with the directions hearing before Justice Bennett on 13 September, where the possibility of an early hearing was noted – this is at tab 44, page 349 – was not quite as strong as our learned friends wished it to be. In the last bullet point on the page it says:

The indication from the judge was that they want to move towards a final trial sooner rather than later.

That is good:

The next six months was mentioned, subject to availability of expert witnesses etc.

And in the last line on the page:

We may not get to court next week and the situation may change.

Now, it is not clear how far that expression “and the situation may change” might go, but it is, in short, a statement of the obvious at that point in time. It crystallised only at a later point. There are coordinate findings related to this topic. The first is the trial judge at 341. He says:

the coincidence of events that would have led to both PBS listing on 1 April 2008 . . . followed by the commencement of the trial . . . later that month was a result of developments that could not have been anticipated until about the time the interlocutory application was determined.

The Full Court dealt with this at 354 to 355. And a corollary of that, the trial judge at 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.

The Full Court dealt with this at 217 to 220, 231 and 354. There are coordinate findings in addition in relation to the proper interpretation of Apotex’s publication to the market in mid‑August 2017. The document is at tab 30, page 236. This is the decision whether to launch will have to wait. The trial judge’s interpretation is at paragraph 260 – sorry, that is where he sets it out, and his finding is at page 288, and the Full Court deals with it at 118, 120 and 155.

The Commonwealth has a different interpretation of it. The short point is that the interpretation adopted by four judges below is not only open, it was, in our submission, correct. The short point is this: saying that a decision whether to launch will be delayed until we know the result of the application is not a natural way to express the idea that a decision has been made to launch unless restrained. Rather, it is a form of words – we would say quite understandably, indeed, almost predictably – that leaves Apotex with room to move.

This brings me to the subject of risks because it is in the – all these things need to be understood in this context. Our learned friends say that the assessments on which we rely that post‑date 2007 are irrelevant because they are too remote, and the assessments made in 2007 are overtaken by the fact that they did oppose the application for injunctive relief. We have talked about that already.

It is useful to look at them. The 22 June 2017 assessment of Apotex’s upside is in the folders at tab 13, page 130. I think your Honours have been given a document which supplements this with the table that was attached to the email in the original bundle. What emerges from that table is the calculations were done on two scenarios: Apotex having a 30 per cent or a 17 per cent market share. For one year in those scenarios, the relevant expected profits were respectively 20‑odd million and 9.7 million. Now, that is the upside. Let us assume in favour of leader Apotex that they are actually expecting to sell a full year’s worth of product even though they are only on the market for four months.

What was the downside? Sanofi’s damages – our learned friend said the estimate was 50, in fact the estimate was 150, which appears from the transcript of evidence tab 105, page 1463.

JAGOT J: Sorry, what page were you previously on? I am very sorry to do that to you.

MR SHEAHAN: No, that is no trouble at all, your Honour. It is was page 130.

JAGOT J: Page 130 of what?

MR SHEAHAN: Of the further materials.

GORDON A‑CJ: So, what appears at the joint book of further materials at 130 we then had given to us a magnified copy of the chart that was attached to it.

MR SHEAHAN: Yes. That was provided, I think, by the Commonwealth in advance of the hearing. I am now going to the script of Mr Millichamp’s cross‑examination at 1463. Your Honours can see from the previous page that we are talking about September 2007. On page 1463, at line 30:

you had internal figures indicating that the amount of security that Sanofi might be able to justify would be in the order of 150 million; correct?‑‑‑Yes.

GORDON A-CJ: What about the next paragraph?

There was never any consideration given . . . at that level –

Does that matter?

MR SHEAHAN: There were never given consideration to providing security at that level, but that was their risk exposure. Can I just interpolate here to say that the risks for Apotex were not confined to cash. Your Honours can imagine this situation – which our learned friends promote, oddly – that Apotex was going to go out and encourage pharmacists to buy a year’s supply in advance if they were on the market because “not restrained”. When four months into the period they are restrained, if they are by a final injunction, then the pharmacists cannot sell because they are infringing products, the pharmacists will want their money back, patients’ habits with the use of drugs will be disrupted, supplies will be disrupted, and so on.

There was evidence about this from the Commonwealth’s expert in the case – the market expert, Mr Montgomery – who addressed the various supply chain impacts of going onto the market and having to come off, and he said in evidence, which is quoted in our submissions, at tab 107, page 1633, that it:

“would have become a logistical and financial nightmare for Apotex that it would have wanted to avoid at all costs”.

That was the Commonwealth’s expert.

GORDON A-CJ: Where is that, I am sorry?

MR SHEAHAN: That is quoted in our trial submissions, tab 107, page 1633.

GORDON A‑CJ: Yes, I see it. Thank you.

MR SHEAHAN: So, the pre‑hearing risk analysis has the upside between nine and 20, downside 150. In 2008, what was the risk analysis? This is done just before judgment is coming down, trying to work out what do we do if we are successful. Your Honours know the answer, the decision was made internally that if we are successful, we will try, somehow, and get Sanofi to give us an undertaking as to damages and stay out of the market, because that was the better option. That was the decision about it being the better option in circumstances where, in 2008, it would have been more attractive to launch at risk than it would have been in 2007, for two reasons. The remaining life of Sanofi’s patent was shorter, so the exposure to damages to Sanofi would be reduced to that extent and ‑ ‑ ‑

GORDON A-CJ: I thought the patent did not expire until 2013.

MR SHEAHAN: Yes, 2013, correct.

GORDON A-CJ: I meant to say 2013.

MR SHEAHAN: Yes. So, there will be some reduction in the exposure to Sanofi but, more importantly, the hypothesis here is, you have run the trial, you have had the contest and you have won, which would have a material impact on your assessment of the risks going forward, you would think. You would have won, and you would have reasons for your win. In those respects, more favourable circumstances for engaging in a launch at risk. Still, at that time, Apotex was the only firm with a product on the ARTG register. Now, what Apotex, as we have said, proposed and did was to stay out of the market. Its calculation in 2008 is at tab 66 in volume 2.

BEECH‑JONES J: Could I have a page number, sorry, Mr Sheahan?

MR SHEAHAN: Pages 613 to 615. Page 615 is their upside analysis, and your Honours will see that the first two parts of the table are basically the same as the table from 2007: 35 per cent market share, 17 per cent market share, net margin for year 1 of $20 million and $9.7 million – almost identical. There is an additional analysis done on a smaller market share. The smaller market share assumes the possibilities, as it said:

Two authorised generics –

An authorised generic is not someone else coming into the market, it is my clients launching their own generic products in order to compete with someone like Apotex, which is a possible strategy, not always adopted, but it was possible. So, the upside is the same as the year before – what about the downside?

BEECH‑JONES J: So, where is the bottom line for the upside, sorry?

MR SHEAHAN: The bottom line – I am just looking at a year’s worth of sales.

BEECH‑JONES J: Yes.

MR SHEAHAN: In the second column, bottom line, $19,988.227.

BEECH‑JONES J: I see.

MR SHEAHAN: And then the total below that, 9.7, and in the total before that, 4.8, where you have two auto‑generics, as they are called.

GORDON A‑CJ: When you say it is “the same”, which page am I comparing it with?

MR SHEAHAN: You are comparing it with the Commonwealth’s insert document, that was tab 13, page 131, which had market share scenarios of 35 per cent and 17 per cent – I am corrected – and numbers of 20 million and 9.7 million.

GORDON A‑CJ: Thank you.

MR SHEAHAN: Now, what about the downside? Has that changed? We saw that it was 150 million, according to Mr Millichamp’s testimony. Here, your Honours can see from page 613 going over to 614, that it is 166 million. So, the risk assessment, when they are coming to look at will we launch at risk, having won the case, was hardly distinguishable from the risk assessment they did immediately prior to resisting interlocutory relief. And we know the decision – Mr Kay’s was, we should not launch at risk if we are successful in resisting final relief.

GORDON A‑CJ: Is that an appropriate time, Mr Sheahan?

MR SHEAHAN: Yes.

GORDON A‑CJ: The Court will adjourn for 15 minutes.

AT 11.18 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.34 AM:

GORDON A-CJ: Mr Sheahan.

MR SHEAHAN: Just a couple of things before finishing on risk. First, my learned friend thinks that Mr Millichamp might have been confused in his answer to me saying 150 million because of the context in which that question was put. I will have a think about that over lunch and let your Honours know if I think there is substance in it. But we think – anyway, I will reflect on it to see if there is substance in that.

GORDON A-CJ: Thank you.

MR SHEAHAN: It remains a possibility that the witness was confused. Now, in 2008, the response internally appears at tab 69.

STEWARD J: Page?

MR SHEAHAN: Pages 628 to 629.

STEWARD J: Thank you.

MR SHEAHAN: You will see Mr Kay, who was Mr Millichamp’s superior, on page 629:

Thinking further about it, I wonder if the best outcome would be that we win at first instance, SA appeal and the injunction remains in place pending appeal. That way, we don’t expose ourselves to –

what he calls:

potentially ruinous damages –

And on the opposite page at the top:

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

Of we lose . . . we need tp evaluate the judgement.

My learned friends, I suppose, will say that in this context Mr Kay was not Dr Sherman, and in another context I think they are happy to have him be, in effect, Dr Sherman’s mouthpiece. But here, at least, what we have is an internal indication at the second highest level in Apotex as to how it would respond if it were to win the trial, and an objective characterisation of the extent of the downside risk as “potentially ruinous”.

Now, in 2009, the analysis appears at tab 77 and we accept that this is a distinctly different set of numbers because, as our learned friend pointed out yesterday for the first time – there was a document added, I think, by the Commonwealth to this tab, so your Honours should have a table like this that goes with it. But let me just say that the ‑ ‑ ‑

BEECH-JONES J: What page, sorry, Mr Sheahan?

MR SHEAHAN: So, it would be 675. And your Honours will see that in the top half of the page, the total Sanofi damages – this is bringing into account the disclosure price reduction discount has increased significantly to 651 million. The numbers for the Apotex profits have also gone up. Your Honours will see for the first full year, which is 2010, they are 45 million, more than double what we saw before. The trial judge’s assessment at 296 and 391 was that the relativities had not changed dramatically – it had gone from five times to seven times – but we accept that in absolute terms the risk assessment in 2009 was much greater, and that may have been a factor that distinguished it.

It is striking that even in 2009, having won in the Full Court, they decided to maintain the status quo, stay out of the market, with the benefit of an undertaking as to damages, rather than do the aggressive thing and launch at risk. That was despite the fact that in 2009 one of their competitors had applied for ARTG listing, so there was a real prospect that if they were kept out of the market for another year or year and a half by a special leave application and an appeal, that they might lose the market to a generic competitor. That would have been, you would think, a compelling consideration to launch at risk, that did not attain in 2008 and 2007.

Now, those are real world demonstrations of Apotex’s attitude to risk in relation to this very molecule in this market in circumstances – certainly for 2008 – that were not materially different from those it attained in 2007. My learned friend thinks they had been registered in 2009. That might be correct. All the dates are in paragraph 78 of the trial judge’s reasons. That makes it worse. If they had been registered, all the more reason to get into the market as soon as you can, you were the only person – rather than waiting out of the market for them to exploit the registration. I am grateful for my learned friend’s correction.

The Commonwealth wants to accept that Apotex was an aggressive risk‑taker, as we see from paragraph 56. This was dealt with by the trial judge and by the Full Court with, again, coordinate findings. The primary judge dealt with the suggestion that the United States launch suggested that they were an aggressive risk‑taker at paragraph 217 to 218. He rejected the suggestion. The Full Court agreed at 199 to 200, 261 and 272. And as for Apotex Canada wanting to always push the boundaries and so on, the primary judge dealt with this at 316 to 330, and in particular at 323, and the Full Court at 222 to 229 and 260 to 267.

We have mentioned a number of coordinate findings on what I will call particular questions up to this point. There are also coordinate findings on matters that are, or are very close to the ultimate question. So, the primary judge at 286, 348 to 349, 351, found that the evidence did not establish that Apotex would have made and maintained an application to list its generic products from 1 April at risk of being unsuccessful. The Full Court concurred, as we read their reasons, at paragraphs 12, 14 and 373.

Dr Sherman, the primary judge found, had deferred making a final decision – the primary judge at 251 and 287; Full Court dealt with that at 174 and 189 to 192. Finally, the trial judge at 348 held that neither the:

20 February 2007 email, or any of the subsequent correspondence in evidence . . . justifiy the drawing of such an inference, that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing . . . with effect from 1 April 2008.

The Full Court dealt with that at 189, summing up on its analysis from 126 to 188 as to the effect of the documents, and then at 380 to 387, dealing with a credit attack on Mr Millichamp.

All of that evidence and those coordinate findings have to be taken into account and dealt with in accordance with the decision in Kozarov. Can we simply say that there is no reason, apropos the last few, to doubt that the principle in Kozarov applies where there is a concurrent finding that a fact has not been proved to the requisite standard as well as where a fact has been proved.

We say that because the rationale for the principle is the same in both cases. The rationale is to do with the interests of the administration of justice, the need for finality and equality of access to justice. It appears in Justice Deane’s judgment in Louth v Diprose at page 634 of that report. It is also specifically affirmed by relatively recent decisions of the House of Lords and the Privy Council. If I can just give your Honours references: Hicks v Chief Constable of South Yorkshire [1991] UKHL 9; [1992] 2 All ER 65, and for the Privy Council it is Gormandy v Trinidad and Tobago Housing [2022] UKPC 55.

JAGOT J: Did you say 55?

MR SHEAHAN: Yes, 55. Notice was given to your Honours of those decisions earlier. It is English precedent, but English practice is the source of Australia’s practice in this respect.

Can I finally mention, before going to the law, that the courts below included judges who were highly experienced, not just as judges but as barristers, in relation to this type of litigation. None of them thought that the arguments for Sanofi, as our learned friends put it, were grounded in an absurdity – on the contrary.

As for the law, despite what was said by the Commonwealth in seeking special leave, it seems now that no question of law is raised by this appeal. In paragraph 6 of their reply, they complain that my client has confused the legal onus and an evidentiary onus which is shifting. Evidentiary onuses which shift are not governed by rules of law. That is made plain by the article by Professor Williams which was referred to three of your Honours in Cessnock [2024] HCA 17 at paragraph 128. It is in the joint bundle of authorities, item 47, and the relevant passages are at pages 2106 to 2107.

Shifting onuses are properly or conveniently called a tactical onus. They are not governed by rules of law, they are just estimations during the course of the proceeding as to who is winning at a particular point in time. They have no significance once you get to the end of the hearing – which is what the Full Court said in this case – because at the end of the hearing you have all the evidence, and you have to make a decision whether the person bearing the legal onus has discharged it.

The same propositions appear in Lord Denning’s very useful Law Quarterly Review article on “Presumptions and Burdens” – which is also in volume 7, in particular at pages 1979 to 1980. One of the things that is useful about his Honour’s analysis is that he talks about how a person who has the tactical onus going against them can respond. What he says is that party:

may seek to repel the inference by argument, as by submitting that the facts proved only raise a suspicion as distinct from a legitimate inference; or by contradicting the evidence; or by giving evidence of other facts to explain why the fact in issue should not be inferred; or by raising suspicions which counter‑balance the presumption.

That is what my client did in this case – adduced evidence, cross‑examined witnesses, undermined their credibility and made arguments as to the strength of what was put against us.

Briefly, Air Express we deal with, we think, reasonably adequately in the written submissions at paragraphs 27 to 40. I just want to mention three things briefly about it. First is that the record of argument indicates that the sort of question we thought our learned friends were trying to agitate was raised by the parties in that case. In volume 3 of the authorities at pages 260 to 261, your Honours will see about three‑quarters of the way down the page, on 260, Mr Barnard’s argument. He says:

In considering what motivated the Secretary here, there was no evidence to enable the judge to conclude that the damage would necessarily have occurred. The onus lies on a plaintiff who seeks to escape liability to prove what damage it contends would have flowed from the injunction –

The argument to the contrary appears at page 262, just before Mr Barnard’s reply:

The onus is on the claimant to prove its case. Having elected not to call a material witness, the appellant cannot say that it ought to be assumed that if he had been called he would have given evidence of a specific kind. The loss if any flowed from the litigation not the injunction –

and the appellant failed. The second point is that, if there were such a principle, this would have been a brilliant case for the application of it because of a particular aspect of the facts. That appears from ‑ ‑ ‑

BEECH‑JONES J: When you say “this”, do you mean Air Express?

MR SHEAHAN: I mean Air Express, yes. That appears from Justice Aickin’s reasons at first instance, at page 205 of the book, 252 of the report. The proceedings were commenced on 18 February. If your Honours look halfway down, on 17 February, the day before, the Minister had made a statement:

in the House of Representatives. That statement included the following:

What “the following” includes is a statement that:

I have approved the import of –

the aircraft, and then goes on to give public benefit reasons why that was a good idea. The interim injunction is applied for the very next day. Despite that circumstance, the outcome at trial and in the Full Court was that the claimant on the undertaking failed because they had not proved what the Minister would have done if not restrained.

BEECH‑JONES J: There might have been a privilege problem, relying on that statement.

MR SHEAHAN: I am sorry, your Honour?

BEECH‑JONES J: There might have been a parliamentary privilege problem in relying on that statement.

MR SHEAHAN: There could have been, but the point does not seem to have been taken. We know that that is the fact. There was also evidence, which is set out later, of correspondence, in which the same material is stated outside a parliamentary context.

Justice Stephen’s reasons make it plain, if one reads them, he gets to the point where it is all going to turn on the burden of proof because, in his mind, you could not speculate as to what the Minister would have done. That appears in the record at 318. The question of onus was critical, there was an evidentiary deficiency, and the result was that the claimant failed. The logic of that reasoning is that the claimant failed because it did not fill the evidentiary deficiency by calling the decision‑maker, which was exactly the reasoning of Justice Gibbs.

Your Honours, those were the submissions we had on the notice of appeal. If I can turn, then, to notice of contention 1. We will propose firstly to go to two authorities, Smith v Day and Sigma v Wyeth ‑ ‑ ‑

GORDON A‑CJ: This is the requirement about “flow directly”? Is this the point?

MR SHEAHAN: This is “flow directly”, yes.

GORDON A‑CJ: Thank you.

MR SHEAHAN: Then to the terms of the injunction and the undertaking in their forensic context; thirdly to the reasons of the primary judge; and fourthly to the reasons of the Full Court. Sanofi’s position is summed up in our written submissions at paragraphs 16 to 18. The proposition is that “flow directly” encompasses “but for” causation and a limit on “but for” causation encompassed by the word “directly”. That limit is distinct from remoteness, which depends upon reasonable foreseeability as opposed to a question of causation.

Now, one can see, in our respectful submission, relatively easily, why it is necessary for there to be a limit on recovery beyond remoteness and “but for” causation. A case such as this affords a good example. The restraint on Apotex supplying product in the market would foreseeably cause loss to everyone in its supply chain, and possibly to its customers as well. Those amounts would be impossible of estimation, and possibly unlimited in amount. This is an artifact of the undertaking as to damages extending to third parties. So, mere “but for” causation combined with foreseeability are not an adequate control on recovery under an undertaking as to damages.

EDELMAN J: That is the case with many, many duties, and we talk about that limit as one that is concerned with the scope of the duty itself, not as one that is concerned with directness. The language of directness in many areas is an anachronism.

MR SHEAHAN: Well, what we would say is – in other contexts, certainly that would be correct. Here we have a court‑created device, undertaking is given to the court, where the person giving the undertaking is not a wrongdoer – that is made absolutely plain in Air Express – but where the purpose of the undertaking is to facilitate the court’s power first to grant interlocutory injunctions, in particular to grant interlocutory injunctions by protecting those who would be unjustly prejudiced by the court’s order, or to turn out to have been wrongly made. But the context creates a different way of looking at the notion of directness, a different way of looking at the limit, in our respectful submission. Now, the two authorities I wanted to go to were – and I will just say one more thing.

EDELMAN J: You do not dispute that the Commonwealth is within the boundaries of the limit, do you?

MR SHEAHAN: They are third party and they are potentially affected.

EDELMAN J: But you say that they are entirely outside the limit, or that the scope of the harm to them is outside the limit?

MR SHEAHAN: So, they are outside – the particular loss they claim, which is loss consequent upon someone not listing, is insufficiently direct in this case for a suite of reasons that have at their heart a proper appreciation of the terms of the injunction and the terms of the undertaking.

Now, there are two authorities I want to go briefly to. The first is Smith v Day, which is in volume 6 at page 1929, and briefly, it concerned an injunction to restrain building and the claim was for damages for loss of a valuable tenancy. Ultimately, it was not found that there was such a tenancy agreement, but all the members of the Court of Appeal dealt with the matter on the assumption that there had been. Sir George Jessel at 426 to 427 at the bottom of the page says:

But suppose there had been an agreement for a lease which the injunction prevented . . . The damage is the difference . . . Is that a kind of damage as to which the Court should direct an inquiry? . . . it is not.

Lord Justice Brett at 428, about two‑thirds of the way down:

I do not think the existence of such agreement proved. If it did exist, the next question is, whether the injunction so interfered . . . I am not satisfied that it did. But assume that it did, and that the agreement was broken in consequence of the injunction, still I agree with the Vice‑Chancellor in thinking that the breach is not by reason of the injunction, but is a consequence too remote to be regarded.

And then, at the bottom of the page:

But the fact that the injunction prevents the carrying out of an entirely independent agreement as to the property is too remote.

His Lordship is using this language “remote” here, but it is not remoteness in the sense that we now use it, of reasonable foreseeability, it is “flow directly”.

EDELMAN J: That is because it is 1882.

MR SHEAHAN: I am sorry, your Honour?

EDELMAN J: That is because it is in 1882, and notions of foreseeability arose, really, after Wagon Mound, many years later.

MR SHEAHAN: Somewhat later – we agree. At page 430, Lord Justice Cotton about halfway down the page:

The only damages suggested are that the Defendant lost the advantage of a beneficial lease . . . I agree with Lord Justice Brett that if there had been one, damages could not be recovered on that ground. I think 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 –

So, all the members of the Court of Appeal agreed that even if it had been proved that damage in relation to the loss of a lease had been – there been damage arising from the loss of lease, because of the injunction, there would be no recovery. That is entirely on all fours with, in our respectful submission, your Honour Justice Jagot’s decision in Sigma v Wyeth, which we deal with in our submissions at 36 to 38. The judgment is in volume 6, commencing at page 1595.

We deal with it in our written submissions at 36 to 38. The critical paragraph is paragraph [227], on page 1648. This is where the court is distinguishing between third‑party claimants – manufacturers and suppliers – who had contracts who had contracts with the person restrained and third‑party claimants who did not have contracts with the party restrained. In relation to that second category, your Honour at [227] said that recovery was not possible – and that is on this ground – importantly, your Honour made that judgment in the context of the last two sentences:

Even if those contracts would have existed at an earlier time but for the injunctions, the loss was not a direct or natural consequence of the injunctions.

That is to say, even if you could prove causation consequent upon the injunction, the loss is insufficiently direct. Here, there was not merely – from the Commonwealth’s point of view, there were two hurdles that it had to overcome. One was Apotex’s decision to launch at risk and the other was a completely independent decision by the Minister whether to list its product on the PBS despite the fact that there was extant patent litigation which might end up with an injunction against Apotex’s product at the end of a trial or an appeal.

JAGOT J: I thought it was common ground before Justice Gyles that if they went for listing, it was inevitable the Minister would list on the PBS. That was common ground before Justice Gyles.

MR SHEAHAN: Your Honour asks a very good question. I am not conscious of the precise way it was put but, certainly, it was dealt with on the basis that ‑ ‑ ‑

JAGOT J: The word “inevitable”, I am almost certain, was used somewhere in that transcript from both sides.

MR SHEAHAN: Yes.

EDELMAN J: That must have been the assumption, given that what was clearly comprehended by the scope of the undertaking as to damages is that it would extend to losses suffered by the Commonwealth.

MR SHEAHAN: No, with respect.

EDELMAN J: The passage that Mr Gleeson took us to in the transcript, I think involved at least Mr Catterns acknowledging that.

JAGOT J: No. Mr Bannon was saying the Commonwealth was covered or protected – I cannot remember the word.

MR SHEAHAN: I will come to the sequence of events. I will come to the sequence of events almost immediately.

GORDON A-CJ: Can I just say, I think the relevant page of transcript is page 508, in volume 2, where – we were taken to this yesterday – Mr Catterns says:

it’s virtually impossible to imagine that we would – that when we apply in December we won’t get listed. I think both sides treat that as being inevitable, as is the twelve and a half per cent reduction.

MR SHEAHAN: I accept that, your Honours. That, of course, is in a context where the issue is about the balance of convenience, but I will come back to that in a second. Our point, for present purposes – whether it is inevitable or not in the estimation of the parties – is that for the Commonwealth to suffer the loss that it claims, it must get over two hurdles, not one. It must get over the hurdle of proving the counterfactual – proving a decision by Apotex to launch and proving a decision by the Minister to list.

Notwithstanding what was said by Mr Catterns on that occasion, in the trial of this matter, there was a very live contest about whether the Minister would have approved the listing of the product on the PBS. That is the subject of a notice of contention that your Honours are not going to be troubled with. There were findings of fact made on that.

GORDON A-CJ: So, we have three points. We have an assessment of the law about what “flow directly” is; we have the question about these two hurdles; and then do we have a question of construction of the relevant terms of injunction and the undertaking?

MR SHEAHAN: Yes. So, I will turn to that now. It is affected by the context.

BEECH-JONES J: So, can I just – it is because there is the second hurdle, you say, denies it the characteristic of “flow directly”?

MR SHEAHAN: Yes, because it becomes on all fours with Smith v Day and Sigma.

EDELMAN J: But if Smith v Day is really talking about a remoteness criterion, and you say that is not your argument – you are not concerned with reasonable foreseeability, because this was reasonably foreseeable – then what we are left with is a criterion, whatever words you use, that comes from the scope of the terms of the injunction itself. One might call it a question of construction, or one might call it a question of the legally imposed scope of duty, but on any view, you have both of the parties fully aware that this type of undertaking is going to extend to losses that are proved to have been suffered by the Commonwealth. That is what I am struggling with at the moment, understanding how you confine that.

MR SHEAHAN: I will do my best, your Honour, and I will do it as quickly as I may.

JAGOT J: Can I put the flipside, which is if you come to the court and say, the Commonwealth is not covered, it is excluding the Commonwealth – which was not said, in fact, the opposite seems to have been said – how does any originator get an interlocutory injunction? Because it is always going to cost the Commonwealth extraordinary amounts of money; there is always going to be that loss. I just do not ‑ ‑ ‑

MR SHEAHAN: And that is why these sorts of questions are very important, may we say, in a practical sense.

JAGOT J: But how would you ever get the interlocutory injunction? If you come to the court saying, we will not – of course, the undertaking does not include the Commonwealth, whatever the taxpayer or Commonwealth suffers by having to pay more, that is outside, why would you ever get an injunction on that basis? There is always a third party that suffers significant loss as a result, which is presumably why Mr Bannon said they are covered.

MR SHEAHAN: I will just fill in the context, and the answer will either fall out of what I do or it will not, your Honour – but I understand what your Honour is asking me. It might be ‑ ‑ ‑

BEECH‑JONES J: Just to pick that up, if you are right on this point, that means no interlocutory injunction in these circumstances could ever cover the Commonwealth’s losses under the PBS scheme.

MR SHEAHAN: There are two things to be said. One is that the Commonwealth was on notice of this application. The statute – the Therapeutic Goods Act – requires it to be on notice. It is common ground that it was on notice. That means that is entitled to come along to court and ensure that any undertakings that are given are satisfactory to it in respect of any loss that it anticipates. And the Commonwealth is not, (a), a shrinking violet, and (b), it is not under‑resourced.

GORDON A‑CJ: But that just takes us back to the terms of the injunction.

MR SHEAHAN: I am sorry, your Honour?

GORDON A‑CJ: That just takes us back to the terms of the injunction.

MR SHEAHAN: That is where I want to go to.

GORDON A‑CJ: Why, on its terms, does it not extend to the Commonwealth?

MR SHEAHAN: We are not saying it does not extend to the Commonwealth.

GORDON A‑CJ: So, it extends to the Commonwealth, but it excludes this aspect of a loss because it failed on the factual hurdle of the second limb.

JAGOT J: It is only Commonwealth loss – that is what I am struggling with. That is it – they cannot have anything else.

MR SHEAHAN: In practice, it is likely to be the only loss for the Commonwealth, we agree. The second thing to note about the Commonwealth’s position is that it has the special statutory rights under the Therapeutic Goods Act ‑ ‑ ‑

GORDON A‑CJ: This is ground 7 of the notice of contention?

MR SHEAHAN: Which is ground 7 of the notice of contention. So, the Commonwealth, on any view, is not without a remedy.

EDELMAN J: How does this help you? This is all against your argument. These are all reasons why, when you look at a standard form injunction and undertaking, you would assume it extended to the Commonwealth and its usual losses.

MR SHEAHAN: All we would say is this. This is an odd situation, for these reasons. Sanofi, when it commenced its cross‑claim, sought two separate injunctions against Apotex, one against infringement and one against listing. In its written submissions, it said that it offered the usual undertaking as to damages in respect of both injunctions. That appears from page 479 of the book.

The position changed during the course of argument. While the possibility of an injunction to restrain listing was still in discussion between counsel and the court, Justice Gyles made it plain that he was not going to do that – he was not going to grant an injunction against listing. And shortly after that, Mr Catterns for Apotex said, I will get instructions, but we will undertake not to list if your Honour is going to make an injunction against infringement.

After that, the subject of PBS listing disappears. What happens in the end is the court grants an injunction against listing, Apotex offers its undertaking ‑ ‑ ‑

BEECH‑JONES J: An injunction against launching.

MR SHEAHAN: I am sorry. There is an injunction against infringement, Apotex offers its undertaking not to list. The undertaking as to damages is confined to the injunction. There is no undertaking as to damages in respect of Apotex’s own undertaking not to list. The court does not seek an undertaking as to damages in respect of that undertaking. Apotex does not insist that Sanofi give one, and Sanofi does not offer one.

So, you have had, in the unusual circumstances of this case, a situation where two separate forms of relief were sought with an undertaking as to damages attached to both. The court says, we will not give you number two in the end, undertakings as to damages and security in respect of that undertaking – security explicitly confined to Apotex and its losses ‑ ‑ ‑

JAGOT J: Where is the order again? Can we just look at the order?

GORDON A-CJ: It is page 593 of the second appeal book. Can I just ask about that? On its face that might be right, but we were taken to evidence which, in order to list, the practicality of it was you needed to make and have available stock. Am I right about that? So, the restraint from making, selling or otherwise disposing necessarily impacted the ability to list. I know there was an undertaking not to list, but you could not do it.

MR SHEAHAN: There is undeniably a likely impact, at the very least.

GORDON A-CJ: I accept that (a) might say the undertaking given is in relation to the operation of order 1, but the effect of order 1 was that listing was, in effect, impractical.

MR SHEAHAN: And all we say is that in circumstances where the injunction and the undertakings associated with the injunction have arisen in the circumstances that we have described, the trial judge was correct to conclude that the objective indicators are that the undertaking was not intended to extend to the consequences of the Apotex undertaking.

GORDON A-CJ: The other way of looking at it may very well be, given the transcript, that Justice Gyles formed a view consistent with a lot of trial judges that one restrains the minimum in order to achieve the maximum effect. In other words, it was unnecessary to do both, because the first achieved the objective.

BEECH‑JONES J: Or was he saying – I think he had some doubt that simply applying for listing was a breach of the patent – which I think, in some of the authorities, it is said to have subsequently been held to be the case – so that there was no basis for an injunction, because it is not a breach of the patent.

MR SHEAHAN: Yes. Listing was not an infringement of the patent.

BEECH‑JONES J: But bringing you back, if you are right, in all these cases the Commonwealth would never be able to recover for damages – for losses under the PBS.

MR SHEAHAN: It would not be able to recover unless it came along to court and said I want the undertaking to be framed to protect me, or it made an application under its statutory right under the Therapeutic Goods Act.

BEECH‑JONES J: I think you are saying the order, do you mind telling me what you say the order should say if the Commonwealth ‑ ‑ ‑

MR SHEAHAN: It could simply say that the plaintiff undertakes to pay any loss the Commonwealth might suffer on account of the failure of the defendant to be able to list its products on the Pharmaceutical Benefits List – full stop. If the court requires that undertaking, then the plaintiff has the option of either giving it and doing without an injunction, or not giving it. But if it gives it, because it has been sought, because the Commonwealth wants protection in that respect, then at least it knows what it is up for. Whereas here, it has sought two things and been denied one of them. Apotex, for reasons that are just a mystery ‑ ‑ ‑

BEECH-JONES J: Mr Bannon said the Commonwealth is protected, did he not?

MR SHEAHAN: It was protected in the sense that they can call on the undertaking.

BEECH-JONES J: But there was nothing else to be protected from, was there?

MR SHEAHAN: I accept that, your Honour.

EDELMAN J: And you accept that what Mr Bannon said is material against which you can construe the order that is made?

MR SHEAHAN: I would not deny that, your Honour, no.

JAGOT J: It is pretty unattractive, is it not, to go and get an undertaking worth millions and millions and millions of dollars on the basis of telling the court that the Commonwealth is protected, when the only loss it could suffer is this kind of loss.

MR SHEAHAN: I understand what your Honour is saying. Now, ground 3 of the notice of contention, our learned friends’ submission is that it should not be dealt with. They say there are facts to be found; they do not say what they are. In truth, there are none. Our propositions document at pages 13 to 15 deal with it. The issue relates to the legal characterisation of facts found and undisputed facts, and we rely on our written submissions.

GORDON A-CJ: Anything further, Mr Sheahan?

MR SHEAHAN: Not on that one, not on notices of contention 1 and 3.

GORDON A-CJ: Has that also dealt with 7, because that is the ‑ ‑ ‑

MR SHEAHAN: No, I was about to go to that now.

GORDON A-CJ: I see. So, I think we have 4 and 7 to go. Is that right?

MR SHEAHAN: Yes, 4 will be very brief, and I will finish 7 just after lunch. Now, notice of contention 7 is a pure question of statutory interpretation and it involves the question of whether the provisions inserted into the Therapeutic Goods Act exhaustively define the remedies available to the Commonwealth in circumstances such as this.

GORDON A-CJ: I should say, for my part, it seems to be attacking a decision made by a differently‑constituted Full Court.

MR SHEAHAN: It is, yes, but in these proceedings.

GORDON A-CJ: Well, not in these proceedings.

MR SHEAHAN: Well, in the proceeding constituted by the Commonwealth’s claim on the undertaking as to damages given by Sanofi to Apotex. It is in these proceedings.

GORDON A-CJ: Thank you.

MR SHEAHAN: Now, the Therapeutic Goods Act is in volume ‑ ‑ ‑

GORDON A-CJ: Sorry, just one other factor. You did not re‑agitate this point either before the primary judge or the Full Court, did you?

MR SHEAHAN: No, we could not, because in these proceedings, by a separately‑constituted Full Court on a separate question, it had been decided against us. So, we have an entitlement to raise it on a ‑ ‑ ‑

EDELMAN J: They were decided against you and special leave was refused.

MR SHEAHAN: It was. Special leave does not go to the merits of the point, as your Honours appreciate, but nor does it matter procedurally, because it is always open to a party to challenge an interim decision on a particular point, even as a separate question, in a challenge to the final verdict. And we have given your Honours a copy of David Syme & Co, a decision of the New South Wales Court of Appeal, which makes that plain. And that is why we say we are entitled to be here.

Now, the statute is in volume 2, commencing at page 138. I need to give your Honours a brief bit of background. When generic manufacturers seek to register their products, they can rely:

(in whole or in part) on evidence or information that another person –

has already:

submitted to the Secretary –

and typically that other person is an originator like my client. They need to have information about the safety and so on of the product. This is called “springboarding”, and it is the subject of the provisions of the United States Free Trade Agreement entered into in 2004, which your Honours can see in the decision below in volume 6 of the bundle at paragraphs 44 to 48, but we do not need to go to them.

Under the statute, springboarding was prohibited for five years and then when springboarding was permitted, a party – this is under the treaty, I should say; that is, Australia – must provide measures preventing patent infringement and providing for notification to patentees. That was the treaty. The way that statutory provisions work is this: section 26B(1A), which is on page 163, provides that when springboarding occurs, the manufacturer must give a certificate under subsection (1). Subsection (1) provides for two possible certificates – just two. The first is a certification that the springboarder is:

acting in good faith, believes on reasonable grounds that it is not marketing . . . in a manner . . . that would infringe a valid claim of a patent –

The other certificate is that it intends:

to market the therapeutic goods before the end of the term of the patent –

and:

has given the patentee notice –

So, you are either an innocent springboarder, if I can put it that way, or a risk‑taking springboarder. That is the core distinction that underlies these provisions. In this case, Apotex gave a certificate under the first limb, as it claimed to be an innocent springboarder, and, in retrospect, perhaps it was.

BEECH-JONES J: It was.

MR SHEAHAN: Now, section 26C deals with patent infringement following a certificate under subsection (1). It says, where a certificate has been given and a patentee intends to commence infringement proceedings, then the patentee must give:

a certificate to the effect that the proceedings:

(a) are to be commenced in good faith; and

(b) have reasonable prospects of success; and

(c) will be conducted without unreasonable delay.

That is the patentee’s certificate. We gave such a certificate. The focus of section 26C or the provisions in it – or subsequent provisions – are on the patentee’s certificate and what flows from it. There are various incidents attaching to it: giving a false one or a misleading one, or breaching an undertaking given in the certificate, and possible pecuniary penalties – that is in subsections (5) to (7).

Subsection 26C(8) deals with the effect of the patentee’s certificate where there is an interlocutory injunction. It only applies where a certificate is given under subsection (1), but only where section 26D does not apply – that is, there is a hierarchy of provisions created by 26C and 26D. Section 26D has first place, so I will go to it now and come back to 26C.

The focus of 26D is not on patentee certificates but on interlocutory injunctions. But the section only applies where a patentee gives a notice under 26B(1)(b)(iii), that is, it only applies where you have a risk‑taking springboarder. Subsections (4) and (5) then create, as your Honours will see, a remedial regime subject to explicit and tailored preconditions – the preconditions are in subsection (4), the principal proceedings are discontinued and:

the prescribed court declares that:

(i) the patentee did not have reasonable grounds –

Or:

(ii) the application for the interlocutory injunction was otherwise vexatious or not reasonably made or pursued –

Now, the subsection ends with the words:

in addition to any other relief –

That is not referring to other relief pursuant to the usual undertaking. As the Full Court decided, and we accept, it is referring to other relief that may be available for the kind of default required to satisfy the preconditions in subsection (4). Now, the remedies that are available are in subsection (5). They are expressed to be, as your Honours see, by these important words:

pursuant to the usual undertaking as to damages given by the patentee –

Those words, in our submission, indicate that what follows, is seeking to define the remedies available pursuant to the usual undertaking and not seeking merely to create parallel remedies. It is difficult to see what function they would have if it were not so – they would be redundant. The remedies under 26D(5) include:

compensation to the applicant –

on the basis set out in (a), which may be a valuable option in some cases, and they include, in (b) and (c), compensation to the Commonwealth, the States and Territories:

for any damages sustained . . . as a result of the grant of the interlocutory injunction.

BEECH‑JONES J: Just dealing with (a)(i), can you get an account of profits on an undertaking as to damages?

MR SHEAHAN: Not normally, no, and that is why we say it may be valuable in some circumstances.

BEECH‑JONES J: All right. Sorry, I interrupted you.

MR SHEAHAN: So, against that background, that is your first priority. It applies if you are a risk‑taking springboard. If you are not, we go back to 26C. Relevantly, it applies where there is a certificate of the kind we have mentioned. In a case of that kind, 26C(8) deals with remedies. It does not say anything about compensation to the generic, with the consequence that the innocent springboarder is left to their rights under the usual undertaking as to damages. But it does make provision for the court to order the patentee to pay compensation to the Commonwealth or the States and Territories for damage or costs flowing from the grant of the interlocutory injunction.

That is, if not identical, in substance the same as the remedy given under 26D(5). The precondition to that power is the patentee certificate “is false or misleading” or the undertaking is “breached”, that is, by unreasonable delay. So, in our submission ‑ ‑ ‑

BEECH‑JONES J: And that would apply regardless of rules about remoteness or directness?

MR SHEAHAN: Arguably. There would be debate about that sort of thing, with a statutory remedy for compensation, and there are questions about how those concepts, if at all, are incorporated into the remedy. Now, your Honours will see that the remedy is described as being:

pursuant to this section –

whereas in the other section it was:

pursuant to the usual undertaking –

This is “pursuant to this section”, and that language indicates that it is the section itself creating a remedy.

GORDON A‑CJ: It does not expressly say, though, that one is precluded from relying on an undertaking.

MR SHEAHAN: It does not expressly say that, no. Our submission is that it is the proper interpretation of these provisions, taken as a whole, for the following reasons.

EDELMAN J: Where does it say “pursuant to this section”?

MR SHEAHAN: It says, under this section, in the words immediately under the subparagraphs:

the prescribed court may, pursuant to this section –

in subparagraph (8). Now, 26C and 26D are directed to situations where the generic is innocent on the one hand and a risk‑taker on the other. In the former case, there is no impact on the generic’s ability to rely on the usual undertaking – that is, where they are innocent. In the latter case, when you have a risk‑taking springboarder, 26D, in our submission, does regulate the usual undertaking by the language of 26D(5).

GORDON A‑CJ: It is a matter of construction consistent with the sort of analysis undertaken in Cross. Do these provisions cover the same field, or are they directed at different fields?

MR SHEAHAN: The provisions operate coordinately, because they have divided the universe of springboarders into two: you are either one or the other. Importantly to understand them, the remedies that are provided for the risky springboarder, if the Commonwealth is right, are better than the remedies available to the innocent springboarder.

On the Commonwealth’s case, none of this affects the ability to claim under their cross‑undertaking as to damages. If that is so, the risk‑taking springboarder can get the account of profits remedy, if they can prove the preconditions for it under 26D(5), or, if they do not think they can get over the predicate for that, they can rely on the usual undertaking as to damages, but the innocent springboarder only has the cross‑undertaking as to damages.

That is incoherent, in our respectful submission. So, at least in that respect, it is easy to conclude that 26D is intended to operate comprehensively, rather than merely additively.

BEECH-JONES J: You would need fairly clear intent to boost the court’s power to control its own processes, would you not? That is the underlying rationale for interlocutory injunctions and undertakings. The court stops its own processes being abused, and so forth – you would want pretty clear language.

MR SHEAHAN: The usual undertaking as to damages is not, in our submission, about abuse of process of the court.

BEECH-JONES J: I use that in a broad sense.

MR SHEAHAN: No, it is more prosaic than that, we think, your Honour. Before Lord Justice Knight‑Bruce invented them in 1840, or whoever it was – Dr Kramer has written a fascinating article on this – it was harder to get an interlocutory injunction because the balance of convenience was a problem with persons who might be affected by it. The point of the undertaking as to damages is to facilitate the grant of the remedy. It is not about abuse, in any sense. It is facilitative of the equitable jurisdiction to protect parties on a . . . . . basis in an appropriate case.

If 26D is exhaustive in the case of a risk‑taking infringer, then it must be exhaustive for the Commonwealth – that simply follows because of the way it provides for the Commonwealth in exactly the same section as it provides for patentees. If 26D is exhaustive of the Commonwealth’s rights, then that is a powerful indication that the same must apply to 26C(8), because it is conferring on the court a power to make the same order that is in 26D(5), and it is confined by tailoring preconditions – that the patentee defaulted by giving a false certificate, and so on – that correspond – broadly speaking, at least – to the conditions in 26D(4)(c).

While 26C talks about “pursuant to this section”, rather than “pursuant to the usual undertaking”, that is explained simply by the fact that the focus and the whole content of 26C is on the certificate that is given by the patentee and its consequences, whereas 26D, its focus is on interlocutory injunctions.

GORDON A-CJ: The arguments that you put here are the same arguments, substantially, that were put to the Full Court on the stated case and, again, on the application for special leave.

MR SHEAHAN: We think that in their nuances they differ. I can say that there was not, in those arguments, a focus that we put on the distinction between what we have called innocent and risk‑taking springboards. The focus in the arguments below started from a different point. It ended up in the same destination and, broadly speaking, for similar reasons – that, looking at these provisions as a whole, you would conclude that this tailored, carefully specified set of preconditions and remedies does not make any sense – not much sense.

GORDON A-CJ: I ask because the same answers that have been put to you are answers that can be found in the stated case – no express words; do not cover the same field – at least, substantively, anyway.

MR SHEAHAN: So, in terms of aspect of the argument, they are exactly the same.

GORDON A-CJ: Thank you.

MR SHEAHAN: What is different, in our respectful submission, is our focus on the incoherence of treating 26D, in the case of patentees, as non‑exhaustive.

BEECH-JONES J: Mr Sheahan, in 26C, there is no remedy for the person you call the innocent infringer of.

MR SHEAHAN: No.

BEECH-JONES J: So, (8) only gives a remedy to the Commonwealth or a State or a Territory. So, is it contemplated that the party that was restrained still seeks recovery pursuant to, presumably, the undertaking as to damages that was given?

MR SHEAHAN: Yes, yes.

BEECH-JONES J: So, it is certainly not exhaustive in that respect at all.

MR SHEAHAN: Not in that respect, but that is because 26C is – except in relation with the Commonwealth, States and Territories – not concerned with interlocutory injunctions so far as the patentee is concerned. It is concerned with certificates given by the patentee. So, the rights given to the originator – the innocent springboarder – are outside the scope of 26C.

BEECH‑JONES J: So, 26C only operates, on your thinking, to carve out from that injunction any rights that the Commonwealth, State or Territory might otherwise have to apply under that injunction, in that circumstance?

MR SHEAHAN: Yes. It is exhaustive of their rights.

GORDON A-CJ: I am sorry, Mr Sheahan, I interrupted.

MR SHEAHAN: I am sorry, your Honour. The only other point is that you can stare into the interstices of these provisions in a way that I am sure my learned friends will and find things here and there that suggest maybe this is a slightly better remedy for the Commonwealth and under the usual undertaking as to damages, but the substance of the matter is that there is not much work to do for these provisions unless they are treated as exhaustive.

GORDON A-CJ: I do not know about that. In the parliamentary debates which are referred to in the stated case, they talk about them enhancing the rights rather than being substitutions for them.

MR SHEAHAN: It is always a mistake to overly construe the language used in a parliamentary debate. It occurred to me that the language “enhance” and “clarify” might be a handy – that is to say, enhance by clarifying or clarify. Let us say “clarify” because we can accept that there were perhaps some doubts, which we raised in this Court, about the effective ability of the Commonwealth to make a claim. If what you want to do is clarify, this is not how you do it.

GORDON A-CJ: What is interesting, though, the reference at least to enhancement, from my memory, was addressed both to the Commonwealth, the generic company, and another – it was not just for the Commonwealth.

MR SHEAHAN: In some respects – there is no question of enhancing the generics rights under 26C, unless one says that their ability to apply for a civil penalty to be paid to the Commonwealth is an enhancement – perhaps it is.

Under 26D, it gives and takes for the risk‑taking springboarder. It takes by setting the hurdle higher for being able to recover under 26D(5). You have to prove that the proceedings were vexatious, in a sense – but the remedy can be better. There is give and take there because the remedy can include an account of profits.

GORDON A-CJ: Thank you.

MR SHEAHAN: That detailed set of interlocking moving pieces, in our respectful submission, does not make a lot of sense unless it is intended to be covering the fields that it covers.

Finally, there is an evident policy justification for this tailored regime, in our submission. It facilitates cheap and efficient applications for registration or listing – that is, permitting springboarding – and that benefits generics and the Commonwealth by reduced regulatory costs and saving time, but it involves a form of free‑riding on the intellectual property of the originator. It is the subject of negotiated treaty obligations under the Free Trade Agreement with the United States. What one sees in this scheme, in our respectful submission, is a structure which permits springboarding, also gives patentees a measure of protection from infringement conduct – e.g., a requirement for notice by the risk‑taking springboarder – and it includes limiting the recourse of risk‑taking springboarders in the Commonwealth and States generally against a patentee who does nothing more than seek to enforce its rights.

EDELMAN J: Why would you not see it as regulating or covering the whole field of circumstances involving 26D risk‑takers who are vexatious, or do not have reasonable grounds?

MR SHEAHAN: For the reason that if, in the background, you can still go to court and seek a remedy under the usual undertaking as to damages, that remedy will be to get:

compensation for any damages sustained, or costs incurred, by it as a result of the grant of the interlocutory injunction –

In other words ‑ ‑ ‑

EDELMAN J: But not an account of profits.

MR SHEAHAN: That is not for the Commonwealth, that is only for the risk‑taking springboarder.

EDELMAN J: Yes.

MR SHEAHAN: And it is, in our submission, incoherent for the risk‑taking springboarder to be given a valuable remedial option under 26D that the innocent springboarder does not have under 26C.

EDELMAN J: Yes, I see.

MR SHEAHAN: So, that incoherence points you in the direction of treating 26D as exclusive of the circumstance it covers, and once you reach that – as we would submit – comfortable conclusion, it follows naturally to the position of the Commonwealth under 26C, given that this is a package of provisions designed to deal with the springboarding problem to give effect, in a particular way, to international obligations assumed by Australia with the United States and adjusting the rights of parties in that field.

BEECH‑JONES J: The so‑called incoherence that you say between the remedies for the two springboarders in 26C and 26D, that subsists regardless of your construction.

MR SHEAHAN: No, in our respectful submission, because on our construction, the risk‑taking springboarder ‑ ‑ ‑

BEECH‑JONES J: Gets the account of profits.

MR SHEAHAN: Gets the account of profits, but they are confined – to get that, they have to get over the hurdle of proving that this was a vexatious proceeding, in effect.

BEECH‑JONES J: Indeed, and then, absent that, they just claim under the usual undertaking as to damages.

MR SHEAHAN: And our submission is that if they can, absent that, claim under the usual undertaking as to damages, then there is incoherence, because the risk‑taking springboarder has more rights than the innocent springboarder.

BEECH‑JONES J: Well, the innocent springboarder could also recover under the usual undertaking.

MR SHEAHAN: They can recover under the undertaking, but they do not have any option ‑ ‑ ‑

BEECH‑JONES J: I see.

MR SHEAHAN: ‑ ‑ ‑ to prove vexation, and forego proving their own damages and get an account of profits.

BEECH‑JONES J: So, you read 26D as exhaustive of all the rights of the risk‑taking springboarder.

MR SHEAHAN: Yes. So, 26D(5), that whole universe of remedies, is exhaustive.

BEECH‑JONES J: I see.

MR SHEAHAN: And, for the reasons we have given, we think that the Court can comfortably draw that conclusion. It then follows, really, that 26C(8) is in the same category.

BEECH‑JONES J: But just for the Commonwealth, a State, or a Territory.

MR SHEAHAN: The Commonwealth, States, or Territories.

GORDON A‑CJ: Does that complete ground 7, Mr Sheahan?

MR SHEAHAN: I was just going to say a couple of things about the Full Court’s reasons, if I may. So, their judgment is in volume 6, tab 31 at page 1471. Justice Dowsett gave separate reasons from the majority. At paragraphs 6 and 10 he appeared to be saying that the purpose of these provisions was to ensure that the Commonwealth would:

have some recourse –

this is the enhancing by clarifying point, and that appears to be the basis for his Honour’s conclusions in 18 that the scheme does not subtract from the court’s powers. The short answer, in our respectful submission, is that a scheme can be intended to ensure a position by exhaustively stating the position.

Justices Kenny and Nicholas reason more fully. There are a couple of points to note. At paragraph 76 it was suggested that:

s 26C operates to provide the Commonwealth with a monetary remedy that would not be available to it under the usual undertaking –

namely, in circumstances where the patentee and the generic settle proceedings. That does not seem, with respect, to be correct. It was established law that, where the patentee and generic settle – when a plaintiff that obtains an interlocutory injunction ultimately settles, that does not bring an end to the ability of someone to make a claim on the usual undertaking as to damages.

A decision to that effect is Balout v Bella Ikea Cronulla Pty Ltd [2024] NSWSC 775, the first‑instance decision of Justice Rees in the New South Wales Supreme Court, which is in the bundles at volume 5, page 1241. It is, in our submission, no surprise that equity can and does address that state of affairs. Her Honour just makes that decision by reference to older authorities. So, that point had no substance to it, in our respectful submission.

Paragraph 78 in the majority’s reasons suggests that, contrary to the way we have put it to your Honours, 26B does not present an election that rather might allow a generic to give the (1)(a) certificate – so the unison generic could give that certificate and also give a notice to the patentee for the purposes of (1)(b)(iii) – a (1)(b)(iii) certificate. In our submission, that is unlikely to be correct. Subsections(1)(a) and (1)(b) are expressly alternative forms of certificate, and (1)(b)(iii) is a certification of notice having been given, necessarily, for that certificate. The reference in 26D(1)(a) to:

notice . . . in accordance with subparagraph 26B(1)(b)(iii) –

is, in our respectful submission, plainly a reference to a situation where a certificate has been given under 26B(1)(b).

GORDON A-CJ: I notice the time, Mr Sheahan, do you have much to go on this point, or could you finish it after lunch?

MR SHEAHAN: I will finish it after lunch, your Honours. I do not have much to go, though.

GORDON A-CJ: Thank you.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

GORDON A-CJ: Mr Sheahan.

MR SHEAHAN: Your Honours, just two final points about the decision of the Full Court on the notice of contention 7 point. The first is that at paragraph 84, as I mentioned, the court held that the reference in 26D(4) to “other relief” is other relief for the patentee’s misconduct, not relief on the usual undertaking, and we embrace that finding.

The last is a reference to paragraphs 88 to 90 of their Honours’ judgment, where they held that section 26D(5) might enhance the relief available to a restrained generic and perhaps the Commonwealth in relation to matters such as those raised by your Honour Justice Beech‑Jones earlier – questions of remoteness and so on, amongst other things. Our response to that is that whether or not there is some enhancement in the kind of compensation available does not deny the proposition that what is being provided for is exclusive or exhaustive of the rights and indeed, if anything, so far as the position of the generic is concerned – the risk‑taking generic – it supports our argument. The wider the relief available, the more likely it is it was intended to be comprehensive, otherwise you have the coherence problem that we mentioned this morning. That is what we wanted to say about notice of contention 7.

Notice of contention ground 4 deals with a very short argument about whether the Commonwealth in relation to the claimed losses, that is, the ‑ ‑ ‑

GORDON A-CJ: Sorry, can you just speak up – the Commonwealth in relation to the claimed losses?

MR SHEAHAN: Its claimed losses under the undertaking, which are payments which were made pursuant to the Pharmaceutical Benefits Act, but which would not have been made if the injunction had not been granted. Now, the question is whether in that respect the Commonwealth is adversely affected by the interlocutory injunction. That question, in our submission, requires attention to the precise incidence of the effect, the unique character of the personality of the Commonwealth as a body politic and, in those circumstances, whether the effect is properly characterised as an adverse effect on the Commonwealth.

BEECH-JONES J: Are you using the phrase “adverse effect” from some particular case?

MR SHEAHAN: No.

JAGOT J: It is in the injunction, is it not?

MR SHEAHAN: It is in the terms of the undertaking.

BEECH-JONES J: Terms of the undertaking.

JAGOT J: Yes, the undertaking, sorry.

MR SHEAHAN: Yes.

GORDON A-CJ: So, if you go to that undertaking at 593:

any person whether or not a party –

We know that that extends it, to that extent, to someone like the Commonwealth:

adversely affected by the operation –

MR SHEAHAN: Yes.

GORDON A-CJ: Why is the Commonwealth not adversely affected?

MR SHEAHAN: So, in short, we submit that the distribution of fiscal benefits pursuant to statute operates at a level removed from the Commonwealth’s status as a person who might, like others in the community, be adversely affected by an injunction. That is to say ‑ ‑ ‑

GORDON A-CJ: So, that is to say, if the Commonwealth does not pay the relevant amounts, they might have been able to use the money for something else. Is that not an adverse effect?

MR SHEAHAN: So, in our submission, no.

GORDON A-CJ: Why?

MR SHEAHAN: It is of the same – because it is dealing with the Commonwealth as a political organ which raises revenue, it collects taxes, and it distributes revenue. Those are functions which are special to the Commonwealth.

BEECH-JONES J: This is a matter of construction of the undertaking, is it not?

MR SHEAHAN: It is, in a sense, a question of construction of the undertaking, and we are taking the words “adversely affected” ‑ ‑ ‑

BEECH-JONES J: All right. So, when we raise the spectre of Mr Bannon again and again, he referred to the Commonwealth, did he not?

MR SHEAHAN: Yes. And our answer is in part the same, that is to say, if one is looking at this in some sort of consequential – I am not answering your Honour’s question, so I will stop.

BEECH-JONES J: What I am suggesting is, you could have a statute that talks about someone being harmed, and you might say, Commonwealth paying out social security benefits is not a form of harm, but we are just interpreting an undertaking and the phrase “adversely affected”, where one of the events leading up to it was the counsel proffering it and saying the Commonwealth was protected. So, it is difficult to see that what was conceived of as the adverse effect was not an adverse effect on Commonwealth spending – is it not, in those circumstances?

MR SHEAHAN: I take your Honour’s point. We would submit that in answering this question it may be an error to place too much weight on the mere fact of someone acknowledging in the course of argument that the undertaking as to damages extends to third parties, and that would include the Commonwealth. That is true, but the question of the significance of that acknowledgment depends upon what loss the Commonwealth would seek – and we have talked about this before – and whether it is comprehended by the words “adversely affected”.

EDELMAN J: But the words “adversely affected” are to be interpreted against the context in which they are used, and part of that context is the common assumption that they will extend to losses by the Commonwealth.

GORDON A-CJ: Can I ask a different question – sorry, I should not interrupt. Do you challenge the ordinary, well‑established principles about the construction of an undertaking?

MR SHEAHAN: No.

GORDON A-CJ: So, as Justice Edelman puts to you, one takes the words of the undertaking in the context in which it was made, do we not?

MR SHEAHAN: Your Honours do.

GORDON A-CJ: Thank you.

MR SHEAHAN: Can I move on, then, to just a couple of points of tidying up. The first relates to something we think our learned friends said yesterday, in relation to Mr Millichamp’s fifth affidavit, which was at tab 86. Our recollection is that he took your Honours to paragraphs 200 and following, which dealt with Apotex’s plan to market and so on. Your Honours will see that the relevant paragraphs – 203, 205, 207 and 209, they commence at page 686, I think – all relate to Mr Millichamp’s intentions. It was submitted that that evidence was not challenged. In a sense, it was, as your Honours can see from paragraph 335 of the judgment.

JAGOT J: The primary judgment?

MR SHEAHAN: Of the primary judgment, yes – where the judge distinguishes this affidavit from Mr Millichamp’s earlier affidavits as one where the role of Dr Sherman really ought to have been touched upon and it was not. Can I simply refer your Honours to our cross‑examination on the topic, which is in tab 105 at pages 1527 to 1529.

The second point of clarification is one I foreshadowed before the break, and it relates to the 2007 estimate of potential damages. Your Honours will recall that I mentioned before the break that our learned friends were concerned that the witness might have been confused by the questioning, so I will deal with this, as thoroughly as I may, to avoid any unfairness to anyone. The evidence is tab 105 ‑ ‑ ‑

GORDON A-CJ: What page is that, please?

MR SHEAHAN: Pages 1462 to 1463. I took your Honours to a reference to $150 million on page 1463, at about line 30. We accept, without hesitation, that cross‑examination is challenging for witnesses and confusion is possible, and we also accept – and I will take your Honours to it – that in re‑examination Mr Millichamp said that he had been confused about this. What I want to say about it, is this: if your Honours go back to the previous page, 1462, at about line 20, what had been happening up to that point was that I was asking him about the 2008 assessment, and then I said:

So what I want to do is take you back to the point in time just before decision is given on the interlocutory application?

If your Honours read the questioning and answering which follows, over to the question and answer of interest, it seemed to us, with respect, it was tolerably clear, subject to the pressures of cross‑examination, what time period was being asked about.

BEECH-JONES J: Can I ask you about line 29 on page 1463? In cross‑examining, he is asked:

But you had internal figures –

MR SHEAHAN: Yes.

BEECH-JONES J: What are those internal figures?

MR SHEAHAN: So, if he had said no to that question – there is nothing in writing, we accept that. But if he had said no to the question, the questioning would have continued on the theme of, this is something you would ordinarily have done; circumstances in 2007 were not materially different from the circumstances in 2008, et cetera. But he did not, he said yes. So, that is largely where it stopped.

BEECH-JONES J: Because the internal figures he did have ‑ ‑ ‑

MR SHEAHAN: I am sorry?

BEECH-JONES J: The internal figures we have seen are the 2008 figures.

MR SHEAHAN: Correct.

BEECH-JONES J: And they are of the order of 150 million.

MR SHEAHAN: Yes.

BEECH-JONES J: So, is this the origin of what is said to be the confusion?

MR SHEAHAN: Yes.

BEECH-JONES J: That the question may be suggesting to him, the effect of the paperwork in 2008 – because I am just wondering what the basis for these internal figures – which are in the question. The question assumes that there are those figures.

MR SHEAHAN: Yes, it does.

BEECH-JONES J: What figures are we talking about?

MR SHEAHAN: The basis is, that is what you would expect – that is to say, we know they have written figures from 2008. Nothing, relevantly, changed. As a matter of ordinary business practice, you would think about what your exposure was in 2007 – did you not think about it, Mr Millichamp? Yes. Because we will see, he told his superiors – as he acknowledges – that the exposure was, as he puts it, “huge” or “substantial”.

GORDON A-CJ: Can I ask you about page 1464, at the top of the page.

MR SHEAHAN: Yes.

GORDON A-CJ: Is that further evidence that there was an extinction drawn?

MR SHEAHAN: The subject‑matter, in the answer at about line 5, is the security number, and what is said consistently is that the only offer of security was 50. At the bottom of the previous page, he says it might increase:

It wasn’t a specific number of 166 million or 200 or – or 80 was not given. The initial figure was 50 –

The initial figure.

BEECH-JONES J: Did the primary judge make a finding about this?

MR SHEAHAN: I will come to that. Now, at 1478, you can see from about line 10, we are talking about 2007 – at the bottom of the page:

A potential exposure in the order in the order of one to two hundred million dollars?‑‑‑I – I can’t remember whether we said one hundred . . . . . two hundred million dollars. But certainly they were aware –

that is, Canada:

there was a huge exposure –

and then he corrected himself:

or a very substantial exposure.

And, in a sense, it is perhaps sufficient for us to rest on that. Now, the re‑examination is at 1542, line 25. So, he is taken to the transcript, he is asked:

what were the internal figures –

And he says:

I think I got confused –

And he gives an explanation, over to the top of the next page. That is where that topic ended in the cross‑examination. In the judgment of the trial judge, paragraph 292 ‑ ‑ ‑

STEWARD J: Sorry, what was that paragraph?

MR SHEAHAN: Paragraph 292.

STEWARD J: Thank you.

MR SHEAHAN: Your Honours will see:

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 –

So, the trial judge treats the 2008 assessments – rightly, we would submit – as good evidence of its perception of its exposure a year earlier, circumstances not being different. He touches on it again at 314:

Sanofi’s loss was likely to have exceeded the $52 million estimate –

that underpinned the guarantee:

by a substantial margin –

At 315, quoting, at the end of that paragraph, “they” – that is, Canada:

they were aware there was a huge exposure, or a very substantial exposure”.

And 317, referring to the evidence just above it:

I did not find this evidence persuasive. The evidence does not suggest that the business case for Apotex Australia launching . . . in August or September 2008 . . . would have been significantly less attractive . . . than a launch at risk in February or March 2008 followed by a PBS listing from 1 April –

So, that is the relevant comparison. Then the Full Court dealt with this at paragraphs 224 to 229. Your Honours will see there the argument that was repeated at 224, the argument was repeated here about relying on different analyses because the circumstances had changed. The argument was rejected at 225 for two reasons: first, it was not within the scope of the ground of appeal; and:

Secondly, even if it were, it is without substance.

Then their Honours explain why over paragraphs 226 to 229. So, that is where the evidence was left. We accept the possibility that the witness was confused in the answer to my question, but we would submit that the findings of the trial judge and the Full Court are correct and we would submit that the Court should have no hesitation at least in accepting that Mr Millichamp told his superiors in Canada that the downside was “huge”, the qualification “or substantial” likely being an advocate’s flourish from the witness.

Those were our submissions, your Honours.

GORDON A-CJ: Thank you, Mr Sheahan. Ms Roughley, are you doing the reply?

MS ROUGHLEY: Your Honour, I am addressing on the notice of contention. Mr Gleeson will address on the notice of appeal.

GORDON A-CJ: Thank you.

MS ROUGHLEY: Can I start with notice of contention 1. Your Honour Justice Gordon posed three questions: first, what is the law of “flow directly”? Secondly, factually, does the Commonwealth fail at one or both of two hurdles? And that was clarified in an answer to a question by your Honour Justice Beech‑Jones as meaning the second hurdle of whether the Minister would have listed. The third question is the construction of the terms of the undertaking. I will address in that order.

Can I start with the question of what the law of “flow directly” is and in the process also address your Honour Justice Edelman’s observations about whether it is a question of the scope of the promise made by the undertaking. The Commonwealth’s submission is that the meaning of “flow directly” does not turn on what Justice Aickin meant or what was in Smith v Day. We say it turns on what five judges of this Court meant when they used that expression in the decision of European Bank v Evans [2010] HCA 6; (2010) 240 CLR 432, which your Honours will find in volume 3 of the authorities, tab 12, page 501.

It is of course true that at paragraph 18 of that decision, five Justices of this Court referred to the observation of Justice Aickin in Air Express, and they extracted it in terms. But your Honours will see that paragraph 18 begins with:

These considerations, bearing upon the interests of justice in the particular circumstances –

which immediately indicates that what their Honours were picking up in extracting Justice Aickin is qualified by “these considerations” which flow before. Now, “these considerations” are principally found at paragraphs 15, 16 and 17 of the judgment, though there are some others I will come to. Starting with paragraph 15, their Honours identify by reference to a different decision of this Court – which I will come to, and I am hoping your Honours have been provided with it separately – that the creature of an undertaking as to damages is 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.

In some of the submissions that were made this morning, it seemed to be accepted at least in general terms that that is the case, that the purpose is to facilitate – I am hoping my note is accurate of what Mr Sheahan said – that the purpose is to facilitate the court’s power to grant interlocutory injunctions by protecting those who would be unjustly prejudiced by the court’s order.

But we say expressing it at that level of generality is only going halfway. The “anxiety” to which European Bank is referring at 15 is both a general anxiety that courts of equity need this type of creature, but also an anxiety the content of which is informed by the particular content of the case in which the creature of equity is used.

We would say that arises on the terms of paragraph 15 itself, but it is put beyond doubt when one goes to the decision of Mansfield v Director of Public Prosecutions [2006] HCA 38; (2006) 226 CLR 486 to which their Honours refer. Their Honours have referred to paragraphs 30 to 34 of that – the relevant paragraph for present purposes is paragraph 33. The Court there referring to Russell v Farley and a reference to Kerr on Injunctions opens in the first paragraph that:

“It is a settled rule of the Court of Chancery, in acting on applications for injunctions, to regard the comparative injury which would be sustained by the defendant, if an injunction were granted, and by the complainant, if it were refused.

That “comparative injury” of course informs the balance of convenience in any case, but comparative injuries will always be case‑specific to the application for an interlocutory injunction.

So, what we say follows from this, is that the purpose of an undertaking as to damages is both general in the sense that it is a general requirement informing the ordinary operation of the jurisdiction, but it is also specific in that its purpose in each case where required at least includes remedying the kinds of injuries actually considered by the court at the time of the interlocutory hearing and which were part of the comparative injuries being assessed.

We do not suggest, of course, that the purpose and the scope is limited to those that are actually contemplated and put before the Court, but it would at least include those that are actually contemplated and put before that court and are part of the comparative injuries being assessed.

EDELMAN J: I think you mean objectively contemplated by manifest words or conduct.

MS ROUGHLEY: Yes, yes. So then, if we turn back to European Bank at paragraph 16, their Honours embrace the observations of Justice Mason in Air Express:

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 your Honours have our submissions on purpose being general and specific:

and to identify the causal connection or standard of causal connection which is most appropriate –

Now, that then feeds into paragraph 17, of how a party seeking equity, i.e., to be protected from their part of the comparative injury:

is required to do equity –

on the other side, for the flipside of the coin. The last sentence of paragraph 17 is important, that:

Given its origin and application to varied circumstances in particular cases, the process of assessment of compensation cannot be constrained by a rigid formulation.

So, in other words, the scope of the undertaking – the scope of the promise – cannot be informed by what we say the respondents have attempted to do in this case and take the words “flow directly”, divide them up, treat “flow” as factual causation, “directly” as some words of limitation with some abstract constant meaning, and apply it in a sense of an abstract way to the Commonwealth.

Now, then we get to paragraph 18 and the reference to Justice Aickin’s decision in Air Express. But your Honours will see the invocation of Air Express is accompanied by footnote 43, which does not just refer to Justice Aickin; it also refers to a decision that I am also hoping your Honours have been provided with separately, which is R v Medicines Control Agency; Ex parte Smith & Nephew Pharmaceuticals Ltd (Primecrown Limited Intervening) [1999] RPC 705 at 714.

Whilst the Court referred to 714, part of what they said has regard to what is at the bottom of page 713. At the bottom of page 713 – this is following a reference to Smith v Day – it is said that there is a liberal approach – I am reading from lines 47:

a more liberal approach had been indicated by James L.J. in Graham v. Campbell –

and I would ask your Honours to read the quote. So, now we are on to the page that European Bank does refer to; and after referring at line 5 to:

A more liberal approach –

in another case, at line 13 we have:

The leading modern case –

Air Express – and we have Justice Aickin. It is from line 39 onwards that is particularly interesting, and here, quite determinative:

much sympathy with the view that the contract basis for assessment is or may be too narrow in some cases.

We would say, indicating that the scope of undertaking moulds to the context:

After all, even if the injunctor is no wrongdoer, as compared with the wholly wrongly assailed injunctee, he stands a notch down.

We would adopt that language of a “notch down” also in respect of third parties who are protected by the modern form of the usual undertaking as to damages. Hence there is the reference back to Lord Justice James and the “voluntary litigant” idea:

There is a lot to be said for the view that the paying party should pay for all the damage directly caused to the injunctee by the wrongful injunction – that he must take his victim as he finds him.

This has relevance to notice of contention 4, as well:

Of course if, once he knows of the injunction, the injunctee does not spell out to the injunctor any special circumstances causing direct but, to the injunctor, unforeseeable damage, he may not be allowed to recover for that damage. Equity would apt to blame an injunctee who stood by, letting the injunctor build up a liability on the cross‑undertaking of which he had no knowledge.

We would say equity treats both sides of the coin the same way.

EDELMAN J: It sounds a lot like Hadley v Baxendale.

MS ROUGHLEY: Yes.

EDELMAN J: That really is your submission, is it not, you are using the word “equity” quite loosely, but really to mean that it is a question of construction of the scope of the undertaking, but with some limits – whether you call them reasonable foreseeability – that cap indeterminate liability.

MS ROUGHLEY: Yes. And the flipside, if I can just go back to the flipside, is that, just like a equity might take a dim view of the injured innocent party who stands by, it would take a dim view of the voluntary litigant who gets the benefit of an injunction but did not tell the court, by the way, even though I am telling you this is this comparative injury to the Commonwealth, will later say, our undertaking does not protect them.

In fact, as your Honours have referred to, what was actually said to Justice Gyles went beyond that. What was said to Justice Gyles was something that expressly indicated the undertaking as to damages – that the Commonwealth was not here, but, of course, our undertaking as to damages is not limited to the parties.

Then, can I come back to European Bank – I am almost finished – and if we go to paragraphs 23 to 24, there, their Honours were dealing with the reasons of the Court of Appeal which had invoked the type of language found in other cases in very different circumstances and used words of limitation like “extrinsic”, “coincidental”, “supervening”. Your Honours will see paragraph 24, at the start of it:

These distinctions are of little assistance in a case such as the present.

Then in paragraph 25, there is criticism of one of the other members of the Court of Appeal who was too influenced by the idea of it being a device for risk allocation. That premise assumed too much. And hence, their Honours get to paragraph 29 ‑ ‑ ‑

GORDON A-CJ: They are the three questions.

MS ROUGHLEY: They are the three questions, and what your Honours will see is that, of those three questions: what is the loss; secondly, did it flow directly; and third, could it have been foreseen? There is not, like the trial judge did: what is the loss; did it flow; did it flow directly; and could it have been foreseen? We know that because at the end of the page on 442, within paragraph 29 their Honours say:

In the present case there was a finding by the primary judge, as indicated above, that the loss directly flowed from the order –

That finding “indicated above” can only be what appears at paragraphs 20 and 21 of European Bank. In 20, (a) is what was contemplated at the time, what was known – it is essentially a foreseeability question; (b) is the “but for” question; and (c) is the last question. There is nothing like the types of limitations that Sanofi has proposed at various stages throughout this litigation. Now, the reason I say “at various stages throughout this litigation” is because it actually becomes quite difficult to understand what the content of the limitation that the respondents actually urge this Court to adopt is.

Can I take your Honours to the propositions documents of the parties. I will start with the respondent’s proposition document. It is, relevantly, page 15 of that document. If I use the blue numbering in the middle, it is page 16. It is propositions 22 through to 26. At 22, we have:

“Directness” is a requirement –

Then in 23, we have that it captures “two concepts”: (a), flow in fact, and (b), some limitation. Proposition 24 is where your Honours will see what the limitation pressed in this Court is – is it that:

the event which occasions the loss –

actually be:

restrained by the injunction.

That is a very bold proposition. There is, in 24(a), perhaps an attempt to soften it, it:

does not mean that any interposed causal step defeats a claim.

But we are not sure which. Subsection (b), we do have a limitation that, at least where there is an event in the chain that involves, quote, “unrestricted choice”, that will engage the relevant limit. And, (c), applied in this case, it:

did not operate in relation to PBS listing at all, either regards Apotex or the Commonwealth.

and we have the two hurdles. Now, as I understood my learned friend, this morning, hurdle i, is no longer pressed, at least for directness, but hurdle ii is pressed. We have set out our competing propositions in the Commonwealth’s proposition document, beginning using the blue numbering in the middle of the page, at the bottom, page 30, with Commonwealth’s proposition 31. Based on the analysis of European Bank, we have made, 31 is established, it:

it is concerned with the practical, substantive effect of an injunction understood in all the circumstances relevant to its making and the giving of the contemporaneous undertaking as to damages.

In 32, that also follows:

Where loss occurs by reason of a chain of events consequent upon the making of an interlocutory order –

First, it is:

merely one “view” –

One needs to adopt what:

“is just and equitable, or fair and reasonable, in all the circumstances” –

Paragraph (b), the “evaluative judgment” is always considering:

“the nature of the interposed step and the circumstances more broadly, assessed having regard to the equitable rationale –

i.e., the purpose. And (c):

even if applied, does not –

and there are, in roman numerals (i) through to (iv), various expressions of the limitations that have been sought to be applied by the respondents at various stages. It seems to us that (iii) which is the one that is pressed in this Court by the respondents.

Can I then come to the hurdles. It seemed that significant emphasis was placed on the idea that there were unrestricted choices involved here. Paragraph [227] of your Honour Justice Jagot’s decision in Sigma was being relied upon. The Commonwealth’s loss is a very different situation from the circumstances that confronted your Honour Justice Jagot in Sigma. Apart from the matters your Honours have already heard, can I take your Honours to the primary judgment at paragraph 61.

What your Honours see from paragraphs 61 to 63 is how the Commonwealth price – i.e., the amount of subsidy paid by the Commonwealth – is set. Now, the Commonwealth is not someone who did not have a contract. The Commonwealth had a price agreement with, relevantly, two of the respondents, which set out the Commonwealth price – i.e., what is reflected in the ultimate subsidy – for their products:

The price agreed, until 30 September, was known as the AP2P (ie. the approved price to pharmacists) –

and that is because the Commonwealth pays the subsidy to pharmacists. Now, at 62, that the prices:

set in price agreements can be, and were, reduced by virtue of statutory provisions that did not require new agreements to be executed.

Paragraph 63 refers to the “three kinds” of price reductions that can happen. We have:

statutory price reductions, negotiated price reductions . . . and statutory price disclosure price reductions –

The point is that the contract that the Commonwealth already had, before we even get to Apotex’s listing, is it had a contract to subsidise clopidogrel, which is actually what it paid out money on in the real world, and the terms of that contracts were such that the price would be reduced in accordance with the operation of the National Health Act. That, relevantly, included the entry of competition which brought down the price.

What then follows from paragraphs 64 through to 76 is an explanation of how each of them worked. But your Honours have seen from Mr Gleeson’s submissions that Sanofi itself put forward a very plain terms explanation of it in the affidavit of Mr Lindsay given to Justice Gyles at the interlocutory hearing, which explained how the price would be affected.

BEECH‑JONES J: So, in this case, if Sanofi had not yet itself been listed, and that was some future thing off in the distance, you would see that it might be a bit closer to what you said was the position in Sigma at [227] – that is, it later went on, listed, and the Commonwealth said, if you had not restrained your competitor your listing price would have been lesser. You might be a bit closer.

MS ROUGHLEY: I can accept “a bit closer” – we say it is still not there, for reasons we put in our submissions, but we say ‑ ‑ ‑

BEECH‑JONES J: Yes. It does not matter.

MS ROUGHLEY: ‑ ‑ ‑ having a price agreement puts it beyond doubt in this case. Coming, then, to what was said to Justice Gyles, although your Honours have been taken to most of that transcript, could I just add references to ‑ ‑ ‑

GORDON A-CJ: This is where he is dealing with the Commonwealth – this is at page 519, or 23 of the transcript, in the book of further materials.

MS ROUGHLEY: Yes, your Honour, and the only addition ‑ ‑ ‑

GORDON A-CJ: Just so it is clear for the transcript, that is between lines 23 down to 32.

MS ROUGHLEY: Yes, thank you, your Honour. And the only addition I would make to that is that follows from page 516, line 5, Mr Bannon reading the affidavit of Mr Lindsay. There is a bit of interaction during most of page 516, but from line 40 down ‑ ‑ ‑

JAGOT J: What page are you looking at? I have found 519.

MS ROUGHLEY: Page 516, just three pages earlier.

JAGOT J: Okay.

MS ROUGHLEY: It actually makes 519 stronger. Page 516 is where Mr Bannon is reading Mr Lindsay, and he is summarising it for the judge in – again – plain English terms, to explain what will be the effect for the Commonwealth. It clearly says on page 517, line 22:

So we don’t have the F2 type price reduction problems at the moment.

i.e., our contract does not have that problem at the moment; we have not moved to formula E2, which is where you go as soon as there is competition and your price agreement with the Commonwealth is immediately reduced. So, it continues to be explained all by reference to Mr Lindsay’s affidavit. There is the interchange on 518, line 7, where his Honour Justice Gyles says:

how can you possibly stop them getting the listing –

There is that interchange. But then, we come back at the top of page 519, line 5:

Yes. And that continues over to 22.

He is back on Mr Lindsay’s affidavit, which is about whether, if there is a twelve and a half per cent price reduction, whether they can recover it. We finally get to the passage on 519 your Honour Justice Gordon referred to:

The government hasn’t applied to be a party –

Now, Mr Lindsay’s affidavit is transparent as to the savings the Commonwealth would make if Apotex lists on the PBS. So, can I then say that, on the terms of the undertaking, we rely on the analysis of the Full Court from paragraphs 17 to 32, which is a very useful and thorough recitation as to what happened before Justice Gyles, who said what, and how the injunction came to be ordered, the Apotex undertaking came to be given, and the security of $40 million by Sanofi also proffered.

When I refer to the last matter, the security, that is actually the one part of the orders that is left out from 17 to 32. So, nowhere in the Full Court’s reasons – or, actually, in the primary judge’s reasons – does it refer to paragraph 3 of the orders that were made that day and which do have the security. Your Honours will see that in further materials, volume 2, page 593.

If Sanofi’s argument about “flow directly” is right in respect of the Commonwealth, the logical consequence of it is that that offer of security and order for security found at page 594 was effectively worthless. And your Honours can make that finding because of what has been agreed in the propositions documents. I am sorry to jump around a little bit. If your Honours go to the Commonwealth’s propositions document, page 29, proposition 30(b), (c) and (d).

Even if one was just to construct this whole analysis by reference to the terms of the order and try to draw inferences from it – and we do not have to, because our learned friends have conceded that it is possible to have regard to the objective circumstances at the time and what was said – those orders themselves make plain that the chain of events that involved application for listing plus listing by the Minister is within the scope of the undertakings coverage.

GORDON A-CJ: Is that end of notice of contention 1?

MS ROUGHLEY: Save for this, we rely on the analysis of the Full Court, in particular paragraph 37 and the first sentence of 38. One part of the Full Court’s orders that I should indicate we do not rely on is paragraphs 41 to 43 and, to the extent it relies on those paragraphs, paragraphs 77 to 78, which we think proceeds on an incorrect form of logic that if you have two restraining orders both secured by the same undertaking as to damages, you should separately divide up the coverage of the undertaking as to damages. We do not accept that. If you have a package, you treat it as a package.

Then can I come to notice of contention 3. Mr Gleeson has given most of our submissions on this, that we think it is premature, and we remain of that view. I say that despite – everything that I have submitted this afternoon should make the answer on “flow directly” very obvious. At least the price disclosure price reduction losses were contemplated to Justice Gyles and would be within the concept of “flow directly”. There is a second part of notice of contention 3, which involves combination items, and my learned friend did not address your Honours on that at all. If your Honours do get to it, we have annotated their propositions document – because ours does not deal with the merits – with the findings of the primary judge that we would say are sufficient to satisfy the “flow directly” requirement.

The reason we maintain that it is premature is really from a duty to the court perspective. If the primary judge found that the Commonwealth’s losses stopped once Justice Gyles made final orders, that means that the entirety of losses that are the subject of notice of contention 3, which all are suffered after Justice Gyles granted final relief, are at the moment not within the quantum of loss that the primary judge has assessed would follow if the Commonwealth won on its grounds of appeal.

GORDON A-CJ: So, in relation to the PDPR, it is actually a response to their proposition 20, and then in relation to the culmination product claim, it is 21. That is your response to their propositions.

MS ROUGHLEY: Yes.

GORDON A-CJ: Thank you.

MS ROUGHLEY: We just struggle to see how your Honours would word the answer to notice of contention 3, if you are in favour of the Commonwealth. It is so conditional; it would have to say, if the Commonwealth is successful on a remitter in overturning the primary judge’s stopping of the loss such that losses after the date of the final injunction are recoverable, then any PBS losses after that date relating to the operation of the National Health Act and, in particular, the price disclosure price regime and the application to combination items, would have flowed directly. Now, that sounds far too conditional for your Honours to reach it.

Then, can I come to notice of contention 4. In substance the respondents’ submissions on this start at the wrong point; they start by looking at the character of the claimant. The Commonwealth says the proper starting point is the purpose of the equitable rule or principle in issue in the case. That, we would say, follows from what is said in European Bank. But there are two cases that our friends rely on in their submissions that would, we say, also support that. The two cases: the first is in volume 3 of the authorities, tab 10 ‑ ‑ ‑

GORDON A-CJ: What does this stand for – proposition 4?

MS ROUGHLEY: This is a case about confidentiality: John Fairfax & Sons Ltd. It is that when the Executive Government seeks the protection given by equity, the question is: what detriment does it need to show? And one looks at what the equitable principle has fashioned to protect. Justice Mason, at page 51, about point 8 of the page – page 380 of volume 3 – dealing with the equitable principle in issue there, says:

The equitable principle has been fashioned to protect the personal, private and proprietary interests of the citizen, not to protect the very different interests of the executive government.

Et cetera. If exactly the same logic is applied to the undertaking as to damages, our friends have accepted the reasoning of their Honours Justices Kenny and Nicholas on the stated case at paragraph 109, which is that the Commonwealth can be “any person”. That, we say, is the end of it, because the purpose is to protect comparative injury and not limited to injuries private persons can sustain.

The other case our friends rely on is Williams v Commonwealth, which is in volume 4 of the authorities, tab 21. I will not go to it other than to say the paragraphs they rely on, which are paragraphs 150 to 151, are talking about what is the purpose that:

The law of contract has been fashioned primarily to deal with –

and it is:

the interest of private parties, not those of the Executive Government. Where public moneys are involved, questions of contractual capacity are to be regarded “through different spectacles”.

If one looks at the purpose of the undertaking as to damages, and that the Commonwealth can be a person, it is difficult to imagine a circumstance where the injury the Commonwealth has suffered is not the expenditure of public moneys – that is, it does not have some private moneys that it could claim injury on.

Can I then come to notice of contention 7. Our primary proposition is this should not be entertained, but I will address the merits briefly. I will start with why not entertained. Can I do it by reference to our propositions document. Proposition 42, which is page 34 of that document, sets out all agreed facts of what has happened so far in respect of this issue.

As to 42(c), the submissions that were made by these parties, as well as other parties who raised the same question and heard the same case determined in the same stated case, they are included in the joint bundle of further materials, and whilst we are not asking your Honours to read it – they start at volume 3, page 1151 and run to volume 4, page 1311 – it shows how exhaustively this issue has been litigated by these very parties and considered by this Court. Special leave was refused on the papers, and it has not been the subject of a second special application. Additionally, in the Commonwealth’s proposition 43 ‑ ‑ ‑

EDELMAN J: Strictly, the respondent does have a right to raise it as a matter of a notice of contention. But is this a submission, effectively, that this ground of the notice of contention is an abuse of process?

MS ROUGHLEY: Can I deal with the first part – the “strictly” part? We are not sure that it does, actually, as a notice of contention. On our reading of rule 42.08.5 of the High Court Rules, that only allows a party to raise a point by notice of contention if the Full Court has erroneously decided or failed to have decided an issue that was put to it. On proposition 42, one can see it was never put to the Full Court below.

EDELMAN J: I am not sure notices of contention have ever been viewed that strictly under the Rules. There are many, many examples where notices of contention have been allowed where the point was not strictly put.

MS ROUGHLEY: If it is able to be done, either on a notice of contention or – if it had to be raised as a cross‑appeal point, they would need leave.

EDELMAN J: A second special leave application would immediately run into an abuse of process argument.

MS ROUGHLEY: Yes. Yes, we would embrace what your Honour has said, but in addition – or, probably, feeding into the abuse of process – are all the discretionary reasons of delay; there was another party involved in the question as well; that it has been fully litigated by the parties and it was not raised below. So, we would make that submission.

If the merits are to be considered, though, we also say that nothing new has been raised except to introduce the red herring. Can I go to the Therapeutic Goods Act, volume 2 of the joint book of authorities, and start with section 26N on page 163, of the authorities.

All that was new, as we understand it, is the introduction of this language in 26B, for 26B(1)(a) and (b), of an “innocent” springboarder, and for (b), a risk‑taker. We would wholly reject that as appropriate shorthand. Let me explain why. If one starts with 26B(1A), what this is doing is, where a generic is coming along for registration on the TGA of its product that it says it bio‑equivalent to something already on the ARTG – so, something that can already be legally imported into Australia for supply to consumers – that what they need to satisfy, are (1A)(b)(i), the “safety or efficacy” of those therapeutic goods. And what they can do is they can rely on information that another person has submitted to the Secretary – i.e., the patentee’s information – the patentee who did all the work.

So, what 26B(1) certificates are doing is, if a generic is going to do that, (a) means that if they do not think they would infringe a valid claim on a patent, they do not have to give notice to the patentee – they do not have give notice to anyone of what they are trying to do. It is Apotex who did that. That is the risk‑taking. If there is a patent, and a generic is saying, I think that patent is invalid, I am going to apply for therapeutic goods registration and I am not going to tell the patentee what I am doing, it is exactly what Apotex was trying to do, strategically – get all its ducks in order before it gave any notice to Sanofi that it was looking to enter the market and to avoid any defensive strategy by Sanofi that they would seek to bulk‑sell any drugs, get all of their strategies in order, to meet generic competition.

It is a 26B(1)(b) certificate that is the non‑risk‑taking approach, because if you do that, you say a patent has been granted, you propose to market it, and, (iii), you have given notice to the patentee, but you do not make any commitment one way or the other whether it would infringe a valid patent.

JAGOT J: Which certificate did Apotex give? I got completely lost in the submissions. It gave a (b) certificate?

MS ROUGHLEY: No, it gave the (a).

JAGOT J: It gave the (a) – 26B(1)(a). How does it give that?

MS ROUGHLEY: Because it took the view that the patent was invalid, and 26B(1)(a) ‑ ‑ ‑

JAGOT J: I see:

that would infringe a valid claim of a patent –

I have got it.

MS ROUGHLEY: A valid patent – yes. If your Honour wants the finding on the certificate given, it is an agreed proposition: Commonwealth proposition 43A.

JAGOT J: Yes.

BEECH‑JONES J: You described that as “risky”, because they took the risk that they were wrong about whether it was valid.

MS ROUGHLEY: Yes. And once one understands that – that the whole logic of our friends’ submissions has it around the wrong way – everything that was said about 26C and 26D falls away, because if one has given the (1)(a) certificate, that person never gets the benefit of the section 26D(5) remedies, including that you might be able to:

pursuant to the usual undertaking –

in 26D(5)(a)(i):

an account of the gross profits –

It is only if you have done the less risky thing and given the patentee notice that you have applied for registration, that you open up the possibilities that you can get the enhanced protection of the remedies in 26D(5).

In the Full Court’s stated case, there is, we would submit, compelling analysis from 92 through to 113 – it is not that many paragraphs, but it is compelling analysis of why 26D is giving remedies that enhance the position that would be available under the usual undertaking in circumstances of somebody – I will just use this word pejoratively – doing the right thing and giving notice, and ‑ ‑ ‑

JAGOT J: This is the Commonwealth – which Full Court are we looking at? Not the one below – the other one?

MS ROUGHLEY: No, the reasons on the stated case, your Honours will find that in volume 6 of the authorities, tab 31, page 1471.

GORDON A-CJ: It is [2015] FCAFC 172; 237 FCR 483.

MS ROUGHLEY: Those reasons, explaining why this is a different and extended relief, why it is not inconsistent with the maintenance of the
court’s powers under the usual undertaking in the ordinary circumstances and why this is not one of those situations where there is some code by the Commonwealth’s Parliament – because the general law is so confusing, there just needs to be a clear statement in a Commonwealth statute – those are all matters addressed.

Last, can I also refer to paragraph 113 of the Full Court’s reasons, which deal with purpose. It seems to be faintly suggested that because this has come from the Free Trade Agreement with America, limiting the Commonwealth’s remedies to claim under the usual undertaking as to damages somehow followed. It is a very large proposition to say that in bargaining with a foreign country, the Commonwealth gave away the rights it would have in a non‑fallback situation to protect the public purse.

Those are the submissions on the notice of contention.

GORDON A-CJ: Thank you, Ms Roughley. Mr Gleeson.

MR GLEESON: Your Honours, it is late in the day, but everyone is fresh.

GORDON A-CJ: I assume that you have agreed with Mr Sheahan as to the division up?

MR GLEESON: Yes, we have.

GORDON A-CJ: Thank you.

MR GLEESON: The first point. Your Honour Justice Steward asked what degree of commitment needs to be proven in respect to the decision‑maker in the counterfactual. We can start with the negative. There is no onus to negative every possible event that might have occurred in the counterfactual, and there is no onus to negative every possible ambiguity that might arise from a document.

What is necessary is to look at the commitment as proven, and those matters which would have occurred in the counterfactual and how they might have altered that commitment. A way of expressing that here is that in the case where you have the degree of commitment shown by the unqualified statements to the court, absent Sanofi identifying some event which would have occurred in the 28 days and would have undermined that commitment, the claimant should succeed. I say 28 days because, while the trial judge thought there was four to five and a half months, it seems now accepted correctly by Sanofi that the 28 days was a pretty critical decision point when they either had to stump up the money or beg the court to be relieved of the undertaking they had given.

Secondly, I want to deal with where the case has reached on the significance of Mr Catterns’ statements and Mr Millichamp’s sworn evidence. We have provided your Honours’ associates with the page you were not given this morning, which is 975 of the transcript of 26 September 2017, where Mr Brereton between lines 5 to 10, with more succinctness than I have, put the case. His Honour at that point was alive, in lines 10 to 15, to the additional point that it is Mr Catterns on Mr Millichamp’s sworn evidence making those statements in the presence of Mr Chalk who, as you have seen from those critical emails in June, was one of the people on the relevant privileged communications. Now, that was the case put and fortunately, at least, you have no submission from Sanofi impugning Mr Catterns or Mr Chalk.

So, the question then is what did Sanofi ask his Honour to do with this submission, and you have that in the transcript handed up this morning at pages 1111, line 45 to 1112, line 45. On that day, 27 September 2017, it was still very much alive in his Honour’s mind that this was an absolutely central matter that had to be grappled with, and he came back to it and said:

what you have here is senior counsel telling the court they’re going to launch.

With Mr Chalk:

sitting there and Mr Millichamp in court . . . what am I to make of that?

That was, we would submit, one of the most central battlegrounds at the trial because this was our prima facie case at its height.

What you were shown this morning was a difficult set of answers from Mr Sheahan where he is referring to paragraph 38 of Millichamp – that is the key paragraph – and Mr Sheahan is saying he has a slightly complicated answer. Well, that is a kind way of describing what follows. He is trying to have a little bit both ways. He is trying to say, I am not really impugning Mr Millichamp, but on the other hand I am, because – line 30 – what he told was “an incomplete picture”.

Now, that does not grapple with the real challenge for Sanofi because there are only two possibilities here. The first is to accept that Catterns and Millichamp were telling the court truthfully that Apotex had formed a considered intent to list and launch based on all matters known and anticipated, or Millichamp was giving false evidence to the court and was misleading his counsel.

I put it that way because if Sanofi was pressing the deferred decision theory, that is a theory whereby Millichamp and Catterns should have said this to the court: some of us are keen to list and launch, but we have to tell you truthfully, what will happen is, if we succeed in defeating the injunction, Dr Sherman will go through a further round of analysis of the risk and reward, and he feels perfectly entitled at that point to say yes or no. That is the only way in which the deferred decision theory could be honestly communicated to the court.

Mr Sheahan at this page does not put it that squarely, and the reason he cannot put it that squarely is that he never put to Mr Millichamp that he was being untruthful in his evidence and his instructions. That is the problem that Sanofi has in this case. You will see in line 25 ‑ ‑ ‑

EDELMAN J: Unless there is an intermediate position, which may or may not be what was found by the trial judge, which is that Mr Millichamp did not deliberately mislead the court, which – I think there is an express finding to that effect.

MR GLEESON: Yes, there is – 332, 338.

EDELMAN J: But they may have been proceeding on the basis that he did unintentionally mislead the court in the respect of conveying the impression that he was the decision‑maker.

MR GLEESON: There is no finding that he unintentionally misled the court in respect to the critical matter, which is the proposition being put: Barry has not yet made a decision. So, it is one question whether a person should have said, although I am the MD in Australia, of course it is ultimately Dr Sherman’s company. That is one thing. But that does not get you to deferred decision.

For deferred decision, you have to put to Millichamp, what you needed to tell Justice Gyles was, Barry is keeping all of his options open and he wants to wait and see the result, he wants to read your decisions, your reasons, and when he does that he will go through the approval process he regards as appropriate. That is what had to be told if the deferred decision theory is to stand, and that had to be put to Millichamp. Now, what has happened ‑ ‑ ‑

BEECH-JONES J: May I ask, do you put that so high because it is only if you get a decision that watered down that the absence of Dr Sherman from the witness box could become significant, or is at least part of it?

MR GLEESON: It is part of that, but in fact, even if you took Sanofi’s case at its highest – let us assume what Mr Sheahan says is correct, namely, they have gone through a process in June, looks like it is full steam ahead, but when you get the result, you go back to Barry and say, just checking in, are you still happy with it? That is a version of his case. Even if that was what you carried into the counterfactual, you would then still have to ask the question, what had Sanofi pointed to which suggested that in the 28‑day period there was a realistic likelihood that Barry would change his mind? And that is our submission. They pointed to no event in the 28‑day period likely to lead to Barry even considering changing his mind.

So, in one sense, while this is an absolutely central part of the case, if we have ultimately lost for are not calling Barry, when your Honour Justice Steward, I think, asked the question this morning, what could he have said that might have made a difference, the answer you got was, if he turned up with the typical hindsight evidence, thinking back 10 years ago, had I been asked I think I would have stuck to my guns, or not, that evidence would be of minimal weight for the reasons your Honour Justice Jagot pointed out in Sigma. The evidence that it was suggested he could have given is objective evidence: these were my decision‑making parameters in 2007.

The answer to that is, we proved those decision‑making parameters through the email chain where February, April, June, August, September, we saw Barry being copied in and agreeing to go ahead. So, we would put that there was no evidentiary deficiency that any realistic evidence from Sherman needed to fill.

STEWARD J: What I was going to suggest to you, Mr Gleeson, that this search for a final decision might be a furphy in the context of a privately‑owned company such as this. No doubt, inferentially, Dr Sherman reserves, at all times, the right and option as the controlling mind to do something different.

MR GLEESON: Yes.

STEWARD J: But you might say it is sufficient that what we can from the evidence is that a decision was made to engage in a strategy to force this matter into court.

MR GLEESON: Yes.

STEWARD J: And part of that strategy required their making a commitment – a representation – to their competitor and statements to the court that they are going to launch at risk unless stopped. And that may have been for the primary motivation of securing the undertaking – maybe so – but it still sufficient for your purposes to show that that is what they were going to do, that is what they said to the world they were going to do.

MR GLEESON: That is what they said to the world they were going to do. That is sufficient to discharge our evidentiary onus. Your Honour, with respect, is correct. Private company, not public company; Barry’s money – we agree with Mr Sheahan. So, he is the person who could change tack at some point in time.

STEWARD J: Inferentially, all of what is happening in court, it is all done with Sherman’s knowledge and blessing, because he is micro‑managing everything.

MR GLEESON: He is micro‑managing ‑ ‑ ‑

STEWARD J: That is why they keep on asking him to say, are you really sure?

MR GLEESON: Yes. And he has approved the $2 million legal expenditure on the whole case – but that includes fighting the interlocutory ‑ ‑ ‑

STEWARD J: That is cheap for the Sydney Bar.

MR GLEESON: Mr Catterns is very modest – was a modest charge, your Honour. Indeed, down the track, Justice Gyles ordered the cost of the interlocutory against Apotex, because he said, you lost. So, there is all of that. So, we do not need to overstate the degree of finality of the decision. We do not need to say it is irreversible. What we need to say is that that is a formed, considered decision, honestly communicated to the court, and that was our case, absent something been shown in that 28‑day period which, realistically, might have caused Barry to go the other way. That is the evidentiary onus on Sanofi – and they still have not told you what it was. They have said, here are some possibilities, but they still have not told you what might seriously have caused Barry to change his mind.

Your Honour, the third matter is this: when asked this morning whether Mr Sheahan supported the theory of gaming, or goading, or other improper behaviour, he said, candidly, they did not ask for any such finding. He did not put it in those terms to any witness. We submit the Full Court, at the three most offensive paragraphs – which are 90, 129 and 134 – went well beyond its remitting that sort of improper speculation.

Your Honours, the fourth matter, then, is to summarise what we say are the facts which would be carried through into the counterfactual. They are as follows: first, Apotex, on Sherman’s instructions, made a statement of truthful intent to list and launch to the court which could be understood as a considered position based on known and anticipated circumstances. That is the best evidence in the counterfactual. But we say, secondly, what is proven is that Apotex was prepared to back its statements by the offer of $50 million security which would have to be delivered within 28 days at grave peril of being asked to be relieved from the undertaking.

Thirdly, that Apotex, well‑advised by its lawyers, would have understood, in making that offer, that it could not expect to be relieved from it unless it could show a true material change in circumstances. The fourth fact is that the degree of commitment of Apotex to what it told the court can actually be seen in the reasons of Justice Gyles himself, which are in volume 6 of the authorities, at tab 36. That is page 1589.

GORDON A-CJ: What paragraph number are you on, sorry?

MR GLEESON: It is page 1589, tab 36. We have seen paragraph [7]. The balance of convenience is addressed between [12] and [17], but particularly the purple passage in the middle of [15] – his Honour refers to:

the offer on the part of GenRx to adequately secure a very substantial amount to cover any reasonable likely assessment of damages and other undertakings –

His Honour was clearly treating that as an offer of undertakings that would be honoured, not an offer that Apotex would later decide whether it wished to honour.

BEECH-JONES J: Sorry, are you in paragraph [15]?

MR GLEESON: Paragraph [15], so he is treating the $50 million offer exactly as it should be – a serious offer to the court, not part of buying an option, which is one way Mr Sheahan put it. And I do say on that that, the notion of a party treating a court as someone you can buy an option from, by running a case and then telling the court afterwards what you now think, I do put is disgraceful conduct – and that never occurred. But you see in the middle of that paragraph:

I am much influenced by the effects of disturbing the status quo, particularly as it relates to the operation of the PBS.

That is the central part of the balance of convenience. So, the reason Justice Gyles in the end was persuaded was that if he did not grant this undertaking, the status quo would be disturbed, because Apotex would list and launch.

Now, any counsel going back within the 28 days saying, we wish to be relieved from the undertaking, not because of material change in circumstance but because we really had not yet made up our mind, would be not looked on kindly by his Honour, who would say, you have misled me, and you have wasted a day of the court’s time. There will at least be indemnity costs, and there may well be professional sanctions for wasting the court’s time. What happened here in the reasons, in the actual world, can be taken into account as a matter in the counterfactual world in the sense of confirming the seriousness of the intent.

The fifth fact to be carried forward is the refusal to accept the undertaking that was on offer. I do not think Mr Sheahan has really offered you a submission as to how that could be consistent with his case theory. Why do you reject the undertaking when it is on offer, if you are thinking of going back and reconsidering your decision-making process? It would be fraught with risk to engage in that form of gaming, because if you come back to the court, and say, I have now done a further risk assessment, nothing material has changed, but I now think it is too risky, I wish to be relieved from my undertaking, but, your Honour, what I would now like is to be injuncted with that undertaking as to damages that I told you last week was not good enough for me. Can you imagine putting that to Justice Gyles, or any equity judge?

Of course, what the judge would immediately say, is, hold on, Mr X or Ms X, you told the court one thing last week, what you are telling me today is your client’s intention – do you intend to list or launch? And in this scenario, the honest answer would be, we do not intend to list and launch, because it is too risky. And the second that is done, if that is taken to be a truthful statement, the need for the injunction disappears and the possibility of the undertaking disappears. Now, that is the sort of reality that Apotex would have been facing, had it been even contemplating the strategy that is involved in the deferred risk theory.

In that vein, your Honour Justice Beech‑Jones asked, has Sanofi pointed to any document where Barry was getting cold feet? The candid answer was, there is no such document. We know he did not want to spend money which would be unnecessary if they lost the injunction – that is perfect common sense. But there is not a single document where there is a suggestion that Barry was getting cold feet or wanting to reconsider his decision‑making.

The next topic, your Honours, is the internal emails of June. Fortunately, we now agree on the chronology and the timing. Can I indicate where the evidence has reached on the progression of that timing by reference to the chronology and volume 1. The sequence is pages 136 to 137 – which is item 19 in the chronology – it is the plan for which Millichamp seeks approval.

The second step is page 142, which is Kay asking for the re‑confirmation from Sherman, making very clear the plan is to list and launch if not injuncted. The third step is pages 144 to 145, starting at the bottom with that email from Mr Kay, and then a series of redacted communications, importantly involving Ivor Hughes, the Canadian lawyer, and Peter Chalk, the Australian lawyer in charge of the proceedings. While we do not know what is in them, we do know on page 144, in the middle, that Barry has decided:

We will stay with bisulfate in Australia.

That is the answer to the question at page 142, and it is evidence that Barry wants to get on the market as soon as possible, rather than develop a different salt which would cause delay. Then, the top of 144 is the critical request from Kay to Sherman for confirmation of the two topics your Honour Justice Gordon identified, one “revocation”; two, “launch at risk”.

In terms of the answer, as your Honour pointed out, at the top of 144 there is one version of the answer which came at 4.44 am Sydney time, and that same redacted answer is found at the top of page 149, the 14.44 Tuesday time is the 4.44 am Wednesday Sydney – and that is sent on, bottom of 148, at 5.12 am on the Wednesday, to the same group of people. And that same document is found at the bottom of 152, top of 153. So, the parties seem to agree that it was that communication, 4.44 am and/or 5.12 am, that contained the instruction.

GORDON A-CJ: Sorry, just stop – and that instruction is completely and fully redacted?

MR GLEESON: Yes. Then we have three pieces of evidence of what was in that instruction. The first piece of evidence in time is the “game on” email, page 152. Once you dismiss the Full Court’s speculation that “game on” is playing a trick on Sanofi and the court – which Mr Sheahan has correctly said he never ran – the obvious inference of “game on” is, you may go ahead, Mr Millichamp, with the plan that you have described in full at page 136, and Mr Kay had decided, summarised at 142. That is, the two steps to the plan: revoke and launch at risk.

GORDON A-CJ: Why would the second step require to be the subject of privilege?

MR GLEESON: Your Honour, I cannot answer why Apotex has made these claims. What I can say is ‑ ‑ ‑

GORDON A-CJ: You are asking us to infer the obvious inference is going ahead with both limbs at plan, and the instructions in a fully redacted email. I just do not understand why you would have that instruction – the subject of a privilege claim – if it was intended to deal with something which ‑ ‑ ‑

MR GLEESON: It has been treated by them, I can only infer, as a composite strategy, which was the way it was presented. The question is ‑ ‑ ‑

STEWARD J: One inference is that part of the plan was, we are going to force this into court.

MR GLEESON: We are going to force it into court, because the plan had all been laid out: we threaten, if they do not injunct us, we launch; if they do seek to injunct us, we fight it out; if we win, we launch; if we lose, we do not launch. So, it is being treated as a composite. That is confirmed by the immediate one above. So, has Sanofi been notified? We know what they were notified of. What they were notified of, when it came to September – page 234 – is the strategy; we are moving for revocation, we are planning to launch in the near future.

That is the first piece of evidence of three pieces of evidence of how this communication was understood. In terms of cross‑examination, Mr Sheahan has correctly confirmed he never put any question to Mr Millichamp on what “game on” meant and he never put to him that the game was to revoke but not launch at risk or that the game was any different to that which Millichamp was seeking approval for. The second form of response to it is page 148:

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

When it is read in the context of the three emails, it is clearly open to the instruction: we go ahead, we follow the plan; of course, Barry wants to be kept in the loop, and ultimately it is Barry’s company, but have our authority to execute the plan.

At the top of the page, Mr Hass, who is the tablets man, interprets it that way. He now wants to know exactly when there is going to be a launch date. That is exactly how he understand it. Not that it is a plan only to revoke not at risk, because if that were the plan it would be irrelevant to Mr Haas. So, when you read that email in that context, it is consistent with that. Then, the third piece of evidence comes from the question at page 160 from Mr Haas:

Is Barry in the loop –

And he is asking, as your Honour Justice Jagot suggested, with his production hat on. That is in response to the

as per instructions from Barry –

The “as per instructions” means what it says. Sanofi really has no answer to paragraph 3 of the “as per instructions”, which is, we will launch if we defeat the injunction. Once one puts those three responses together, it is tolerably clear what the inference is. Then, to the extent Mr Haas was unclear because of his production hat on, the answer was given at page 166. Millichamp clears up the ambiguity: as soon as we avoid the injunction, then I need stock.

When one puts those four answers together, and then puts them in the context of everything that happened as the plan unfolded, the conclusion is probably clear. Now, I indicated Mr Sheahan did not cross‑examine on the “game on” email, and on the “as per instructions from Barry” email – that is page 160 – the only cross‑examination appears to be at page ‑ ‑ ‑

GORDON A-CJ: Is this in relation to the “game on” or “as per instructions from Barry”?

MR GLEESON: This is “as per instructions from Barry”, and in particular paragraph 3. So, it is in response to page ‑ ‑ ‑

GORDON A‑CJ: Page 156?

MR GLEESON: Yes. At page 1499, of volume 4.

JAGOT J: Volume 4, thank you.

MR GLEESON: Lines 15 to 25, he is asked about where the instructions came from, and this is where the memory point comes in. Millichamp honestly says, well, I remember February but there may be interim ones, I cannot remember – well, that is June. Then he asked about it, paragraph 3:

If we are successful –

That is the critical one, and what is put to him is a diverting irrelevance: you have not addressed a different possibility that Sanofi might not apply for an injunction. There are some attempts to say, well, that is something he has not thought about. So, the very thing that is not done in the cross‑examination is to say, well, when you recorded paragraph 3, the critical one, “as per instructions from Barry”, you did not mean what you said.

Your Honours, the second‑last topic is the risk/reward analysis of 2007, 2008 and 2009. You heard a long explanation after lunch which in part accepted that the submission you were given this morning was wrong. What obviously happened, if you read those four or five pages of the cross‑examination, was that Millichamp got confused because Mr Sheahan was darting between the 2008 document, which had the $166 million figure in it, and the 2007 period where he never showed the witness a document in the order of $150 million, and there is no such document anywhere in the record. There might be criticism for the way the critical question was framed, because if it was trying to get him to agree there was a missing document of 2007, around the $150 million figure, it ought to have been far clearer.

In any event, you saw the re‑examination. It was completely cleared up by Mr Brereton’s question, that there was a confusion. So, there is no finding of fact that the amount of 150 was known or considered in 2007 from the primary judge. The relevant paragraphs are 312 and following in the judgment, and your Honours should, with respect, dismiss that submission entirely. What that leaves is 2008 and, as I put in chief, undoubtedly in 2008 they are comparing upsides not quite as good as 2007, because there is a third scenario, and a downside which is now bigger because they are now looking over a longer period.

The critical issue never addressed by Mr Sheahan is the 2008 question was not the counterfactual question of 2007. Mr Kay was wondering, given we have now been held off the market for a number of months, if an undertaking to damages was on offer as part of an injunction, would we be better off taking it than not? That is not evidence in the counterfactual in 2007, which is if no undertaking to damages is on offer, would I risk at launch or not. Apart from that, I have made my submissions in chief as to why the risk/reward assessment in 2008 is not ‑ ‑ ‑

GORDON A-CJ: You say it is irrelevant.

MR GLEESON: It is irrelevant, yes. Your Honours, the final question is this. Your Honour Justice Gordon asked me yesterday whether in a sense we have abandoned our Ansett point, and whether we are now just in evidentiary onus, or whether there is anything deeper in what we are trying to put.

We submit that the three‑step analysis, while not every judgment needs to be written that way, what it does do is crystallise a degree of rigor which is appropriate for the undertaking as to damages, and it is appropriate in allowing the court to look at what is the correct counterfactual, what facts from the real world carry through to the counterfactual – and, if left unchallenged, would lead to success for the claimant – and on the other hand what facts from the counterfactual world has the party that got this injunction – wrongly – managed to prove, which could be sufficient to establish the loss would have been suffered absent any injunction.

We think that the passage we have cited from Purkess v Crittenden which applies that approach in the context of tort – where one is dealing with past hypothetical facts – is exactly that which Justice Mason and Justice Stephen – including on page 318 that I did not refer to yesterday – were advancing.

Your Honours, in terms of re‑opening it, I was confused yesterday because I saw Justice Murphy’s name on the side of the CLR. It appears that his Honour sat in the hearing but did not deliver a judgment.

BEECH‑JONES J: I think that is true of Justice Wilson, too. They went from seven to five at some point.

MR GLEESON: Yes, that is what confused me. So, I think the status of it is in fact four judges sat in the Full Court, only two judges ventured on this question of onus and how one deals with the principle – that is Justices Mason and Stephen. For Justice Barwick, it was straightforward, he just approved Justice Aickin. Justice Gibbs said what he said. So, really, there was no decision of the Court against the approach we are taking. The matter is before your Honours to identify the correct approach on this question.

GORDON A-CJ: Have you altered your position from yesterday that it is a prism at best?

MR GLEESON: Yes. I am where I started, your Honour.

GORDON A-CJ: Does that mean you are back to where you were in your notice of appeal?

MR GLEESON: Yes.

GORDON A-CJ: I see.

MR GLEESON: And our final submission on Ansett was there were some comments this morning about the lack of evidence from the decision‑maker and whether that was a parallel to our case. The two critical differences in the facts between us and Ansett – apart from the fact that it was a government decision‑maker, where there was at least a question
in 1981 whether as soon as you are sued in court, you would never contemplate carrying through your intention without an injunction – now, whether governments behave that way these days, I am not sure – but that is a government decision‑maker question, and of course that is irrelevant to a commercial actor.

The other most critical thing is that the only evidence of intention was the statement in Parliament, which may have a privilege problem, but there was a letter outside Parliament to the same effect. That statement of intention was made in advance of the injunction being sought. And there was simply no evidence of two things – no evidence that the Minister had contemplated the possibility of an injunction and had planned a strategy for how to respond to it, and then no evidence that after the injunction was sought, the Minister had expressed any position to the court as to what it would do if not injuncted.

That is the reason why the decision‑maker’s intentions were regarded as speculation and that created the evidentiary onus. What we have, contrary to that, is the decision‑maker forming an intention about the counterfactual in advance and then telling the court of that intention on the injunction suit. Then what do you have from Sanofi to say in the 28‑day period something different would have happened?

May it please the Court, they are our submissions.

GORDON A-CJ: Mr Sheahan, anything in reply?

MR SHEAHAN: Just a brief point on notice of contention 1, just to clarify something that may not need clarifying. The orders of Justice Gyles at page 594, the security to be provided by my client was only for Apotex. That is clear from the last words of paragraph 3 of the order – made no provision for the position of the Commonwealth.

On notice of contention 7, the Commonwealth’s position involves latching onto our metaphorical language of a risky springboarder, which is fair enough. But the point of this bifurcation of parties is not about looking at who is the bigger risk‑taker in truth. The innocent – we have called them innocent – person who can make out a certificate they are acting in good faith and on reasonable grounds, do not believe they are infringing a patent, they get the benefit of being under section 26C. Being under 26C is a benefit because they are not required to give notice to the patentee.

Section 26C imposes no burdens at all on the person who gives a certificate under it. They are left free. All the burdens in the provisions of 26C are imposed on the patentee. That is fair enough in a context where, on the hypothesis, the springboarder here can give the certificate of, as it
were, innocence. My learned friends quite rightly say you can be charged if you give a false certificate. But subsections (3), (4) and (5) are all putting burdens on the patentee – you cannot give a false certificate.

Now, the position under 26D is different. Section 26D is dealing with a person who cannot say that they are acting in good faith and innocently, and they must give notice to the patentee. The consequences of giving notice to the patentee, it means that there is much more likely to be a contest, especially given that it is a notice from someone who cannot say in good faith that they are not infringing.

What the section then goes on to do is elaborately regulate that likely contest, including as to parties. So, in 26D(2), notice has to be given to the Attorney‑General, and under subsection (3)

The Attorney‑General of the Commonwealth shall be deemed to be a party –

Then in (4) and (5), elaborate provision for the remedies that are available in this very likely set of proceedings. Those remedies are dealt with in language that, not merely of the perceptions about it, but by virtue of the words “pursuant to the usual undertaking as to damages” in the chapeau to subparagraph (5), appear to be intended to be exhaustive. It makes sense that they are exhaustive of the rights of a patentee and the Commonwealth in the circumstances of someone who is springboarding, but cannot say that they are doing so in good faith without a belief that they are going to be infringing a patent.

The person who can do that in good faith gets the benefit of not having to give notice to the patentee, and, save the penalty for a false certificate, all the burdens under 26C are imposed on the patentee. In other words, however, verbally, one wants to think about this, substantively, the distinction for which we contend is correct, and the two sections create and operate differently by reference to whether one can give a certificate of innocence, as we call it, and the remedial provisions in 26D make no sense if that distinction is collapsed by letting someone under 26D still have all the remedies that are available to the 26C innocent springboarder as well as additional remedies under 26D.

Those are our submissions, your Honours.

GORDON A-CJ: Thank you, Mr Sheahan. The Court will reserve its decision in this matter and otherwise adjourns to next Tuesday, 10 September, in Hobart. Thank you.

AT 4.07 PM THE MATTER WAS ADJOURNED