Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) - [2023] FCAFC 97

FEDERAL COURT OF AUSTRALIA
Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97

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

File number: NSD 586 of 2020

Judgment of: BESANKO, PERRAM AND YATES JJ

Date of judgment: 26 June 2023

Catchwords: PATENTS – where listing of generic drug on Pharmaceutical Benefits Scheme (‘PBS’) reduces listing price and Commonwealth subsidy of non-generic form of drug – where Respondent held patent for clopidogrel – where interlocutory injunction obtained restraining generic supplier from entering market with generic clopidogrel – where generic supplier undertook not to seek PBS listing – where Respondent undertook to compensate persons adversely affected by injunction – where Respondent’s patent subsequently found invalid – where Commonwealth seeks recovery of additional subsidies provided to Respondent due to non-listing of generic clopidogrel – where Respondent’s patent subsequently found invalid – whether generic supplier would have sought PBS listing if injunction not granted – whether trial judge overlooked material evidence – whether trial judge incorrectly drew Jones v Dunkel inference against Commonwealth – whether delay in delivering judgment more readily establishes error in trial judge’s reasons concerning credit of witness and overlooked evidence – whether Commonwealth’s claimed loss flows directly from injunction

Legislation:
National Health Act 1953 (Cth) ss 99AEB, 99AEH(2)

Trade Practices Act 1974 (Cth) ss 52, 82

Cases cited:
AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503

Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249

Australian Securities and Investments Commission v Hellicar [2012] HCA 17; 247 CLR 345

Berry v CCL Secure Pty Ltd [2020] HCA 27; 271 CLR 151

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

Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50

Douglass v Bullen (1913) 12 DLR 652

European Bank Ltd v Evans [2010] HCA 6; 240 CLR 432

Ex parte Hall, in re Wood (1883) 23 Ch D 644

Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; 140 FCR 17

GenRx Pty Ltd v Sanofi-Aventis [2007] FCA 1485

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640

Jones v Dunkel (1959) 101 CLR 298

Palmer Bruyn & Parker v Parsons [2001] HCA 69; 208 CLR 388

Purkess v Crittenden (1965) 114 CLR 164

Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716

Schlesinger v Bedford (1893) 9 TLR 370 (CA)

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8

Smith New Court Securities Ltd v Citibank NA [1997] AC 254

Smith v Day (1882) 21 Ch D 421

Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 3) [2012] FCA504; 290 ALR 263

Warner-Lambert Company LLC v Apotex Pty Ltd [2017] FCAFC 58; 249 FCR 17

Wyzenbeek v Australasian Marine Imports Pty Ltd [2019] FCAFC 167; 272 FCR 373

Division: General Division

Registry: New South Wales

National Practice Area: Intellectual Property

Sub-area: Patents and associated Statutes

Number of paragraphs: 392

Date of last submissions: 4 February 2021

Date of hearing: 16-19, 22-24 February 2021

Counsel for the Appellant: Mr J Gleeson SC, Dr B Kremer and Ms F Roughley

Solicitor for the Appellant: Corrs Chambers Westgarth

Counsel for the Respondents: Mr J C Sheahan QC, Mr J J Hutton and Mr S Fitzpatrick

Solicitor for the Respondents: Jones Day

ORDERS

NSD 586 of 2020

BETWEEN:
COMMONWEALTH OF AUSTRALIA

Appellant

AND:
SANOFI (FORMERLY SANOFI-AVENTIS)

First Respondent

SANOFI-AVENTIS US LLC

Second Respondent

BRISTOL-MYERS SQUIBB INVESTCO LLC

Third Respondent

ORDER MADE BY:

BESANKO, PERRAM AND YATES JJ

DATE OF ORDER:

26 JUNE 2023

THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The Appellant pay the costs of the Respondent to the appeal as taxed, assessed or agreed.

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

REASONS FOR JUDGMENT
THE COURT:
INTRODUCTION

Clopidogrel is a medication which inhibits the formation of blood clots and is usually prescribed to those who have suffered, or are at risk of suffering, a heart attack or stroke. Material before the trial judge indicated that revenue from worldwide annual sales of clopidogrel exceeded US$1 billion. In Australia at the times relevant to this litigation, clopidogrel was supplied in tablet form under the brand name ‘Plavix’ by Sanofi Australia Pty Ltd and under the name ‘Iscover’ by Bristol-Myers Squibb Australia Pty Ltd (‘BMS’). As the parties did in their submissions, we will refer to the Respondents to this appeal together as ‘Sanofi’. Clopidogrel is the non-proprietary name for the dextro-rotatory enantiomer of methyl alpha-5 (4,5,6,7-tetrahyrdo (3,2-c) thieno pyridyl) (2-chlorophenyl)-acetate.
Both Plavix and Iscover are listed on the Pharmaceutical Benefits Scheme (‘PBS’) and have been since 1999. The usual effect of being listed on the PBS is that a pharmacist who sells the drug receives a substantial subsidy from the Commonwealth. The listing on the PBS of a generic version of a drug results in a variety of reductions in the extent of that subsidy, including an automatic 12.5% reduction in the listed price of the drug.
In the present litigation, the Commonwealth seeks to recover from Sanofi the loss it claims to have suffered on the non-triggering of price reductions for clopidogrel after Sanofi successfully prevented the entry of a generic version of clopidogrel into the Australian market. This occurred on 25 September 2007 when Sanofi obtained an interlocutory injunction restraining Apotex Pty Ltd (‘Apotex’) from launching into the Australian market its generic form of clopidogrel. Sanofi obtained this interim relief on the basis of a patent later held to be wholly invalid. At the time Sanofi obtained the interlocutory injunction, it proffered an undertaking to the Court that it would compensate any person adversely affected by the grant of the injunction.
The Commonwealth’s case at trial was that it was entitled to recover from Sanofi a range of price reductions that would have occurred in the pricing of clopidogrel starting on 1 April 2008. In essence, the Commonwealth seeks to recover the harm done to the PBS by Sanofi’s thwarting of the entry of a generic competitor into the Australian market.
BACKGROUND AND ISSUES
In 2007 Apotex (which until 20 September of that year was known as GenRx Pty Ltd) wished to launch a generic version of clopidogrel into the Australian market. However, Sanofi held a patent, Australian Patent No 597784 (‘the Patent’) which was for clopidogrel, a process for its preparation and pharmaceutical compositions containing it. The active pharmaceutical ingredient in Plavix and Iscover is a salt, clopidogrel hydrogen sulfate. That salt was the compound specified in claim 3 of the Patent. The active pharmaceutical ingredient in Apotex’s proposed generic clopidogrel product was also the hydrogen sulfate salt.
The Patent was therefore an obstacle that stood in the way of Apotex entering the Australian market with its generic product. On 16 August 2007, it took its first steps to clear that obstacle out of the way by commencing proceedings in this Court seeking to revoke the Patent on the basis that it was invalid. Sanofi, apprehending that Apotex was going to seek to invade the monopoly it held in the Australian clopidogrel market by virtue of the Patent, filed a defence denying that the Patent was invalid and filed a cross-claim against Apotex on 17 September 2007 which sought, inter alia, final injunctive relief restraining it from distributing its clopidogrel products in Australia. In the cross-claim Sanofi also sought a final injunction restraining Apotex from applying to have those products listed on the PBS. Also on 17 September 2007, Sanofi filed a notice of motion seeking equivalent interlocutory injunctions pending the trial of the substantive dispute between the parties as to the validity of the Patent.
Sanofi’s application for an interlocutory injunction came before Gyles J on 18 and 21 September 2007 and again on 25 September 2007 when his Honour published reasons and made orders granting an interlocutory injunction restraining Apotex from distributing its clopidogrel products in Australia. The price Sanofi paid for this injunction was the proffering by it of an undertaking to the Court that if it should eventually transpire that it had not been entitled to enforce the Patent and therefore had not been entitled to the interlocutory injunction, it would compensate any person adversely affected by the injunction. The undertaking and the injunction it supported took this form:
UPON the Respondent/Cross-Claimant undertaking to the Court to:
(a)submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person whether or not a party, adversely affected by the operation of Order 1 set out below or any continuation (with or without variation); and
(b)pay the compensation referred to in (a) to the person or persons there referred to.
THE COURT:
1.ORDERS that, pending the determination of the proceedings or further order, the Applicant/Cross-Respondent whether by itself, its directors, officers, servants, agents or otherwise, be restrained from infringing Australian Letters Patent No 597784 (the Patent) and, in particular, from engaging in the following acts within the patent area (as that term is defined in Patents Act 1990 (Cth)), without the license or authority of the Respondent/Cross-Claimant:
(a)making, selling or otherwise disposing of the products known as GenRx Clopidogrel, Apo-Clopidogrel, Chemmart Clopidogrel and Terry White Chemists Clopidogrel or any other pharmaceutical composition the active ingredient of which is clopidogrel bisulfate, a compound claimed in claims 1, 3, 10 and 11 of the Patent (collectively, the GenRx Clopidogrel Products);
(b)offering to make, sell or otherwise dispose of the GenRx Clopidogrel Products;
(c)using or importing the GenRx Clopidogrel Products;
(d)keeping the GenRx Clopidogrel Products for the purpose of doing any of the acts described in sub-paragraphs (a) to (c) above;
(e)authorising other people to engage in any of the acts described in sub-paragraphs (a) to (d) above.
2.NOTES that the Applicant/Cross-Respondent undertakes to the Court that, pending the determination of the proceedings or further order, it will not, whether by itself, its directors, officers, servants or agents or otherwise, take any steps to obtain listing of any of the GenRx Clopidogrel products under the pharmaceutical benefits scheme maintained by the Commonwealth under the National Health Act 1953 (Cth).
There are three matters to note about this. First, Sanofi’s undertaking as to damages was expressed to extend to persons adversely affected by the injunction whether they were parties to the litigation or not and it is this aspect of it which the Commonwealth submits founds its entitlement to seek compensation. Secondly, the notation refers to an undertaking by Apotex not to seek PBS listing of its products. Thirdly, although the injunction restraining Apotex from distributing its clopidogrel products was supported by Sanofi’s undertaking as to damages, Apotex’s undertaking not to seek listing of its clopidogrel products on the PBS was not supported by that undertaking.
The Commonwealth alleges that if the interlocutory injunction had not been granted then Apotex would have attempted to list its generic product on the PBS on 1 April 2008 and would have succeeded in that endeavour. This would have triggered three kinds of price reductions. The amounts claimed by the Commonwealth are large. Clopidogrel was, for the financial year ending 30 June 2008, the third most heavily subsidised prescribed drug in Australia and the cost involved to the Commonwealth for that year alone was approximately $170 million. The Commonwealth submits that the mandatory 12.5% price reduction triggered by the launch of a PBS-listed generic clopidogrel product would have reduced the price per packet of Plavix from $64.94 to $56.82 from 1 April 2008 and there would have been a further price reduction of 2% on 1 August 2009. These would have saved it $50,718,312. It says a different system of price reductions known as ‘price disclosure reductions’ would have saved it a further $215,922,465 from 1 April 2010. In addition, it claims $58,307,301 for payments made by it in relation to certain combination products containing both clopidogrel and aspirin. The total sought by the Commonwealth exceeds $325 million together with interest.
Apotex was partially successful at trial in invalidating part but not all of the Patent. On appeal to the Full Court it was wholly successful and the Patent was declared invalid. An application to the High Court by Sanofi for special leave to appeal was refused on 12 March 2010. On 11 April 2013, the Commonwealth filed an interlocutory application seeking compensation from Sanofi pursuant to the undertaking as to damages it had proffered and which was reflected in the orders of Gyles J dated 25 September 2007. The trial judge dismissed the Commonwealth’s claim on 28 April 2020: Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543 (‘J’). It is from his Honour’s orders that the Commonwealth now appeals. For its part Sanofi has filed a notice of contention seeking to uphold the trial judge’s reasons on alternate grounds. The two principal issues which occupied most of the appeal are:
(a)The Apotex Launch and Listing Issue. The trial judge found Apotex would not have sought to list its generic clopidogrel products on the PBS on 1 April 2008 even if it had not been restrained by the interlocutory injunction. The Commonwealth argues that the primary judge erred in making that finding in four ways: (a) he applied the wrong standard and should have asked whether the Commonwealth had made out a prima facie case that Apotex would have sought listing by 1 April 2008; (b) he overlooked critical evidence; (c) he drew an inference adverse to the Commonwealth because of its failure to call the chief executive officer (‘CEO’) of Apotex, Dr Barry Sherman, to give evidence about what Apotex would have done but for the injunction; and (d) his Honour delayed for a substantial period of time before delivering judgment and thereby lost any advantage he had in relation to the credit of witnesses. These issues are encompassed in Ground 2 of the Commonwealth’s amended notice of appeal.
(b)The Directness Issue. The trial judge concluded that even if he had found that Apotex would have successfully listed on the PBS on 1 April 2008, nevertheless, the loss claimed by the Commonwealth did not flow directly from the interlocutory injunction and therefore did not satisfy the requirements of Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 (‘Air Express’) and European Bank Ltd v Evans [2010] HCA 6; 240 CLR 432 (‘European Bank’). His Honour did accept that the claimed loss would not have occurred but for the grant of the interlocutory injunction and in that sense was caused by it. However, he thought that the loss claimed flowed directly from the undertaking not to seek PBS listing which Apotex had proffered. Whilst his Honour accepted that the undertaking not to list would not have been proffered if the interlocutory injunction had not been granted, nevertheless he concluded that its existence as an intermediate step between the interlocutory injunction and the loss claimed meant that the loss could not be said to flow directly from the interlocutory injunction. His Honour also thought that it was significant that the undertaking not to seek listing proffered by Apotex was not supported by the undertaking as to damages proffered by Sanofi. This issue is the subject of Ground 1 of the amended notice of appeal.
There were other issues in the appeal none of which, however, arise if the Apotex Launch and Listing Issue is, as we believe it should be, resolved adversely to the Commonwealth. These issues related to further hypothetical causative obstacles sequentially secreted within each other and all of them within the overarching hypothetical situation in which Apotex did seek to list its clopidogrel products on the PBS from 1 April 2008 and to launch those products in Australia.
Thus, lest the Commonwealth succeed on appeal in demonstrating that Apotex would have sought that listing, Sanofi took issue with his Honour’s alternative conclusion, had he so found, that the Minister or the Minister’s delegate would most likely have approved that application (Notice of Contention Ground 1). The Commonwealth then disputed his Honour’s further conclusion that if that had occurred then Apotex would, in any event, have ceased to supply its products following the grant by Gyles J of final injunctive relief in August 2008 (Notice of Appeal Ground 3(c)). In the hypothetical scenario where Apotex did continue after August 2008 to supply its products, the Commonwealth challenges the trial judge’s conclusion that various price reductions which would then have occurred were not recoverable by it since, in fact, they did not occur (Notice of Appeal Ground 3(d)). In the event that the Commonwealth succeeds on that issue, Sanofi then submitted that the trial judge ought to have found that these losses did not flow directly from the grant of the interlocutory injunction (Notice of Contention Grounds 2 and 4). Sanofi also submitted that the trial judge ought to have found that all of the claimed losses were too remote (Notice of Contention Ground 3). More generally the Commonwealth took issue with his Honour’s refusal to deal with its case as a loss of a chance case (Notice of Appeal Ground 4) and an argument based upon undertakings given by Sanofi in subsequent appeal litigation (Notice of Appeal Ground 3(a)). For its part, Sanofi submitted that the Commonwealth ought not be permitted to recover any compensation since, as a polity, it was not a person adversely affected by the interlocutory injunction (Notice of Contention Ground 5). Finally, Sanofi submitted that the trial judge had erred in rejecting a number of discretionary defences to the compensation claims such as delay (Notice of Contention Ground 6). Because we are of the view that the Commonwealth fails at the threshold in its challenge to his Honour’s conclusion that Apotex would not have sought to list its clopidogrel products from 1 April 2008 we see no utility in resolving these issues. The Directness Issue also does not need to be resolved but, out of deference to the extensive submissions made about it and because it involves a question of principle, we will indicate our views on it. In the result the appeal will be dismissed with costs.
We begin with Ground 1 and the question of whether the claimed loss flowed directly from the injunction.
THE DIRECTNESS ISSUE: NOTICE OF APPEAL GROUND 1
The premise upon which the Commonwealth’s claim for damages rests is that but for the injunction, Apotex would have successfully launched its clopidogrel products on 1 April 2008 including by applying for and successfully securing listing on the PBS by that date. The trial judge was not persuaded of this as a matter of fact and we reject the challenge to that conclusion below.

However, his Honour also concluded that even if he had accepted that Apotex would have launched its products by 1 April 2008 including by successfully achieving PBS listing by that date, he still would not have accepted the Commonwealth was entitled to damages. This was because whilst he accepted that the loss claimed by the Commonwealth would not have occurred if the interlocutory injunction had not been granted, nevertheless, he did not accept that the claimed loss flowed directly from it. This conclusion was material because of the High Court’s decision in Air Express which contains a statement by Aickin J (sitting as a trial judge) that in a claim for compensation pursuant to an undertaking as to damages it is usually necessary that the loss should flow directly from the interlocutory injunction supported by the undertaking: Air Express at 266-267.
As mentioned above, the trial judge thought that the claimed loss flowed directly from the undertaking not to seek PBS listing which Apotex had proffered. In fact the trial judge described the loss as the ‘direct consequence’ of the Apotex undertaking – a formulation which his Honour understood to be interchangeable with that of Aickin J: J [445], [451]. That undertaking was therefore causally interposed between the interlocutory injunction and the loss claimed by the Commonwealth and, as such, the loss claimed could not be said to flow directly from the injunction. His Honour also thought this conclusion was supported by the fact that Apotex’s undertaking not to seek listing was not supported by Sanofi’s undertaking as to damages.
The resolution of the issues relating to this ground turn on the events surrounding the grant of the interlocutory injunction and the form of the undertakings proffered by Sanofi and Apotex.
Sanofi filed a notice of motion seeking two interlocutory injunctions on 17 September 2007. The first was an injunction restraining Apotex from supplying its generic products into the Australian market. The second was an injunction restraining Apotex from seeking to list those products on the PBS. In the notice of motion, Sanofi proffered an undertaking in respect of both injunctions that it would submit to such order as the Court may consider just for the payment of compensation to be assessed by the Court ‘to any person whether or not a party, adversely affected by the operation’ of the injunctions.
This application came before Gyles J on Tuesday, 18 September 2007. One issue which was the subject of debate was whether seeking PBS listing for its clopidogrel products was an act by Apotex which infringed Sanofi’s Patent. It is apparent that Gyles J was sceptical that it could be. At T22.7-22 this exchange with senior counsel for Sanofi took place:
HIS HONOUR: Mr Bannon, how can you possibly stop them getting the listing, or how could I possibly stop them getting a listing done?
MR BANNON: Because that would be a step towards launching.
HIS HONOUR: You can forget that.
MR BANNON: Sorry?
HIS HONOUR: You can forget that. I just don’t – at the moment I just can’t see a proper basis why I could intervene that process at all, based upon the patent. I mean, if there’s something I’ve overlooked, well of course I’ll review that, but at the moment, just as a matter of principle, I can’t quite see it. You know, you can come back to that, you know, it’s not a final view, but it’s - - -
MR BANNON: Yes. Well I will address that.
As it happens, his Honour’s doubts about this were well founded for it has been subsequently established that a person who seeks PBS listing for a drug does not exploit a patented invention: Warner-Lambert Company LLC v Apotex Pty Ltd [2017] FCAFC 58; 249 FCR 17.
However, due to the way in which the hearing played out it became unnecessary for his Honour to determine this issue. This was because of two practical matters raised during argument at the hearing. The first was mentioned by senior counsel for Sanofi immediately after Gyles J had expressed his scepticism that the Court could restrain Apotex from seeking PBS listing. It was submitted that Apotex could not ‘plausibly apply for listing without indicating they’re going to be able to supply’: T22.36-37. This was being put by Sanofi as a reason why the Court’s power to grant ancillary relief might extend so far as to restrain PBS listing however the submission reflected both a practical and a legal reality.
The practical reality was that the Health Department imposed as an administrative requirement in the process of achieving PBS listing that an applicant provide a written assurance that sufficient stock of its brand would be available on the proposed date of listing to meet anticipated demand.
The legal reality was that from 1 August 2007 s 99AEB of the National Health Act 1953 (Cth) required that for a newly listed brand the supplier must supply the medicine for a period of 24 months beginning on the day of PBS listing. Failure to comply with this statutory obligation of supply could result in the delisting of the brand or any other brand held by that person: s 99AEH(2). It was also an offence. In practical terms, a pharmaceutical company which failed to meet its supply obligations during this two year period faced the potential risk of having all of its products removed from the PBS. Such an outcome would be commercially undesirable.
These two matters are related in the sense that both are directed at the need of an applicant for listing to be able to meet its supply obligations. The assurance of supply was prospective in nature and was required before listing, but had no legal effect. The guarantee of supply was enlivened on listing on the PBS and was attended with significant legal and commercial peril if not met.
The point senior counsel for Sanofi was making was that once Apotex was restrained from supplying its generic products it would not be able to give the written assurance of supply which was necessary, at least in a practical if not legal sense, in order to obtain listing. Further, assuming Apotex obtained listing, the injunction would also prevent it from complying with its supply obligations under s 99AEB, a failure which could lead to the whole of Apotex’s listed pharmaceutical repertoire being removed from the PBS. Sanofi was making this point as part of an endeavour directed at persuading Gyles J that PBS listing was so bound up in questions of supply that the power of the Court to restrain the latter carried with it ancillary jurisdiction extending to the former.
The second practical reality was identified by senior counsel for Apotex. It related to the automatic price reductions. Once Apotex’s products were listed on the PBS this would result in an automatic 12.5% reduction in the price of Sanofi’s products to pharmacists. Although this had no direct impact on the pharmacists’ profits it had an indirect effect because, as the primary judge explained at [65], a mark-up which pharmacists were entitled to charge (known as the dispenser mark-up) was a percentage of the price at which the pharmacist purchased the product from Sanofi. Thus a reduction in that price affected a reduction in the mark-up which could be charged by pharmacists and, therefore, a reduction in their profits.
Where Apotex, however, was restrained from supplying the generic product, PBS listing would have resulted only in the reduction of the pharmacists’ profits, corresponding resentment by them towards Apotex and, at the same time, no benefit to Apotex apart from the negative one consisting of the risk of having all of its products taken off the PBS for not complying with its supply obligations.
This second matter played out before Gyles J at T79.32-80.29 where his Honour raised the issue he had raised with senior counsel for Sanofi as to the ability of the Court to restrain PBS listing:
HIS HONOUR: Could I just – sorry, to interrupt you, but there’s one matter which I really had raised this morning and I meant to take it up with Mr Bannon and you both, and that is this question of - really it is for Mr Bannon, how can he get a – how can he stop your registration?
MR CATTERNS: Your Honour, our applying on 1 December. If your Honour - - -
HIS HONOUR: Is that under this – have you got any certificates and all that sort of thing?
MR CATTERNS: We have done those, your Honour. But for us to get PBS listing as an equivalent so they can be substituted at the pharmacy, we would, unless restrained from selling, apply in 1 December, list in 1 August.
HIS HONOUR: April.
MR CATTERNS: We would be prepared, if your Honour is against us and grants an injunction against us from selling, we will not apply to the PBS during the period of that restraint with liberty to apply.
HIS HONOUR: Yes. All right.
MR CATTERNS: Because, in short your Honour, it’s pointless for us, the question of needing to restrain us from doing anything with the PBS or restraining the PBS doesn’t arise. If your Honour were against us - - -
HIS HONOUR: Why would that be, why would that be, because - - -
MR CATTERNS: It’s of no value to us, your Honour. We don’t want to get listed, to be candid, we don t want to be listed on the PBS if we can’t sell. It would damage our friends by bringing their price down twelve and a half per cent.
HIS HONOUR: Yes, that’s a risky thing anyway.
MR CATTERNS: Yes. It will only damage our friends, it’s of no benefit to us, and we will make ourselves enemies in the industry.
HIS HONOUR: Yes. All right. I’m not inquiring really why, I just want to know what the situation is.
MR CATTERNS: So, your Honour, we would be happy to – if your Honour, we would be unhappy, but if your Honour makes an injunction against us selling, we would agree on an appropriate undertaking that would fix that up.
HIS HONOUR: Yes. All right. Thank you.
It was at this point that the question of the Court’s power to restrain listing became moot. Because Apotex had indicated that it would proffer an undertaking not to seek listing if Gyles J otherwise granted an interlocutory injunction against supply, the issue no longer mattered, at least from the perspective of Gyles J.
However, the precise bargain which had been worked out between the parties was a little unclear. Sanofi had been seeking an injunction restraining Apotex from seeking PBS listing supported by an undertaking as to damages. Apotex had now indicated that if an injunction against supply was granted it would undertake not to seek PBS listing. On that basis Sanofi did not need to pursue its application. However, was Apotex’s undertaking to be secured by Sanofi’s undertaking as to damages or was it to be freestanding? This uncertainty marks the beginning of a conceptual fissure which runs all the way through to this appeal.
Gyles J reserved his decision on the Tuesday and gave judgment on the next Friday, 21 September 2007. He decided that Sanofi was entitled, in principle, to an interlocutory injunction restraining Apotex from supplying its generic products. It is apparent from the transcript of another hearing which took place on the following Tuesday, 25 September 2007, that his Honour’s judgment went through two phases of development. The first was an oral judgment delivered on Friday, 21 September 2007. The second was a revised set of those oral reasons published in written form on Tuesday, 25 September 2007. The form of the published reasons show that no orders were made on Friday, 21 September 2007 and no undertakings were proffered. The train of events appears to have been that the parties considered the implications of his Honour’s Friday reasons and formulated orders and undertakings to give effect to them for a directions hearing then held on Tuesday, 25 September 2007. It was at the commencement of that hearing that his Honour published the revised reasons. This exchange then took place at T1.8-40:
HIS HONOUR: Mr Bannon. Yes, I'll publish the revised reasons that I delivered last Friday.
MR BANNON: Your Honour, we've got some short minutes which are agreed, so they're for your Honour's consideration. There's two copies, if needed.
HIS HONOUR: Yes, thank you. Yes, excuse me for a moment. Yes, I have got no difficulty with any of those matters. Now, the undertaking is given to the court, is that correct?
MR BANNON: Yes.
HIS HONOUR: That's the undertaking at the commencement of the - - -
MR BANNON: Yes, I give on behalf of the respondent the first undertaking, the undertaking as to damages.
HIS HONOUR: Yes.
MR CATTERNS: And your Honour remembers your Honour raised the jurisdictional question relating to our applying to a listing under the PBS.
HIS HONOUR: Yes.
MR CATTERNS: And we've agreed – your Honour remembered in running we agreed that if your Honour would make the first injunction, to save the jurisdictional argument, we would make the second undertaking.
HIS HONOUR: Yes, and you give that undertaking?
MR CATTERNS: Yes, your Honour, I do.
HIS HONOUR: Well, that's noted. That's the undertaking in paragraph 2, all right.
The form of the injunction against supply, Sanofi’s undertaking as to damages, and Apotex’s undertaking not to seek listing appear above at [7] and need not be set out again.
The trial judge found that the loss claimed by the Commonwealth did not flow directly from the interlocutory injunction because it flowed directly from the undertaking not to seek PBS listing which was therefore an interposed causal step. He also thought that the fact that the Apotex undertaking was not supported by Sanofi’s undertaking as to damages provided strong contextual support for the view that Sanofi’s undertaking should not be interpreted as extending to loss suffered by third parties such as the Commonwealth as a result of Apotex being prevented from applying to list on the PBS: J [446].
In our opinion, his Honour erred in this conclusion. There are four reasons for this.
First, we do not agree that the loss claimed by the Commonwealth flowed directly from Apotex’s undertaking not to seek to list on the PBS. The trial judge approached the matter this way: although the injunction did not in terms prevent Apotex from applying for PBS listing, it made it impossible for it to give the necessary assurance of supply or to comply with its supply obligations during the guaranteed period. The trial judge therefore accepted that the interlocutory injunction had the practical effect of preventing Apotex from applying for PBS listing from 1 April 2008 assuming it was otherwise willing and able to do so. (As will be seen the consequences of this finding are significant). But even so, his Honour did not accept that the interlocutory injunction directly affected the legal rights, obligations or interests of the Commonwealth: J [443]. In particular, his Honour noted that it would not have been a breach of the interlocutory injunction for Apotex to have taken steps to obtain PBS listing: J [445].
This fact led his Honour to conclude that the Commonwealth’s loss was a natural and direct consequence of the inability of Apotex to apply for PBS listing: J [445]. This was the conduct to which the Apotex undertaking was directed but it was not something required by the interlocutory injunction. This suggested to his Honour that the loss was an indirect consequence of the injunction: J [445]. Indeed, his Honour concluded that the direct cause of the loss was the undertaking Apotex gave not to seek PBS listing: J [451].
As we have explained above, as the trial judge found at J [428], the interlocutory injunction put paid to any plan by Apotex to launch its generic product. Consequently it could not have complied with its obligation of supply for the two year period referred to in s 99AEB of the National Health Act 1953 (Cth) nor would it have been able to proffer to the Department a written statement that it could guarantee that supply. From the moment of the grant of the interlocutory injunction there was not the slightest prospect that Apotex would seek PBS listing. This was the very proposition which had been put to Gyles J by senior counsel for both Sanofi and Apotex and it was the reason that the trial judge accepted at J [428] that the interlocutory injunction had the practical effect of preventing Apotex from seeking PBS listing for its generic products.
Once the interlocutory injunction was in place the proffering of the undertaking by Apotex was therefore no more than a promise not to do something which Apotex could never have done. The trial judge thought that the Apotex undertaking was the direct cause of the Commonwealth’s loss. We respectfully disagree. If during the hearing on 18 September 2007 Apotex had refused to give the undertaking not to seek PBS listing Gyles J would still certainly have granted the interlocutory injunction restraining supply but on the issue of PBS listing there were only three possible outcomes which could have occurred:
(a)Gyles J could have granted an interlocutory injunction restraining PBS listing;
(b)Gyles J could have refused the application for that injunction; or
(c)Sanofi could have abandoned the application for that injunction.
Regardless of which of these happened, the finding by the trial judge at J [428] was that the practical effect of the interlocutory injunction against supply was that Apotex was prevented from applying for a PBS listing of its clopidogrel products on 1 April 2008, assuming it was otherwise willing and able to do so. It follows that regardless of which of these three outcomes occurred Apotex would not have sought PBS listing in any realistic way and the Commonwealth’s claimed loss would still have occurred.
That conclusion means that the Commonwealth’s claimed losses cannot be seen as flowing directly from the Apotex undertaking not to seek PBS listing. If the undertaking is removed from the counterfactual (that is to say, if any of (a), (b) or (c) above occurred) then the Commonwealth’s loss would still have been suffered. Neither party disputes that where an undertaking as to damages is concerned, a claimant for loss caused by an injunction must generally show that damages claimed would not have occurred but for the injunction: Air Express at 313 per Gibbs J, 316 and 320 per Stephen J, 325 per Mason J. We are unable to reconcile the trial judge’s finding that the loss flowed directly from the undertaking not to seek PBS listing with this aspect of Air Express. Since the loss would still have occurred even if the undertaking had not been proffered it cannot be said that the undertaking is the sine qua non of the occurrence of the loss.
The matter may be tested another way: if Apotex’s undertaking not to seek PBS listing had been supported by Sanofi’s undertaking as to damages, it would not now be possible for the Commonwealth to recover under Sanofi’s undertaking because the ‘but for’ test could not be satisfied. In such a situation the argument that the Apotex undertaking not to seek PBS listing was the direct cause of the Commonwealth’s loss would be precluded by the holding in Air Express that the claimant must satisfy the ‘but for’ test. We do not think that whether the loss flowed directly from the Apotex undertaking not to seek PBS listing can be affected by whether that undertaking was itself supported by an undertaking as to damages.
Indeed, the consequence of the trial judge’s finding that the Apotex undertaking not to seek PBS listing was the direct cause of the Commonwealth’s loss would have the result, if it had been supported by Sanofi’s undertaking as to damages, that the Commonwealth could not have recovered under any circumstance. It could not have succeeded in relation to the injunction because of his Honour’s finding that the loss did not flow directly from that injunction; and, it could not have succeeded in relation to the Apotex undertaking not to seek PBS listing because the Commonwealth’s claimed loss would have occurred even if that undertaking had not been proffered so that the general sine qua non requirement in Air Express could not be satisfied.

Consequently, in concluding that the Apotex undertaking not to seek PBS listing was the direct cause of the Commonwealth’s loss the trial judge erred by failing to apply the ‘but for’ requirement in Air Express. Had he done so, his Honour would have been required to conclude that the Apotex undertaking not to seek PBS listing was not a cause of the Commonwealth’s loss.
Once that conclusion is reached that leaves in place only his Honour’s finding that the interlocutory injunction was an indirect cause of the Commonwealth’s alleged loss. Shorn of the conclusion that the direct cause of the loss was the undertaking not to seek PBS listing, there is, in our opinion, no avoiding the conclusion that the interlocutory injunction was the direct cause of the Commonwealth’s alleged loss and not an indirect cause as the trial judge held (for clarity, we are presently assuming, contrary to what we will find in relation to Ground 2 of the amended notice of appeal, that Apotex would have applied for and obtained PBS listing by 1 April 2008).
Secondly, even if Apotex’s undertaking not to seek PBS listing was causally connected to the Commonwealth’s loss (in the ‘but for’ sense) we would not accept that its presence in the causal chain implied inevitably that the loss could not also flow directly from the interlocutory injunction as we now explain.
His Honour’s findings on directness were material to his Honour’s reasoning because of a passage in the reasons of Aickin J in Air Express at 266-267:
In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case.’
(emphasis added)
This passage was cited with approval by five Justices in European Bank at [18] and [29] in these terms:
These considerations, bearing upon the interests of justice in the particular circumstances of the litigation, support the following statement by Aickin J in Air Express, made with respect to interlocutory injunctions, but applicable to the interlocutory order made by the Court of Appeal against European Bank. His Honour said:
“In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case.”
The phrase “could have been foreseen” should be noted.
…
On the inquiry before Gzell J the first question was “What is the loss that is now alleged?”, the second “Did that loss flow directly from the order of 18 May 2004?” and the third “Could the loss sustained have been foreseen at the time of that order?” The inquiry presented by the third question is an inquiry as to whether a loss of the kind actually sustained could have been foreseen. Contrary to the submission by the respondent, Mr Evans, the inquiry is not as to whether the actual loss suffered was foreseen at the time the undertaking was given.
His Honour therefore posed for himself the question of whether the loss claimed by the Commonwealth had flowed directly from the interlocutory injunction. Because, on the trial judge’s findings, Apotex’s undertaking not to seek PBS listing was the direct cause of the claimed loss it followed that the loss had not flowed directly from the interlocutory injunction in that sense. Although his Honour did not use the language of an interposed causal step we are unable to construe his Honour’s conclusion other than that the presence in the causal chain of another cause of the loss located between the interlocutory injunction and the loss claimed by the Commonwealth meant that the loss could not be said to flow directly from the injunction.
The Commonwealth submits that the statement in Air Express that the loss must flow directly from the interlocutory injunction does not entail that there can be no interposed causal step between an interlocutory injunction and the loss claimed under an undertaking as to damages. Sanofi, on the other hand, submits that the statement reflects a limitation on the scope of recovery which has been accepted in a number of authorities many of which were referred to by Aickin J in passages of his reasons which were immediately prior to the passage set out above. That existence of that limitation supported, so submitted Sanofi, the trial judge’s conclusion that there should be no interposed causal step.
The Commonwealth’s response to this was that the cases referred to by Aickin J were all concerned with remoteness of damage and largely not with causation. Further, to the very limited extent to which these cases did touch on principles of causation none provided support for the proposition that the requirement that the loss should flow directly from the interlocutory injunction necessitated that there should be no other causal step interposed between it and the loss claimed.
There is some uncertainty in our minds as to whether the statement made by Aickin J is a statement about causation, or remoteness or possibly both. Support for the view that it is a statement about causation may be garnered from the fact that the word ‘flow’ clearly implies some causative notion. Further, the subsequent reference by Aickin J in the same passage to an additional requirement of foreseeability may be apt to suggest that the ‘flow directly’ element was not a remoteness standard.
On the other hand, support for the view that the ‘flow directly’ requirement is concerned with remoteness of damage may be discerned from the fact that it appears in the reasons immediately after a survey of cases which are largely concerned with remoteness of damage. This interpretation is also consistent with the fact that the issue decided by Aickin J was actually one of causation – specifically the application of the ‘but for’ standard in this area – and that discussion occurred only later in his Honour’s reasons.
On the other hand, it seems to us from the passage quoted above that in European Bank the High Court approached the ‘flow directly’ requirement as being distinct from any remoteness inquiry.
The uncertainty about the relationship between the ‘flow directly’ requirement and notions of causation is not unique to this area of the law. The requirement that loss should flow directly appears in a variety of contexts and much ink has been spilt on how it relates to remoteness of damage. In relation to the tort of deceit, it appears that a plaintiff is entitled to compensation for all losses directly flowing from the tortious act and that direct losses also include consequential losses: Smith New Court Securities Ltd v Citibank NA [1997] AC 254 (‘Smith New Court’) at 264-265 per Lord Browne-Wilkinson, 281-282 and 285 per Lord Steyn. The same approach was taken by the High Court to the tort of injurious falsehood in Palmer Bruyn & Parker v Parsons [2001] HCA 69; 208 CLR 388 at [54], [63]-[65], [76]-[79] per Gummow J, Gleeson CJ agreeing at [13]-[14], Hayne and Kirby JJ concurring in the result. In that case Gummow J observed (at [53]) that remoteness can sometimes be understood ‘in terms of causation’ rather than in terms of foreseeability, which has a certain resonance with the conceptual fluidity of the passage in Air Express.
Reference to losses which flow directly may also be found in the context of statutory misleading or deceptive conduct. A recent example is Wyzenbeek v Australasian Marine Imports Pty Ltd [2019] FCAFC 167; 272 FCR 373 (‘Wyzenbeek’) at [59], [73], [78]-[79], [93] and [111] per Rares, Burley and Anastassiou JJ, citing the High Court in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640 at [65] for the proposition that s 82 of the Trade Practices Act 1974 (Cth) ‘allowed a court to assess loss or damage on the basis of the loss flowing directly from the transaction without any reference to the date of the transaction or to any particular date’. More significantly the causation requirement in this area has not been thought to prevent the recovery of consequential losses. As Brennan J observed in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 (‘Sellars’) at 356-357, where the making of a false representation induces a person to act in a certain manner, loss may flow directly from the act and only indirectly from the making of the representation but in such cases the act ‘is a link – not a break – in the chain of causation’.
Similarly, it would appear that in a claim for equitable compensation for breach of trust, notions of foreseeability of loss are not generally relevant, but the loss must ‘be caused by the breach of trust, in the sense that it must flow directly from it’: AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [135] per Lord Reed.
Although none of these statements answers the question which is before the Court, they do underscore that the distinction between causation and remoteness may not be as clear cut as the arguments before this Court implied. They also suggest that the concept does not exclude claims for consequential losses.
It is not necessary to resolve this conundrum definitively. Regardless of where the requirement that loss should flow directly is to be accommodated as a matter of jurisprudential taxonomy, there is no dispute that it is indeed a requirement. That observation must, however, be understood in light of the equitable nature of the remedy at hand and the High Court’s insistence that the principles in this area are always flexible: Air Express at 266-267 per Aickin J, 324 per Mason J; European Bank at [16]-[18]. It was not suggested in this case, however, that the admitted requirements of flexibility militated against the application of the directly flow requirement.
The real question is not where the ‘flow directly’ requirement fits into the structure of the topic but rather the ascertainment of its content. We do not think that there can be any hard and fast rule that an interposed causal step between an injunction and the loss claimed results in the injunction not being the direct cause of the loss. It depends on the nature of the interposed causal step.
For completeness, it is worth noting Sanofi’s submission that the ‘flow directly’ requirement must be applied with ‘particular care’ in the case of claims on the undertaking made by non-parties such as the Commonwealth, in order to avoid a situation in which actual or potential losses are ‘practically indeterminate’: RS [21]. We accept that, as in other areas of the law, there is a need to ensure that some restraint is imposed on the recovery of damages – both as to the number and identity of claimants, and as to quantum. Assuming, in Sanofi’s favour that the requirement that losses should flow directly from the injunction is intended to perform a limiting function complementary to that performed by the requirement that losses must have been of a kind that was reasonably foreseeable, it does not follow that, in every case, the mere existence of an interposed causal step between the injunction and the loss claimed will have the consequence that the loss did not flow directly from the injunction. Again, it depends on the nature of the interposed step and the circumstances more broadly, assessed having regard to the equitable rationale for the award of damages in this area. Indeed, as Sanofi recognised in its submissions, that task is ‘one of evaluative judgment’: T157.1-2.
We do not think therefore that any relevant guidance is to be obtained from the various cases referred to by Aickin J in the passages immediately before his statement that the loss must flow directly. These were: Smith v Day (1882) 21 Ch D 421; Ex parte Hall, in re Wood (1883) 23 Ch D 644; Schlesinger v Bedford (1893) 9 TLR 370 (CA); Douglass v Bullen (1913) 12 DLR 652 (‘Douglass v Bullen’); and Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716 (‘Pemberton’). Sanofi seeks to derive support for its argument from various expressions deployed in these cases, for example Britton J’s statement in Douglass v Bullen at [24] that ‘the damages ought to be confined to the immediate natural consequences of the injunction’, and Bankes J’s reference in Pemberton at 718 to ‘damage which necessarily and naturally flowed’. Properly understood, these cases do not support a definitive view one way or the other on the question of whether the existence of an interposed causal step negates a finding that damage flowed directly from an injunction. And indeed, a closer inspection of passages relied upon by Sanofi suggest that they may in fact hinder rather than aid its submission. Two examples suffice:
In Douglass v Bullen, the plaintiff obtained an interim injunction, supported by an undertaking as to damages, restraining the defendant from undertaking certain building work on the defendant’s land. It was later held that the plaintiff had not been entitled to the injunction. The defendant claimed damages including for alleged loss of rent. Britton J held that, in his opinion, the alleged loss of rent was ‘too remote’ because the prospect that the injunction would cause such loss was not something within the plaintiff’s knowledge or which he ought reasonably to have contemplated: [24]. The effect of Britton J’s reasoning would seem to be that if the plaintiff did contemplate the loss of rent, or ought reasonably to have done so, such damages may have been available notwithstanding, as is obvious, that they were the result of a series of causal steps.
In Pemberton, a tenant of a farm proposed to switch from raising sheep to growing corn. The landlord obtained an interim injunction restraining this and proffered an undertaking as to damages. It transpired that the period of the restraint corresponded with a drought which had the result that the sheep depreciated substantially in value whereas a corn crop would likely have succeeded. The tenant obtained damages from the landlord both for the depreciation of the sheep and the loss of the prospective corn crop: 718. Sanofi submits that Bankes J held that the tenant was entitled to these damages because they ‘necessarily and naturally flowed from the interlocutory injunction’ (RS [16]) but in fact what Bankes J said is that the damages ‘necessarily and naturally flowed from the course which the landlord compelled [the tenant] to adopt’: 718 (emphasis added), quoted by Aickin J in Air Express at 264-265. Thus, consistently with Brennan J’s statement in Sellars to which we have referred above, Bankes J seemed to recognise that a course of conduct entered into by the claimant may amount to a series of links (rather than a break) in the chain of causation.
As we have explained, however, in truth the decisions referred to by Aickin J were simply not concerned with the effect of an interposed causal step on the ‘flow directly’ analysis and for that reason do not provide definitive instruction on that issue.
On the other hand, the reasoning in Air Express is against any general rule that a loss ceases directly to flow just because there is an interposed causal step. In fact, Aickin J rejected an argument in Air Express that the loss claimed by the appellant (‘Air Express’) was not recoverable because it was only an indirect result of the interlocutory injunction. By way of background, in that case the respondent (‘Ansett’) obtained an interlocutory injunction restraining a Commonwealth government official from issuing to Air Express a licence to import two planes. The injunction had no direct effect on Air Express in the sense that it did not require it to do anything or to refrain from doing anything. Indeed, Ansett did not join Air Express as a defendant and it became one only on its own application. Despite that, the form of the injunction never impacted directly on it in terms of legal rights, interests or obligations.
When the interlocutory injunction was eventually dissolved, the claim then made by Air Express under Ansett’s undertaking as to damages principally related to the harm done to its business when it was unable to import the two planes. At 283, Aickin J recorded Ansett’s argument that Air Express had been ‘merely affected indirectly’ and rejected it in these terms:
Another argument was based on the fact that Air Express was not a party to the original proceedings and became a party on its own application in a situation in which no claim was made against it or could have been made against it. It was not restrained from taking any step itself and was merely affected indirectly by the injunction obtained against the Commonwealth and the Secretary to the Department. I think this argument is misconceived and is really an argument that it should not have been joined as a defendant at all. It would no doubt have been possible for Air Express to have been permitted to intervene in the argument without being made a party but the fact is that it was joined as defendant and that there was no appeal from that order. There is no direct authority on this point, but the decision in Tucker v. New Brunswick Trading Co. of London suggests that parties against whom no injunction is granted may nonetheless claim pursuant to an undertaking given in respect of them, though in that case the defendant in question was named as a defendant when the writ was issued.
(citations omitted)
If his Honour had intended by the expression ‘flow directly’ necessarily to exclude cases where there was an interposed causal step, it is difficult to see why the loss claimed by Air Express would not have fallen foul of that requirement. On that view of affairs, Ansett’s interlocutory injunction caused the official not to issue the licence and the non-issue of the licence then caused the loss claimed. That would be the same kind of interposed causal step which Sanofi now contends defeats a claim on the undertaking. This is an indication that his Honour did not intend that the ‘flow directly’ requirement should forbid such an interposed causal step.
To that we would add the observation that in other areas of the law where one encounters the ‘flow directly’ concept, claimants have nonetheless been entitled to recover consequential losses which points against the stricture for which Sanofi contends: e.g. Sellars; Wyzenbeek; Smith New Court (above).
A few remarks should also be made about the decision of Jagot J in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 (‘Sigma v Wyeth’) to which both parties referred in submissions.
The facts of Sigma v Wyeth bear some similarity to the present appeal. The respondent (‘Wyeth’) was the proprietor of a method patent for venlafaxine, an anti-depressant drug which it sold under the brand name ‘Effexor-XR’. The appellants (Sigma Pharmaceuticals (Australia) Pty Ltd, Generic Health Pty Ltd and Alphapharm Pty Ltd; together, ‘the generics’) brought proceedings against Wyeth challenging the validity of the patent. Wyeth counterclaimed for infringement and threatened infringement premised on the supply or threatened supply by the generics of their own venlafaxine products. Upon the application of Wyeth and supported by an undertaking as to damages which it gave, Jagot J granted interlocutory injunctions restraining the generics from supplying their venlafaxine products. Jagot J later upheld the validity of the patent and granted permanent injunctions. The generics succeeded on appeal to the Full Court, whereupon the patent was held to be invalid and the matter was remitted to Jagot J to determine claims on Wyeth’s undertaking as to damages.

Importantly for present purposes, the generics were not the only claimants on Wyeth’s undertaking. Three non-parties also claimed: two entities which manufactured and supplied venlafaxine to the generics (‘the suppliers’); and the Commonwealth of Australia. The Commonwealth’s claim was settled after the hearing and therefore did not remain for determination when Jagot J delivered her reasons.
Attention may presently be confined to the claims made by the suppliers. Wyeth resisted these claims on alternative bases: first, that the requirement that losses should ‘flow directly’ precluded the recovery by non-parties to the proceeding in which the injunction was granted; secondly, that the losses claimed by the suppliers were ‘merely consequential upon the effect of the orders upon the generics and thus could not be said to be losses flowing directly from the orders’: [219]-[220]. Her Honour disposed of the first contention on the basis that it was contradicted by principle and by the terms of the undertaking which referred to ‘any person, whether or not a party, adversely affected’ by the operation of the injunction: [219]. In respect of the second contention, her Honour said at [220]:
The description of the manufacturers/suppliers’ losses as consequential is accurate. If the generics are right that the orders prevented them from supplying their products when they otherwise would have done then the orders necessarily had consequential impacts on the manufacturers/suppliers. But this description does not answer the question whether the claimed loss of the manufacturers/suppliers flowed directly from the interlocutory orders or are too remote to be the subject of a just order for compensation.
We return shortly to the significance of the finding that the suppliers’ consequential losses could nonetheless be ‘direct’ in the requisite sense. It is convenient at this point to say something about the concept of ‘remoteness’ as it appears in the passage just quoted and elsewhere in Jagot J’s reasons. The Commonwealth is probably right to say, as it does in its reply submissions at [20], that Jagot J seemed to view the concept of ‘directness’ in this context as a remoteness limitation additional and complementary to the requirement that losses of the kind alleged must have been reasonably foreseeable: [12], [217], [222]-[225]. At the same time, however, her Honour identified (at [219]) the rationale of the ‘flow directly’ requirement in a manner which closely resembles the causation principle articulated in Air Express and European Bank: ‘The concept of loss flowing directly from an interlocutory injunction reinforces the necessity of focusing on the allegedly adverse effects of the interlocutory orders alone, rather than the potentially adverse effects of the litigation’. As we have explained above, the taxonomic question of remoteness versus causation, while perhaps an interesting academic exercise, is not ultimately useful in identifying the content of the requirement of ‘directness’.
What is noteworthy for present purposes is how Jagot J dealt with the suppliers’ claims for consequential losses. Sanofi relies on her Honour’s finding at [227] that the suppliers could not sustain claims based on supply contracts which did not exist and were contingent on future negotiations at the time the interlocutory injunctions were granted. Such alleged losses did not satisfy the requirement of directness even if the suppliers could show, with the benefit of hindsight, that the contracts would in fact have come about had the injunctions not been granted: [227].
However, Sanofi did not refer to her Honour’s finding in respect of supply contracts which did exist at the time the injunctions were granted (at [226]):
… to the extent that the claims of the manufacturers/suppliers are based on contracts for supply of the products to Sigma, Alphapharm and Generic Health which existed before the interlocutory injunctions were granted, I am unable to characterise the claimed loss from the generics not having ordered products as anything other than loss which is the direct and natural consequence of the interlocutory orders which prevented supply. The products as supplied to the generics were the complete products in packages ready for supply to pharmacists. The fact of supply to the generics or not was a natural and ordinary consequence of and directly related to their sales to pharmacists. If restrained as they were by the interlocutory injunctions, it was inevitable that the generics would not place orders with their suppliers.
In other words, her Honour accepted that a claim on the undertaking could be made good even where the claimant was a non-party to whom the injunction was not expressly or impliedly addressed and whose losses were ‘consequential’ in the sense that they came about via a series of steps linking them to the parties restrained: in that case, the generics. This is very difficult, indeed impossible, to square with Sanofi’s submission at [28] of its written outline that ‘[t]he fact that several successive steps are involved is itself sufficient to prevent the relationship between the injunction and the loss from meeting the requirements for directness’. That submission cannot be accepted.
We would therefore reject the proposition that the presence of an interposed causal step inevitably prevents a loss flowing directly from an injunction. Other than to make that observation we do not think it appropriate further to go. On the findings we have made, the Apotex undertaking not to seek PBS listing did not constitute an interposed causal step because it was in fact not a cause in the ‘but for’ sense required by Air Express. We would defer a determination of what kind of interposed causal step is sufficient to prevent a loss flowing directly from an interlocutory injunction to a time when that question needs to be answered in a concrete fashion.
Thirdly, the fact that the Apotex undertaking not to list was not supported by Sanofi’s undertaking as to damages did not provide contextual support for his Honour’s conclusions once one accepts, as we have, that the loss claimed flowed directly from the interlocutory injunction. The orders and undertaking must be interpreted and applied in accordance with their terms. Because the Commonwealth would not have been able to recover under Sanofi’s undertaking as to damages even if it had been proffered in support of Apotex’s undertaking not to seek listing (because the Apotex undertaking could not be the sine qua non of the Commonwealth’s loss), the existence of the undertaking not to list has no impact on whether the loss claimed by the Commonwealth flowed directly from the interlocutory injunction or not. It becomes material only when it is possible to say that the loss claimed flowed directly from the undertaking not to seek listing. Of course, the trial judge did so find but, as we have explained, in our view it was erroneous for him to do so.
Fourthly, the question in this appeal is concerned with the scope of Sanofi’s undertaking as to damages proffered not only to compensate Apotex in the event the injunction was dissolved but also any third party. If the effect of Apotex’s proffering of an undertaking not to seek listing on the PBS and Sanofi’s non-proffering of an undertaking as to damages in respect of that undertaking was to reduce the ambit of the undertaking as to damages in relation to third parties, it is difficult to see why this was not a matter which was immediately disclosed to Gyles J. More is this so when it is clear that his Honour was exercised about the impact of the injunction on the PBS and took that into account in considering the balance of convenience (‘However, I am much influenced by the effects of disturbing the status quo, particularly as it relates to the operation of the PBS’: GenRx Pty Ltd v Sanofi-Aventis [2007] FCA 1485 at [15]).
The third parties having the benefit of Sanofi’s undertaking as to damages were not before the Court. No suggestion was made by Sanofi to Gyles J on 18, 21 or 25 September 2007 that if the injunction caused loss to a third party relating to the inability of Apotex to seek PBS listing then this would not be recoverable under its undertaking as to damages. If that truly was the case it was a matter which required explicit disclosure.
This is significant because the role of the Court in assessing damages is to award compensation which is just and equitable. No doubt in doing so it is necessary to take into account the undertakings proffered and the injunction ordered. But the Court must also take into account the justice of the position of third parties being adversely affected by inter partes arrangements together with the fact that no such adverse affectation was disclosed to the judge to whom the undertaking as to damages was proffered.
There were three aspects to the Commonwealth’s contention under Ground 1. These were that the trial judge erred because he had:
(a)identified an inappropriate causal test or standard of causal connection;
(b)erred in assessing whether the Commonwealth’s loss flowed directly from the interlocutory injunction; and
(c)ought to have found that the Commonwealth’s loss did flow directly from the terms of the interlocutory injunction.
We have upheld propositions (b) and (c). This is sufficient to conclude that had it arisen we would have upheld Ground 1. It is not necessary to consider whether (a) is made good in light of that conclusion. We now explain why Ground 1 does not arise.
THE APOTEX LAUNCH AND LISTING ISSUE: NOTICE OF APPEAL GROUND 2
Introduction
Between J [197]-[351], the primary judgment considered a substantive body of evidence both documentary and testimonial. This evidence concerned the question of whether Apotex, had it not been restrained by the interlocutory injunction, would have applied to list clopidogrel on the PBS and would then have launched its products on and from 1 April 2008. At J [351], his Honour reached this conclusion on this topic:
In the result, I am not persuaded that Apotex Australia would have sought and obtained a PBS listing of its clopidogrel products from 1 April 2008 even if the interlocutory injunction had not been granted. It follows that the Commonwealth’s claim for compensation must be dismissed.
By Ground 2, the Commonwealth contends that this conclusion was erroneous for four substantive reasons. First, the trial judge had erred in failing to conclude that the Commonwealth’s onus was only to establish a prima facie case that its damage flowed directly from the grant of the interlocutory injunction (Ground 2(a)). Secondly, the trial judge had failed to have regard to: relevant contemporaneous evidence concerning Apotex’s intention to launch if it was not restrained; relevant evidence from witnesses called by the Commonwealth; and associated submissions made by the Commonwealth about these matters (Ground 2(b)). Thirdly, his Honour had erred: in concluding that the Commonwealth’s case suffered an evidentiary deficiency which could only be made good by its calling Dr Sherman to give evidence; in drawing a Jones v Dunkel (1959) 101 CLR 298 (‘Jones v Dunkel’) inference against the Commonwealth for failing to call Dr Sherman; and in failing to address the Commonwealth’s associated submissions about these matters (Ground 2(c)). Fourthly, it was said that his Honour had lost the advantage usually afforded to a trial judge in relation to the assessment of the credit of witnesses by reason of the long delay in the production of his Honour’s reasons (Ground 2(d)). The Commonwealth raised a fifth contention that the trial judge ought to have found that Apotex would have sought PBS listing had the interlocutory injunction not been granted (Ground 2(e)), however, this does not arise where no error is found in relation to the other particulars.
We begin with Ground 2(a).
GROUND 2(A): WHAT WAS THE COMMONWEALTH REQUIRED TO PROVE?
The Commonwealth puts its argument on Ground 2(a) this way: the compensation sought by a claimant pursuant to an undertaking as to damages is in the nature of equitable relief for the wrongful grant of an injunction. Where it appears that an injunction has been wrongly granted, the claimant for compensation is put in the difficult position of having to prove what would have happened if the injunction had not been granted. Equity comes to the assistance of the wronged party in that situation by requiring it to prove no more than a prima facie case of the loss caused by the non-performance of the act which was restrained by the injunction. It does this by inferring that the party who was restrained would have done the act which was restrained but for the injunction. Once that prima facie case is established, the evidentiary burden shifts to the respondent to the claim to prove that the prima facie case is wrong and that the loss claimed would not have occurred if the injunction had not been granted. This principle was said to be similar to that which occurs in the realm of causation in claims under s 52 of the Trade Practices Act 1974 (Cth) where it suffices for an applicant to make good a prima facie case on causation at which point the evidentiary burden shifts to the respondent to show otherwise: cf. Berry v CCL Secure Pty Ltd [2020] HCA 27; 271 CLR 151 at [29], [39]. The Commonwealth submits that the principle is established by two passages in Air Express. The first is in the reasons of Mason J at 322 and the second in the reasons of Stephen J at 320.
We do not accept the Commonwealth’s submissions on Ground 2(a) for two reasons: (a) if the principle exists it has no application to this case; and (b) in fact, the principle is not established by any binding or persuasive authority.
(a) The principle has no application to this case
Assuming the principle to exist, Sanofi submitted that all it would require is for it to lead some evidence to discharge its evidential burden. Once that was done, the persuasive burden would remain unchanged and would rest on the Commonwealth: Purkess v Crittenden (1965) 114 CLR 164 at 167-168 per Barwick CJ, Kitto and Taylor JJ and at 170-171 per Windeyer J (‘Purkess v Crittenden’).
Sanofi then submitted that it had in fact led evidence which discharged its evidential burden. We discuss these matters in more detail later, but for present purposes they included evidence pertaining to at least two matters: first, evidence tending to suggest that Apotex was better off being restrained with the benefit of the undertaking as to damages than it would have been if it had launched at risk and was exposed to the risk of damages for patent infringement; and, second, evidence that once it was no longer restrained by the injunction after winning its appeal to the Full Court, it still did not launch at risk whilst Sanofi’s special leave application was pending in the High Court. This was said to be actual evidence of what Apotex would have done in the counterfactual.
We did not apprehend the Commonwealth to submit that this evidence did not have the effect of discharging Sanofi’s evidentiary burden. Rather, the Commonwealth accepted the effect of Purkess v Crittenden but submitted that it was not enough, once the Commonwealth had established a prima facie case, for Sanofi to speculate about what Apotex might have done if it had not been restrained. Rather, this had to be the subject of evidence: T315.34-36. However, this submission is unresponsive to Sanofi’s submission which referenced actual evidence about the question. Since the Commonwealth did not submit that the evidence relied upon by Sanofi did not have the effect of discharging the evidentiary burden, Sanofi’s submission stands unanswered. Alternatively, if the Commonwealth’s submission at T315.34-36 is to be understood as a denial that the evidence relied upon by Sanofi discharged the evidentiary burden then we reject the denial. Both matters referred to by Sanofi were evidential in nature rather than speculative. One concerned the financial position of Apotex and the incentives that would have been created. This is material from which an inference can be drawn. The other concerned actual evidence about how Apotex had behaved in a factual circumstance similar to the counterfactual. Again this is evidence from which an inference can be drawn.
In that circumstance, the effect of Purkess v Crittenden is not in dispute and either the Commonwealth has not met Sanofi’s submission that there was evidence which discharged its evidential burden or, if it has, that submission should be rejected. Consequently, we accept that the effect of Purkess v Crittenden is that once both sides had adduced evidence on the topic of what Apotex would have done if not restrained, it remained for the Commonwealth to discharge its persuasive burden by showing, on all of the evidence, that Apotex would have sought to list on the PBS and then distribute its products in Australia.
As such, we do not think that the principle invoked by the Commonwealth has any relevance to this proceeding even if the principle exists.
(b) The principle is not required by any binding or persuasive authority
The Commonwealth relies upon the judgment of Mason J and the judgment of Stephen J in Air Express as the source of the principle. Dealing first with the reasons of Stephen J, we do not accept that his Honour said anywhere that it could be inferred from the fact that Air Express suffered loss because it did not receive an import licence, that the Secretary of the Department of Transport would have issued the permit to Air Express if he had not been restrained by the interlocutory injunction. In fact, Stephen J dismissed the appeal which is inconsistent with the drawing of any such inference.
As for the reasons of Mason J, we accept that if they represented the ratio decidendi of Air Express then they would be authority for the principle for which the Commonwealth contends. However, they do not represent the ratio decidendi of the decision. Rather, they are reasons which were delivered in dissent. Further, it is apparent that the matter which caused Mason J to dissent is the same matter which caused all of the judges to dismiss Air Express’s appeal. This matter is the absence of any evidence as to what the Secretary for the Department of Transport would have done if he had not been restrained by the injunction. Only Mason J was willing to infer from the fact that Air Express had suffered loss by reason of the non-performance of the restrained act that had the injunction not been issued the Secretary would have issued the permit. All other Justices declined to take this step.
The Commonwealth did not take the Court to any other authority dealing with the undertaking as to damages to make good its argument. We conclude that the principle is not required by any binding or persuasive authority. That conclusion is consistent with the way in which the issue has been approached at first instance: see Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50 at [18(e)]; Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 3) [2012] FCA504; 290 ALR 263 at [7] and [15]; and Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 at [122] and [144].
Once it is accepted that both sides have adduced substantial evidence on the question of what Apotex would have done had it not been restrained, Air Express is not relevant to the question of onus. The question for the trial judge and, assuming its review jurisdiction is engaged, this Court, is whether on all the evidence, the Commonwealth has satisfied its persuasive burden of demonstrating that if it had not been restrained Apotex would have sought to list on the PBS and then distribute its products in Australia. Since this is precisely what the trial judge in fact did it follows that Ground 2(a) must fail.

Of significance is his Honour’s observation that the Commonwealth had called an Apotex witness from Canada, Mr Fahner. It is evident that the absence of any explanation for why Dr Sherman was not called impressed the trial judge. While it is easy to imagine that Dr Sherman might have told the Commonwealth that he was not willing to travel to Australia to give evidence, the absence of any evidence to that effect provides material from which, on its face at least, it was open to the trial judge to conclude that the Commonwealth decided not to call Dr Sherman because it did not think that it was to its advantage to do so.
Having laid that groundwork, the trial judge then reasoned this way at J [348]-[349]:
I am not prepared to infer, based on the 20 February 2007 email, or any of the subsequent correspondence in evidence which was said to justify the drawing of such an inference, that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing of Apotex’s clopidogrel products with effect from 1 April 2008.
In my opinion, the Commonwealth’s case suffers from an evidentiary deficiency which cannot be made good by drawing inferences from correspondence written by Dr Sherman in the lead up to the hearing of the interlocutory application. In particular, I do not think it can be inferred that if Dr Sherman had known that the trial of the patent proceeding would commence in the same month that Apotex Australia obtained a PBS listing of its clopidogrel products (triggering a 12.5% statutory price reduction), that he would have, in those circumstances, authorised Apotex Australia to obtain such a listing before judgment was delivered or, at least, until the trial had concluded (by which time he and his colleagues and his legal advisers may have had a clearer view of the strength of Sanofi’s case).
In its written submissions, the Commonwealth identified four errors in this reasoning: AS [81]-[90]. The first and second contentions were effectively the same and were that the trial judge had erred in thinking that there was a situation in which Jones v Dunkel could apply. The Commonwealth submitted that the trial judge was required to consider whether it should be inferred from the documents it relied upon that Dr Sherman would have decided to launch at risk if the injunction had been refused. The trial judge had erred in thinking that he could decline to draw an inference from the documents just because Dr Sherman had not been called.
We do not accept this submission. The trial judge did not decline to draw inferences because Dr Sherman was not called. Rather, his Honour felt that the documents upon which the Commonwealth relied could not, in themselves, sustain any inference about what Dr Sherman would have done if the injunction were refused. The reason this was so was because by the time the injunction was granted, it was known that there would be an early trial in April 2008 and that this was the same month that Apotex would have obtained its PBS listing. These two matters were not known at the time of any of the correspondence upon which the Commonwealth relied.
Assuming for the sake of argument that these pre-injunction documents, viewed in pure isolation, could support an inference that Dr Sherman would have launched at risk, the problem is that the question the trial judge had to decide did not arise in such a circumstance of pure isolation. Rather, it arose in a factual milieu which necessarily now included additional facts that Dr Sherman would have known, i.e. that there was to be a trial and PBS listing in April 2008. The trial judge’s point is that no amount of scrutiny of the prior correspondence can provide any assistance in determining what Dr Sherman’s reaction to these unanticipated developments would have been. It is this problem which is the evidentiary deficiency to which his Honour referred at J [349].
As such, his Honour was correct to identify this as an evidential deficiency from the Commonwealth’s perspective. Once that is accepted, it follows that the Commonwealth’s first and second submissions must be rejected. The trial judge did not utilise Jones v Dunkel to decline to draw an inference from the pre-injunction documents. Rather, he thought those documents were insufficient to draw any inference from in light of the developments which had occurred.
The Commonwealth’s third contention was that the trial judge had failed to deal with the question of which party bore the onus of demonstrating that Dr Sherman would be expected to be called: AS [84]-[85]. It submitted that the party seeking the drawing of the Jones v Dunkel inference bore the onus of proving this matter. That party was Sanofi.
It may, we think, be assumed that as the party seeking the drawing of the Jones v Dunkel inference, it was for Sanofi, rather than the Commonwealth, to demonstrate that circumstances enlivening the rule were present and that the inference should be drawn. This necessitated that Sanofi demonstrate both that the evidence of Dr Sherman was likely to be relevant to the determination of a fact in issue, and that Dr Sherman was relevantly in the camp of the Commonwealth.
The trial judge was evidently persuaded of both matters. On appeal, the Commonwealth took issue with both conclusions. As to the relevance of Dr Sherman, the Commonwealth submitted (as part of its fourth contention at AS [86]-[87]) that Apotex had successfully claimed legal professional privilege over substantial parts of its internal correspondence. This mattered because whilst the Commonwealth accepted in its written submissions that Dr Sherman could have been asked whether he would have launched at risk in the counterfactual, he would not have been able to have been asked any questions about the material over which privilege had been claimed. His answer would therefore have been a hindsight answer made 10 years after the event and divorced from the contemporaneous documentary material (which was privileged): AS [88].
Taking this submission at its highest, it is not a submission that Dr Sherman’s evidence about whether he would have launched at risk in the counterfactual was irrelevant. Rather, it is a submission that, despite being relevant, its significance was to be downplayed. As such, it cannot be said to have been erroneous for the trial judge to have approached the matter on the basis that the evidence of Dr Sherman would have been relevant.
In any event, the Commonwealth’s submission greatly overstates the effect of Apotex’s claims for privilege. Whilst much of the correspondence was masked for privilege, much of it was not. It is difficult to see how the Commonwealth’s submission – that the available material which was not masked for privilege could lead only to the inference that Dr Sherman would have launched at risk – can be reconciled with its present submission that Dr Sherman could have been asked nothing useful about that same material.
In his address, Mr Gleeson developed this submission by drawing an analogy between Dr Sherman and the position of Mr Robb in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; 247 CLR 345 at [168] (‘Hellicar’). In Hellicar, ASIC had not called Mr Robb and the Court of Appeal had drawn a Jones v Dunkel inference against ASIC. At [162] the High Court explained the evidence he might have given in this way:
The respondents submitted that it should not be inferred from the rendering of this bill that Mr Robb looked again at the minutes after the February meeting. The better view of the evidence would require rejection of that submission. But even if it were accepted, the evidence that Mr Robb could be expected to give of what was said or done at the February meeting would have to be assessed in light of the part he had played in preparation of the minutes that were ultimately adopted by the board as a correct record of what was decided at the February meeting. It could be expected that Mr Robb could have given evidence to the effect (a) that he recalled what was said and done at the meeting and it accorded with the minutes which had been drafted and settled under his supervision, or (b) that he had no independent recollection of some or all of what transpired at that meeting, or (c) some mixture of the two. It seems unlikely that he would say that he had not seen, in any of the successive drafts, the reference to tabling and adoption of a draft ASX announcement, a copy of which, as the respondents emphasised for other reasons, he had been given and he had annotated. It seems very unlikely that he would say, contrary to his own interests and the interests of the firm of which he was a member at the relevant times, that he positively remembered that what was recorded in the minutes was untrue.
It then reasoned this way at [168] and [169]:
The Court of Appeal concluded that ASIC’s not calling Mr Robb founded an inference that his evidence “would not have assisted the ASIC case”. There was no basis for drawing any inference that Mr Robb would have given evidence adverse to ASIC’s case. More particularly, there was no basis for concluding that it was more likely than not that he would say that the minutes whose preparation he had supervised were false. The most that could be inferred from Mr Robb not being called by ASIC was that he could not give evidence, from his own independent recollection, of what had happened at the February board meeting. He was not “a person presumably able to put the true complexion on the facts relied on [by ASIC] as the ground” for any inference that ASIC sought to have drawn from the evidence. And contrary to the conclusions reached by the Court of Appeal, what Lord Mansfield said in Blatch v Archer permitted no larger conclusion.
ASIC had tendered admissible evidence that, if accepted, showed that the draft ASX announcement had been tabled and approved. This was not a case where ASIC’s case depended on inference, let alone on “uncertain inferences”, or where there was a question about whether “limited material is an appropriate basis on which to reach a reasonable decision”. It was not a case where “the missing witness would be expected to be called by one party rather than the other” or where it was known that “his evidence would elucidate a particular matter” (emphasis added). It was the respondents’ case that depended upon inference. The inference they sought to have drawn was that the minutes were not accurate evidence of tabling and approval. ASIC not calling Mr Robb did not entail that the inference which the respondents sought to have drawn could be more safely drawn. It was not to be expected that ASIC would call him (and the respondents not call him) if Mr Robb would have given any evidence that cast doubt on whether the minutes were accurate.
We do not think the positions of Dr Sherman and Mr Robb are analogous. Here, Dr Sherman’s evidence would have undoubtedly elucidated the central issue in this case: what would Dr Sherman have done if the injunction had been refused?
Turning then to the fourth contention i.e. the question of which party should have called Dr Sherman, the Commonwealth developed two contentions. The first was that Dr Sherman was equally available to both the Commonwealth and Sanofi. The second was that Dr Sherman was not in the Commonwealth’s camp in light of Apotex’s extensive claims for privilege.
The first contention is a false issue. The question is not whether both parties stood in the same position when it came to the practicalities of calling Dr Sherman. It is whether he was more in the camp of one party rather than the other. His Honour considered and, in our view, correctly rejected the Commonwealth’s contention that Sanofi ought to have called Dr Sherman. The trial judge did this on the basis that Sanofi and Apotex were trade rivals engaged in litigation across three jurisdictions: J [344]. To tease that out, Sanofi ran the real risk if it called Dr Sherman that he would seek to injure it by giving unhelpful evidence. Dr Sherman was not therefore in Sanofi’s camp.
As to the second contention that Dr Sherman was not in the Commonwealth’s camp, the question of what can be inferred from Apotex’s extensive claims for privilege requires a broader conspectus of the evidence than the Commonwealth’s submissions allow. As we have explained above (at [361]), we do not accept the Commonwealth’s submission in relation to privilege. Further to this, it might, in principle, be possible to infer from the claims made for privilege that Apotex was unwilling to co-operate with the Commonwealth. The problem with that inference, however, is that it cannot be made to co-exist with the fact that the Commonwealth did, in fact, call several witnesses from Apotex including two from overseas. More precisely, the Commonwealth’s submission must confront the fact that it had called Mr Fahner who was an employee of Apotex usually resident in Canada. The trial judge was alive to this and to the fact that the Commonwealth had also called two other witnesses from Apotex, Mr Millichamp (from Australia) and Mr Goel (from India): J [342].
We do not, therefore, see how an inference can be drawn that the claims for privilege justified the drawing of an inference that Apotex was not co-operating with the Commonwealth for it is clear that it was. The only way around this conundrum is to redraw the inference so that instead of suggesting that the claims for privilege implied that Apotex was not co-operating with the Commonwealth it would instead be suggested that the claims for privilege implied only that Apotex was not co-operating to the extent of making Dr Sherman available. It is true that this would overcome the difficulty for the argument that the other Apotex witnesses constituted, but it comes at the price of being entirely implausible. There is no basis upon which the claims for privilege may be used to draw different inferences about the degree of Apotex’s co-operation depending on who the relevant witness was.
In our view, the fact that the Commonwealth called three witnesses from Apotex, including one from Canada and another from India, was evidence from which it could be inferred that Apotex was willing to cooperate with the Commonwealth and Apotex’s claims for privilege in no way impacted upon this.
Leaving aside the question of Apotex’s claims for privilege, the Commonwealth then submitted that an inference of co-operation could not be drawn about Dr Sherman himself. The reason for this was that it was ‘obvious’ that Dr Sherman would not have been willing to give evidence: AS [87]. In this context, the implications of the word ‘obvious’ should be explicitly stated. The implication is that no evidence was necessary in order to establish that Dr Sherman was not willing to give evidence. What were the facts, matters and circumstances advanced to establish the necessity for this implication?
They were: first, that he would have had no interest in exposing himself to cross-examination by his trade rival, Sanofi; secondly, Apotex had not called Dr Sherman in its own case against Sanofi on the undertaking before reaching settlement which gave rise to an inference that he was unwilling to give evidence; thirdly, as Mr Gleeson observed in his address at T102, the Commonwealth did not have access to any affidavit evidence prepared by Dr Sherman from the Apotex proceedings; and fourthly, because the trial judge had rejected questions asked by Sanofi’s counsel to Apotex witnesses directed to establishing that Dr Sherman was available to give evidence.
We would accept that it would be open to infer from the first three of these matters that Dr Sherman would be unwilling to give evidence. However, the question is whether that inference should be drawn. The Commonwealth’s submission that the inference should be drawn must dwell in the long shadow cast by the fact that at trial it led no evidence that Dr Sherman had declined to give evidence on its behalf. As his Honour observed at J [346], there ‘was no evidence called by the Commonwealth that would provide any explanation as to why it did not call Dr Sherman or what attempts, if any, it made to call him’. The absence of any evidence of that kind powerfully now tells against drawing any inference that it was obvious that Dr Sherman would not agree to give evidence. We decline to draw such an inference.
Once that is accepted, the reasoning of the trial judge cannot be faulted. His Honour did not err in declining to draw an inference that Dr Sherman would have instructed Mr Millichamp to procure the PBS listing of Apotex’s clopidogrel products from 1 April 2008.
For completeness, we should note the Commonwealth’s submission under this heading that the approach of Mason J in Air Express necessitated that it was Sanofi which ought to have called Dr Sherman. Here the argument was that the onus lay on the defendant to a claim under an undertaking as to damages to demonstrate the existence of countervailing circumstances why compensation ought not to be ordered. It is doubtful this submission relates to Jones v Dunkel at all. The submission seems to be an effort to put on Sanofi a particular legal burden to have called Dr Sherman. Assuming the submission is correct, it would, however, render the Jones v Dunkel question irrelevant. There would be no issue as to the significance for the Commonwealth of its failure to call Dr Sherman. The effect of the Air Express submission would be that Sanofi was required to call Dr Sherman and having not done so, was therefore bound to fail. As such, we doubt that this submission meaningfully relates to Ground 2(c) which takes as its point of departure that Jones v Dunkel is an applicable part of the conceptual framework. Even if the Commonwealth’s submission can be meaningfully integrated into such a framework, Mason J was in dissent in Air Express and we see nothing in the other reasons for judgment which suggests that Sanofi was bound to call Dr Sherman.
GROUND 2(D): DELAY
Ground 2(d) is as follows:
(d)The extreme delay by the primary judge in delivering judgment allows an appellate court more readily to conclude that arguments and evidence not addressed were overlooked, that the advantages otherwise usually held by a trial judge were lost, and that the above errors can be more readily established.
There were 31 months between the conclusion of the case and the delivery of the judgment by the trial judge. The Commonwealth made two submissions. First, whilst ordinarily the fact that a trial judge had not dealt with every item of evidence might not lead to an inference that that evidence had been overlooked, this was not so where such a significant delay was involved: AS [92]. Secondly, the trial judge had rejected certain aspects of Mr Millichamp’s evidence and found him to be in some ways an unsatisfactory witness. Because of the delay, the deference shown by appellate courts to credit findings was therefore lost: AS [93].
We would accept, in principle, the point made by the Commonwealth. As this Court said in Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; 140 FCR 17 at [68]-[73] (‘PRD Realty’):
Where there are relevant contemporaneous materials, such as file notes and correspondence, and there is significant delay between the hearing of evidence and the giving of reasons for conclusions, being reasons that do not advert to the contemporaneous materials and do not give specific reasoning for accepting or rejecting the evidence of particular witnesses, the conclusions reached should be given careful scrutiny and consideration by an appellate court where the findings are challenged on appeal.
Delay between the taking of evidence and the making of a decision is not, of itself, a ground of appeal, unless the judge could no longer produce a proper judgment or the parties are unable to obtain from the decision the benefit which they should (cf Boodhoo v Attorney-General of Trinidad and Tobago [2004] 1 WLR 1689 at [11]-[12]). Nor does such delay of itself indicate that a trial has miscarried or that a verdict is in any manner unsafe. However, where there is significant delay in giving judgment, it is incumbent upon an appellate court to look with special care at any finding of fact challenged on appeal. In ordinary circumstances, where there is a conflict of evidence, the trial judge who has seen and heard the witnesses, has an advantage.
That advantage includes seeing the oral and documentary evidence unfold in a coherent manner, which cannot be replicated on appeal (State Rail Authority (NSW) v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306 per Kirby J at [90]; Bartlem Pty Ltd v Cox Industries (Australia) Pty Ltd (2002) 55 IPR 449 at [87]). That advantage will ordinarily prove decisive on appeal unless it can be shown that the trial judge failed to use or misused such an advantage. The mere fact of a long delay itself weakens a trial judge’s advantage. Thus, delay must be taken into account when reviewing findings made by a trial judge after a significant delay from the time when the relevant evidence was given.
In the normal course, statements made by a trial judge of a general assertive character can be accepted as encompassing a detailed consideration of the evidence. However, where there is significant delay, such statements should be treated with some reserve. After a significant delay, a more comprehensive statement of the relevant evidence than would normally be required should be provided by the trial judge in order to make manifest, to the parties and the public, that the delay has not affected the decision.
In cases not affected by delay, an appellate court is entitled to assume that the mere failure to refer to evidence does not mean that it has been overlooked or that other forms of error have occurred. However, where there is significant delay, no favourable assumptions can be made. In such circumstances, it is up to the trial judge to put beyond question any suggestion that he or she has lost an understanding of the issues. Where there is significant delay, it is incumbent upon a trial judge to inform the parties of the reasons why the evidence of a particular witness has been rejected. It is necessary for the trial judge to say why he or she prefers the evidence of one witness over the evidence of other witnesses (Hadid v Redpath (2001) 35 MVR 152 at [34] and [53]).
Of course, where the trial judge, notwithstanding significant delay, demonstrates by his or her reasons that full consideration has been given to all of the evidence, the parties and the public may be satisfied that the delay has not affected the decision. More specifically, if the reasons demonstrate that the delay has not weakened the trial judge’s advantage, confidence will be maintained in the decision. For example, it would be open to a trial judge to explain in the course of giving reasons that contemporaneous notes were made of impressions formed as evidence was given by witnesses of importance (see R v Maxwell (unreported, Court of Criminal Appeal, NSW, Spigelman CJ, Sperling and Hidden JJ, No 60282 of 1998, 23 December 1998)).

In the course of dealing with Ground 2(b), we have engaged with each of the matters which were said to have been overlooked by the trial judge. In every case, we have concluded that the evidence was either not material or was in fact examined by the trial judge in his reasons. Thus the first limb of the Commonwealth’s argument does not result in the demonstration of error. Even assuming that the trial judge’s failure to advert to the evidence was the result of the delay, the evidence was not material to the outcome.
That reasoning does not, however, apply to the second limb which relates to his Honour’s assessment of the evidence of Mr Millichamp. One begins by reminding oneself about the metes and bounds of the context with which the trial judge was confronted. Although the earlier affidavits prepared by Mr Millichamp had suggested that he was the key decision maker in relation to the question of whether Apotex would launch at risk if the injunction was not granted, by the time of the trial, the role of Dr Sherman had been dislodged from the undergrowth. Sanofi launched an attack on the credit of Mr Millichamp on the basis that his earlier evidence had been false (because of his failure to disclose the role of Dr Sherman), but the trial judge did not accept this. Instead, his Honour was inclined to read Mr Millichamp’s evidence in light of the context in which it had been given. That context had been Apotex’s efforts to resist the interlocutory injunction and the trial judge reasoned, correctly in our opinion, that not too much was to be read into Mr Millichamp’s omission of any mention of Dr Sherman: J [332].
By the time of the trial, however, it had become apparent that the critical decision maker was Dr Sherman. This fact was recognised on both sides although the forensic postures then adopted differed. The Commonwealth’s case became that Dr Sherman had decided in February 2007 that Apotex would launch at risk. Once that decision was made, no further discretion remained in Mr Millichamp to decide otherwise. The die had been cast and all that awaited was for Mr Millichamp to find out whether Gyles J refused or granted the injunction. If the injunction were refused, then Mr Millichamp already had his instructions and they were that he should proceed to launch at risk.
One difficulty with this case was the absence of Dr Sherman to give any evidence as to what he would have done. The Commonwealth’s answer to this problem was that it could prove that Dr Sherman had already made that decision on 20 February 2007. The evidence for this consisted of his email of that date to which reference had already been made so that no further reference to Dr Sherman was necessary. If this defensive line could be maintained, it entailed that no inquiry into what Dr Sherman would have done was necessary. On this view, Mr Millichamp had his instructions; all that remained was for him to act upon them.
A further problem with that case was the large amount of evidence which was only consistent with Dr Sherman having a continuing role in the decision making process. These included the emails passing between Mr Kay and Dr Sherman on 25 June 2007 and 27 June 2007 and the cascade of emails between Dr Sherman, Mr Kay, Mr Millichamp and others on 26 and 27 June 2007.
It also included Mr Millichamp’s email of 27 June 2007 in which he referred to the fact that any launch at risk was subject to Dr Sherman’s ‘further advice/approval’. Mr Millichamp was cross-examined about this email. He endeavoured to say that he thought it was unlikely that Dr Sherman would have changed his mind. We will return to this cross-examination in a moment, but it will be at once apparent that this answer involved a breach of the defensive line which the Commonwealth had sought to erect. Whether Mr Millichamp thought it likely that Dr Sherman would or would not change his mind did not detract from the fact that his email showed that it was not the case that Mr Millichamp was mechanically to carry into effect Dr Sherman’s instructions contained in his email of February 2007. Mr Millichamp’s own email showed that Dr Sherman, as might naturally be expected of the CEO and Chairman of the entire Apotex group, continued to be the decision maker.
Turning then to the cross-examination itself, this was set out in the reasons of the primary judge at J [249] in these terms:
Mr Millichamp was cross-examined by Mr Sheahan QC on the email to Mr Haas as follows:
MR SHEAHAN: Now, what you were indicating to Mr Hass, I suggest, was that the final decision to launch, even if you were successful in avoiding an injunction, would be a decision made by Dr Sherman at that time; correct? ––– And I think the thinking was that Dr Sherman gave the initial instructions. Andrew Kay had then clarified things with Dr Sherman. Again, we need to show him respect. If there was anything we needed to go to him with, we would. But, if there was no change on the instructions he had given, we would just move ahead.
So do you say to his Honour that what – the only possibility you’re addressing here is that after having informed Canada of your success on the interlocutory injunction, then, out of the blue, as it were, they might indicate to you that they had had a change of heart? ––– Very unlikely.
…
MR SHEAHAN: You were saying that it’s very unlikely that out of the blue Canada would – having been told of your success – just send you a message saying, “We’ve changed our mind.” You agree? ––– I agree with that.
…
And because that scenario was unlikely, what I want to suggest to you is that that is not the scenario you were addressing in this email by saying:
We plan to launch subject to Barry’s further advice/approval
You were addressing another possibility, weren’t you? ––– It’s – in – in retrospect I – or in – in hindsight or in – I can’t actually remember what scenario I was discussing here. It’s to Steven Hass [sic]. I guess I’m just covering all angles and just saying look, subject to Barry’s further advice/approval – it’s a – it’s almost a throwaway line. But you know, there could be a scenario, I guess, where Barry could change his mind. I mean, I ..... think he would. But – it would be very unlikely.
What you were addressing here, I suggest, was your intention to confirm the instructions that you had after a successful interlocutory proceeding, to make sure that Canada still wanted to proceed at risk in Australia? ––– It’s an email to the – I already had the instructions on what to do and had already explained to my boss – this is another email to somebody in production, and I’ve just put that comment in there. I never at any stage would – I think it would be very, very unlikely indeed that Barry would ever change his mind. And it’s only to Steven Hass [sic], who actually is a personal friend of mine. And I put that – put that line in there – I didn’t think that I would have to go through another round of approval with – with – with Barry.
It will be seen that the last answer suggested, contrary to the terms of his own email, that he did not think that he would need further to consult with Dr Sherman. It was this aspect of Mr Millichamp’s evidence that the trial judge found to be unsatisfactory (having acquitted him of the larger charge of giving deliberately false evidence by failing in his earlier affidavits to disclose the role of Dr Sherman). His Honour dealt with this at J [250]-[251]:
I found this evidence most unconvincing. In my view it was largely non-responsive and evasive. Mr Millichamp was not asked whether he believed that Dr Sherman was unlikely to change his mind, but he was at pains to emphasise how unlikely it was that Dr Sherman would do so (“very, very unlikely indeed”). The suggestion that Mr Haas was his personal friend, or that he was only “Stephen Haas” or “somebody in production” does not explain why the launch was said by Mr Millichamp to be subject to Dr Sherman’s “further advice / approval”.
I do not accept the explanation given by Mr Millichamp concerning his email to Mr Haas. In particular I do not accept that the relevant statement was a “throw away” line or that Mr Millichamp was merely seeking to “cover all angles”. Nor do I accept that it was unlikely that Dr Sherman would change his mind. On Mr Millichamp’s own evidence, Dr Sherman had already changed his mind in that the revocation/launch strategy for Australia was originally predicated on a successful outcome of the litigation in the US and Canada. In my view, the terms of Mr Millichamp’s email are more likely than not to be correct in so far as they suggest that Dr Sherman had not finally committed to a launch at risk in Australia and that it would be necessary for Mr Millichamp to obtain final approval to launch at risk in the event that no interlocutory injunction was granted.
It will be apparent that the trial judge’s criticisms were not related to the demeanour of Mr Millichamp. Rather, they were directed at the content of what he had said. The trial judge examined that content and found it wanting. This is not a case, therefore, where a trial judge has said that he did not accept a witness’s evidence because he found it unconvincing. Rather, it is a case where the trial judge has explained precisely why he found the response given orally to be unsatisfactory and why he preferred the contemporaneous written record. The basis for the credit finding is therefore entirely before this Court.
The delay in the production of the trial judge’s reasons required, as this Court held in PRD Realty at [72], that the trial judge inform the parties the reasons why the evidence of Mr Millichamp was rejected. As the Court observed at [73], where the reasons of the trial judge demonstrate that, notwithstanding the delay, full consideration has been given to all of the evidence, the public may be satisfied that the delay has not affected the decision. In our view, this is such a case. The trial judge’s reasons for finding this aspect of the evidence of Mr Millichamp unsatisfactory demonstrate, clearly in our view, that the trial judge was very much alive to the detail of the evidence and its significance. Indeed, if we may say with respect, the trial judge’s reasons as a whole represent a most thorough and searching excavation of the very complicated factual questions which the case generated.
In that circumstance, we are not satisfied that the delay provides any reason for reviewing his Honour’s conclusion that this aspect of Mr Millichamp’s evidence was unsatisfactory. Ground 2(d) should be rejected.
GROUND 2(E): FINDINGS THE TRIAL JUDGE OUGHT TO HAVE MADE
This ground does not arise where we have not detected any error in the trial judge’s approach to the issues otherwise raised in Ground 2.
CONCLUSION ON GROUND 2
In light of the above, it follows that Ground 2 must be rejected.
CONCLUSION
As have explained above, once Ground 2 is rejected the appeal must be dismissed. Whilst the Commonwealth would have succeeded on Ground 1 had it succeeded on Ground 2, we do not think, in the circumstance, that there should be a departure from the ordinary position that the unsuccessful party should pay the costs of the successful party.
We would make the following orders:
(1)The appeal be dismissed.
(2)The Appellant pay the costs of the Respondent to the appeal as taxed, assessed or agreed.

I certify that the preceding three hundred and ninety-two (392) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Besanko, Perram and Yates.
Associate:
Dated: 26 June 2023

Appeal from:	Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543
File number:	NSD 586 of 2020
Judgment of:	BESANKO, PERRAM AND YATES JJ
Date of judgment:	26 June 2023
Catchwords:	PATENTS – where listing of generic drug on Pharmaceutical Benefits Scheme (‘PBS’) reduces listing price and Commonwealth subsidy of non-generic form of drug – where Respondent held patent for clopidogrel – where interlocutory injunction obtained restraining generic supplier from entering market with generic clopidogrel – where generic supplier undertook not to seek PBS listing – where Respondent undertook to compensate persons adversely affected by injunction – where Respondent’s patent subsequently found invalid – where Commonwealth seeks recovery of additional subsidies provided to Respondent due to non-listing of generic clopidogrel – where Respondent’s patent subsequently found invalid – whether generic supplier would have sought PBS listing if injunction not granted – whether trial judge overlooked material evidence – whether trial judge incorrectly drew Jones v Dunkel inference against Commonwealth – whether delay in delivering judgment more readily establishes error in trial judge’s reasons concerning credit of witness and overlooked evidence – whether Commonwealth’s claimed loss flows directly from injunction
Legislation:	National Health Act 1953 (Cth) ss 99AEB, 99AEH(2) Trade Practices Act 1974 (Cth) ss 52, 82
Cases cited:	AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 Australian Securities and Investments Commission v Hellicar [2012] HCA 17; 247 CLR 345 Berry v CCL Secure Pty Ltd [2020] HCA 27; 271 CLR 151 Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543 Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50 Douglass v Bullen (1913) 12 DLR 652 European Bank Ltd v Evans [2010] HCA 6; 240 CLR 432 Ex parte Hall, in re Wood (1883) 23 Ch D 644 Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; 140 FCR 17 GenRx Pty Ltd v Sanofi-Aventis [2007] FCA 1485 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640 Jones v Dunkel (1959) 101 CLR 298 Palmer Bruyn & Parker v Parsons [2001] HCA 69; 208 CLR 388 Purkess v Crittenden (1965) 114 CLR 164 Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716 Schlesinger v Bedford (1893) 9 TLR 370 (CA) Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 Smith New Court Securities Ltd v Citibank NA [1997] AC 254 Smith v Day (1882) 21 Ch D 421 Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 3) [2012] FCA504; 290 ALR 263 Warner-Lambert Company LLC v Apotex Pty Ltd [2017] FCAFC 58; 249 FCR 17 Wyzenbeek v Australasian Marine Imports Pty Ltd [2019] FCAFC 167; 272 FCR 373
Division:	General Division
Registry:	New South Wales
National Practice Area:	Intellectual Property
Sub-area:	Patents and associated Statutes
Number of paragraphs:	392
Date of last submissions:	4 February 2021
Date of hearing:	16-19, 22-24 February 2021
Counsel for the Appellant:	Mr J Gleeson SC, Dr B Kremer and Ms F Roughley
Solicitor for the Appellant:	Corrs Chambers Westgarth
Counsel for the Respondents:	Mr J C Sheahan QC, Mr J J Hutton and Mr S Fitzpatrick
Solicitor for the Respondents:	Jones Day

ORDER MADE BY:	BESANKO, PERRAM AND YATES JJ
DATE OF ORDER:	26 JUNE 2023