Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) & Ors

[2024] HCATrans 58

[2024] HCATrans 058

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S169 of 2023

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Appellant

and

SANOFI (FORMERLY SANOFI‑AVENTIS)

First Respondent

SANOFI‑AVENTIS US LLC

Second Respondent

BRISTOL‑MYERS SQUIBB INVESTCO LLC

Third Respondent

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

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON WEDNESDAY, 4 SEPTEMBER 2024, AT 9.59 AM

Copyright in the High Court of Australia

____________________

MR J.T. GLEESON, SC:   May it please the Court, I appear with MS F.T. ROUGHLEY, SC, MS G. WATSON KEESING and MS M.F. CARISTO for the appellant.  (instructed by Corrs Chambers Westgarth)

MR J.C. SHEAHAN, KC:   May it please the Court, I appear with MR J.J. HUTTON, SC, MR S. FITZPATRICK and MR B.K. LIM for the respondents.  (instructed by Jones Day)

GORDON A-CJ:   Thank you, Mr Sheahan.  Mr Gleeson. 

MR GLEESON:   Your Honours, could I offer a conspectus of the Commonwealth’s appeal and then develop the detailed propositions in the outline?

GORDON A-CJ:   Certainly. 

MR GLEESON:   18 September 2007, almost 18 years ago to the day, saw a contested interlocutory injunction in the Federal Court of Australia between two large powerful pharmaceutical companies.  Sanofi‑Aventis, the French company, had in its kitbag of patents clopidogrel.  Clopidogrel was the third‑largest drug on the PBS.  The Commonwealth then, 20 years ago, was paying $170 million under the PBS in respect of clopidogrel.  Apotex, based in Canada, was a well‑resourced, aggressive generic company who identified a weakness in the Sanofi patent; a weakness on the ground of anticipation or want of novelty which proved to be correct three years later.

In the interlocutory injunction, Justice Gyles, who no one would describe as an ingenue in litigation generally or patents in particular, had before him two of the finest counsel of the patent bar:  Mr Bannon, senior counsel, and Mr Catterns, senior counsel.  I emphasise they were instructed by leading solicitors:  Mr Kerr of Allens for Sanofi, Mr Chalk of Blake Dawson Waldron for Apotex.  One issue was common ground on 18 September 2007.  Everything else was in dispute but one issue was common ground, and that was that if no injunction were given, Apotex would list and launch on the next available date, which was 1 April 2008. 

This particular interlocutory injunction, unlike many others – such as the ones your Honour Justice Jagot had to deal with in Sigma, where there was not this type of contest – required Apotex through its solicitors and counsel to state openly and fully and honestly to the Court what its intentions were.  It did so by Mr Catterns and on sworn evidence which was unchallenged.  Mr Bannon, supported by his sworn

evidence, agreed Apotex would list and launch if not restrained.  In particular, what Mr Bannon’s side put was to explain to Justice Gyles in one words of one syllable, although with Mr Bannon’s charm, exactly what was the causal chain which would bring the feared loss to Sanofi.  That causal chain had three simple steps in it, and the steps were important both to the appeal and to ground 1 of the notice of contention.

The first step was, if no injunction were given, Apotex would apply to list and if successful launch, the second step was that the Minister would grant that application as a matter of course, and the third step was once Apotex was listed there would be immediate consequences by law under the PBS legislation.  There was no dispute what those consequences were, there were at least two. 

The first was that, from the moment of listing, the price payable to Sanofi would decrease by 12.5 per cent, and there were many tens of millions of dollars in that as feared loss to Sanofi, and consequently to the Commonwealth the gain that it would save the twelve and a half per cent.  The second head of loss, which your Honours may not need to get to although it is raised in notice of contention three – if you decide to permit that ground – we oppose it is on discretionary reasons.  I will just identify they are the price disclosure losses, and as Mr Sheahan correctly says, they are very large.  There is $215 million, as the numbers played out, in the price disclosure loss, and it came about this way.

In August 2007, the Commonwealth legislation changed – this is legislation, not just practice – to require generics who get listed to disclose their prices to the Commonwealth.  This was a measure to save money for us as taxpayers, because the PBS is always under enormous pressure.  The purpose of price disclosure was that over time an average would be worked out of the price being charged by everyone in the market who were required to disclose their prices – that is Apotex – or who voluntarily submitted to do so, which inevitably would be Sanofi.

I say “inevitably” – this was in Sanofi’s evidence, and I will come to it.  Because it is an average of all prices, Apotex is going to come on at a big discount – say, 60 per cent.  Unless Sanofi reveals its price, it will be the Apotex price that sets the new PBS price, and therefore Sanofi will suffer a big loss beyond the twelve and a half per cent.  They are the three steps in the causal chain that Mr Bannnon and his witnesses said require the court’s intervention.  Mr Catterns said, no, we will offer security of $50 million for your losses for one year with liberty to top up, but unless the injunction is given, we will go ahead and list and launch, and we will take our chances on the final hearing because we believe the patent is bad.

Justice Gyles granted the interlocutory injunction on that basis.  That is, that Apotex would list and launch.  He also granted it on the basis of Mr Bannon’s very fair concession that the undertaking as to damages extended to third parties, and he mentioned the Commonwealth.  In that context, the approach which the Commonwealth urges to the correct principles for the assessment of damages under the undertaking can be summarised in this form.  Firstly, we accept the legal onus on causation lies on the Commonwealth, and never shifted.  Secondly, as per paragraph 4 of our outline, the causation question has two related aspects to it.  The first is a question of past fact, namely:  was the injunction granted by Justice Gyles a cause of Apotex not listing?  The second is a question of past hypothetical fact:  if the injunction had not been granted, would Apotex have gone ahead and carried out its intention to list and launch?

We submit the first fact is not in dispute.  The primary judge found it at paragraphs 428 to 432.  The Full Court confirmed it at paragraphs 37 to 38.  What the case, properly viewed, turned upon is the second hypothetical aspect to the causation question, and the approach we contend – which is now in paragraph 3 – is that the first step is to ask:  did the Commonwealth advance, in satisfaction of its evidential burden, a prima facie case that, if no injunction, Apotex would have listed and launched?  That is, did the Commonwealth adduce evidence which, if left uncontradicted and otherwise accepted, could satisfy the legal burden?

The primary way in which the Commonwealth advanced and satisfied the prima facie case requirement is by proof of what the parties did in the real world leading up to and at that hearing on 18 September 2007, and that material, which we have summarised in our propositions as propositions 1 to 10, I will come to in detail, but the essence of it was Apotex stated its position clearly to the Court, Sanofi accepted that was Apotex’s position, Justice Gyles acted upon it, and that is the prima facie case.  If left uncontradicted, the Commonwealth had satisfied its legal onus.

Step two in the exercise – we do not wish to be overly rigid but we are following Purkess v Crittenden, and we believe we are following Justices Mason and Stephen in Air Express, and we are consistent with Berry, and we are consistent with Henderson and Sigma – is if the Commonwealth has got that prima facie case, an evidentiary onus shifts to Sanofi to advance a reason supported by evidence which is sufficient to require the court to consider Apotex may not have listed and launched despite what it told the court.

The critical aspect that we are advancing on step two is that it is not good enough to put up speculation, it is not good enough to cast out, it is not good enough to hint but not wound, it is not good enough to suggest propositions that might have deceit rolled up in them but not actually spell it out.  Sanofi had to say, here is the reason why, notwithstanding what Mr Catterns said, notwithstanding what Mr Millichamp said, they would not have launched and listed, here is our evidence, and there would be an assessment whether that was sufficient to reach stage three where the court would then weigh those two competing cases always against the Commonwealth’s legal onus.  That simply has not been done by either court below, we respectfully submit.

Your Honours, with reference to paragraph 1 of our outline, could I identify the key places in the primary judge’s judgment where we say the exercise is wholly miscarried.  I will start, if I may, at paragraph 272 on page 82.  In that paragraph, the primary judge records something of what happened on 18 December.  As far as it goes, what his Honour says is correct, but it does not go far enough.  Yes, it is correct:

Mr Catterns QC was explicit and direct in stating that Apotex would apply for listing as at 1 April 2008 if there was no interlocutory injunction.

That is correct.  What is omitted from that paragraph are three critical facts which are not in dispute.  The first is that Mr Catterns’ statement was supported by the sworn evidence of Mr Millichamp at paragraph 38 – uncontested evidence.

BEECH‑JONES J:   Sorry, Mr Gleeson, paragraph 38 of Mr Millichamp’s affidavit?

MR GLEESON:   Of 17 September 2007.

BEECH‑JONES J:   Yes.

MR GLEESON:   It is counsel, but it is counsel supported by sworn unchallenged evidence.  That is the first thing omitted.  The second thing omitted is that, in the second sentence:

The cross‑claim included the claim for interlocutory injunctive relief.

True, accompanied by an express offer of an undertaking to damages which Apotex rejected.

JAGOT J:   Sorry, could you repeat that?

MR GLEESON:  

The cross‑claim included the claim for interlocutory injunctive relief.

Accompanied by an express offer of an undertaking to damages in respect to both listing and launching injunctions, an offer which Apotex rejected.

JAGOT J:   Thank you.

GORDON A-CJ:   So, that is in addition to the second sentence.

MR GLEESON:   Yes.  I pause there because your Honour knows we take particular offence at paragraph 90 of the Full Court who says – hints, but does not wound, and says maybe Apotex was goading Sanofi into an injunction.  At paragraph 124, the Full Court improperly suggests maybe Apotex was playing a “game”, a game of deceit – that is 129, they say that, and 134, they hint at the same.  If you are playing a game to goad Mr Sheahan’s client into suing you and getting the offer of an undertaking as to damages, when that offer is made the very thing you do not do is what Apotex did, which was to say, we do not want your undertaking, we want to list and launch.  That is the second matter that is omitted from the paragraph.

The third matter that is omitted is that, at the time those unequivocal statements were made, Apotex already knew the two matters which are said to be the subsequent developments.  I can take you to his Honour’s reference to those matters.  The first is at paragraph 264, which is from as early as 4 December Apotex knew it had missed the December application date and it would have to await – sorry, it had missed the December listing date, so the next available date was apply in December, list in April.  So, that fact was known well before the date.

The second fact that was known, at paragraph 266, was that on the first directions hearing on 13 September – we do not have a transcript, unfortunately, we have an email I will come to – there is some doubt whether it was Justice Gyles or Justice Bennett or, perhaps, as sometimes happens in the Federal Court, they both sat.

GORDON A‑CJ:   I thought it was a suggestion that they both sat.

MR GLEESON:   Both sat, yes, that seems to be the most likely suggestion for the reason revealed to the parties, that Justice Gyles was the intended final hearing judge as long as he was available.  Everyone knew he just had had his happy 69th birthday, and he was there until August the next year to deliver judgment if he was the assigned judge, but Justice Bennett – who I think at the time was managing the patents list – was there to oversee the matter and step in if for some reason Justice Gyles could not hear the matter.

On that first directions hearing, not only did Mr Catterns offer the $50 million, but Justice Gyles raised the possibility of fixing the proceeding for a final hearing to take place within the next six months, and the email will show it was a final hearing contemplated before him.  So, on that date – that is, the 13th ‑ ‑ ‑

GORDON A‑CJ:   I had thought it was not until 21 September that that fact was known, that it was to be trial by Justice Gyles and that he therefore would deliver judgment by August 2008.

MR GLEESON:   As a final fact, your Honour is correct. 

GORDON A‑CJ:   Correct, but that fact was not known as a final fact until after the directions hearing.

MR GLEESON:   Correct.  What was known at the directions hearing was a reasonable anticipation that that fact might come to pass.  Of the two supposed new developments, the first one, 264, that is known as a fact.  The second one is a reasonable anticipation in the light of what the court has told the parties.  What we submit is, in the context of parties with the most experienced solicitors and counsel and duties to the court, when Apotex formed its final position on 18 September to the court, it obviously was expected to take into account all matters known and reasonably anticipated.

GORDON A‑CJ:   Can I just ask one question, and I am sure you are going to come to it, but I had understood that prior to the hearing there was, I think, acceptance that Dr Sherman was of the view that they would launch, but the question in issue between the parties was whether that was the final approval.  If that is right, what then happens on the 21st, and the subsequent evidence, is directed at showing that whether or not that was the final view.

MR GLEESON:   That is how Sanofi tried to engender doubt.

GORDON A‑CJ:   No, that is the way that both the trial judge and the Full Court ultimately addressed it, is it not?

MR GLEESON:   And that is the error, because if one is looking at the best evidence of what would have happened immediately after the injunction not being granted or, as your Honour Justice Jagot put it in Sigma, not being pressed on the day, the best evidence put forward by the Commonwealth were the unqualified statements to the court based on sworn evidence made in the knowledge of the first fact and the reasonable anticipation of the second fact.  One can test it this way.  Let it be assumed Justice Gyles had accepted Mr Catterns’ submission and refused the injunction.  What was then to happen in the counterfactual?  Mr Catterns’ client needed to put up $50 million within 21 or 28 days.  They had told the court they would do it, and they were bound to do it. 

Can you just imagine for one second Mr Catterns or more likely his successor, because Mr Catterns would not have been party this form of deceit, turning up to Justice Gyles on 21 September or the 22nd or 23rd and saying, look, your Honour, when we told you we intended to list and launch, we did not actually have a final position on that topic, we were still having a think about it and what we were actually trying to do was to have a little game before you and see what you did.  If you injuncted us, well, then we did not have to make any hard decisions, but if you did not injunct us, we would then be completely free to decide whether or not to do that which we had told you we would do.

Had that been done by Mr Catterns or any competent counsel, the court would rightly have been disgusted with that type of behaviour because that would have been in breach of every duty of counsel and parties to be forthright and frank and complete in their statements to the court.

JAGOT J:   It would have dissolved the interlocutory injunction, as well.

MR GLEESON:   I am looking at it from the ethical duty, but your Honour’s question, with respect, takes it right to the practical level.  Can you imagine turning up and saying, I have now done the numbers, I have thought about it again, I have thought about the early final hearing, I no long want to put up my security.  Now, there are only two possibilities then.  The first is Apotex is now saying to the court, I do not intend to list and launch.  The thing I told you last week, I have now got the exact opposite intention, so you do not need to injunct me because I do not threaten to do it.  If that had happened, of course, there is then no undertaking as to damages.  That is one was it would have had to play out in the counterfactual.

The only other way it could have played out – and Mr Sheahan avoids the D‑word, the deceit word – is for Apotex to go back to the court and try and somehow manoeuvre to get themselves injuncted now and get the undertaking as to damages, even though their real intention is not to list and launch.  That would be a deceit and it would be a disgusting and disgraceful thing in its own right, but it would also be wholly counterproductive, because even if it worked in the first instance, what would happen when Apotex came to claim on that undertaking as to damages down the track, someone would have to give turgid evidence that they had an intention to list and launch when they did not.

BEECH-JONES J:   Mr Gleeson, you have to come to Dr Sherman at some stage, I assume, but in short is it your client’s case that the position was, we had unequivocal approval to go ahead and list and launch, but of course there was the possibility that Dr Sherman may change that?  As opposed to what is said to be characterised against you was that it was provisional on Dr Sherman approving launching.  Is that the essence of the difference?

MR GLEESON:   The second one your Honour described is what has been found against us, and that is what we are vigorously opposing.

GORDON A-CJ:   What is your position on it?

MR GLEESON:   Our position is that when a party ‑ ‑ ‑

GORDON A-CJ:   No, we are asking about Dr Sherman for the moment.  We are just dealing with Dr Sherman.

MR GLEESON:   Our position is Dr Sherman had authorised his lawyers to tell the court the truth, and the truth was, I intend to list and launch.  Now, that statement was a complete and accurate statement.  There are circumstances that can be imagined where a party might have to go back to a court and say there has been a truly material change in circumstances, an event that could not have been foreseen.  For example, my factory burnt down last week, I now do not have supply, I cannot get supply in from anywhere else, I now cannot list and launch.  I am sorry, your Honour, for putting you through a hearing for a day but I did it in good faith.  A circumstance has occurred which I could not have foreseen last week. 

Of course, in that world it would be open to Dr Sherman to say something truly has changed, I instruct my team to go back, explain it to the court, apologise for wasting time, and then – as your Honour Justice Jagot put to me – either there will no need for an injunction because I have made an unequivocal statement to the court as counsel, with an affidavit, that I no longer intend to list and launch, in which event I have no one to undertaking as to damages, or query, a party tries to manoeuvre themselves into being injuncted which, as I say, has the D‑word attached to it.  So, your Honour Justice Beech‑Jones, our position is tolerably close to the first way you put it, provided when we say it is always possible Dr Sherman could go back, only in those circumstances truly unforeseen events.

EDELMAN J:   Well, intentions – particularly intentions as to the future – may not be quite so binary.  I mean, intentions can be held with varying levels of strength.  One can assert that one intends to do something to a level of mere certainty, and one can also assert that to a level of high probability, or even low probability.

MR GLEESON:   Well, this evidence is the first.  This is, I intend to do it, I do not express any qualification that is to a level of very high probability, and the only circumstance when we go into the counterfactual where that is not good and sufficient evidence for us to succeed is where something truly unexpected has occurred, in which event perhaps you then say I now need to look around the evidence to see how would the decision‑maker have behaved in the light of that truly unexpected event.

STEWARD J:   Mr Gleeson, just in relation to the answer you gave Justice Edelman, I noticed in the written submissions of Mr Catterns that what he said was, we accept that we threaten, we are threatening to launch.  No doubt you will go to the detail later on, but is that more accurately the position that was put to the court, the threat?

MR GLEESON:   No, because – to the extent “threat” might be distinguished from “intend”, having regard to the old equity formulation – in the oral argument ‑ ‑ ‑ 

STEWARD J:   He went further, did he?

MR GLEESON:   First, Mr Bannon went further and said they will list, they will launch Mr Bannon.  Mr Catterns then said to his Honour, we will, if not injuncted, apply on 1 December and list on 1 April, and that exactly supported paragraph 38 of Mr Millichamp’s affidavit.

STEWARD J:   Thank you.

EDELMAN J:   Is the counterfactual one which is assessed by reference to an injunction that would have been applied for but then withdrawn on the date of the hearing, or is it a counterfactual on the basis that no injunction would ever have been sought?

MR GLEESON:   It is the former, your Honour.

EDELMAN J:   Is that common ground?  It may not matter in this case.

MR GLEESON:   That is what the primary judge found, that is the way he approached it, and the Full Court approached it on the same basis.  That is consistent with the way your Honour Justice Jagot approached it in paragraph [12] of Sigma.  So, you look at everything in the real world up to the very day upon which the injunction is being applied for, and on that day you switch to a counterfactual, what if Mr Bannon got up and said, I do not need to give reasons, your Honour, we are not pressing our application for interlocutory relief.

In that counterfactual you then say Mr Catterns’ side has suddenly been offered everything which they are asking for the last four weeks to be free to list and launch, they are ready to go, they are not being asked to be injuncted, there is no undertakings to damages on offer, so their choice at that point is, do I simply carry through everything which I have attempted to achieve for the last four weeks, I am now free, I will list and launch.  Now, it may be at some point at trial Mr Sheahan attempted to argue the second way your Honour put it, but he was unsuccessful in that before either court, and it may not now matter.

EDELMAN J:   It may be that there is potentially an even stronger position than the position taken in Sigma and the English authorities, which is that the hypothetical changes as little possible so that the injunction hearing is completed and the order is made, but it is not executed, and at that point in time then it is withdrawn.

MR GLEESON:   I am not sure that would ‑ ‑ ‑

EDELMAN J:   Make any difference.  Yes.

MR GLEESON:   ‑ ‑ ‑ alter the strength of our case, because Apotex’s position through the beginning and end of that day ‑ ‑ ‑

EDELMAN J:   I appreciate that.

MR GLEESON:   Yes.  Your Honours, I have drawn attention to paragraph 272, where I had said to your Honour the Acting‑Chief Justice that it was correct as far as it went, but it omitted three critical facts.  Our next observation about 272 is that is the core of the Commonwealth’s prima facie case, and what you will never see from the primary judge is any analysis of how Sanofi’s argument can sit with those statements on that day.  Just never grappled with the prima facie case.  How could it be that counsel on sworn affidavit, having rejected an undertaking, knowing or anticipating all relevant facts, makes a statement – in your Honour Justice Edelman’s words – of the very highest degree of probability of intent, if it be the case that, in truth, the position was the position that his Honour then contemplates at paragraphs 282, 286 and 287?  If I could come to them next, as key parts where his Honour’s method has gone wrong.

In 282, his Honour accepted this was a submission by Mr Sheahan, that because you did not need to apply for listing until 1 December, there was “no reason” why you had to make any final decision before 1 December.  Indeed, you could have put in an application and withdrawn it up until 14 February.  That is 282, and that is then the premise for 286.  There is an evidentiary deficiency because we did not call Dr Sherman to say what he would have done had he known the two matters.  Then, 287:

The evidence is . . . consistent with –

a finding that Dr Sherman had:

deferred any final decision . . . until after the outcome of the interlocutory application was known.

Now, what is wrong with those paragraphs?  Starting with 282 – and it is surprising that a judge is experiencing patent litigation as an equity, as Justice Nicholas could have made this error, but he did.  When you go to the court and tell them you want to be free of the injunction and you are offering $50 million pro tem, you cannot wait for three months or four and a half months to make your final decisions.  You have to come back to court and stump up the money within 21 or 28 days.

So, you do have to make a decision, and the context of an interlocutory injunction which is contested requires you to make your decision in respect to all matters that are known and foreseeable before you go to court.  You do not have the liberty to say, I will tell the court one thing, and then I will think about it three to four and a half months down the track.

Mr Sheahan will surely tell you that he got some credit findings against Mr Millichamp, and you see one of them in 287, where his Honour thought that Mr Millichamp’s evidence, denying the proposition that there were months and months to wait, was not credible.  Mr Millichamp’s evidence was exactly what you would expect from a person who is not making the error in paragraph 282.  You see in 284, Mr Millichamp is criticised for not understanding the realities of the situation.

What Mr Millichamp is in fact saying in this evidence, just at the top of page 85, which makes absolute common sense, is to learn of the early final hearing – which they did in principle before the 18th, in finality after the 18th – was good news.  It was great news.  It was going to be better for Apotex, and why would it be better?  It would be better because the earlier you get the final hearing, the earlier you get the result which limits the downside.  So, if you are wrong on your patent claim, the sooner you know that the better, because that limits the damages you are causing to Sanofi, and on the upside, an early final hearing is still good news for this reason – and I will take your Honours to the evidence of Sanofi and Mr Millichamp.

The great fear of Mr Bannon’s side was that once the generic got listed the generic would, if I can use a colloquial expression, front‑end load its sales.  What it was going to do was offer discounts of up to 60 per cent and lock the pharmacists in for up to a year’s supply, and indeed even do that in February and March before it could actually supply on 1 April.  So, on the upside, to get an early final hearing does not reduce your sales because you can still sell in bulk at discount early.  On the downside, it reduces your risk.  That is 282.  Could your Honours then look at 286 and 287.  Paragraph 286:

In the absence of evidence from Dr Sherman, I am not persuaded that he would have authorised a launch at risk in circumstances where an interlocutory injunction had been refused –

Well, that raises the question of how you frame the counterfactual:

but a final hearing was fixed to commence on 28 April 2008.  The advice previously communicated by Mr Millichamp in his letter of 17 August 2007 was that a trial was to take place within approximately 12 to 18 months.

Correct:

In the absence of evidence to the contrary I infer that Apotex Canada was also acting on this understanding until –

And then look at these critical words:

no earlier than 13 September 2007.

His Honour is cryptically referring back to paragraph 266.  What he is actually accepting here, but not confronting, is that no earlier than the 13th – we would say on the 13th – it was now known as a fact that the listing would occur no earlier than 1 April and, as a reasonable expectation, the final hearing would occur around that date.  So, the two critical facts being known or anticipated, how could there be an evidentiary deficiency in the Commonwealth’s case?

How could you be required to call Dr Sherman 10 years after the event, with all the problems of hindsight evidence your Honour Justice Jagot referred to between about paragraphs [273] to [286] of Sigma, to ask the question:  what would you have done had you known those two facts?  To which his answer would have been, well, I would have to look at the documents, and the documents would tell you that he knew the first, he anticipated the second, and he instructed his counsel to nevertheless go to court and resist the injunction.  What has gone wrong, with respect to paragraph 286, is that an evidentiary deficiency has been conjured up from supposed new developments that have nothing like the factory fire situation about them.

Now, your Honours, 287 – this is where it really comes to the rub.  Your Honour Justice Beech‑Jones, this is the second version you put to me.  This is, on its face, a finding that Dr Sherman had deferred a:

final decision . . . to launch at risk until after the . . . application was known.

See the next sentence, but then take that together with 348, where it gets even – sorry, first, paragraph 341, last sentence.  The coincidence of the two key events:

could not have been anticipated until –

Critical words:

about the time the interlocutory application was determined.

That, again, is a reference back to 266 in cryptic language, and it has the same problem as 286, last sentence.  It was anticipated when they went to court on 18 September.  So, then the high point, 348:

I am not prepared to infer, based on the 20 February 2007 email, or any of the subsequent correspondence in evidence . . . that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing . . . from 1 April 2008.

Where is the reference to the conduct of Apotex on 18 September in that reasoning?

BEECH‑JONES J:   Mr Gleeson, what I was going to ask you about that was – that is in the language of Jones v Dunkel, so we are talking, I think, about inferences.  As I understand it, you say, well, we just had direct evidence.

MR GLEESON:   Yes.

BEECH‑JONES J:   You may need to take this on board.  Who at the trial invited the drawing of inferences about what Dr Sherman would have instructed?  Because I do not understand that that was your side seeking that inference, because you were saying, we do not need it.

MR GLEESON:   We were saying we do not need it.  We were saying, based on what had happened in the actual world, the instruction had been given, which was communicated to the court, and that is the evidence of what happened in the counterfactual.

BEECH‑JONES J:   So, you were saying, we have direct evidence of that, but did somebody – so when I look at Jones v Dunkel and Payne v Parker, I personally just start with who invited what inference, and I was wondering if anyone invited that inference, or was Sanofi inviting an inference?

GORDON A‑CJ:   Sanofi complained, did it not, about the failure of you calling Dr Sherman?

MR GLEESON:   Yes.  The whole of this judgment, with respect, your Honours is – I do not want to be too critical – reverse engineering.  His Honour did not like Dr Sherman not being called.  The whole of Sanofi’s case was then to work backwards and say, can we find a gap.  Sanofi’s case really ran like this – Mr Sheahan will tell you differently, but it ran like this – he was there, I was not.

First of all, it was, stay a long way away from what happened in court on 18 September.  Do not go near that, because that is not good for Sanofi.  Then it was, we have these two new developments, unknown, anticipated, so they create in the counterfactual a question which, of course, they then say, well, that is different to anything that happened on the 18th.  So, they do that.  They then say, here is some objective evidence to say it was risky to list and launch, and then they put in this critical timing point I have shown you, that Dr Sherman did not have to make up his mind until December or possibly February.

By the time they have done all that, they have then said what is at the top of paragraph 349 – which is Jones v Dunkel language – you have an evidentiary deficiency.  We, the Commonwealth, have never led evidence – direct evidence or evidence capable of inferences – as to what Dr Sherman would have done had he been addressing his mind to the relevant question, which he could have been doing at any time up until February 2008.

Having conjured up that evidentiary deficiency, his Honour then at 349 comes up with an idea:  we cannot infer that he would have, had he known the facts, authorised Apotex to obtain a listing before judgment was delivered or at least a trial was concluded – that is, the April 2008 trial – and his legal advisors had a clearer view of the strength of Sanofi’s case.  Then 351 is the wrap-up. 

So, your Honour Justice Beech‑Jones, it is Sanofi through that process of purporting to identify an evidentiary deficiency in the case saying, you, the Commonwealth, need to get an inference, you need to call Dr Sherman; if you do not call him, you failed on what we call step 1.  The Sanofi argument, which his Honour appears to have accepted, is the Commonwealth never in fact established a prima facie case, because all of the evidence we led was not addressed to the right question.

When you shift the goalposts through until possibly February 2008, and when you falsely assert these are new unknown unanticipated developments, you then conjure up an evidentiary deficiency.  You then say, where is Dr Sherman, your fault, you lose.  That is what his Honour did.

GORDON A-CJ:   So, if we break this down into propositions, you say it is the wrong counterfactual that was adopted.

MR GLEESON:   Yes.

GORDON A-CJ:   Second, you say there is a dispute between you about what are the relevant facts for that counterfactual.

MR GLEESON:   I think so, yes, your Honour. 

GORDON A-CJ:   And in particular, that dispute about the facts relevant fall into, I think, probably two if not three categories.  The first is, what actually was the facts.  As I understand Mr Sheahan’s case, he says one looks at the objective evidence, and Dr Sherman had not given formal approval; he was waiting to see the outcome of the injunction; you say that is irrelevant because of the submissions that were made at interlocutory hearing; and no steps were subsequently taken to reverse the position which had been put at the interlocutory hearing.

MR GLEESON:   Yes.

GORDON A-CJ:   Have we missed something? 

MR GLEESON:   Well, that is close to the heart of it, your Honour.  I am just going to show you a couple of documents, if you permit me, in a moment.

BEECH-JONES J:   But just on Jones v Dunkel, do you actually say, we had direct evidence of an unequivocal intention to launch, we did not need an inference based on the missing witness?

MR GLEESON:   Yes.

BEECH-JONES J:   I understand. 

GORDON A-CJ:   Just so I am clear, the direct evidence you referred there is what? 

MR GLEESON:   The direct evidence is the unqualified statements of intention communicated to the court on 18 September made in the light of all relevant facts being either known or reasonably anticipated.  That is Commonwealth propositions 1 to 4 that I will come to in a moment, and the two further steps of the direct evidence, which is Commonwealth propositions 5 to 10, are, thirdly, the conduct of Sanofi in that same hearing. 

GORDON A-CJ:   I missed what you just said there.

MR GLEESON:   The conduct of Sanofi in the same hearing, asserting to the court its understanding that Apotex would list and launch.  So, I will come to that ‑ ‑ ‑

GORDON A-CJ:   Sorry, I am a bit confused, Mr Gleeson.

MR GLEESON:   Can I just identify it, your Honour.  I am going to come to proposition ‑ ‑ ‑

GORDON A-CJ:   That was your first point.  You said it was the unqualified statements of intention expressed by counsel on 18 September.  That was your first bit of direct evidence.

MR GLEESON:   Yes.  Those are Apotex’s statements.

GORDON A-CJ:   Yes, I see.

MR GLEESON:   I am breaking it down.  Those are propositions of the Commonwealth 1 and 2.  Propositions 3 and 4 are those statements were made in the knowledge or reasonable anticipation of all material facts which would bear upon the counterfactual.  Propositions 5 and 6, that I will develop in a moment, are reliance upon Sanofi’s actual conduct in the interlocutory hearing, which is to the same effect.  And then propositions 7 to 9 is the particular conduct in rejecting the offer of the undertaking as to damages.

STEWARD J:   Also, you would rely upon an omission – that is, Apotex’s failure to go back to the court to say, we have changed our mind, consistently with the duty of full disclosure.

MR GLEESON:   That in the counterfactual, going back to the court in that way would have been impossible.

STEWARD J:   Yes.

MR GLEESON:   Yes.  Consistent with the duty of full disclosure and consistent with avoiding suicide.

JAGOT J:   And your Sanofi conduct – gone to Apotex’s conduct.

MR GLEESON:   Yes.

JAGOT J:   The Sanofi conduct, I assume, is obtaining the interlocutory injunction at the price of the undertaking.  If you did not believe Apotex was going to launch, why would you ‑ ‑ ‑

MR GLEESON:   Why would you do it?

JAGOT J:   Why would you give the undertaking?  Why would get the interlocutory injunction?

MR GLEESON:   Yes.  And why, when Justice Gyles – who I unkindly said before was no ingenue – decided he was going to balance this convenience in favour of Sanofi, he extracted security of $40 million from Sanofi for the undertaking.  So, they had to put up 40 million.  Bannon says, you know, your Honour, do not worry about the Commonwealth, they are protected as a third party.  That was a huge commercial step being taken by Sanofi because they correctly read the threat.  They regarded the threat as so great they would not only give the undertaking, but put up 40 million in security.  That conduct is evocative of the true position, and it has just never been addressed – not by the primary judge; never really considered by the Full Court.

GORDON A-CJ:   Do you go so far as to say that steps taken by Apotex and Sanofi post the hearing are irrelevant given the objective evidence and direct evidence of 18 September but for the fact that they did not go back to court?

MR GLEESON:   If your Honour is referring to 2008 conduct, a year later, or 2009 conduct, I am going to show that is truly irrelevant.  But if one is actually looking at the couple of months after the hearing ‑ ‑ ‑

GORDON A-CJ:   That is what I am asking.

MR GLEESON:   Yes, I do not think it does have potency, because what happened is – it does not have potency for the counterfactual because Apotex says, we have been injuncted – so, all these arrangements they were putting in place for supply, they all have to be halted because they cannot be injuncted.  So, what they do is they operate under the restraint that they have now been faced with.  I am not sure we need that to assist our counterfactual case.  We rely upon what happened in the real world, in and up to the 18th, as the best evidence of what would have happened on the 19th.

What would have happened had the injunction not been granted is Apotex would have said, we have the plan in place, implement the plan.  That is what would have happened in the counterfactual.  They would have got the supply going, they would have sold in bulk to the pharmacists, they would have got the listing, they would have got the first‑mover advantage, they would have made huge profits in the first year.  And, yes, they would have taken on a big risk if they were wrong, but it turned out they were right.

JAGOT J:   As a matter of principle, post‑18 September events would be relevant at least insofar as they cast light on true intentions.

MR GLEESON:   Yes.

JAGOT J:   But they would also be relevant insofar as they cast light on loss, because if the factory burned down the day after the interlocutory injunction, that would inevitably affect what could happen.

MR GLEESON:   Yes.  And your Honour is correct, there was no ‑ ‑ ‑

JAGOT J:   Yes, I understand you are saying we are not in that territory.

BEECH‑JONES J:   You just rely on what did not happen – nothing remarkable.

MR GLEESON:   Nothing remarkable happened.  Yes.  So, it is the absence of a happening.  Your Honours, could I ask your Honours to take up – I am now at paragraph 6 of the outline.  I am going to come back to the cases, if I might, just a little bit further along.  If I could ask your Honours to take up our propositions document, book 1 of the materials.

The way we have constructed for simplicity the prima facie case is proposition 1 – these are the public statements and conduct evocative of an actual intention to list and launch, up to the 18th, which is the best evidence of the counterfactual.  Your Honours will see in the Sanofi column, we have a large measure of agreement.  We have a disagreement about the pharmacist’s letter – or a qualified agreement, rather.

JAGOT J:   I am sorry, what page are you on?

MR GLEESON:   This is the Commonwealth’s document headed “Presentation Document for Oral Argument”, 27 August.

JAGOT J:   Yes.  CP – which number are you on?

MR GLEESON:   CP1.  So, there is a summary of the objective conduct.  We have a large measure of agreement.  We have some quibbling.  Now, if your Honours have book one of the materials, and tab 29, page 234, that is the letter, Apotex to Sanofi.  Third paragraph:

preparing to launch . . . in the near future, with to view to initially marketing and selling –

That is the threat, and that conveys tension.  That is designed, quite properly, to put Sanofi on notice, if you wish to restrain us urgently, you will have to move quickly; if you do not, we will be free to carry out our intention.  Then at tab 30, the pharmacist’s letter, the second sentence ‑ ‑ ‑ 

STEWARD J:   What page is that, sorry?

MR GLEESON:   Page 236.

STEWARD J:   Thank you.

MR GLEESON:   The second sentence:

We intend to launch this product into the Australian market in the near future –

The very same statement made to Sanofi.  What is then done is to give the pharmacists information as to the prudent way in which Apotex will go about carrying out its intention, mindful that Apotex quite properly does not wish to mislead its pharmacists into thinking they will get supply from Apotex until the result of the injunction is known.

GORDON A‑CJ:   Well, that is what it says in the third bullet point.

MR GLEESON:   So, the second bullet point, will “vigorously defend” the application.  Why are we vigorously defending it?  Because we want to defeat it.  The third bullet point is giving the pharmacists the knowledge that, of course, the actual decision to launch – that is, the actual implementation of the intention – cannot occur until after the application has been determined.  So, it is just telling the pharmacists we vigorously defend, if we win we will be able to supply, if we lose, of course we cannot lawfully supply.

That caution that explains that sentence is a very proper caution.  If your Honours could cross‑refer to page 136, which is tab 14, this is the plan that was being laid down in June.  Fourth bullet point:

We will submit our application for PBS listing once we are sure that no injunction will be imposed . . . We will, of course, have to get to court before we know this outcome.

That is what the pharmacist’s letter is saying, we have to go to court before we know the outcome.  Then last bullet point, last sentence:

We will of course be notifying our customers when we launch that this is a high risk launch and subject to legal action so that they are not misled if we are not able to deliver stock for a considerable time.

So, a very prudent approach, we do not want a misleading and deceptive conduct case; for the customers, you should hold off buying from Sanofi because we can definitely supply you product.  They are being told, of course, it is contingent on the court’s decision.

Now, the primary judge and the Full Court read that third bullet point as somehow indicating there was not an intention to launch, and no decision would be made until after the hearing.  It is a wrong reading of the letter, but one only needs to look at it in its context, which neither court ever did, to see that that reading is not the correct one.

GORDON A‑CJ:   What do we make of the last line, last paragraph?

MR GLEESON:   The “should they make one” is Apotex correctly appreciating – they have put the challenge out to Sanofi.  If Sanofi does not make an application for an injunction, Apotex is free to go ahead and list, and will.  But, if an application is made, then whatever happens – that is, whether or not they are injuncted – they will continue to challenge validity.  At that stage, expecting 12 to 18 months – that period came forward as they found out before the date.  If your Honours go directly to tab 31, page 238.

JAGOT J:   Sorry, Andrew Kay is?

MR GLEESON:   He is Dr Sherman’s immediate report.

JAGOT J:   Yes.

MR GLEESON:   He is, effectively, we say, Dr Barry, because the two of them liaise so intimately.  If your Honours go to tab 31, we have in mind here ‑ ‑ ‑

GORDON A‑CJ:   Sorry, what page was that?

MR GLEESON:   Page 238.

GORDON A‑CJ:   Thank you.

MR GLEESON:   We have in mind here your Honour Justice Jagot’s paragraph [319] of Sigma.  Let us look at what Sanofi understood this threat to be:

Dear all,

This seems to be very clear evidence of intention to launch and the urgency for an interim injunction –

So, Sanofi, as a well‑placed commercial rival, has read this exactly as Apotex put it, in our view – which is, we do intend to launch and unless you apply for an injunction, we will launch.  So, that is the immediate reaction of Sanofi, the correct ‑ ‑ ‑

STEWARD J:   Can you just remind us who Jez and Rebecca are?

MR GLEESON:   They are people within Sanofi Australia.  Importantly, it is going to Mr Dick.  He was one of the witnesses for Sanofi at the final hearing.  Rebecca Allsopp was the legal officer of Sanofi.

STEWARD J:   Thank you.

MR GLEESON:   You see from the next one down, Mr Dick – he gives the direction:

Following this communication to the marketplace we will need to put together an internal communication with . . . urgency.

So, I think it is fair to say that all the senior people in Sanofi Australia have read the threat and understand that they need to act, and act they do.  If your Honours have tab 32, at page 241, Mr Kerr has now written a very typical, but proper, letter of demand to Apotex, and on page 242, halfway down, what it cites are the two letters I have just taken you to – tab 29 is the letter to Sanofi; tab 30 is the letter to pharmacists – and the letter to pharmacists is quoted:

GenRX’s intention to launch –

the product:

into the Australian market in the near future –

Mr Kerr says:

Your clients conduct is a threat –

to breach the patent.  We are “entitled to an injunction”.  Over the page, “Demands” – we demand the appropriate undertakings.  So, the well‑placed rival has read it as a threat – a real threat so sufficient there needs either to be undertakings offered by Apotex or else they will probably be moving to an injunction.  You see actually attached to it – page 244 – the pharmacist’s letter.

Not a word from the Sanofi side saying, we actually read that third bullet point as meaning you have not made up your mind.  It is the exact opposite.  You then see the response at tab 33, page 246 – Mr Chalk’s response – the very proper type of response of parties who narrow the issues for the court.  Paragraph 1, infringement is going to be conceded for the interlocutory hearing.  Paragraph 6(a), we decline:

to give the first undertaking sought  

So, that is the first undertaking, on page 243.  So, here we have a joinder of issue and here we have Apotex confirming the threat; we do not give the undertaking, we, therefore, confirm that we do intend to list and launch the product, and you will have to take us to court if you wish to stop us.  If your Honours then go to the document at – you see some documents in the bundle of the listing date being missed, and then at 39 ‑ ‑ ‑

BEECH‑JONES J:   Just give us the page number, sorry, Mr Gleeson.

MR GLEESON:   So, I will jump over to page 330.  Here is the next salvo from Mr Kerr.  Paragraph 3 reasserts that the letter to pharmacists:

constitutes an offer to either sell, or otherwise dispose of, GenRx Clopidogrel.

GORDON A‑CJ:   Where is that?  I am sorry.

MR GLEESON:   Paragraph 3, second subparagraph.

GORDON A‑CJ:   I see, thank you.

MR GLEESON:   We have a further confirmation by Sanofi’s very experienced lawyer that the letter to pharmacists should be read exactly as it is, we would say:  an offer to sell or dispose to the pharmacists.  And paragraph 6 says:

Given the matters . . . at point 3 above, we . . . demand . . . undertakings –

And the undertakings are – the first one is to “immediately cease and desist” from making offers to sell, and the second is an undertaking not to seek listing until the outcome is determined, and a third undertaking not to take orders until the outcome is determined.

So, Mr Kerr is so concerned – quite rightly – by the Apotex responses through Mr Chalk that he now apprehends that Apotex could be taking orders from pharmacists at any time, and he actually says that:

Undertakings (b) and (c) are in accordance with the representations made by your client in its undated letter to pharmacists –

That is the one I took you to.  This confirms that Sanofi’s reading of the pharmacist’s letter is they threaten and intend to list and to launch immediately.  Now, the response to that, at tab 42 ‑ ‑ ‑

STEWARD J:   Page?

MR GLEESON:   Sorry, page 342, paragraph 3(a):

declines to give the first undertaking –

That is the undertaking at 331.  So, the big undertaking has been refused.  The controversy is crystallised.  What they will do – and this is obviously very proper – is to give temporary undertakings until 11 October, not to list and not to take orders from the pharmacists.  The point of that very proper patent practice to avoid the court having the have the urgent, urgent, urgent application for interlocutory relief to allow the court at least, let us say, a month to try and convene a hearing for a full interlocutory, but to make very clear that from 11 October the intention is to be able to list and to take orders from the pharmacists.

Your Honours might be asking, where has this correspondence been actually examined by the primary judge or the Full Court for the obvious strength it has as part of the prima facie case.  The answer is, the primary judge did not consider it, and the Full Court said, in a paragraph that we find very troubling, that the primary judge was perfectly entitled to ignore it – paragraphs 337 and 339 of the Full Court.  This shows where this is an error of method, not just of fact‑finding. 

The Full Court has said primary judge was perfectly entitled to ignore this direct evidence of intention being communicated by Apotex and being understood by Sanofi.  Perhaps that explains why both courts also were not prepared to attend to what happened on the 18th.  They were really not interested in the evidence in the actual world of intention being formed.

GORDON A-CJ:   So, can I just ask a very basic question.  You said there was an error in method.

MR GLEESON:   Yes.

GORDON A-CJ:   Is that an error in method at what level?  I ask that for this question, as I put to you:  is it because it is an error which is not addressing the right hypothetical; is it because it is not addressing all of the evidence relevant to the hypothetical, or is it both?

MR GLEESON:   It is not addressing the evidence of conduct in the actual world which bears directly upon what would have happened in the counterfactual.

GORDON A-CJ:   So, the answer is both?

MR GLEESON:   Yes. 

GORDON A-CJ:   Is it the position that in 338, giving rise to the conclusion at 339, which you also take issue with – these are the letters you have just taken us to.  Were all of these letters put before the Full Court?

MR GLEESON:   Yes, and the Full Court has – what they are dealing with ‑ ‑ ‑

GORDON A-CJ:   Because they do not refer to them.

MR GLEESON:   At 336 – this was one of our grounds of complaint.  Mr Sheahan says we were in the weeds.  This was our written submission to the Full Court, and 336 is setting out our paragraphs 165 and 166, and then 338 is setting out our 174, and that is all part of a larger submission.  The primary judge erred in not looking at this direct evidence of intent in the actual world, and the Full Court says, did not need to.

GORDON A-CJ:   I think they are the trial judge’s ‑ ‑ ‑

MR GLEESON:   Well, if they are the trial submissions, the points ‑ ‑ ‑

GORDON A-CJ:   So, I think paragraphs 161 to 164 are the trial judge.

MR GLEESON:   Yes, I accept that correction.  So, the point is better.  This is what we put to the trial judge, and the trial judge ignored it, and the Full Court says he was entitled to ignore it.  So, what that means is that what we put as our prima facie case – look at what happened in the real world – one court ignores, the other court says you are entitled to ignore it.

I am up to page 343.  So, it is clear by 6 September that the controversy has been locked in.  By that date, Apotex knows the listing date has gone back by four months, and so the first of the so‑called new facts has been known at the time Apotex locks themselves in to a contested final hearing.

JAGOT J:   Sorry, where do you get that from, that they know listing date has gone back?

MR GLEESON:   Well, we have the finding of the primary judge, but ‑ ‑ ‑

JAGOT J:   No, I know by 13 September, but this letter is 6 September.

MR GLEESON:   The first fact – namely, the listing date had gone back – that was known from 4 September.

JAGOT J:   I missed that bit.

MR GLEESON:   The second one is the 13th.

GORDON A-CJ:   What is the best evidence of the 4th?

MR GLEESON:   There is a finding of fact at ‑ ‑ ‑

JAGOT J:   Page 339 as well.

MR GLEESON:   Yes.

JAGOT J:   Sorry.  If you go to page 339 in volume 1, it is clear they have missed the date.

MR GLEESON:   It is 264 of the primary judge and it is page – various, but at 334 of the book, the email at the bottom, that is Mr Millichamp reporting to Mr Kay – that is Dr Sherman’s man – as well as to everyone else in the chain.  Stephen Haas is production.  Paddy Smith is finance.  We have missed the deadline; we are now looking at April 2008; we are going to need stock February/March; please keep the team:

on standby . . . if we are successful in the initial stages of our litigation.  The timing has just moved back three months later than originally communicated.

So, the first fact known, reported, no change to the plan.  That is why 343 is a very important crystallisation of the controversy.  Then, at page 349, we have the email from Millichamp to Kay – Dr Sherman’s man – reporting on the directions hearing.  This appears to be the basis for what the primary judge found in paragraph 266.

JAGOT J:   What page are you on?  I am sorry.

MR GLEESON:   I am on page 349 of the book.  This email appears to be – because we do not have a transcript – the basis of the finding at primary judge 266 as what happened on the first directions hearing.  And it is, again, Millichamp reporting to Kay, therefore to Sherman, and all of it is important:

We were in court . . . 

There was a very interesting “turn of events” – Very much in our favour!

So, it is all good news on that day: 

We have been assigned Justice Giles –

That is how we know Justice Gyles is the probable – not certain but the probable judge for the final hearing.  I will leave out the comment on Justice Gyles’ approach to patents.  This appears to be ‑ ‑ ‑

GORDON A-CJ:   This is the evidence that was before both of them, consistent with their practice at the time.

MR GLEESON:   This is the evidence.  Yes.  They read it, and they understand the case: 

The court wants our case to move quickly.  We have . . . to give undertakings . . . Please see the attached draft. 

Now, they are going to be the undertakings to put up the 50 million security, as were given in these two other matters: 

The judge does not want a long interlocutory hearing.

That does sound like Justice Gyles: 

A day, maximum.  We have been asked to be back in court next Tuesday.

We have to prepare affidavits and file on Monday . . . decision on whether or not to grant an injunction may be made as early as next week.

So, the good news is the train is moving much quicker than we thought:

The indication from the judge was that they want to move towards a final trial sooner rather than later.  The next six months was mentioned, subject to availability of expert witnesses –

And then there is an unkind comment about Mr Bannon looking unhappy with what had happened that day:

We are sure that they will try . . . to delay matters.

I would not suggest that against Mr Bannon:

However, as it stands today, we give undertakings (attached) –

That is the 50 million security, plus an undertaking to keep records:

turn up in court next Tuesday and we will know where we stand by the end of next week.  Our plan is to launch to customers (take orders) immediately, assuming that we are free to sell, and then supply product in early 2008 for an April PBS listing.

Paddy is working on the bank guarantee –

So, here we have Millichamp reporting that the excellent news about the likely assignment of Justice Gyles, the likely early final hearing, next six months mentioned, and the plan is, if we can defeat the injunction next Tuesday, we take orders immediately and supply product early 2008.  That is, get the product supplied into Australia so you are ready for an April listing, a big early launch.  And the response from Mr Kay at the top of 349: 

The undertakings look routine –

No problem:

I had presaged the likely bank guarantee with Barry and Craig, and from Gord’s response it does not look an issue.

JAGOT J:   Can I just ask, does paragraph 38 of Mr Millichamp have something about first mover, or not?  I have forgotten.  None of this is referring – my understanding is, at this point, they think they are going to be the first.

MR GLEESON:   Yes.

JAGOT J:   And somewhere there is evidence of that. 

MR GLEESON:   Yes, I will come to Millichamp in one second.

JAGOT J:   Yes, that is all fine. 

MR GLEESON:   So, we are not in factory fire territory.  We are in the territory of very competent lawyers advising their clients on all material facts; instructions are being given up and down the chain.  You can now see why when Millichamp and Catterns come to court on the 18th this is powerful evidence of intention.  Then, if you go to page 352 ‑ ‑ ‑

GORDON A-CJ:   Before you take us there, Mr Gleeson, I see the time.  Is that an appropriate time to interrupt this very interesting exercise through the documents? 

MR GLEESON:   Yes, your Honour.  Thank you, your Honour. 

GORDON A-CJ:   The Court will take its 15‑minute adjournment. 

AT 11.19 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.33 AM:

GORDON A-CJ:   Thank you, Mr Gleeson.

MR GLEESON:   Your Honour Justice Beech‑Jones, we checked, it was Sanofi that was seeking that inference of Jones v Dunkel about Dr Sherman.  They did it in writing and orally.  Justice Steward, the dramatis personae is at pages 82 and 83 of volume 1 of the materials.

STEWARD J:   Thank you.

MR GLEESON:   Then I was up to page 352, which is immediately after the first directions on the 13th.  The communication was made by Mr Smith up the chain to Gordon Fahner to get things moving for the $50 million L/C, which might now be necessary in the very near future.  Mr Fahner was the VP of finance.  That brings us to page 356, which is 14 September.  There is an email ‑ ‑ ‑

GORDON A-CJ:   Sorry, what page was that, Mr Gleeson?

MR GLEESON:   Page 356.  An email on 14 September, middle of the page, from Stephen Haas, this time directly including Dr Sherman.  That is repeating the communication from Mr Millichamp I took you to earlier about missing the listing date, and the plan being to launch in April, and get to the stock into Australia towards the end of February and March:

assuming that we are able to launch –

And you see above that, from Dr Sherman, he is now in no way saying, no, stop the train; what he is saying is, I am now involving myself in the detailed arrangements which will be necessary, assuming we are free to list and launch.  They are:  which tablets are we going to use?

EDELMAN J:   Is this the first time Mr Sherman comes into the correspondence?

MR GLEESON:   No.  I am going to come back and show you the August correspondence where he is in it, and the June correspondence.  Just as a placeholder, what it is showing is that no doubt Mr Sherman wanted to be all over the implementation of his plan.  He had an acute interest in which salt to use – whether he would use the easy salt or the harder salt – how the supply chain would work; obviously interested in $50 million – it is lot of dollars.

That is the sort of confirmation or advice from Dr Sherman that the mysterious June email is actually referring to – a man who, at critical steps in the implementation, wants to be kept involved.  You see on 357 the email from him – that is, from Dr Sherman – on 13 September:

We may be launching in Australia soon.

Meaning what?  Meaning, if we defeat the injunction, as I have instructed you to seek to do, we will then be free to launch.  Here he is asking questions about which tablets to use, what colour, and so on.  None of that is the conduct of a man saying, I am agnostic as to whether we launch, and I am happy to send my team up to tell the court we intend to do so, but I will come and have a good look at this matter later on.

Critically, 356 shows Dr Sherman’s direct knowledge of the so‑called first change in event.  Then, if you go to 372, again on 14 September ‑ ‑ ‑

GORDON A-CJ:   Sorry, 372?

MR GLEESON:   Page 372.  This is Mr Chalk’s next letter, and this is the formal offer of the undertakings, which are to keep records.  Paragraph 6 is the formal offer of the 50 million, to be increased if necessary.  That is the most serious of commitments being exchanged between solicitors on instruction and central direct evidence of intention, which one court ignores and the other court says it was perfectly entitled to ignore.

Your Honours, in the second volume, at page 399, you have the defence and cross‑claim put on by Sanofi, and at 400, paragraph 8 alleges Apotex’s threat to infringe, and the particulars on 401 ‑ ‑ ‑ 

GORDON A‑CJ:   What paragraph of the defence and counter‑claim do you want, Mr Gleeson?

MR GLEESON:   Paragraph 8.

GORDON A‑CJ:   Thank you.

MR GLEESON:   That is the allegation of the threat to infringe, and the particulars, which are over the page at the bottom, (iii) is the letter to Sanofi I took you to and (iv) is the letter to pharmacists.  So, they are identified as part of the threat.  Then you see the relief that is sought ‑ ‑ ‑ 

GORDON A‑CJ:   Just so we are clear, that is the one you took us – the pharmacist’s letter is the one which was at page 236, and the earlier letter is the one which was at 234, is that right?

MR GLEESON:   Yes, I think that is right, your Honour.  So, they are actually the grounds of the threat and intent to infringe.  Sanofi tells the court by this document that they represent a threat.  The relief on page 402, there is an injunction against supply and then an injunction against listing, and then, critically, paragraph 5 is the claim for interlocutory relief.  So, 1 and 2 are final, 5 is interlocutory.  Then on page 405, notice of motion, undertaking as to damages is offered, attached to both of the interlocutory orders sought, that is, both restraining listing and launching.

Now, in the record, that document at page 405 is the first time Sanofi has done what it would have to do, which is offer the undertakings as to damages, but there it is, crystal clear.  If anyone was gaming the system and trying to play for an undertaking – which is a most unwise move – here is the undertaking on offer.  What has never been explained by any court below, and never explained by Sanofi in its submissions, is if you really want it to be injuncted, why would you not consent now that you have the undertaking on offer.  Because if you continue on and fight the injunction – let us assume you have the Sanofi posited intent that Apotex is too scared to list and launch, if you continue to fight it you have two chances.

One is you actually defeat the injunction, you are then free to list and launch, which you do not want to do; you have to put up $50 million, which you do not need to put up; if you fail in defeating the injunction and you think you have got yourself the undertaking, you are going to have problems honestly proving on it down the track.  But, in any event, there it is, it is on offer.

What is the position that Apotex takes in the face of that offer?  At page 408, you have Mr Millichamp’s affidavit, and he carefully explains the market.  At 26 to 27, he explains why it is critical to Apotex to get clopidogrel generic on the market, not only for its own sake but as a lever to build up related business with the pharmacists.  At 30, he asserts the harm if they cannot get on the market in their relationships with one of their key customers.  He explains the PBS system at 31 and following – so, he is completely aware of the risks to Apotex if it is wrong down the track because of how the PBS is going to be applied if there is a listing, and it is in that context that at 38 he says:

GenRx –

i.e., Apotex:

has provided sanofi‑aventis with an undertaking not to –

list until the outcome of the interlocutory relief, provided it is by 11 October:

However, it is GenRx’s intention to apply for listing of its clopidogrel . . . at the next available opportunity, which is by 1 December 2007.

That is the unqualified statement of intent.  It is made expressly by reference to the new application date that has been pushed back.  So, the first so‑called new development is expressly addressed in the statement of intent, and it is made at a time when the prospect of the early final hearing before Justice Gyles is well‑known.

Then, at 39, he attaches the letter of 14 September with the undertakings and, critically, at 41, he is aware that there will be:

a 12.5% price deduction for all brands of clopidogrel . . . triggered –

when Apotex is listed. 

GORDON A‑CJ:   Sorry, where is that being addressed, Mr Gleeson?

MR GLEESON:   Paragraph 41, the last three lines.  Your Honour Justice Jagot will recall that in Sigma at least two, and probably three, of the generics, the very thing they did not want to do was to be the first lister, because if you are the first lister of the generic, you cause the twelve and a half drop, and you are liable on the damages down the track if you do not infringe the patent.  If you are a second listing generic, you avoid causing that harm to the patentee and you avoid those damages.

Here is Millichamp telling the court, I intend to list at the first date knowing the consequence for Sanofi will be to cause them that loss if we, Apotex, are wrong down the track.  Of course, with our Commonwealth hat on, the twelve and a half per cent loss to Sanofi is the gain to the Commonwealth, which is relevant to the issue of directness Mr Sheahan wants to raise about somehow suggesting that this is not a direct chain of causation.  You could hardly get a more direct chain of causation.  The very thing that Apotex understands it will do and will cause to Sanofi, is the very thing that has now caused the loss to the Commonwealth.

What he then goes over the page to say is that, because we are listing and launching, we will keep all the appropriate records and, therefore, 45, damages can be calculated, if we are wrong, down the track.  Paragraph 46 refers to the 50 million, to be increased if necessary, and 47 is the passage I referred to your Honour Justice Jagot that currently it is in a first mover position as the only person on the ARTG – and that will be the damage to Apotex and the loss of market share, difficult to quantify, and the commercial advantage currently held by Apotex could easily be lost to someone else entering the market.

So, the whole plan was that because it is the first one on the ARTG, it is the first one with the chance to get listed.  It gets into the market early; it locks in the pharmacists, heavy discounts, big sales; makes big profits, and if it is right in its patent strategy, it will be rewarded at the end of the day.  That is the sworn evidence.  Then the submissions – your Honour Justice Steward referred to them – commence at 452.  There is a detailed attack on validity because Apotex really thought they could either defeat the prima facie case or have it be shown to be very weak – it is a very well‑developed case.  “Damages will be adequate” – that commences at 42, and that is explained at paragraphs 86 to 88, and expressly relies upon Millichamp at 34 to 40, which includes the critical paragraph 38.

STEWARD J:   Paragraph 22, I think, was the one I had in mind.

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

MR GLEESON:   Yes, your Honour.  Thank you.  That is what was put to the court.  Now, what was put on Sanofi’s side to the court – this is where I say both parties were idem that Apotex intends the list and launch.  Sanofi’s submissions commence at 478, and at 479, paragraph 2, Mr Bannon puts up the offer of the undertaking to damages, which was rejected on Mr Catterns’ side.  When he comes to the balance of convenience at paragraph 24 on page 489, it is all about you have not yet got into the market; on the other hand, if you are allowed into the market, you will cause us large, unquantifiable loss.  You see that on page 491, paragraph (a) – it is at least $50 million in one year – and (b) is “a significant amount” that is “unquantifiable”.

The way the loss is being structured, because Sanofi‑Aventis is a foreign patentee, the loss to it is the loss of the flow of royalties, transfer, pricing, value of the goodwill in the Australian subsidiary, et cetera.  All of which, it says, is unquantifiable, but most of which is linked to the PBS.  So, you so see in the fourth box:

Loss in the value of wholly‑owned subsidiary . . . due to:  (i) fall in price charged to pharmacists for Plavix (which may be permanent) –

Now, what that is alluding to is that if the 12.5 per cent cut will occur as night follows day, if ultimately Apotex were injuncted, there was a real question under the statute:  could you in fact reverse the 12.5 per cent, or would that loss be forever?  You see in paragraph 29, it is all on the basis that Apotex means what it says.

The two affidavits that supported Sanofi’s submissions are firstly Mr Dick, commencing at page 422.  Particularly paragraphs 33 to 39 all proceed on the basis that Apotex is going to list and launch and cause grave damage to Sanofi.  So, 33 says he expects Apotex will undercut Sanofi’s price.  At 34:

there is a natural incentive for pharmacists to offer . . . brand substitution –

At 36, if Apotex:

is not prevented from achieving PBS listing and launching . . . it will have a significantly detrimental impact on sanofi‑aventis . . . many of the losses which will . . . be very difficult to quantify or irreparable.

And 38 is the evidence that it is expected that what Apotex will do is:

heavily discount it to try and push as much of its product into the market as possible.

The discounts could be up to 60 per cent, encouraging:

pharmacists to stock up on the generic product because of the increased margins –

That is evidence exactly matching what Mr Millichamp said was the plan:  big discounts, sell in bulk, lock up the pharmacists for many months, enormous damage caused to Sanofi.  So, all of this process is confirming, from Apotex’s side, the downside is exactly what we fear, it is a very substantial downside.

Mr Lindsay, commencing at 438, takes this point further.  At paragraph 13, he explains the 12.5 per cent reduction which will inevitably occur.  At 17, he says he is informed by Ms Allsop – the lawyer – that if the injunction is not obtained, Apotex has said it will apply to list.  That is further confirmation Sanofi is reading the letters of Apotex exactly as they appear, and then 18 is important because if they apply by 1 December as they threaten and intend to do and they are successful, it will be listed on 1 April.

Then 19, if they are listed, here are the losses that Sanofi fears, and the first group of losses there are the 12.5 per cent price reduction, potentially irreversible, and then you see in 23 he actually makes that point that there is a possibility the 12.5 per cent can never be reversed and explains why that might be.  Just up on that page, at 22 you see the pricing currently at $80.  That is why this is a PBS product, it is not viable as a private market product, and that shows you the flipside point, that the reduction in payments to Sanofi is to the gain of the Commonwealth.

So, he works through the 12.5 per cent all the way to paragraph 31, and then at 32 he explains the price disclosure reforms.  This is proposed notice of contention ground 3 that we say the Court should not reach.  They had only just come in August 2007, and he explains exactly how they work, paragraph 35, and at 36 he says, once Apotex gets listed, we will be under pressure to voluntarily opt in because we will have a higher price; if we do not opt in, we will suffer even greater deductions.  At 37 he says, we do not know how far we will suffer because it will depend on how the market is then performing with the generics in it, but we do know it will be driven down a long way, and the first price reductions will occur from 1 April 2010 and they will continue annually. 

The reason that is important is that the causal chain of harm which Sanofi put to the court was as I described:  step one, Apotex applies to list; step two, the Minister lists; step three, the twelve and a half per cent inevitable drop in price; step four, additional unquantifiable drops inevitably occurring under price disclosure from 1 April 2010.  So, in notice of contention 3, Mr Sheahan wants you to rule that if we are otherwise right in this case, that loss from 1 April 2010 does not satisfy Justice Aickin’s “flow directly” requirement.

We say the Court cannot reach that question because it involves a vast amount of facts which have never yet been looked at in the court below.  If he were to reach it, it is pretty hard to say something does not flow directly when you, the party seeking the injunction, go and tell the court, I need to be protected against a particular loss, and the court gives you that protection and then you turn around and say, no, that protection is outside the scope of equity.

GORDON A-CJ:   Well, the middle ground is not there.  It may very well be that the question of whether it arose or not is a different question.  That is, it would protect against a particular kind of loss.  It raises two issues – temporal ones. 

MR GLEESON:   Yes, we are simply indicating the difficulty with you deciding notice of contention 3 is you do not have any consideration of this by the Full Court below, it has not been reached yet.  It is intimately bound up with what is the correct counterfactual as you move not just past September 2007 but as you move into years down the track, including the 2008 hearing.  If you were to reach it, Mr Sheahan is trying to persuade you that a loss which was not only foreseen but was one of the bases for interlocutory relief is somehow not a loss which equity protects at the end of the day.  That, we submit, would tear up every purpose of this jurisdiction.  Imagine that you come to a court ‑ ‑ ‑

EDELMAN J:   There is a very large question, as well, which has not yet been agitated, but which is whether the directness requirement is an anachronism.  I realise the parties have raised the issue of what is meant by directness but, whatever is meant by it, it may be that it is a 19th century throwback to notions of remoteness as they were understood at the time.

MR GLEESON:   Yes, your Honour, and it may be you are simply asking the causal question that we have identified.  You have foreseeability as a limit, and we have a finding of fact from the primary judge this was foreseeable; pretty clearly is because they put it to the court.  Then you have someone trying to urge an additional limitation.  So, yes, your Honour, we would embrace that once we have causation and once we have foreseeability, we would win on these price disclosure losses.  Whether your Honours can decide that on this appeal – in interests of finality, we would like your Honours to decide everything you can, but in the interest of judicial economy and efficiency, if you do not have reasons below and it does involve facts, then there may be a difficulty.  I want to be perfectly ‑ ‑ ‑

EDELMAN J:   Well, there is the further difficulty of trying to determine what may be novel points of law against an absence of facts.

MR GLEESON:   There is a total absence of facts and, as we have said, we only sought to bring to this Court the matter we thought did have a neat legal point behind it, and the facts largely agreed.  Really, it is a question of evaluation.  What we have not brought to the Court is the question that is still sitting before the Full Court of, if we are right up until September 2008 when Justice Gyles revokes part of the patent but upholds the other part of it, and the parties then reach a bespoke set of undertakings, which are to roll over the earlier undertakings that we never wanted, how do you do the counterfactual in respect to that? 

Now, we think it is easy.  We think it simply flows on from where we are.  The primary judge thought all the losses stop in September 2008, but we are still in the Full Court trying to argue what the counterfactual is.  These price disclosure losses are a subset of the counterfactual, the second counterfactual which the Court does not have before it.  So, it is in an absence of facts, absence of reasons, and connected with a legal point and factual point that is not before you.  But for present purposes, leaving that discretionary question aside, if ‑ ‑ ‑

GORDON A-CJ:   It is not really discretionary, I think.  The three things of concern are the ones raised by Justice Edelman.

MR GLEESON:   Our primary position is you cannot and should not reach matters where the facts are not resolved before you.  That is a good enough reason not to reach them.

GORDON A-CJ:   Mr Sheahan will no doubt address it, but there seem to be three questions.  One is an assessment of the question about the underlying principle.  The second is whether or not there is a second counterfactual.  The third is what factual material was gone to and whether or not they have been considered by reference to both those two things.

MR GLEESON:   There is all of that, your Honour, and that is particularly notice of contention 3.  On notice of contention 1, that is whether we are correct on “flow directly” as in the issues I have talked to you about today, which is September 2007.  On that, we have a finding in our favour of the Full Court and we defend that finding and, assuming that part of notice of contention is allowed to be permitted, I do draw attention to the earlier parts of the affidavit I have taken you to, to say ‑ ‑ ‑

GORDON A-CJ:   Which affidavit?  Millichamp’s or the Lindsay?

MR GLEESON:   Well, Millichamp on that side, but on this side I draw attention to the one before you, which is Lindsay, that what he is telling the court between paragraphs 10 and 31 – that is, before he gets to the price disclosure – when he is simply talking about the basic immediate effect if this injunction is refused, what will happen in terms of the twelve and a half per cent, which he says is inevitable as a matter of the legislative regime – which it is – and which he says may be irreversible, which is questionable – where a party puts that to the court as the harm that it needs to be protected from, gets the injunction, turns out it was not entitled to it, then turns around and says at the end of the day the person who was on the flipside of that harm, they cannot recover under the undertaking because of “flow directly”.  We think your Honours will not spend much time on that issue in upholding the Full Court. 

GORDON A-CJ:   I do not know about that.  I mean, someone can assert, at the time of the grant of the interlocutory injunction, that that is the harm they anticipate.  It is a separate question when the undertaking is called on whether or not the harm has actually flowed directly.

MR GLEESON:   It may be, your Honour, but we think it is at least relevant and persuasive that if it a harm which you advance in that fashion, and you say to the court, it is so imminent, I need protection, this is why you need to give me the protection, then ‑ ‑ ‑

GORDON A-CJ:   I think we all know, Mr Gleeson, times where people put through a list of what they can think of – every possible harm – and still accept the legal question of whether it flows directly.

MR GLEESON:   Yes, I do not wish to take up too much time on it, your Honour, but I do say on what Lindsay and Bannon were doing, this was not just a harm they could think up, this was not in the consequential loss, the centrepiece of the harm was, I will suffer at least a twelve and a half per cent, potentially irreversible, drop on the PBS, and the person on the other side of that equation is the Commonwealth.

BEECH‑JONES J:   At the very least, you say it is a bit rich to assert that as a matter of persuasion, if not legal.

MR GLEESON:   This is the example of coming to equity and not doing equity.  You tell Justice Gyles you must intervene for this reason, you are now coming along and saying, this is collateral.  That is what Sanofi put in writing.  We then come to the transcript and your Honour Justice Steward’s question:  how did Mr Catterns phrase it?

The transcript commences at page 495.  There are many richnesses in the transcript, but at page 505 – this is where Justice Gyles said to Mr Bannon, if you are going to get the injunction you seek, and if you are going to give the necessary undertaking, I want more, I want security, and Bannon says:

There is no difficulty about that.

GORDON A-CJ:   Where do we find that?  I see, I understand.

MR GLEESON:   Lines 1 to 15.  So, it is clearly put on the table that the potential loss to Apotex, if it is restrained – because it intends to list and launch – is so great that if Sanofi is going to get the injunction with the undertaking it will have to put up big dollars.  Mr Catterns then opens – at the foot of that page, his Honour asks:

This is not a boil on the knee case is it?

The stakes are huge.  Why are they huge?  Because this is a real intent to list and launch.  Mr Catterns says:

It’s not, your Honour.  They are very big stakes –

This is page 506.  There is a typo, the “150,000,000” should be 50,000,000:

with liberty to top up –

and he says:

So that’s either their undertaking as to damages or our security for damages.

Mr Catterns puts at the very heart of his opening submission, we want to list and launch, we are so keen to do so we put up $50 million.  You then see at page 507, commencing ‑ ‑ ‑

EDELMAN J:   The “150,000,000” is a typo, is it?

MR GLEESON:   Typo for 50,000,000, yes.  So, Mr Catterns on 506 and 507 is trying to argue the prima facie case, but his Honour on 507 at line 31 is trying to bring it back to the balance of convenience question and saying:

what about this April point?

His Honour says at 41:

it is said that you will not get your PBS listing until April.

Mr Catterns says:

We agree, your Honour.  We apply on 1 December and we get it on 1 April.

That is, Justice Steward, we would submit, as close to an unqualified statement of, that is what they will do.  Then his Honour says:

And being practical –

is that when you launch?  That is, do you launch in April?  And Mr Catterns’ initial answer, which he then qualifies, is, we do some:

pre launch advertising, telling pharmacies and so on.  But . . . we don’t threaten to sell before 1 August –

It should be 1 April.  Then he corrects himself at line 10, he has been handed a note by his ever‑keen junior:

I’m sorry your Honour, I didn’t make this clear in our written submissions.  We can start taking orders now, even before we apply for PBS listing and unless restrained we would do so.

Now, that is an unqualified statement made after a note has been provided, clearly from Mr Chalk.

GORDON A‑CJ:   Can I ask you about the bit after the next passage, do you rely on that, as well?

MR GLEESON:   Yes:

it’s virtually impossible to imagine that . . . when we apply in December we won’t get listed.

So, we are going to apply in December, we will get listed, I think both sides treat that as inevitable, as is the twelve and a half per cent reduction.

BEECH‑JONES J:   Mr Gleeson, I understand there is a guarantee of supply you have to give when you apply to be listed.

MR GLEESON:   Yes.

BEECH‑JONES J:   Does the listing in December mean you must supply from about April?  Does it carry with it a timing ‑ ‑ ‑ 

MR GLEESON:   Yes.

BEECH‑JONES J:   Yes, all right.

MR GLEESON:   So, you apply in December, you list 1 April, you must be supplying from 1 April, and if you are not supplying you can lose your listing and you commit a criminal offence.  That is why the thinking that has to go on before you make these sort of statements to the court is necessarily detailed.  I do not want to harp on at this stage about the flow directness, but at the very heart of what Mr Catterns is saying is, here we have the three steps:  one, we apply 1 December; two, we inevitably get listed 1 April, next day twelve and a half per cent reduction to Sanofi by operation of law.

At page 518, this is the separate issue, which I think your Honours know about, that arises on not one ‑ where at the moment we have the findings of the Full Court, which is ‑ ‑ ‑ 

GORDON A‑CJ:   Sorry, have you finished with the transcript?

MR GLEESON:   No, I have not, your Honour.

GORDON A‑CJ:   Okay, sorry.

MR GLEESON:   Sorry, I should just, on the question of a statement of intent, just take your Honours forward to 575.

GORDON A‑CJ:   Yes, please.  Thank you very much, it is the page I wanted to take you to.

BEECH‑JONES J:   Page 575?

MR GLEESON:   Page 575.

GORDON A‑CJ:   And over to 576 please, Mr Gleeson, as well.

MR GLEESON:   Yes.  His Honour, at line 35, is raising what Mr Catterns calls the jurisdictional question:  does the court have power to restrain listing, or does it only have power to restrain supply?  That had troubled Justice Gyles during the whole day, and Mr Catterns says at line 37:

Your Honour, our applying on 1 December.

So, again he repeats that is what they are going to do and then his Honour asks about the certificates, they are the particular ones you have to issue on either side under the Patents Act.  Mr Catterns says:

We have done those, your Honour.

They have issued those certificates:

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 –

It should be 1 April.  Then we are:

prepared, if your Honour is against us and grants an injunction . . . from selling, we will not apply . . . during the period of that restraint –

Mr Catterns gives the reason:

it’s pointless for us –

This is how it came about in the unusual circumstance that there was no injunction against listing but there was an injunction against supply which inevitably, as the Full Court correctly found, was going to put an end to the listing application, and it was going to put an end to it for four reasons.  The first is the one your Honour Justice Beech‑Jones referred to, which is that if they cannot supply, they cannot perform the guarantee of supply, so if they list, they will commit a criminal offence and suffer punishment.  The second reason is at line 13:

It’s of no value to us, your Honour.

The reason it is no value is that a mere listing is of no value:

we don’t want to be listed on the PBS if we can’t sell.

Just basic commercial logic.  The listing is of no value to Apotex once there is a restraint on selling.  The third reason is:

It would damage our friends by bringing their price down twelve and a half per cent.

His Honour says:

Yes, that’s a risky thing anyway.

Mr Catterns:

Yes.  It will only damage our friends –

So, what Apotex is saying there very clearly is, if we are free to sell, then of course we will go ahead and list, and we will take the risk on causing them the twelve and a half per cent damage, but if we are not free to sell, we get nothing out of listing, but if we are wrong down the track, we do expose them to the twelve and a half per cent, large damages, and so on.  So, that is the third aspect of it.  The final aspect, line 20:

we will make ourselves enemies in the industry.

That is because the pharmacists are going to suffer once the listing occurs, the price starts to drop, price disclosure, and so on.

GORDON A‑CJ:   Did you say line 20?

MR GLEESON:   Yes:

we will make ourselves enemies in the industry.

GORDON A‑CJ:   Thank you.

MR GLEESON:   So, his Honour is not prepared to injunct listing because he takes a view which, I think, ultimately has been accepted in the Federal Court that listing per se is not an act of infringement.  But he gives Sanofi what they want, which is an injunction against supply, which inevitably, for legal and practical reasons, will mean that there will be no listing.  To the extent Sanofi is trying under notice of contention 1 to suggest this is somehow an indirect chain of events leading to the harm, we submit this page explodes that theory.  Then, Mr Catterns says at 25, in his charming fashion:

So, your Honour, we would be happy to – if your Honour, we would be unhappy –

He makes it clear again.  He does not want to be injuncted.  But if you do make the injunction against sale:

we would agree on an appropriate undertaking that would fix that up.

Your Honour Justice Gordon asked me this morning whether, and to what extent, facts occurring after 18 September could be relevant in the counterfactual, and I said they are probably not going to be of great relevance, and it is really the absence of any material change that is of relevance ‑ ‑ ‑

GORDON A‑CJ:   I think that the answer you gave to Justice Jagot changed that answer.

MR GLEESON:   I think it did.  Yes.  Consistent with my second answer, I wanted to show your Honours page 584.

GORDON A‑CJ:   Of the same book?

MR GLEESON:   Of the same book – because a critical fact is, in the couple of days after the 18th and before the decision was available, what Apotex did was to continue to plan, in the hope of the good news that they would be free to list and sell, and they continued to put in place their arrangements to be ready for putting in the 50 million security.  So, you see Mr Millichamp very excited about how well Mr Catterns had performed.  They were awaiting a judgment in a few days:

We are of course hoping that we get some great news on Friday that we are free to sell.  We certainly did everything we possibly could –

If you read that together with 587 ‑ ‑ ‑

JAGOT J:   Also, his expression of:

very confident that we will win –

MR GLEESON:   Yes.

JAGOT J:   That factors into the balance.

MR GLEESON:   It factors into the balance.  We will come to the financial calculation, but in 2007 it was straightforward:  the downside over one year is about 50 million; the upside over one year is about 20 million; it is a risk worth taking because we think we have a sound patent strategy – and they were right.  Now, at 587 – this is 19 September, so again after the hearing.  So, Paddy Smith to Mr Fahner, the VP of finance, judgment on Friday:

We will know if we require the $50 mln bank guarantee facility in about 24 hours.  We will have 28 days to put this into place (if required) . . . we would like to complete this asap, as we cannot begin to take orders until we have the guarantee in place.  And as this would be a major event in the Australian generic market, to be able to get maximum positive impact of the ruling (if in our favour) –

we must:

begin taking orders as soon as possible.

So, it is after the hearing.  It is before the decision.  The strategy is:  full steam ahead if we get the good news on Friday, and we are going to put up the 50 million; we want to start taking orders as soon as possible.

That has gone to the relevant person, and so the actual conduct of Apotex following the interlocutory is perfectly consistent with what they told the court, and not the slightest suggestion from Paddy Smith of, well, hold on, when we get the result we are going to sit down and start thinking what our plan is.  You will see from Mr Smith’s response on page 586 – he says he:

drafted this reply before the outcome . . . was released . . . and no bank guarantee is required. 

But this is what Mr Smith in this draft email in 586 was putting to the ultimate finance man, Mr Fahner, about putting in place the guarantee.  You see the assumptions upon which it was being done.  About point 6, “a market share of 20 per cent”, sales of 33 to 42 million over two years; “likely” to obtain listing on 1 April; this will trigger the 12.5 per cent; likely date is 1 April; sales will commence in the second half of February assuming availability of product; trial, 28 April.

Now, your Honours, can I just pause on that.  Here we have Mr Smith saying on the assumption of a trial, 28 April, the plan is full steam ahead. 

GORDON A-CJ:   Before the break, Justice Edelman asked you about whether you propose to go back and address the position of Dr Sherman and his evidence.  Is that something you propose to do separately, or ‑ ‑ ‑

MR GLEESON:   Yes, I will, your Honour.

GORDON A-CJ:   As a separate exercise?

MR GLEESON:   Yes.  So, just dwelling on 586 that, assuming a patent trial on 28 April, the very thing that was anticipated, that sort of period, on the 13th, full steam ahead.  Now, 591 is the transcript of when it returned to Justice Gyles on the 25th.  Mr Bannon gives the undertaking to the court – line 23 – and Mr Catterns gives the undertaking not to list, but solely for the reason that he had explained earlier in the transcript.  At 593 you have the order.  You have the undertaking as to damages.  Over on page 594, paragraph 2 is the undertaking not to list, and paragraph 3 is the 40 million security to come from Sanofi – paragraph 12 of the final hearing.

So, your Honours, if you have our Commonwealth presentation document, I have now covered CP1 and CP2, which are the objective statements made to the opponent, to the market and the court.  CP3 and CP4, they were made in knowledge or anticipation of all material facts.  CP5 and CP6, Sanofi’s conduct is premised on that very same assumption as to the intention of Apotex.  CP7 to CP9, you see Apotex rejecting the offer of the undertaking as to damages, which is consistent only with its intent to list and launch.  CP10 would be bringing those matters together.  That created the direct evidence for the prima facie case that in the counterfactual, Apotex would do exactly that which it said in the actual world.

The balance of our propositions proceeds in this fashion – and this is, really, supplementary to or complementary to the prima facie case that has been established.  CP10A through to CP10F are the objective commercial circumstances which support Apotex’s stated intention, being what it would have done in the counterfactual.  In terms of the first mover advantage, we have dealt with 10A(b), which is agreed to, to a large extent.

In terms of 10B, which I have mentioned a number of times – the forward selling of large stock into the pharmacies at discounted prices – I have given you a number of references to that already, including Sanofi’s assessment of it.  Can I just complement that with the reference which is on the top of page 11 of the document, which is Mr Millichamp’s 2011 affidavit, in volume 3.  It is 2011 because Apotex sued on the undertaking.  They settled presumably a lot of money, but we do not know the amount.  So, it is a long affidavit from Millichamp fleshing out what the steps were that were in place ready to be able to list and launch.  The relevant paragraphs are between 200 and 212.

BEECH-JONES J:   Mr Gleeson, this was tendered at the trial before Justice Nicholas on the basis of a representation made by a witness who was called.  Is that ‑ ‑ ‑

MR GLEESON:   Yes, he was called.  So, it is 200 to 212.  We believe he was not challenged on this affidavit.  But you will see in particular at 203 and 205 the plan to start taking orders early at heavily discounted prices and tie up the pharmacists in bulk.  At 207, they would start taking orders from 1 January 2008.  So, this is just ‑ ‑ ‑

GORDON A-CJ:   How does this sit with the findings made by the primary judge about ‑ ‑ ‑

MR GLEESON:   His Honour’s findings cannot sit – it is another reason why those findings cannot sit.  The notion you had until February 2008 to work out what to do, Millichamp said unchallenged, we had to put all this in place in 2007.

GORDON A-CJ:   So, just to answer Justice Beech‑Jones’ questions, this affidavit was before the primary judge, tendered ‑ ‑ ‑

MR GLEESON:   Read.

GORDON A‑CJ:   And these matters were not put to Millichamp?

MR GLEESON:   No.

BEECH-JONES J:   Was there an adverse credit finding saying, I regect that aspect of his evidence, or was ‑ ‑ ‑

MR GLEESON:   No.  Particular parts of his evidence were criticised for reasons that were invalid, but there was no general adverse credit finding.  And this being the plan, his Honour could never have found you had until February 2008 to decide.  So, there were three reasons you did not have until February 2008.  You could not lie to the court – you had to make your decision in September 2007; commercially, you had to get the plan going by December 2007 and, having told the market you were listing and launching, you could hardly dilly‑dally.  Your Honours, we rely upon the whole of 10A to 10F.

What we then do in CP11 is to say – this comes back to your Honour Justice Edelman’s question – is there something different by looking at the earlier internal communication which would cast grave doubt upon what the court was being told and/or put up an alternative reason why Apotex would not have listed.  Your Honours, in CP11, in the interests of time, subparagraphs (a) through to (g) I will simply read because they are largely agreed based on the findings of fact.  In particular, there is no doubt under (e) that by February, Dr Sherman had put in place the plan to list at risk, and in April, he reiterated the plans were to launch at risk.  We then come to the June communications.

JAGOT J:   So, what volume are we in now?

MR GLEESON:   We have to go back, unfortunately, to volume 1.

JAGOT J:   Volume 1.  Okay.

GORDON A-CJ:   So, this aspect is directed at the earlier conduct?

MR GLEESON:   Whether there was anything in that earlier conduct which could allow one to say this court was being told lies.  And the answer is, no.

GORDON A‑CJ:   So much of this deals with evidence of Millichamp, and then either the lack of or otherwise of the evidence of Dr Sherman.  Do you propose to deal with both those aspects after you have taken us to this material.

MR GLEESON:   Yes.

GORDON A-CJ:   One the reasons why I ask is that I know from the Full Court’s reasons that they describe the basis upon which the primary judge criticised Millichamp, and that seemed to a basis that his evidence was inconsistent with the contemporaneous evidence, and they were much more guided by what was in the contemporaneous evidence.

MR GLEESON:   Yes.  And what I am now about to show you, your Honour, is that the critical bits in the contemporaneous evidence were ignored by the primary judge, and were either ignored or not addressed by the Full Court.  So, we are doing this as ‑ ‑ ‑

GORDON A-CJ:   The passage I was considering was paragraph 386 on core appeal book 309.

MR GLEESON:   Yes.  I am now seeking to show your Honour that that was wrong.  Can I just take you to the critical ones in June.  I am following our propositions document from paragraph (h) on page 14.  We start in volume 1 at page 136.  Perhaps I will start at the foot of 137, which is Mr Millichamp to Mr Kay on 22 June.  Attached is the recommendation and the financial scenarios.  It is a recommendation to launch, and all the reasons are given – last bullet point, the financial upside is huge, and over the page, in the first year, if Apotex is the only authorised generic there is 20 million profit, and the TGA is very supportive of getting generics in the market.

So, at the top of 137, Kay asks for a timetable of events and then, at 136, provides a very precise proposed timetable.  The first step is registration on the ARTG.  That is what occurred on 17 August.  The second step is:

propose launching to the trade, by taking orders, on the day that we appear on the ARTG –

That is, launch early:

We propose notifying Sanofi of our planned launch by applying to revoke their patent . . . on the same day –

That is the letter which was then sent, at page 234:

We will submit our application for PBS listing once we are –

clear of the court process.  The next paragraph:

When we get to court we will need to let the judge know that we plan to PBS list.

So, they will be telling the court this:

in relation to the 12.5% drop and further launch activities . . . we will argue that damages are an adequate remedy, give undertakings that we will record all sales, and provide a bank guarantee –

It will come from the parent:

difficult to forecast the amount . . . but we estimate . . . 50‑70 Million AUD (for one year’s damages) depending on what Sanofi argues in court.

We will not continue with launch:

if we do not gain PBS listing.

And the reasons given.  Now, that plan, which Millichamp put up to Mr Kay, is the exact plan which Apotex carried through to 18 September, indeed was still working on up to 21 September, and that is the plan, we say, that would have been implemented in the counterfactual.

BEECH‑JONES J:   Mr Gleeson, they did not, though, take orders on the day they appeared on the ARTG, did they?

MR GLEESON:   No, they modified that because they were wary that that would provoke an urgent, urgent interlocutory that you would not win.  So, that was modified to, we will take the orders as soon as we win the injunction, but otherwise that is the plan.  So, that has gone up to Mr Kay.  Your Honours, on page 138, that financial scenario which was attached to the email and was in evidence, we have given your Honours’ associates a blown‑up version of it.

So, that page 136 is not only the plan, that is the financial calculus upon which the injunction was fought, namely, 50 to 70 million downside, 20 million first year upside, additional gain by building goodwill with the pharmacists, strong belief we are going to win, the upside justifies the risk of the downside.  We then go to page 142, Mr Kay to Mr Sherman, copying Mr Baxter and Mr Millichamp:

please re‑confirm or otherwise our approach in Australia –

So, reconfirm – that is, reconfirm the approach you had approved in February and in April.  Just to give you the April reference, that is at page 126:

Australia is first up and Barry’s instruction is to attempt to launch at risk and then invalidate.

So, there is nothing surprising about this.  At the point when they are crossing the rubicon, which is they are going to start from late June implementing the strategy and running up huge legal costs, they go to Barry, do you reconfirm or do you want to take a different approach.  And so, what is put to Barry: 

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

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

. . .

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

Barry is being told this is the potential risk if we pursue the strategy.  He is then told revocation is “likely to be up to $2m” in costs.  So, this is not a step to be taken lightly, legal proceedings are not for free, and then there is this question of which salt will we use.  There was a possibility of using the HBr salt, but that could cause delay.  The alternative was to use the salt which is in claim 1 of the patent:

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

We then get to the material where we would love to have the bits that are blacked out, but Apotex claimed legal privilege over them and we were unable to overcome that challenge, but if we go to page 145 ‑ ‑ ‑

GORDON A-CJ:   Kay writes again to Sherman, does he not, and asks again, please respond because you have not.

MR GLEESON:   Yes, so that happens all the way up 145 and then back up ‑ ‑ ‑

GORDON A-CJ:   And 144, as well.

MR GLEESON:   Back at 144, and we have the key lawyers involved – Mr Hughes in Canada, Mr Chalk in Australia – and Kay writes again at the top of 144.  Then we go to page 148, and Mr Millichamp says to Mr Haas on 26 June in the part we have: 

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

Now, the way we apprehend, and we will show extra documents confirm this, subject to “further advice/approval” – this is layman’s language – is to say Barry has approved the strategy.  We are to go ahead and do the things which we had set out on that critical earlier page, page 136.  Subject to his further advice or approval, Barry wants to be involved in the implementation of the strategy.  Of course, if some unforeseen event occurred like the factory fire, it would be in Barry’s prerogative to interrupt the strategy, but at this point he is approving the strategy and wanting to be kept involved in it.  Now, that is exactly the way Mr Haas read the email which you see from the top of the page: 

Thanks for the update Roger. 

Once known, please advise as to the estimated launch date so that I can have forecasts shifted –

So, Mr Haas has to do the production, he has to get the goods going, and he has read this as Barry has approved, full steam ahead with the proposal but keep him informed on the critical steps of it – not Barry has not made up his mind at all.  That is Mr Haas.  Then if you go to page 152, you have Barry at the bottom, and that is the blanked‑out email, and then in the middle of 152, Mr Millichamp to the Australian team, plus Paddy Smith: 

FYI -Game on !!!

And above that Karen McTavish says: 

So have they –

Sanofi:

now been notified?

Top of the page:

Not yet.

Now, the Full Court at paragraph 129 suggested that there were two possible games here.  The primary judge made nothing of “game on”.  Full Court says the first possible game is to seek to launch at risk.  That is our prima facie case.  In what sense is it a game?  It is a series of steps which have been laid out, as I have shown you:  put them on notice; see if they try and injunct us; defend the injunction; if we win, list and launch:

Another ‘game’ was to signal to the market that Apotex was going to launch in order to goad Sanofi into seeking an interlocutory injunction and proffering an undertaking as to damages.

Which, he was referring to, turns on the emails which are unknown.  That is a gross error by the Full Court.  The second game – goading an interlocutory injunction – could never have been the conduct of Apotex who, when the undertaking was on offer, rejected it.  So, it does not depend on what is on the missing email, it depends on looking at the way Apotex behaved in the world.  The reason we take particular offence to that paragraph is it is a charge of deceit.  It is a charge – perhaps they are goading Sanofi into seeking an injunction – getting an undertaking, when, of course, they never intend to list all along.

Mr Sheahan might have put various things at trial.  He never put to our witness, he never put to the court, that the “game on” was Millichamp getting approval from Sherman to engage in a deceptive strategy.  Given that that is not the way Apotex behaved when the undertaking was on offer, what the Full Court should have said is, the “game on” is the first of the two games, it is confirmation of what Barry has told us, list and launch. 

Your Honours, I notice the time, but if I could just then refer you to the critical email at 156.  This is Millichamp on Thursday, 28 June.  It is, again, to Stephen Haas, and it says:

as per instructions from Barry the plan (in outline) for clopidgogrel is –

And there is the plan.  The entire plan that had been laid out at page 136.

GORDON A‑CJ:   We may have to deal with this after lunch given the time, but subparagraph (3) of that.

MR GLEESON:  

If we are successful in defending our position vs Sanofi and an injunction is not granted by the courts then we will launch.

That is in an email headed:

as per instructions from Barry –

So, that tells that whatever doubt there could possibly be about subject to the confirmation or advice, he has approved the plan, he wants to keep involved in the implementation of it, he has approved the statement to the court that Millichamp and Catterns made.

GORDON A-CJ:   Then, after lunch, we will have to deal with the last paragraph on that page, too.

MR GLEESON:   Thank you, your Honours.

EDELMAN J:   Mr Gleeson, just before we adjourn, one point which may help me, for you to consider at some stage, is just with a little bit more precision telling us exactly when the real world stops and the hypothetical starts.  So, does the real world stop, for example, at the point in time at which the injunction was first sought and then one treats it as though it had been abandoned, or does the real world stop at the point in time at which the injunction had been sought, the hearing had occurred before Justice Gyles, all the undertakings had been given but at the last minute it was then abandoned?

MR GLEESON:   Thank you, your Honour.

GORDON A‑CJ:   Adjourn the Court.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

GORDON A-CJ:   Mr Gleeson.

MR GLEESON:   Thank you, your Honour.  In terms of timing, I am meant to finish in half an hour.  If I go a little longer that will come off my timing tomorrow, that is our agreement.

GORDON A-CJ:   That is the deal, apparently, so I have read.

MR GLEESON:   We are honourable people, your Honour.  In that limited period of time, I unfortunately have too much to cover, so I have to do it quickly.  Your Honour Justice Edelman’s question – we have thought about it very, very hard, and we hope our answer is responsive.  We submit that you need to distinguish two questions.  One is what real‑world facts go into the construction of the counterfactual, whereas the second question is, once you have the counterfactual construction, what real‑world facts can be considered for the purposes of drawing inferences about what would have happened in that counterfactual.

In terms of the first question, it is possible to take into account everything in the real world up until the real world diverged from the counterfactual, and we think probably that point is the point of the making of the order, because it is making of the order, the injunction, which actually is the cause of Apotex not launching a listing, and is the thing we are testing in the counterfactual.  That probably means the divergence occurs either on 21 September when the result is announced, or 25 September when the order is actually made.

GORDON A-CJ:   Does it matter which it is?

MR GLEESON:   Not on these facts, because whichever point it is, what you do have to remove in constructing the counterfactual is both the order and anything inseverably connected with the court’s intervention, and that includes the reasons.  So, Justice Gyles’ ex tempore reasons on the 21st, corrected on the 25th, do not go in the construction of the counterfactual.  You do that to avoid constructing an artificial counterfactual.

We think that is not inconsistent with your Honour Justice Jagot’s statement at [14] of Sigma, or what the primary judge did at 189.  So, you back out the order, and you back out the reasons, but having constructed the counterfactual, the question you are testing is:  what if Apotex faced the claim for the final injunction with all the risks that carried, plus all the upsides if it won, but was free to list and launch from 21 or 25 September?  What would it have done?

Having constructed that question, you can then bring to account everything from the real world which bears upon the hypothetical question.  So, everything that is in our propositions – between 1 to 10 in particular and perhaps through to 13 or so, which are things in the real world – can be taken into account.  The statements made to the court by Mr Catterns and Mr Millichamp can be taken into account because they were statements directed to the very question:  what would we do next week if not injuncted?

GORDON A-CJ:   So, you say in relation to question 1 and question 2?

MR GLEESON:   No, they are not part of the counterfactual under question – the counterfactual is the narrow question:  what would you do on that date if now free but facing litigation?  But on question 2 – what can I take into account – what is said to the court, which is directed to the very question and said on oath and considered instructions, is directly relevant to what would have happened.

EDELMAN J:   My question was more about the cutoff date rather than what you can take into account, but in principle one would expect that you would have everything in the real world that you could into account so that the hypothetical world differed as little as possible from the real world other than for the counterfactual assumption.

MR GLEESON:   The aim is, we agree, to make it differ “as little as possible” but taking out of it both the order – because that is the thing you are testing – plus any other intervention of the court that is inseverably connected with the order, which would be the reasons.  Your Honour Justice Gordon asked about page 156, at the foot of the page.  What we say Barry was instructing there was, because he wanted to be involved in execution, do not supply the product and do not sell it:

until we are clear on what we can do.

That is, until we defeat the injunction application.  That is also made clear from page 166, where on the Friday, the 29th, Millichamp tells Smith and Andrew Kay he was probably not clear enough in that earlier email.  He is not requesting launch stocks before they commence litigation:

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

. . .

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

This is further confirmation that what Barry had confirmed back at page 156 is it is a bifurcated strategy:  if we defeat the injunction, we are successful, we go ahead and launch with the bisulphate for a December listing.  Then the next paragraph:

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

BEECH-JONES J:   Now, that sentence:

In the instance that we are successful –

Do you say that is a reference to, we are a successful in avoiding an interlocutory injunction?

MR GLEESON:   Yes.

BEECH-JONES J:   In the previous sentence he is talking about a final hearing.  Do you say that because of the December PBS listing, that must be the interlocutory injunction?

MR GLEESON:   Yes.  Success here equals defeat the injunction, then get ready for the listing, prepare the stock using the bisulphate salt.  If we do not defeat the injunction, if we fail, it will be a year or so before we might get on the market, so Barry does not want us to make stock right now.  That is further evidence that in the contested email at page 148:

subject to Barry’s further advice / approval.

He wants, quite understandably, to be involved in the implementation of the strategy, including not wasting money on launching, but equally he has approved that strategy.

GORDON A-CJ:   So, the timeframe was really only four months, was it not, from April to August, for the risk analysis?

MR GLEESON:   Not quite, your Honour, because on the upside the plan was to sell, and his offer to sell from February, March and try and lock the customers in to up to a year’s sales.  So, you might be selling in four months, but the idea is to offer them such big discounts that they agree to take stock for up to a year.  The upside is ‑ ‑ ‑

BEECH-JONES J:   So, it is four months, but it is a really big four months.

MR GLEESON:   It is a big four months.  It is four months of up to 12 months’ stock.

STEWARD J:   You will not probably know the answer to this, Mr Gleeson, but all these emails between executives are all marked in the subject heading “confidential and subject to legal privilege”.

MR GLEESON:   We do not know what Apotex did.  I think it is agreed we exhausted every effort to get the black material, but we were not allowed it.  We would have loved it, but as the moving party, when it said as an evidentiary deficiency in our case, we presented every document we could.

STEWARD J:   I understand.

MR GLEESON:   But yes, your Honour, perhaps it is not an ideal way of marking emails.

EDELMAN J:   As a matter of law, if that be the assumption that were made, that the upside was greater than the downside, it may not have been right, if an account of profits, for example, was available.

MR GLEESON:   May not have been right objectively, but the question was subjectively.

EDELMAN J:   I appreciate that.

MR GLEESON:   Of course, I think it is clear on the raw numbers the downside was greater than the upside.  What was factored in, as your Honour Justice Jagot put to me, was the chance that we will be winners not losers at the end of the day.  That is why pursuing a certain $20 million profit in year one, as against an uncertain downside of $50 million, was regarded as a good bet, particularly with the extra flow‑on effects to building the business.  Your Honours, then in August of that year ‑ ‑ ‑

GORDON A‑CJ:   Can I ask a practical question.  One of the difficulties of going back and going through this and seeking us to have and make different findings to that which were made by the primary judge and the Full Court, is that we are time constrained.  But, for example, what do we with an email which is like on page 164, which seems to show that there is at least confusion within the ranks about what was happening?

MR GLEESON:   Our primary approach to all of this is, we succeed irrespective of any of these emails because the conduct in the actual world is unequivocal.  We are going to this because this is said to be the doubt and what your Honours do is, in fact, fairly simple.  We know the primary judge did not look at a lot of them.  We know the Full Court did not look at all of them.  If one simply looks at how the chain unfolds, the doubt at 164 is resolved at 166.  The short point is that all doubts are resolved by what Apotex did.  So, I think the last ones that your Honours need in this chronology is August, which is page 169.  Mr Kay, at the bottom, refers to the plan:

to put Sanofi on notice of our intention to launch –

He says, he assumes that this will be successful, i.e., success there is that Sanofi will be successful, therefore there will not be a launch.  Sherman is copied in on that.  Sherman, above the page says:

put Sanofi on notice ASAP.

Then, on page 168, Millichamp is here writing to Sherman.  Page 168, your Honour.  This might bring all the doubt to a head.  At page 168, Millichamp to Sherman in August again repeats the bifurcated strategy that we saw in the email at 166:

If Sanofi are successful and get an injunction then we will, of course, not launch . . .

If we are successful and defend against an application . . . from Sanofi we would like to launch as soon as possible.  The earliest date . . . is Dec 07.

We asked Stephen Haas to prepare us a launch plan . . . in the event we are successful . . . We were not expecting any stock . . . until we know the outcome . . .

Please advise if this is an acceptable course of action.

That was sent to Barry Sherman and Stephen Haas says, thanks for the clarity.  So, we would submit the bifurcated strategy – if there were any doubt in the earlier June emails – is confirmed at, really, the three key emails.  Your Honour, it is 156, 166 and 168, and confirmed by 172.  So, 172 is the same Millichamp email and it is copied in to Sherman, and Andrew Kay, clearly on behalf of Sherman, says:

OK by me –

The practical question of your Honour – what do you do – even if there were ambiguity in the one email, which is at 148, you would simply look the at four emails that I have mentioned which clears it up.

GORDON A‑CJ:   In 172, which is the final one, which is confirmation, if one goes to page 173, does one read what is on page 173, which is then endorsed at the top of 172, in exactly the same way that you have just put it to us, or has the position shifted?

MR GLEESON:   No, it is exactly the same position:  we lose the interlocutory, we will not launch, so we do not need stock; if we win, we will launch on the first date, we will need stock.  That is approved by Kay and Sherman.  That is 10 August, and then the strategy I presented to you this morning starts on 17 August, with the external communication at pages 234 and 236.

JAGOT J:   So, it is correct, is it – sorry to hold you up, I know you have limited time.  At the bottom of 169, Mr Kay is responding to Mr Haas when he says:

We are assuming that this will be successful and are thus not planning to launch –

he is saying, I am assuming the interlocutory injunction will be granted, and therefore we cannot launch.  Then, after that, Mr Millichamp saying, of course, if we get injuncted we cannot launch, but if we do not then we will.  That is how you read it?

MR GLEESON:   Yes.  And that is sent to Sherman and Kay.  They say, okay by us.  So, when one then returns to the external communications which start at pages 234 and 236, one can now see why the button was pressed.  It was pressed to implement that approved strategy, and any suggestion that the 234 and following involved a goading or a gaming or a deceit is denied by the internal communications.

Your Honours, in our propositions, we then come to material which is remote in time and context, which are Commonwealth propositions 14 and 15.  Your Honours will need volume 2 again now, I am afraid.

GORDON A-CJ:   So, consistent with the framing that we discussed earlier in relation to the two questions, are these in or out?  And at what point do they come in, and why?

MR GLEESON:   These are not in the counterfactual.  They are not in the construction of the counterfactual because they are events from the real world which are remote in time from the question being asked.  In terms of relevance to it, our primary submission is they have zero relevance to it because they are not only remote in time, they are not addressed to the right question.  But any relevance they have, at best, would be at the margin.

I will do 2008 first, which is page 610.  So, the context we are in from the real world is we are now close to a year after the date upon which we are testing the question, 21 or 25 September 2007.  Apotex is awaiting the final judgment of Justice Gyles, and it is trying to ask itself the question at that date:

If we are successful –

that is, now winning the final hearing – are we going to launch at risk, given the chance that we might lose on appeal.  Millichamp says his:

preferred position here is . . . to launch.

What Millichamp has then done is a recalculation of the potential upside and downside a year later in time, and on a different series of assumptions.  He comes to a downside of 166 million – which you will see explained at pages 613 to 614.  And the reason the number has jumped from 50 or 70 to 166 is he is taking a different approach on 613 to whether the 12.5 per cent reduction was irreversible.

What he has done is, in effect, a worst‑case assumption that, if it is irreversible, even after you would lose the final hearing and Apotex is injuncted, Sanofi continues to suffer that twelve and a half per cent loss through four, five years, which now creates in its own right 123 million in potential loss.  And then, compared to that ‑ ‑ ‑

BEECH-JONES J:   Sorry, Mr Gleeson.  So, this is they win before Justice Gyles, they launch, there is a twelve and a half per cent reduction, they lose on appeal to the Full Court, but the 12.5 per cent cannot be undone.

MR GLEESON:   Yes. 

BEECH-JONES J:   I understand.

MR GLEESON:   No one knew the answer to that question at the time.  In the end, his Honour found very likely it could be undone.  But making the worst‑case assumption, the damages for that are no longer one year’s damages or 18 months’ damages but they are now $123 million damages.  And then the other head of ‑ ‑ ‑

GORDON A-CJ:   That is because it is until expiry of patent, which is the third aspect of it. 

MR GLEESON:   Yes.  And then the mere loss of profits, they are assumed on the basis that they will only run until you lose in the Full Federal Court, so they are 42 million, so you get 166 million.  So, effectively, the 50 to 70 has become 166, if you make an extremely conservative assumption about reversibility of the 12.5 per cent.

Then the upside, which is page 615 – they now have three assumptions.  The new assumption is the third one which is, because time is marching on, if there were two authorised generics, the profit you would make would be much smaller than the profits estimated the previous year.  The assumptions on the first and second scenario are pretty similar to what they were in the previous year.  So, we put to your Honour Justice Gordon, remote in time made on the basis of a different series of assumptions of limited or no relevance to what would have happened in the counterfactual a year earlier.

JAGOT J:   But also after the hearing.

MR GLEESON:   After the hearing, yes. 

JAGOT J:   It is after the hearing before Justice Gyles. 

MR GLEESON:   Yes.  So, you also have that after hearing the full result.  So, at 610, Millichamp is saying, can you give me any advance instructions on what to do, and then the position from Mr Kay at page 620 – at the foot of the page, he is considering the possible damages might be up to $150 million.  He is asking Mr Baxter who is higher in the tree what to do.  And then at 618, working backwards, Kay has a provisional thought – would: 

the best outcome . . . be that we win at first instance –

Roll over the package of undertakings: 

That way, we don’t expose ourselves to potentially ruinous damages, but would collect damages . . . for the further period of being off the market in the event the SA appeal fails.

That is Mr Kay’s thought.  Then at 626, Mr Smith weighs in:  the numbers are big, the decision will be made in Canada.  At 628, Mr Kay’s own view is firming up: 

in some way allow the injunction to continue, and seek damages –

If we win the appeal – Millichamp has called it a:

“Million’s of Dollar” question . . . how big is the risk of us losing on appeal?

Now, what happened was that judgment came down and they were then put in a different world which you see at page 636 – partial win, partial fail.  Against that possibility, or that reality by now, at 647 there was some consideration as to what they would do, and the end result was they negotiated a package of rolling over the restraints with interlocutory undertakings, none of which is directly before your Honours.

Now, what the primary judge and the Full Court seemed to infer from that was, well, looking backwards, here we have at least Mr Kay thinking I might be better being injuncted with an undertaking rather than listing and launching if I were free to do so.  The reason I put to your Honour the presiding judge that is not relevant is twofold.

Firstly, that is the very thing which Apotex did not do in 2007 when the undertaking to damages was on offer.  It was not good enough for them because their intent to list and launch was so firmly fixed.  So, the fact that the year later in a different situation they might be contemplating accepting a package if on offer does nothing to undermine their intent in the previous year.

Secondly, in any event, the only way in which Apotex could be better off by accepting a package of restraints if on offer – and I go back to page 618 – is if there is a genuine intent to list and launch, because otherwise when they come to claim on the undertaking, they will inevitably fail.

So, what Mr Kay is in fact looking at, at page 618, is not the counterfactual question in September 2007.  He is looking at a different question which is:  now that I have been held off the market for the better part of a year – or perhaps less – now that I have lost my prime mover advantage in the real world, but on the assumption that I am currently protected by the undertaking – which can only be true if I had the intent last year – what would be my best choice between the two options of rolling over the undertaking, and being free to list and launch? 

The two options he is considering are not the options that were faced in 2007.  So, to the extent the primary judge and the Full Court said, you can read back from this; it is relevant and high influential as to what would have happened in 2007, the answer is irrelevant – addressing a different question at a different point in time.  So, in paragraph 90, if your Honours could go to the Full Court ‑ ‑ ‑

JAGOT J:   Of the Full Court?

MR GLEESON:   The Full Court.  This is the only place where the court identifies what it says is the evidence led by Sanofi to discharge its evidential burden.  The evidence is firstly:

evidence tending to suggest that Apotex was better off being restrained with the benefit of the undertaking as to damages than . . . if it had launched at risk –

Secondly, evidence of what it did in 2009 when it won in the Full Court.  If that is what Sanofi’s – as we would call it – step 2 case is, this is why absent the injunction you would have not listed and launched.  It is based on a fundamental error that the better off theory was not in fact what Apotex did in 2007 when the undertaking was on offer and, in any event, could only be a sensible option if you had an intention to list and launch at the time, otherwise it is pointless and deceptive.

The second bit – we are now 2009/2010; we are two to three years after the event – it is not hard to understand why, if you have been held off the market for two to three years, you have lost the entire prime mover advantage.  There are now generics lining up to be listed.  If you have to wait three or four months to hear the final result from this Court, you may well rollover the package, knowing that you are already protected for two to three years, and you will extend the protection for the next three months.

JAGOT J:   Do we know when the other generics went on the ARTG and all that?

MR GLEESON:   Yes, by this date, at least one of them had got there.  The references are in paragraph 73 of our written submissions.

JAGOT J:   Thank you.

MR GLEESON:   By this stage, the game – to use that term – was virtually up.  You have a generic.  On the ARTG, if you list first in this three‑month window, you cause the twelve and a half per cent loss.  Sanofi might say that is irreversible, so you trigger three years of losses for none of the real gain that you could have made in 2007.

Your Honours, paragraph 90 of the Full Court, we would submit they are not reasons that could rationally set up a case as to why the mere pendency of litigation would have caused Apotex not to list and launch, and once that be so, that ought to have been the end of the case being made by Sanofi.

GORDON A-CJ:   In paragraph 91 – I did not quite understand that – it is put that you did not submit that the evidence relied upon by Sanofi did not have the effect of discharging its burden ‑ ‑ ‑

MR GLEESON:   Your Honour, I did.  The passage they referred to alternatively, T315.34‑36, that is exactly what we were saying, that once you understand these two pieces of evidence, so‑called, from 2008 and 2009, neither of them can rationally address the critical question.  The Full Court at the end of 91 has said, if we did put it – which we did – they think it:

is material from which an inference could be drawn.

That is because it:

concerned actual evidence about how Apotex –

would have behaved in a similar factual circumstance.  Now, if it is not a similar factual circumstance, they have, with respect, nothing.

Your Honours, while I have the Full Court, could I just in bullet point form refer to a couple of other matters.  Paragraph 117 ‑ ‑ ‑

BEECH‑JONES J:   This is the Full Court?

MR GLEESON:   Full Court.

GORDON A-CJ:   What are these directed to, please, Mr Gleeson?

MR GLEESON:   They are the failures of the Full Court to deal with each of the matters I have been putting to you today.  Paragraph 117 – that is the critical email of 28 June, which the trial judge did not refer to.  The Full Court says, did not need to refer to it because of the reasons at 137 to 143.  If you go to 137 to 143, 137 sets out part of the email but omits the critical opening words:

as per instructions from Barry –

and 141 is erroneous, because it has actually not looked at the whole of the email.  The email is also referred to at paragraph 314, in the sense that the Commonwealth’s written submission at trial – sorry, this is at paragraph 313, page 228 – sets out the Commonwealth’s written submission at trial.  At trial, the Commonwealth added the emphasis for the benefit of the primary judge:

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

See (3):

(emphasis in original) –

that is correct at the bottom.  Paragraph 314, it is not material, for the reasons we gave at 141 – 141 never addressed that this confirmed the instructions were from Barry.

Paragraph 129 of the Full Court – this is the unfortunate and unjustified speculation as to goading, inconsistent with the actual conduct.  We do not think Sanofi in writing is actually giving you an explanation for how a finding of goading could even be on the cards.  Paragraph 134, “game on” – hinting at the possibility that the game might have been a deceitful game without developing that proposition.  Then 154, that is the email above to Stephen Haas make the position pellucidly clear.  Somehow the Full Court thinks there is doubt about that.

GORDON A-CJ:   What date is that email, please?

MR GLEESON:   That is 29 June.  Paragraph 174 – this is the misreading of the letter to the pharmacists near the end and the refusal to put it into context.  Paragraph 176 is particularly egregious, I would submit, because this is our submission based on Mr Catterns being a truthful man.  Look at the only answer to it by the Full Court.  We have seen that Justice Nicholas set out part of what happened but just did not address its significance.  We make the same complaint before the Full Court.  Our submission:

lacks merit since the trial judge expressly dealt with it at J [272] –

So, apparently, to set out an incomplete summary of what occurred on 18 September – the critical day – and make no analysis of the relevance of that fact in the counterfactual is a discharge of the primary judge’s duty.

GORDON A-CJ:   But is this not in the context of error?

MR GLEESON:   Error?

GORDON A-CJ:   This is identifying error, and one of your complaints was that they did not deal with the submission, and the answer was that they did.  Your complaint is not that they did not deal with it, your complaint is the way they dealt with it.  We are talking about error here; we are not talking about redoing the exercise at large.

MR GLEESON:   No, I am not asking your Honour to do that.  This is error because the critical part of the prima facie case – how did Apotex behave when called upon to do so in the real world, on the very question relevant to the counterfactual – has not been addressed by the primary judge and is here not addressed by the Full Court.  So, the Full Court’s approach is, provided you refer to an event, but you conduct no analysis of its significance for the counterfactual, you have discharged your duty.  That is error, your Honour.

Next, page 263, this is where we said a relevant fact from the actual world is Apotex offered the 50 million.  The Full Court seems to say that is an immaterial fact.  Paragraph 204 – because we do not know what it cost you to put up the 50 million – we all know that there is a line fee for a $50 million letter of credit, and we all know $50 million on your balance sheet is a bit of a liability, so it is a real cost.  Paragraph 205, the last couple of sentences, the proffering of the 50 million:

was consistent with Apotex keeping its options open.  It is entirely possible as a matter of logic for Apotex to have been willing to proffer the undertaking . . . and . . . not to have made a final decision as to whether it was going to launch.

So, in terms of error, that is the fundamental misunderstanding of how an interlocutory injunction operates.  It is surprising that the Full Court would make such an error, but they seem to have.  You are allowed to turn up to a court, offer a $50 million security because you intend to list and launch, and you do not have to made up your mind on whether you are going to do it.  Now, can you just imagine Justice Gyles, if you came back to him the next day and said, when I said 50, I had not really made up my mind.  He would be horrified.  Any judge would be horrified by this, but this has been overlooked.

So, next – there is only a couple more – 219, this is about the so‑called new events.  Apparently, the primary judge is acquitted of error that when he said they could not have been anticipated, they were anticipated in fact.  Paragraph 221 is the error imposing the question.  Apparently, you are not allowed to say that evidence is material unless the only inference from it is the ultimate one you seek, as opposed to looking at the body of material together.  Paragraphs 206 to 230, this is the attempt to justify the primary judge’s reliance on the later conduct in 2008 and 2009, conduct that is immaterial.

Paragraph 295, page 283, this is the attempt to deal with paragraph 38 of Millichamp.  It set out in 296, I cannot be accused of not having put the submission I have put today about the critical importance of it.  Between 297 and 305 there is a tortured set of reasons as to how Millichamp could have truthfully sworn paragraph 38 if in truth he knew that Sherman had not made any decision whether to list or launch.

I have dealt with paragraph 313, which is the critical part of the email is not addressed.  Paragraph 341 is particularly egregious, I would submit.  The first sentence:

The trial judge dealt with Mr Catterns’ statement that Apotex would launch at risk –

at, relevantly, 272.  Recited it, but never dealt with it.  Then paragraphs 354 to 355.  Paragraph 354:

These two matters were not known at the time of any of the correspondence –

This is the listing date.  That was known.  The second one, the early final, that was anticipated.  Paragraph 355 at the end, the Full Court says these are “unanticipated developments” that created the evidentiary deficiency.  Your Honours, with respect, what has gone wrong as a matter of method is the three‑step approach has not been followed.  We do not put this appeal squarely on the ground of delay, although there is clearly gross delay by both courts.  Gross delay is a clear explanation for why critical parts of the case have never been addressed.  I would just then conclude, your Honours, on Ansett, if your Honours have that, which is in ‑ ‑ ‑

GORDON A-CJ:   Tab 7.  Is that what you want?

MR GLEESON:   Yes.  What we are commending as a matter of approach is Justices Mason and Stephen, particularly Justice Mason on page 324 of the Commonwealth Law Report.  Point 5 accepting:

The distinction between damage caused by the injunction and damage which flows from the litigation –

at the bottom of the page, we must always “look to the purpose” of the jurisdiction in order to identify the “causal connexion”.  Your Honour Justice Edelman, that is why we say directness is not the requirement.  The requirement is what is there.  The hypothetical question is posed on 325. 

His Honour at 331, in the middle paragraph, is drawing the distinction we have between whether the injunction is a cause in fact of the loss and whether, even if there had been no injunction, the same course would have followed.  At 332, his Honour identifies:

the onus of showing the necessary causal connexion –

And the question was whether the sequence of events that it had set up were sufficient to make out the prima facie case.  Then, in the critical passage:

Unless the circumstances indicate otherwise –

And then his Honour sets out a chain of inferential reasoning, says the inference will be drawn in the counterfactual, but the onus is then on the other party – this is an evidentiary onus, not a legal one – to make out countervailing circumstances.  That, we submit, is the distinction between step one and step two.

We, of course, are not and do not need to embrace the particular inferential step of reasoning his Honour embraced at step one.  It was an extremely thin set of reasoning, and Justice Stephen disagreed on whether that thin step of reasoning was step one.  Our difference is that in Ansett, there was no evidence of any sort of the intentions of the decision‑maker after the proceedings were commenced.

GORDON A‑CJ:   Can I ask three questions about this.  The first is, in relation to Justice Stephen, although he says it is for the claimant to establish a prima facie case at page 320, he does not, does he, anywhere – if he does, I would be grateful if you could take me to it – say that if the prima facie case is established, there is some evidential shift – the burden shifts, does it?  That is, his analysis is not that of Justice Mason.

MR GLEESON:   With respect, we disagree, your Honour.  He does not necessarily spell out the second step, but ‑ ‑ ‑ 

GORDON A‑CJ:   That is my point.

MR GLEESON:   The submission is they are contemplating the same first step and, therefore, a shifting of evidentiary onus.

GORDON A‑CJ:   The second question is, if you are right that Justice Mason – and to the extent that Justice Stephen supports him – had this staged process, does that mean you need leave to reopen Air Express, given the views of the others?

MR GLEESON:   I think not, your Honour, because we have – I believe I am correct – four judges in the Full Court.  We also have Justice Murphy.  I am sorry, I just need to consider that question, if I can.

GORDON A‑CJ:   That is all right.  The third thing I have is that I would like clarification, just at a level of principle.  I had understood from your submissions and your notice of appeal that there really was a complaint that there was this strict three‑stage process that had to be undertaken, and there was a very rigid framework that had to be applied.  I do not seek to verbal you, but what I have taken from what you have said today is that it is no longer a strict framework, it is somehow a prism or a mode of analysis that you might adopt.  Have I misunderstood the submission and the shift in it?

MR GLEESON:   It is an analytical tool.  It is the latter.

GORDON A‑CJ:   Thank you.

MR GLEESON:   It is the latter, your Honour.

STEWARD J:   Mr Gleeson, I take it, though, you do not live or die on your three‑step point.

MR GLEESON:   No, no.

STEWARD J:   You would say you discharge an ordinary onus based upon the material you have taken us to.

MR GLEESON:   Yes, and if one simply read it all and took the right approach to the counterfactual, the right approach to what material needs to be brought into the counterfactual – which has not occurred below – then you get the result we seek.

STEWARD J:   And, really, your positive case really lives and dies about the point you have made about what was said to Justice Gyles.  It is either right or wrong.

MR GLEESON:   That is the high point of it, your Honour.  Combined with a fair conception of the duties of candour of counsel, that which a court expects of counsel and solicitors, and those types of statements being made, then, the absence of something set up in the counterfactual of such an unforeseen character as to remove the force of those statements.  That approach allows you to say that is the question which should have been looked at by the courts, whether that is one, two, three or whether it is a more granular approach.

Your Honours, I did just want to finally note in Ansett at page 282 in Justice Aickin, in the middle full paragraph, it is interesting to note that in that case it is the exact opposite of our case because there was an attempt made to see whether anything said by the Commonwealth’s counsel to the

Court on the application to dissolve the injunction actually bore upon the intent in the counterfactual.  And Justice Aickin said, perhaps due to the absence of accurate transcript in those days or the way in which the Solicitor‑General framed it, there was nothing said to the Court.  That is our critical difference factually from Ansett.  We have the very material of statements to the court, as your Honour Justice Steward put to me.  That was simply missing in Ansett. 

Sorry, I did have to make a correction.  Your Honour Justice Gordon asked me, was Millichamp challenged on his July 2011 affidavit.  He was not challenged on the process of reasoning he set out as to what he would do; the challenge was the general one being made, but you could not do anything without asking Barry.

GORDON A‑CJ:   Do we have that material in the books?

MR GLEESON:   It is referred to in the primary judge at paragraph 331 through to 335.

GORDON A‑CJ:   Thank you very much for that.

MR GLEESON:   May it please the Court.

MR SHEAHAN:   Your Honours, at trial, the Commonwealth closing written submissions sought findings in support of their pleaded causation case on the balance of probabilities.  There was no invitation or insistence that the court address any other standard or prima facie proof or look at shifting burdens.  Accordingly, the primary judge recorded that it was common ground – this is at paragraphs 26 and 27 – whether Apotex would have applied for PBS listing absent the interlocutory injunction was:

to be decided on the balance of probabilities.

Now, to address something your Honour Justice Beech‑Jones asked this morning – who was asking for inferences to be drawn about Dr Sherman and what he would have done if there was no injunction – primarily, it was the Commonwealth, and you can see that in their written submissions at tab 106 in the joint further materials, page 1568, paragraph 126.

STEWARD J:   What volume is that, Mr Sheahan?

MR SHEAHAN:   I am sorry, that is volume 4 of the further materials.

BEECH‑JONES J:   What page is that, Mr Sheahan?

MR SHEAHAN:   Page 1568.  Where, a little surprisingly, the Commonwealth asked the court to make inferences about Dr Sherman’s instructions from the redacted materials, and again, at page 1587 ‑ ‑ ‑ 

GORDON A‑CJ:   What was the paragraph on 1568?

MR SHEAHAN:   On 1568 it was paragraph 126.  In the third line:

the Court can safely infer that these communications contained instructions –

BEECH‑JONES J:   Right.  That is not quite the same, though.  That is not an inference about what he would have done had the injunction been refused.

MR SHEAHAN:   Not literally, but it goes directly to the point, in substance.  The other point is at 1587, paragraph 196:

the overwhelming inference is –

Keeping in mind, your Honour, that the key question was whether there were unequivocal instructions from Dr Sherman to launch at risk – unequivocal and final.  In that context, can I simply say that our learned friends, if they had been conscious of those paragraphs, might not have made the slightly surprising submission that the trial judge had reverse engineered the judgment on account of his dissatisfaction with the absence of Dr Sherman from the witness box and, to that end, had conjured up – my learned friend’s expression – an evidentiary gap.

Our case, as your Honours will appreciate, was substantially negative, that the Commonwealth needed to show, and could not show, what Dr Sherman would have done in the counterfactual.  Now, the trial judge did approach that question and he approached it by a lengthy examination of the evidence.  He found that the Commonwealth had not proved a critical aspect of its case, based on a series of findings which were confirmed by the Full Courts of their coordinate findings.  The main ones, just the main ones, are these.

The person responsible for a decision by Apotex to launch at risk was Dr Sherman, no on else.  Dr Sherman deferred making a final decision until after the outcome of the interlocutory injunction was known, and Apotex had not committed itself to launching in the event no interlocutory injunction were granted.  Thirdly, there were powerful commercial reasons for Dr Sherman to prefer not to launch at risk if Apotex was not restrained, and those commercial considerations were highlighted by the unusual circumstance that the final hearing of the patent proceedings would be resolved within months, four months or so, of the interlocutory hearing – within four months of the PBS listing date, I should say.

So that, in the counterfactual, Apotex would enjoy only a short opportunity to make profits.  After which, if it failed on revocation it faced having to destroy product, cancel orders, refund customers – that is to say, all the pharmacists that my learned friend spoke about before who had put in advance orders for a year, that increased the risk for Apotex if they were not ultimately successful, and then they would have to pay damages to Sanofi referable not merely to the sales that Sanofi lost to Apotex but to a reduction in the margin on every sale of a Sanofi product.  In other words, the upside and the downside were asymmetric because of the operation of the Pharmaceutical Benefits Act.

Now, the evidence as to its likely conduct in the counterfactual, I will come to this in detail, from the first witness called by the Commonwealth, Mr Millichamp, was, as found by the trial judge having heard his cross‑examination, unconvincing, not persuasive, unsatisfactory, all in light of the contemporaneous documents, and he was not the right witness, Dr Sherman was, to talk about what would have happened in the counterfactual.

EDELMAN J:   There was never any finding made by the trial judge, though, in relation to paragraphs 126 and 196 of the submissions that you took us to, that the Commonwealth put about inferences that could have been drawn about Dr Sherman’s instructions.

MR SHEAHAN:   The findings were that he did not find in all the evidence any basis for drawing a conclusion on the balance of probabilities that there had been such instructions.

EDELMAN J:   I see.

BEECH‑JONES J:   Well, the precise finding was that he could not justify the drawing of an inference that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing of the products with effect from 1 April, and that is in the event of the counterfactual, but I did not see, from those two paragraphs you took me, the Commonwealth ask for that.  It is not what the Commonwealth was asking, they were simply seeking an inference about the effect of the emails in the events that happened in June.

MR SHEAHAN:   Your Honour draws an accurate distinction, I accept that.  In the context of those critical facts, the primary judge was not persuaded that Apotex would have obtained PBS listing from 1 April if the interlocutory injunction had not been granted.  With that brief summary, may we say by way of introduction to the primary judge’s reasons, they engaged in a detailed examination of the evidence as to causation, it commenced at paragraph 219 of his judgment at page 68, and it went through 132 paragraphs later to a conclusion at paragraph 251 on page 101. 

The central challenge to it in the Full Court was that the trial judge had not had regard to a large number of particular items, of evidence in particular submissions.  That language “not had regard to” is in the further amended notice of appeal, behind tab 4.  What that prompted in the Full Court was a thorough and scrupulous examination of the matters that the trial judge was said not to have had regard to, and the answers to that in each case were either he did have regard to it, contrary to the submissions that have been made by the Commonwealth, or the matter that he did not have regard to, was not material.

So, when our learned friends take your Honours to the Full Court not developing reasons for the insignificance of something that the trial judge was shown to have had regard to, that is neither here nor there because it does not reflect the basis on which the matters of appeal raised the issues with contention in the court below.

STEWARD J:   Mr Sheahan, can I put something to you.  There is something very artificial about this case, and that is because Sanofi and Apotex knew they were going to have to fight in court.  One of the things we do not know, because of the significant redactions, is the elephant in the room, namely what was Apotex being advised legally about its plan and how it would eventuate.

This is something in your favour, I think, because it means that Mr Gleeson’s ability to discharge his onus of proof, even to get to a prima facie case, is limited because the material that he has secured from Apotex has all of these redactions.  Indeed, one of the key emails, when Mr Millichamp says, go for it,  it is in response to an email which is entirely redacted.  So, inferentially – if assuming it is a proper and valid claim – what he is saying, go for it, is in relation to something legal.

MR SHEAHAN:   It creates ‑ ‑ ‑

STEWARD J:   We all know pharmaceutical companies and their relationships with their lawyers.  It is what they do all the time.

MR SHEAHAN:   Your Honour, it is difficult to do what the submissions of the Commonwealth, that I took your Honour a minute ago, were trying to do, which is to make positive inferences that something was contained in redacted material.  As your Honour says rightly, that is a difficulty for the Commonwealth, which bears by its own admission the burden of proof.

STEWARD J:   Can I put a different proposition to you.  Do you say that, logically, Apotex could not have made a final decision prior to Justice Gyles’ decision because it knew that it had litigation with Sanofi to battle?  They knew it was coming.  Why would they have made a final decision when they knew there was contingency out there which affected what they were going to do?

MR SHEAHAN:   What your Honour rightly identifies, with respect, is what most commercial actors would regard as a compelling consideration for deferring a final judgment.  Just a couple more things about the Full Court’s general approach to the trial judge’s reasons.  At paragraph 387 on page 310, the court said that:

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.

That was after the Full Court’s even longer examination of these questions, from paragraphs 99 to 347 of their judgment.  At paragraph 298 at the top of page 285, they particularly described his reasoning in relation to Mr Millichamp’s evidence as:

precise and astute.

And at paragraph 189, page 259, on the critical question, their Honours concluded that:

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

That Dr Sherman had not made a final decision that Apotex should launch at risk.  Now, we will come a little later to the significance of concurrent findings of that kind.  The trial judge’s examination of the evidence started in mid‑2006.  In the judgment of the trial judge at paragraph 223, he refers to an email of 19 June looking ahead to a possible launch, estimated margins and market shares being provided to Mr Weingarten, who was then Mr Millichamp’s immediate superior.  That is at paragraph 223 at appeal book 69.

Dr Sherman responded in an email referred to at paragraph 224.  He is giving his instructions as to how they should approach the Australian market going forward, and he says:

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

What happened was that Apotex lost in the United States and Canada in the intervening period between June 2006 and October 2007.  In Canada, an appeal was finally dismissed in December 2006, and your Honours will see that in the primary judgment at paragraphs 201 to 202.  In the United States, Apotex was enjoined on a final basis in June 2007, that is at paragraphs 214 to 215.

Dr Sherman changed his mind as to what was to happen in Australia after that, and that change of mind appears in an email of 20 February 2007, which an important document in the case.  Your Honours will see it dealt with by the trial judge at paragraph 229, appeal book page 70.

JAGOT J:   Sorry, where is that in the materials?

MR SHEAHAN:   In the material, it is ‑ ‑ ‑

EDELMAN J:   Appeal book page 70.

MR SHEAHAN:   ‑ ‑ ‑ page 118 in the joint folder of materials in volume 1.

JAGOT J:   Sorry, I missed that.

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

MR SHEAHAN:   Page 118.

JAGOT J:   Page 118 of volume 1, thank you.

MR SHEAHAN:   Yes, behind tab 10.  It is set out effectively in full in the judgment.

EDELMAN J:   Do you want us to go to paragraph 229 or page 118?

MR SHEAHAN:   Your Honours can go to either.  The:

Plan is as follows:

[redacted]

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

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

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

Your Honours might think that that would be a helpful document for the Commonwealth – your Honours will note that our learned friends did not refer to it.  What emerges about this document are a couple of things – a couple not so important, one very important.  The first is, as the primary judge observed at paragraph 231, it:

reflects a clear awareness on Dr Sherman’s part of the requirement for Sanofi to give an undertaking as to damages in return for any interlocutory injunction –

The second point, noted by the trial judge at 232, was that Dr Sherman’s position in relation to a launch in Australia had changed, it:

no longer depended on the outcome of the litigation in Canada or the United States.

And the third point is this.  This email was associated with two developments in that case, in the course of Mr Millichamp’s cross‑examination.  The first was his acceptance that on the question of whether to launch at risk in Australia, the decision‑maker was not him, but it was Dr Sherman.  Mr Millichamp was the CEO of Apotex Australia, which was the actual party.  Dr Sherman, he acknowledged, was the decision‑maker.

The difficulty was that Mr Millichamp had put on seven affidavits in the proceedings over the course of a decade.  His first mention of Dr Sherman or Canada having any sort of role at all was in the seventh, which was in September 2017.  All the other affidavits proceeded on the footing that he was the decision‑maker, even in the seventh, which is in the joint folder of materials at tab 103 in volume 4.  His reference to the role of Canada was a little muted.  At paragraph 18, he says, we generally consult them on strategic questions.  When he got onto the content of making actual decisions in that affidavit at paragraph 118 – the last line of the affidavit, for example – and also paragraphs 63 and 64, he talks about himself as the person making the decisions.

So, right up to the commencement of this trial, Mr Millichamp’s affidavit evidence was proceeding as if he was the decision‑maker.  As I have said, in his cross‑examination he accepted that, in truth, the decision‑maker was Dr Sherman.  One can see that in volume 4, tab 106, at pages 1431 to 1432 – perhaps that is tab 105, I am sorry.

EDELMAN J:   So, we are to infer from that that Mr Millichamp was providing the instructions to the lawyers for the purposes of litigation, yet Dr Sherman was making the business decisions?

MR SHEAHAN:   What we know is that all the evidence that was being given to the court before Justice Gyles – presumably, the instructions to Mr Catterns, consistently with the evidence – was proceeding expressly or impliedly that the decision‑maker was Mr Millichamp, which was not true.

BEECH‑JONES J:   Say that again.  We should infer that Mr Millichamp was giving instructions that led to Mr Catterns?

MR SHEAHAN:   Yes.

BEECH‑JONES J:   Even if that is right, on your scenario Mr Millichamp is getting his instructions from Dr Sherman.

MR SHEAHAN:   We should assume that the instructions were consistent with the evidence, and the evidence was, I am the decision‑maker.

EDELMAN J:   So, Mr Millichamp was misleading the court?

MR SHEAHAN:   Yes.  And we ‑ ‑ ‑

GORDON A‑CJ:   Can I just ask about that.  Can you please go to page 1431 to 1432 that you just identified as being the passage relevant to the evidence that was given when you were cross‑examining him?

MR SHEAHAN:   Yes.  It is at the bottom of 1431, line 39:

Now, that decision to accept restraint with security –

This is addressing circumstances in 2009:

that decision was ultimately made in Canada, wasn’t it?‑‑‑Yes.

And it would be right to say, would it not, that any decision by the Australian Apotex company to launch a blockbuster drug like clopidogrel at risk was one for your superiors in Canada?‑‑‑Yes, the big strategic decisions for litigation are . . . given from our HQ and I then implement and execute those instructions and those actions here in Australia.

He is an implementer, not a decider.  Top of the next page:

that was the same in 2007 and 2008?

And then at line 11:

I would consult . . . and they would give me instructions and then I would implement that –

BEECH-JONES J:   So, why would we conclude that Mr Catterns was not saying something that was conveyed through Mr Millichamp after he had consulted with Canada?

MR SHEAHAN:   Because the way the evidence is framed indicates the decision‑maker is Mr Millichamp, and it is not.  The trial judge made specific observations in this regard in relation to the fifth affidavit, in particular, which is dealt with in paragraph 327.

JAGOT J:   Sorry, 227?

MR SHEAHAN:   Paragraph 327.

JAGOT J:   Paragraph 327.  Thank you.

MR SHEAHAN:   On page 95.  And the commentary in 328 which follows.

STEWARD J:   So, is it a necessary part of your case that what Mr Catterns put to the court was done incorrectly?  When I say that, he did it on instructions but that the instructions did not reflect, accurately, Dr Sherman’s position on that day, and that he inadvertently mislead the court.

MR SHEAHAN:   Yes.  It is a necessary element of our case only that the court cannot take from the material provided to the court in the course of the interlocutory injunction what you would normally take from it.  It does not bear the weight that our learned friends put on it.  Once the court appreciates that the evidentiary basis put before the court in Mr Millichamp’s affidavits left out a critical fact – it left out the critical fact, which was that although he talked about what I want to do, and what I want to do, and so on, his intentions about those matters had to be driven by the decision of Dr Sherman, who he did not mention at all.

STEWARD J:   I go back to this.  You have to be able to say that what Mr Catterns put to Justice Gyles was incorrect – it did not properly, accurately, represent the controlling of them company, who is Dr Sherman.

MR SHEAHAN:   I agree with your Honour.  I am only cavilling with we “have to”.  We do not accept that the mere fact of these submissions made – on any view, that the submissions made of Justice Gyles that dispositive of the matter.

BEECH-JONES J:   All right.  But did you make that submission – as adverted to by Justice Steward – to the primary judge, and did the primary judge make a finding that reflected that?

MR SHEAHAN:   So, the submission we made to the primary judge was that Mr Millichamp’s evidence was not only – the evidence given to the court was not only false, but dishonest.

JAGOT J:   But he rejected that at 332.

MR SHEAHAN:   He rejected its dishonesty.

JAGOT J:   But he:

would not read anything into Mr Millichamp’s failure to make any mention of Dr Sherman in the first two affidavits –

MR SHEAHAN:   In the first two.

JAGOT J:   Yes, but they are the affidavits that existed up to the point of the interlocutory injunction.  The other five are much later and are in relation to Apotex’s own claim on the undertaking as to damages.

MR SHEAHAN:   As we read what his Honour is saying, in terms of not reading anything into it, it is not reading anything into it in terms of the submission that he is addressing, which is Mr Millichamp’s honesty.

JAGOT J:   But he is rejecting your submission, in terms.

MR SHEAHAN:   But this is a submission about Mr Millichamp’s honesty.

BEECH-JONES J:   Was there any finding – there was no finding by the primary judge that no weight should be given to what was to – or whatever Mr Catterns said to Justice Gyles should be discounted?

MR SHEAHAN:   I do not believe there is such a finding.

BEECH‑JONES J:   And there was no submission made to that effect, was there, about what Mr Catterns said, that what he was saying did not accurately reflect the position of his client?  I mean, take that ‑ ‑ ‑ 

MR SHEAHAN:   I will have to take that under advisement, your Honour.

BEECH‑JONES J:   I am not suggesting anyone said Mr Catterns himself misled anyone – no.

MR SHEAHAN:   No, and of course, we abjured any such suggestion.

BEECH‑JONES J:   But did anyone say, look, that should not be treated at face value because of some problem with Mr Millichamp, or anything of that kind?

MR SHEAHAN:   Your Honour, my recollection – we will check.

EDELMAN J:   And in the course of that, to what extent was there a live controversy about the inferences that could be drawn precisely from what Mr Catterns had said to the court?

MR SHEAHAN:   At trial in this matter?

EDELMAN J:   Yes.

MR SHEAHAN:   There was a live controversy about it, but I will get the precise paragraphs and the submissions and so on overnight, your Honour.

EDELMAN J:   Yes.

JAGOT J:   I do not see – I mean, in the face of 332 and 338 of the primary judge, there is just no basis to say that – any finding that Mr Millichamp had engaged in anything about misleading the court whatsoever that is relevant to this matter.  Even the later affidavits, there seems to be a reason – at 336, for example.

MR SHEAHAN:   I will come back to it, your Honour, if I may.

GORDON A‑CJ:   So, I think, it would be useful if you could identify, at least for me – and I speak only for myself – the way it was put to the primary judge by submission from your side.  That is, what the submissions were that were put that you would ask the court to make by reference to findings in relation to the Millichamp evidence and where we find it.

MR SHEAHAN:   I will do that.

GORDON A‑CJ:   Second, what those findings were, as distinct – whether there is anything more other than 332 and 338.  I think that probably includes 339 and 340, which is the way that the trial judge seems to address the Millichamp evidence.  And then, finally, what you would have us do with it.  I think it would be useful, if you would not mind doing that overnight.

MR SHEAHAN:   We will do that.  Now, sticking with Mr Millichamp’s evidence, in volume 4, tab 105, at pages 1453 to 1454 ‑ ‑ ‑ 

JAGOT J:   We are back in volume 4 now, are we?

MR SHEAHAN:   I am sorry, your Honour?

JAGOT J:   Are we back in volume 4?

MR SHEAHAN:   Volume 4.

JAGOT J:   Yes.

MR SHEAHAN:   Your Honours will remember that this discussion started in relation to the 20 February 2017 email.  At 1453 and over to the next page, Mr Millichamp is being asked about an email from July 2008 – that is a period in anticipation of judgment being given – in which he inquires of his superior, Mr Kay:

“If Apotex HQ is comfortable for us to launch at risk”.

given the possibility of an inevitable Full Court appeal, knowing the potential for damages.  The document itself is in tab 67; I think your Honours have seen it already today.

What happens on page 1454, at about line 30, is that he identifies the instructions that he said he had.  I put to him that he was asking for instructions from Mr Kay about whether to launch at risk, because no instruction had been given to him up to that point.  And he says:

No.  I had instructions . . . we were trying to get on the market as soon as we practically could and launch at risk.

Now, the question then arose, what were those instructions?  So, this is, as at July 2008, yes, I had instructions; the instructions, it emerged, at 1486 to 1487 ‑ ‑ ‑ 

BEECH-JONES J:   So, what line were you just reading from?  Because I read 32.  At line 32 he was saying:

I had instructions . . . at the interlocutory stage –

and at the bottom of the page he is saying he “needed new instructions” for 2008.  Have I got that wrong?  That seems to be his evidence.  Sorry, Mr Sheahan, you are taking us to where?

MR SHEAHAN:   Pages 1486 to 1487.

JAGOT J:   We are moving between time periods here.  One, we are back in 2007, the next we are in mid‑2008.

MR SHEAHAN:   We are, and that is because ‑ ‑ ‑

JAGOT J:   Yes, and then we go to 1486.  Are we back now in 2007?  I think we are, are we not?

GORDON A-CJ:   We are, in the middle of the page, I think.

MR SHEAHAN:   At 1487, at the bottom of the page, this is dealing with the same time period because it is referring back to the evidence that I have just taken your Honours to.

GORDON A-CJ:   So, that is on 1486 at the bottom.  There is a cross‑reference back to page 1453.

MR SHEAHAN:   Correct:

Was this the instruction that you were referring to?

And this is the 20 February 2007 email, and that becomes clear on the next page, at about line 15:

Was it your view after 20 February you had no need to seek any further instructions from Canada as to whether you should launch at risk?‑‑‑In 2007?

In 2007?‑‑‑After receiving those instructions, there was no doubt in my mind that I needed to do everything – or I was instructed to do –

And so on:

And did your understanding in that respect change between 20 February and September?

The email of 20 February was his instruction.  The Full Court described the significance of this shift in paragraphs 378 to 383.

BEECH-JONES J:   So, what was the shift?

MR SHEAHAN:   The shift was that, as we have said, the affidavit evidence, including right up to the seventh ‑ ‑ ‑

BEECH-JONES J:   The absence of Dr Sherman to this?

MR SHEAHAN:   Yes.

BEECH-JONES J:   Yes.  I am sorry.  Go on.

MR SHEAHAN:   So, there is no Dr Sherman in the frame, and then Dr Sherman is in the frame, and the instructions to launch were specifically given by Dr Sherman on 20 February 2007.  So, this is in the Full Court’s judgment at pages 306 to 307.

STEWARD J:   Sorry, was that a paragraph number?

MR SHEAHAN:   Paragraph 378 to 383 – perhaps 379.  Now, this is dealing with the assessment of Mr Millichamp’s evidence.  At the top of the next page their Honours say:

Although the earlier affidavits prepared by Mr Millichamp had suggested that he was the key decision maker . . . by the time of the trial, the role of Dr Sherman had been dislodged from the undergrowth.

Their Honours explain the trial judge’s treatment of Mr Millichamp’s evidence.  Then they say in 380:

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 –

To adopt my friend’s caesarean metaphor, that was the crossing of the Rubicon.  Then in 381, there was a difficulty; Dr Sherman was absent.  The Commonwealth’s answer:

was that it could prove that Dr Sherman had already made that decision –

in February.  The evidence was the email.  Then in 382, the next problem, there was a:

large amount of evidence which was only consistent with Dr Sherman having a continuing role in the decision making process.

In other words, there was not a final decision in February 2007.  Your Honours have seen in the course of our learned friend’s submissions a large number of those pieces of evidence, where considerably after February 2007 Dr Sherman is being asked:  shall we launch at risk?  The result includes what the Full Court describes in paragraph 383.  This material:

included Mr Millichamp’s email of 27 June –

which your Honours saw earlier today:

in which he referred to the fact that any launch at risk was subject to Dr Sherman’s ‘further advice / approval’.

What that email did, essentially, was undermine completely the evidence of Mr Millichamp that he could act throughout 2007 on the basis of an instruction he was given on 20 February.  That was his evidence, and it was wrong.  Now, just to see how far his evidence went ‑ ‑ ‑ 

BEECH‑JONES J:   Can I just ask you this.  Is there any evidence of any hesitation emanating from Dr Sherman between the February 2007 email and the hearing before Justice Gyles?  I know they keep saying, well, he was involved and things of that kind, but it is one thing about keeping the ultimate boss in the loop.  Is there any material that says – and people acknowledging that Dr Sherman may change his mind or might make a further decision, but is there anything actually that emerges from February to September where it says Barry has cold feet?

MR SHEAHAN:   Nothing in those terms.  There is material indicating that he did not want to spend money on the launch until they knew what the outcome was, and there was material indicating that he expected to lose the interlocutory injunction application, which are in the territory but not decisive of your Honour’s question.

BEECH‑JONES J:   Yes, I am sorry now I took you off your course, Mr Sheahan.

MR SHEAHAN:   No, no.

GORDON A‑CJ:   Just so I am clear, I mean, we were taken to material especially around – and I am just using some examples; this is the problem of cherry picking – pages 144 and following of the book of materials, which are in the June correspondence where they are asking constantly for Mr Sherman to confirm the plan of attack and he responds but it is a subject of privilege, and so we do not know what his response is.

MR SHEAHAN:   No.

GORDON A‑CJ:   Those redactions of privilege are identified and referred to both in the judgments below.  Are we to make anything of that?  Or where do you put it in this mix?

MR SHEAHAN:   So, what we say about that is two things.  Obviously, it is, in a sense, a gap in the evidence.  You cannot infer positively that it contained an instruction, but there is this other significance.  This material is redacted solely for legal professional privilege.  An instruction, launch at risk, or words to that effect, would plainly not be privileged.  Some words around them might be, in other words like, I have spoken to my lawyers and what I want you to do is launch at risk.  What you see, for example, in the 28 June 2007 email, on which our friends heavily rely ‑ ‑ ‑

BEECH-JONES J:   The one at page 156, you mean?

GORDON A‑CJ:   The one I was looking at was page 144, which is the 26 June request: 

Please advise when you have decided whether to pursue . . . and if you wish us to move to launch at risk.

And there is one that is at least redacted.  Then I think you go through to – and the same again on 26 June, on page 145, and then 156.

MR SHEAHAN:   Yes.  All we can say, your Honour, is that consistently with an expectation that people have done the task of redacting for privilege carefully, it is a reasonable inference that those redacted parts do not include a simple instruction to risk.

BEECH-JONES J:   But is not 156 that?  Is that not recording the evidence of instructions from Barry?

MR SHEAHAN:   I am sorry, which page, your Honour?

BEECH-JONES J:   Page 156. 

MR SHEAHAN:   So, in relation to page 156 – this is the one I was going to take your Honours to.

BEECH-JONES J:   Yes.

MR SHEAHAN:   Your Honours will see the first four or five words are redacted.  What that indicates, in respect of what I was just saying – I will come to your Honour’s point – is that the redaction process appears to have been done on a quite scrupulous basis.  A few words will be redacted and the rest of it is left there – the rest of it not being privileged.  The likely inference is there is nothing amounting to an instruction in any of this covered‑up material.

As to the particular question about this email, what we have only a couple of days before – on the day before, I think, the 27th – is Mr Millichamp saying, this is what we are going to do, subject to Dr Sherman’s final advice approval.  So, this is the next day, the 27th.  In that context, and having regard to the subject matter of the email, one does not take anything from the fact that he says:

as per instructions from Barry the plan –

Because all he is doing is telling someone about getting some packaging processing lined up for a possible launch.

BEECH-JONES J:   What, point (3):

as per instructions from Barry the plan . . .

. . .

3)  If we are successful –

MR SHEAHAN:   Yes, but the object of the email – why is he writing this?  He is writing it to someone to deal with item 6:

Initial quantities and follow up / replenishment orders . . . blister constraints.

and so on.

EDELMAN J:   Is that why, at 160, the further question that is put in response to an email that says “as per instructions from Barry”, the further question is “is Barry in the loop”?

MR SHEAHAN:   Yes.  So, that is another indication that this 28 June email is not to be taken as if it were a statute about the state of mind and the state of instructions from Dr Sherman.  Another indicator is that it says:

as per instructions from Barry the plan (in outline) –

Another question, rhetorically, is would you necessarily expect Mr Millichamp in every email – in particular, to an email to subordinates dealing with mundane matters about preparing for a possible launch – to consistently say, subject to Barry’s further advice approval. 

BEECH-JONES J:   Was Mr Millichamp cross‑examined about that – this email?

MR SHEAHAN:   This particular email, I cannot tell your Honour.  I will have that looked‑up overnight.

BEECH-JONES J:   One thing is clear, the Commonwealth extracted it in complete text with emphasis in its submissions.

MR SHEAHAN:   Yes.

BEECH-JONES J:   The primary judge did not address it.

MR SHEAHAN:   No.  The Full Court said that, having regard to his reasons as a whole, it was not necessary for him to address this.  That was a fair assessment, in our respectful submission, but I cannot ask your Honour to accept that until I get to the end of my submissions.

BEECH-JONES J:   Yes, certainly, I do not want to interrupt.

MR SHEAHAN:   The trial judge concluded, about Mr Millichamp’s 27 June email saying, subject to Mr Sherman’s final advice or approval, that the terms of his email were:

more likely than not to be correct –

This is set out in the Full Court’s judgment at 385, I think.

GORDON A-CJ:   Do you mind speaking up, Mr Sheahan, please?

MR SHEAHAN:   Yes, your Honour, I will try.  In the Full Court at 385, page 309 at about line 35:

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.

The Full Court rejected a challenge to that finding.  It is here that they acknowledge in the next paragraph the care and detail of his Honour’s examination and the evidence.  I simply refer your Honours in that context as well to paragraphs 135, 142, 155 and 174 dealing with this topic.

What you have in relation to what comes from the 27 June email are concurrent findings of the trial judge and the Full Court.  They are challenged by the Commonwealth, but the only basis for the challenge is one which appears in the written submissions at paragraph 85, which is that the email, in referring to needing Dr Sherman’s advice or approval, might be referring to:

the precise details of supply arrangements –

rather than whether or not to launch at risk.  That piece of speculation was not even suggested by Mr Millichamp in his attempts to explain this email.  The result is that the coordinate findings of the trial judge and the unanimous Full Court can comfortably stand.  Your Honours appreciate the standard that special circumstances such as plain injustice or clear error are necessary to interfere with coordinate findings.  There has not been an attempt to establish special circumstances of that kind in relation to this finding.  Other circumstances ‑ ‑ ‑

BEECH‑JONES J:   Which finding is that?

MR SHEAHAN:   The finding that:

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.

JAGOT J:   Could I ask for clarification as to one thing – not now if you cannot do it, but at paragraph 246, the primary judge refers to an email from Millichamp to Haas, he says:

27 June 2007 at 1.59pm.

If you go to page 148 at volume 1, the email is in the middle of the page, it says 26 June 11.59, not 27 June at 1.59.  The trial judge has said in 247 that it appends a copy of Dr Sherman’s email of 27 June.  I do not quite know how all of that works.  The date seems to be wrong.  Anyway, you do not have to answer this now, but clearly the “game on” email – 7 June at 152 at 11.23 – certainly seems to be after this 26 June.  It just seems to be wrong date and time.

MR SHEAHAN:   That could well be right, because – it may be that the dates are not wrong because of the time difference between Canada and Australia.

JAGOT J:   I understand that, but that means that it is clear that the “game on” email that Millichamp is sending on June 27 postdates the email at 246 – does that make sense?  The trial judge has 245 as though it happens first, but it looks like 246 has happened before the end of 245.

MR SHEAHAN:   It appears obscure.  I will see if we can get some clarification about that, your Honour.

GORDON A‑CJ:   I had understood that your answer – I may be confused – was that the instructions they were seeking was not the plan but a more limited instruction consistent with the findings, which is why you took us to those paragraphs in relation to the way in which the email had been dealt with.  Then you criticised the Commonwealth by saying the Commonwealth was identifying speculation which had not been put, suggested by Mr Millichamp.

MR SHEAHAN:   Yes.  That is in the context of there being coordinate findings as to the appropriate inference from the 27 June email.  The Commonwealth challenges that without seeking to meet the hurdle in Kozarov, as far as they go as to speculate about how it might better be interpreted, and that is not enough.  So, the Court can comfortably start from the 27 June email and the finding about it recorded by the Full Court at paragraph 385 and following, and adopting what the trial judge had said.

BEECH‑JONES J:   So, the 27 June email is the one on page 148, which is 26 June, 11.59, and that is a timing difference.  Is that what you get?

MR SHEAHAN:   Excuse me, your Honour.  The 27 June email is the one on page 148, in the middle of the page.

BEECH‑JONES J:   Page 148, middle of the page.

MR SHEAHAN:   It says:

Stephen –

there is a redaction:

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

BEECH‑JONES J:   And the email that Justice Jagot referred to, which the primary judge refers to as sent on 27 June at 5.12 am – which one is that?

JAGOT J:   It is below it.

GORDON A‑CJ:   I think the one that Justice Jagot was referring to was on 152.

BEECH‑JONES J:   On 152.

JAGOT J:   Page 152, in the middle of the page, there is a 27 June email at 11.23.  The only point I was making is that “game on”, whatever the sequence, it comes after the email to Mr Haas, because Mr Millichamp’s time must be the same on his computer, and it is the sent time from Mr Millichamp, whereas the trial judge has it around the opposite way.  That is all.

MR SHEAHAN:   Yes, and I take your Honour’s point.  Mr Millichamp’s email – the “game on” email – is timed 11.23; the later email is saying “subject to Barry’s further advice”.

GORDON A‑CJ:   I think what this little exercise demonstrates is that we had hoped that the chronology and the joint exercise – which sort of half‑succeeded – might have produced, in chronological order, a set of documents which showed us what the exchanges were one after the other.  What the difficulty is, is so much of this is repeated.  Is it not possible to produce, consistent with the evidence, a bundle of emails which actually identify what is responding to what in the appropriate order?  It may be it existed and was done for the judges below.

You might take that on notice, Mr Sheahan, and have a discussion with Mr Gleeson, but that is what we had hoped it would produce.  So, we are not actually trying to work out what is the “game on” email responding to and what the time distance is.  It shows my old age, but I do remember another case where you have difference in times between countries – it can be quite misleading to not identify what it is responding to what. 

MR SHEAHAN:   Yes, I understand your Honour’s point. 

BEECH-JONES J:   I am slow on the uptake, Mr Sheahan, but it does look like 246 and 247 is wrong.  It does seem that that email at 5.12 am may have come after that email that is in 246.

GORDON A-CJ:   You might take that on notice, Mr Sheahan.

MR SHEAHAN:   We will.

GORDON A‑CJ:   It is a good example of the issues that we are facing, and it is, I think, unfortunate that we would be left to try and resolve those questions. 

MR SHEAHAN:   No, your Honours should not be left in that position.

GORDON A-CJ:   As I said, we had hoped that the directions which were given might have alleviated some of these issues, but it does not seem as though it alleviated them all, although the documents were helpful.

MR SHEAHAN:   I regret that, your Honour, but we will get onto it.  There are other circumstances leading up to the end of August 2007, that is, between 27 June and then.  They are dealt with in our written submissions in a bit of detail from paragraphs 73 to 86.  The key points are these.  First, the documentary evidence is completely inconsistent with the Commonwealth’s case that Mr Millichamp had a 20 February 2007 instruction that subsisted and was sufficient for all purposes subsequently, and that he was relying on.  There is no evidence of any subsequent instruction by Dr Sherman to launch at risk, that is, subsequent to 22 June.  Can I note that some unrecorded ‑ ‑ ‑

BEECH-JONES J:   Did you say 22 June?

MR SHEAHAN:   I did say 22 June; I meant 27 June.  Forgive me.

BEECH-JONES J:   This may be the same problem – 28 June, at 158, you say that is not evidence of instructions of Mr Sherman.

MR SHEAHAN:   No.

BEECH‑JONES J:   Why not? 

MR SHEAHAN:   It is not evidence inconsistent with what is recorded in the 27 June email.  So, in the 27 June email, Mr Millichamp is saying, we will launch subject to approval.  It would be a mistake to read the 28 June email as inconsistent with that; that something had happened in the meantime so that I no longer need to get Dr Sherman’s approval. 

BEECH-JONES J:   That is where the “game on” might be important, might it not?

MR SHEAHAN:   Well, we accept – as we have just been through, I think – the “game on” email comes before the 27 June email.

BEECH-JONES J:   I see.

MR SHEAHAN:   We will check the chronology.  What emerges from Mr Millichamp’s evidence is that he consistently attributed his belief that he did not need to go back to anyone for approval to launch at risk to the 20 February email.  Your Honours can see that in the transcript of his cross‑examination at 301, points 14 to 19 in the further materials at page 1499.

JAGOT J:   Could I ask, what does any of it, in one sense, matter if at 156 at point (3), Mr Millichamp is clearly saying on 28 June he got instructions from Barry – point (3) – and we do not get enjoined, we are going to launch?  What does it matter if he has made his mistake about February?  I mean, he has been asked this five years later, or four years later.  What does it matter whether he has telescoped time or something between February and June or July or August?

MR SHEAHAN:   There are two things.  Based on his oral evidence, there is no reason to think that there were any intervening oral instructions or unrecorded written instructions from Dr Sherman.

JAGOT J:   About what?

MR SHEAHAN:   About launching at risk. 

JAGOT J:   After 20 ‑ ‑ ‑

MR SHEAHAN:   After 20 February.  So, he is asked about it and says, I do not recall that. 

JAGOT J:   What about the thing I am looking at right now on page 156:

as per instructions from Barry –

MR SHEAHAN:   This is the 28 June email?

JAGOT J:   Yes.

MR SHEAHAN:   So, that is consistent with him having instructions from Dr Sherman, subject to his final approval.  Where we put our stake in the sand is the 27 June email in which Mr Millichamp makes it clear that they cannot, in our submission – and this is the finding – he cannot actually press the button on a launch if the injunctive relief is refused without going back to Dr Sherman.

JAGOT J:   Where is this?

BEECH-JONES J:   That is the based on the words:

we will plan to launch subject to Barry’s further advice / approval.

JAGOT J:   That looks like it is out of – I interrupted, sorry.

BEECH-JONES J:   And that is reading that as saying, we plan to launch only with Barry’s further advice or approval, as opposed to, we will launch unless Barry gives advice not to launch.

MR SHEAHAN:   I see the distinction.  The interpretation that was preferred by the trial judge and the Full Court was the one for which we contend.

BEECH-JONES J:   Based on words, not based on – and that was not based on any oral evidence advantage, though, was it?

MR SHEAHAN:   No, but it was an interpretation based upon the overall context, including what I was discussing with Justice Steward earlier, which are the commercial considerations that would make it highly desirable not to make a decision before you had to.

JAGOT J:   I just do not understand when you have the email on 26 June that says what it says, then you have one on 27 June that says “game on” and “So have they now been notified?”  “Not yet.” – That is clearly about Sanofi.  And then you have one to the same person – Stephen Haas – referring expressly to instructions from Barry that says unequivocally in point 3:

If we are successful . . . we will launch.

MR SHEAHAN:   So, we simply say that the reference to instructions from Barry in the first line is not inconsistent with the 27 June email, which says:

subject to Barry’s further advice / approval.

In other words, at that point in time, at the date of the 28 June email, saying:

as per instructions from Barry . . . (in outline) –

JAGOT J:   So, you are building into 28 June, we have instructions from Barry that are subject to further instructions from Barry?

MR SHEAHAN:   Yes.  So, what we are saying is that the mere use of that language does not countermand, does not override, the qualification that appears on 27 June.  It just does not record it, and you would not expect it to be consistently recorded in every email that Mr Millichamp was sending, particularly purely ministerial ones to subordinates of this kind.

EDELMAN J:   What is meant, then, by the email at 160 in response to an email that says:

as per instructions from Barry . . . (in outline) –

Maybe even subject to further instructions, the response is:

Is Barry in the loop –

MR SHEAHAN:   That response, “Is Barry in the loop”, is a further indication that it is inappropriate to treat the text of the email from Mr Millichamp of 28 June as if it is a complete and concrete articulation of evidence necessary to be understood about his instructions from Dr Sherman.

EDELMAN J:   But, even accepting that, how could Barry not be in the loop if the email was on instructions from Barry?

JAGOT J:   You need to look at the words in the brackets, I might add.

BEECH-JONES J:   Mr Haas was product manager, effectively, in Canada, was he not?

MR SHEAHAN:   Yes.

BEECH-JONES J:   So, this email from Mr Millichamp was about lining up product.

MR SHEAHAN:   Yes.  So, Mr Haas needs to know that his boss ‑ ‑ ‑

BEECH-JONES J:   Knows about the product issues.

MR SHEAHAN:   ‑ ‑ ‑ is actually happy with all of this, because the real decision‑maker in all of this is Dr Sherman.

STEWARD J:   Mr Sheahan, can I ask a slightly different question.  Was there any evidence below about how Apotex’s corporate governance structures worked?

MR SHEAHAN:   Apotex is a completely private company essentially owned by Dr Sherman.

STEWARD J:   Was there any evidence that one would expect, under their structures, that if you were going to launch at risk, there would need to be – as one would expect of a publicly‑listed company – a resolution of the board of directors, or a delegation to someone who then records the making of the decision one way or another?

MR SHEAHAN:   No, there was nothing of that kind.

STEWARD J:   It is all a bit shadier than that?

MR SHEAHAN:   It was Dr Sherman’s money that was at stake in a launch at risk, and he would make the decision.  I see the time, your Honour.

GORDON A‑CJ:   Yes.  I think it would be useful if you could at least let the Court know, before court tomorrow – if the things we talked about, about the documents, could be addressed, just so that we could even have a look at them, if they are available before then – but I do not expect people to work all night.

MR SHEAHAN:   We will do what we can.

GORDON A‑CJ:   Thank you.  Adjourn the Court, please.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 5 SEPTEMBER 2024