F H Faulding & Co Ltd v Ranbaxy Laboratories Ltd
[2004] VSC 315
•19 August 2004
,:
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 7597 of 2004
| F.H. FAULDING & CO LTD | Plaintiff |
| v | |
| RANBAXY LABORATORIES LTD | Defendant |
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JUDGE: | OSBORN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 19 AUGUST 2004 | |
DATE OF RULING: | 19 AUGUST 2004 | |
CASE MAY BE CITED AS: | F.H. FAULDING & CO LTD v RANBAXY LABORATORIES LTD | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 315 | |
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Interlocutory injunction - Licence distribution and development agreement – Purported termination of agreement – Dispute as to interpretation – Temporary injunction granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | N. Mukhtar QC with P. Nicholas | Minter Ellison |
| For the Defendant | H.M. Symon SC T.D. Cordiner | Deacons |
OSBORN J:
The plaintiff in this matter seeks an interlocutory injunction restraining the defendant from terminating a licence distribution and development agreement. The injunction in effect requires or is intended to require the defendant to continue to supply general oral pharmaceutical drugs pursuant to the agreement.
An injunction is sought for the purpose of keeping the Agreement on foot pending resolution by an arbitrator of a dispute which has arisen between the parties
The defendant manufactures pharmaceutical drugs in India. In July 2000 it appointed the plaintiff as its exclusive distributor of certain pharmaceutical drugs in Australia for a period of ten years. The defendant takes the position that the plaintiff has breached the Agreement. In consequence on 20 July last, the defendant purported to terminate the Agreement, giving the plaintiff 30 days to remedy the breach.
The plaintiff denies it has breached the Agreement and says there were no grounds for terminating it. The plaintiff wishes to preserve the Agreement and maintain its operational effect.
The basis of the purported termination of the Agreement is an alleged breach of Clause 22.1 of the Agreement which provides that neither party may assign or transfer the Agreement without the prior written consent of the other party.
The plaintiff's position is that the transaction upon which the defendant relies is a delegation in accordance with Clause 24.2 of the Agreement which provides that the parties agree that performance of any or all of the party's obligations or the exercise of any or all of the party's rights under the Agreement may be delegated to affiliates and delegates of that party. It is further provided, such delegation will not derogate from each of the party's obligations or rights under the Agreement.
There is a dispute as to the interpretation of this clause, but I am satisfied that there is a serious question as to whether it should be interpreted as the plaintiff contends. In particular, the question of whether the phrase "affiliates and delegates" should read discursively is a serious one if both words are to be given effect and are to be construed in the light of Clauses 2.1 and 2.2 of the Agreement. The latter provisions comprise grants of licences to the plaintiff and appointments of the plaintiff as distributor of the defendant. These grants and appointments are expressed to be to the plaintiff, its nominated affiliates or delegates.
Apart from the construction of Clause 24.2, there is also a dispute as to the characterisation of the transaction in issue. On 4 July, the plaintiff publicly announced that it had entered into an agreement to sell its Australian oral generic pharmaceuticals business, namely GenRx Pty Ltd, to Apotex Australia Pty Ltd.
Following this and after correspondence between the parties, the plaintiff advised the defendant by letter of 6 July 2004 as follows. "We confirm that GenRx Pty Ltd was sold to Apotex Australia Ltd on 1 July 2004. We can confirm that under the terms of the sale we did not assign any of our rights under the agreement to Apotex or GenRx. Accordingly, there has been no breach of the assignment clause of the Agreement. Pursuant to Clauses 2.1, 2.2 and 24.2 of the Agreement we, by this letter, on behalf of our subsidiary F.H. Faulding & Co Ltd, are notifying Ranbaxy that we have nominated GenRx as a delegate of F.H. Faulding & Co Ltd for the purposes of the Agreement."
On the same day the plaintiff also advised the defendant by e-mail that all future orders would be made by GenRx rather than the plaintiff.
The defendant has sought production of all documents evidencing the sale and delegation referred to in the plaintiff 's letter of 6 July 2004. The plaintiff resists production of these documents, as do GenRx and Apotex, on the basis of commercial confidentiality and on the further basis in the case of the plaintiff that they are strictly speaking irrelevant to the plaintiff 's application.
The plaintiff contends that once it is established that there is a genuine question for arbitration, in accordance with the provisions of the Agreement, and in particular Clause 18.1, a serious issue to be tried arises as to whether an injunction should go to preserve the status quo. It is further said that the cessation of supply will cause loss to the plaintiff because it has retained substantial distribution functions under the Agreement and that this is so despite the provisions of Clause 17.7 of the Agreement which governs the situation after termination and provide for some 12 weeks continuation of run off supply.
The position taken by the plaintiff does not place before the court any evidence of the matters said to establish delegation and disprove assignment. There is thus an obvious reason for the defendant's application that the relevant documents be produced before any substantive order is made in this matter. The defendant also asserts that Clause 24.2 of the Agreement does not have the effect for which the plaintiff contends, either by its terms or read as part of the Agreement as a whole, including Clause 2.1A.
It further contends that the power granted by Clause 24.2 cannot be exercised other than in good faith and contends that it is apparent the power was not so exercised in the present case.
The defendant submits that it will suffer substantial loss if the injunction is granted because Apotex is in fact its direct commercial competitor. In support of its submission that the documents evidencing the transaction which lie at the heart of the dispute should be produced to the court, it has offered by its counsel an undertaking that such documents should remain confidential to counsel and solicitors acting for it.
In my view, the plaintiff is entitled to a holding injunction until a date next week, provided of course that it gives the usual undertaking as to damages. Conversely, the defendant's legal advisers should, in my view, be given access to the documents which form the subject of subpoena, subject to an appropriate confidentiality undertaking.
The defendant has also sought injunctions which would give effect to the alleged termination of the Agreement and restrain the use of information supplied by it to the plaintiff pursuant to the Agreement. I am not satisfied that these injunctions should be granted. The defendant has now known of the relationship between the plaintiff and Apotex for a substantial period of time in relative terms and I am not persuaded that there are issues of confidentiality justifying the grant of interim cross-injunctive relief.
Having said that, are we in a position to agree as to what undertaking might be given as to the issue of confidentiality?
MR MUKHTAR:
My instructor is just looking at that as we speak, Your Honour. May I make use of time in the meantime to hand to the Bench and to my learned friend the proposed order we would have dealing with the pronouncement just made. Would Your Honour just bear with me as I go through it. Apart from the formal matters, the undertaking is given in other matters and I have expressed the order to run until 4.15 p.m. on 26 August. I have deleted the last ten or so words and I have added a paragraph 2 to say the further hearing of our summons filed 16 August be adjourned to 26 August in the Practice Court. Paragraph 3 is typical, and we would ask for the direction in 4, just an interest of certainty. We can have this re-engrossed if it is acceptable to our learned friends and indeed to the court.
OSBORN J.:
Yes. Mr Mukhtar, I do not have any particular difficulties with the order as you reformulate it, except that I propose to insert in paragraph 1 an order that until 4.30 p.m. on 26 August 2004 or further order the defendant be restrained. I have formed the view that I have expressly on a temporary and holding basis.
MR MUKHTAR:
Indeed, Your Honour.
OSBORN, J.:
I should add to the orders a further order dealing with this question of the subpoena, I think.
MR MUKHTAR:
I think I should say that I think we are in a position now to at least put to my learned friends a proposed confidentiality undertaking to cover these documents. They may wish to have some time to look at it and it should not take long, Your Honour.
OSBORN, J.:
You can either deal with it by mutual undertakings or you can reach some agreement that will facilitate an order by me. Do you want me to leave the Bench for five minutes or do you just want to look at it with Ms Symon while I am sitting here?
MS SYMON:
It might be simplest if you left the Bench for five minutes, Your Honour. Could I just raise the question of the cross summons, whether Your Honour would propose to make any orders or whether we might expect an undertaking from both Faulding and Apertex and Generex who are here with regard to Ranbaxy's confidential information on a holding basis.
OSBORN, J.:
No, I have taken the view that I am not satisfied that interim orders are necessary in that regard. It seems to me that they are extremely difficult for me to formulate on the present state of the evidence in a way which would give effect to the injunction that I have granted to the plaintiff on an interim basis, and I think that is a matter that you will just have to address further next week, but I am not satisfied that there is a proper basis for such an injunction over the next few days.
MS SYMON:
As Your Honour pleases. Then the Minute 2 of my learned friend Mr Mukhtar's proposed order should perhaps adjourn the cross summons as well.
OSBORN, J.:
It should. I should say together with the defendant's summons filed 19 August 2004.
MS SYMON:
Your Honour, with regard to the order, I wonder if it might be added to not only that Ranbaxy be restrained from terminating the Agreement pursuant to its written notice, provided that it shall not be required to supply Generex in the meantime.
OSBORN, J.:
No, I have taken the view that the Agreement is on foot until a date next week.
MS SYMON:
The difficulty is what is the Agreement, Your Honour. It might be simplest if there was an indication that Ranbaxy will not be asked to make any supply to Generex until the termination of the matter. That would resolve it.
OSBORN, J.:
You can have some discussions about that. What I have said is that in my view the plaintiff on the material before me at this stage is entitled to keep existing arrangements on foot until a date in the middle of next week. You have asked for Thursday, I am happy to give you Thursday. I have indicated to you that I will give you access to the documentation that you wish to see, but I am not going to do anything other than make orders of that nature at this point in time.
MS SYMON:
As Your Honour pleases. Then there is just the matter of the undertaking, if we could have five minutes for that perhaps.
OSBORN, J.:
Yes.
(Short adjournment.)
MR MUKHTAR:
Your Honour, I think there has been consensus on the terms of the confidentiality order. The document is a bit shandy and we will just get it neatly handwritten for Your Honour because it will involve signatures and undertaking of the court. Whilst that is happening, may I hand up to the Bench a re-engrossed order.
(Discussion ensued.)
OSBORN, J.:
Mr Mukhtar, it did occur to me that the parties might consider whether mediation is appropriate in this matter. I am not going to delay matters further this afternoon but I thought I might expressly reserve liberty to apply and if you wish me to order a mediation and you signed consent minutes, then they could simply be given to my associate and I would so order tomorrow or Monday or whenever you ask me to.
I must say that my impression is that a protracted dispute in this matter carries with it a very substantial down side for one side or the other, and possibly for both, but the delay which may be inherent in an arbitration seems to me to present particular problems in the commercial situation which you have both sought to elaborate to me.
There are different problems on each side but they are quite significant and it seems to me that there are members of Counsel such as Mr Uren and others who practise internationally in arbitration and I think you might give some thought as to whether you can come to some agreement about trying to sort it all out. It may be that in the end the positions of the parties are so entrenched that nothing can be done, but it is one of those cases that threatens to go on a long train ride to trial and that will not be to anyone's advantage, I suspect.
I will reserve liberty to apply in addition to the orders that you have foreshadowed.
MR MUKHTAR:
Should that be a new paragraph 4, Your Honour?
OSBORN, J.:
Yes, it should.
(Discussion ensued.)
Perhaps the order that I have made should also recite under Other Matters that the plaintiff produced to the court documents responding to the subpoena dated 17 August 2004 subject to the confidentiality undertaking dated this day and filed in the court. Such documents were released to the parties for inspection and copying.
I will make the order set out in the minutes with the addition to other matters that I have just recited and with the inclusion of liberty to apply. I shall return the proposed confidentiality undertaking for dating and signature.
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