Hamilton Pharmaceutical Pty Ltd ACN 008 204 635 v Australian Medic-Care Co Ltd

[2008] FCA 821

FEDERAL COURT OF AUSTRALIA

Hamilton Pharmaceutical Pty Ltd ACN 008 204 635 v Australian
Medic-Care Co Ltd [2008] FCA 821

HAMILTON PHARMACEUTICAL PTY LTD ACN 008 204 635 v AUSTRALIAN MEDIC-CARE CO LTD and KENNETH KIN WAH KEUNG

SAD 17 OF 2007

BESANKO J
3 JUNE 2008
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 17 OF 2007

BETWEEN: HAMILTON PHARMACEUTICAL PTY LTD
ACN 008 204 635
Cross-Claimant/Respondent

AND:

AUSTRALIAN MEDIC-CARE CO LTD
First Cross-Respondent/Applicant

KENNETH KIN WAH KEUNG
Second Cross-Respondent

JUDGE:	BESANKO J
DATE OF ORDER:	3 JUNE 2008
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1.The parties be heard as to the appropriate orders on the notice of motion in light of these reasons.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 17 OF 2007

BETWEEN: HAMILTON PHARMACEUTICAL PTY LTD
ACN 008 204 635
Cross-Claimant/Respondent

AND:

AUSTRALIAN MEDIC-CARE CO LTD
First Cross-Respondent/Applicant

KENNETH KIN WAH KEUNG
Second Cross-Respondent

JUDGE:	BESANKO J
DATE:	3 JUNE 2008
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. This is an application by notice of motion issued by the applicant/first cross-respondent and second cross-respondent in a proceeding in this Court. Fifteen orders are sought in the notice of motion. The applicant/first cross-respondent is Australian Medic-Care Company Ltd (“AMC”) which is a company incorporated in Hong Kong and the second cross-respondent is Kenneth Kin Wah Keung and he describes himself as the sole executive director and the sole executive officer of AMC. The respondent/cross-claimant is Hamilton Pharmaceutical Pty Limited (“Hamilton”). The claim by AMC relates to a distribution agreement between it and Hamilton and associated matters. AMC makes a variety of claims. Hamilton’s cross-claim against AMC and its principal director, Dr Keung makes a variety of claims against AMC including a breach of confidence claim and a breach of confidence claim only against Dr Keung.

2. Three of the orders sought in the notice of motion are presently relevant and they relate to the cross-claim brought by Hamilton. The orders sought which are presently relevant are as follows:

   “2.      That the Second Cross-respondent Kenneth Kin Wah Keung (appearing conditionally) be disjoined or, in the alternative, that the Further Amended Cross-claim filed 2 May 2008 as it relates to Kenneth Kin Wah Keung, the Second Cross-respondent, be struck out as beyond the jurisdiction of this Court and/or as disclosing no cause of action.

   3.        That paragraphs 19-32 of the Further Amended Cross-claim filed 2 May 2008 filed by the Respondent/cross-claimant in these proceedings, paragraph 33 of the Further Amended Cross-claim to the extent it relates to, refers to or incorporates any or all of paragraphs 19-32 and paragraph 34 of the Further Amended Cross-claim to the extent it relates to, refers to or incorporates any or all of paragraphs 19-32 or refers to Kenneth Kin Wah Keung, each be struck out including (but not only) as beyond the jurisdiction of this Court and/or as disclosing no cause of action.

   4.        Further or in the alternative, that:

   4.1the claims contained in paragraphs 19-32 of the Further Amended Cross-claim filed 2 May 2008 filed by the Respondent/cross-claimant in these proceedings, paragraph 33 of the Further Amended Cross-claim to the extent it relates to refers to or incorporates any or all of paragraphs 19-32 and paragraph 34 of the Further Amended Cross-claim to the extent it relates to, refers to or incorporates any or all of paragraphs 19-32 or refers to Kenneth Kin Wah Keung, be heard by separate trial; and …”

3. The proceeding has been given a trial date. It is listed to proceed before Finn J commencing on 7 July 2008.

4. A Further Amended Cross Claim was filed by Hamilton on 2 May 2008. That document contained amendments to the existing cross-claim and it added, in paragraphs 19‑32 inclusive, a claim based on an action for breach of confidence against AMC and Dr Keung respectively. No claim for breach of confidence against AMC had previously been made in the cross-claim and Dr Keung had not previously been a party to the cross-claim. I was told that the claim for breach of confidence came forward as a result of information contained in an affidavit of Dr Keung filed in the proceeding in January 2008 which revealed (so it is alleged by Hamilton) that after the distribution agreement had come to an end AMC and Dr Keung had given confidential information belonging to Hamilton to two third parties they had dealings with, namely, Sphere Healthcare Pty Ltd (“Sphere”) and Tabco Pty Ltd (“Tabco”). That evidence from AMC was apparently directed to its plea of loss and damage and an allegation that in 2007 AMC obtained an alternative supply of products.

5. Hamilton accepted that it did not have the leave of the Court to join Dr Keung as a cross-respondent to its cross-claim. It made an oral application to me for such leave.

6. Whether Dr Keung be “disjoined” as sought in paragraph 2 of the notice of motion or whether Hamilton be given leave to join him raises in effect the same question in the circumstances of this case.

7. I put to one side for the present the no jurisdiction point and the no reasonable cause of action point. It seems to me quite clear that the proceeding against Dr Keung and the relief claimed against him falls within O 6, r 2(a) of the Federal Court Rules having regard to the fact that a similar action for breach of confidence has been brought against AMC. It does not necessarily follow from that conclusion that leave will be granted under O 6, r 2(b) because there may be other reasons to refuse leave, for example, if there are factors such as delay or disruption to the existing proceedings, which would suggest that leave should not be granted. I will deal with factors such as delay and disruption to the existing proceedings when discussing the order sought in paragraph 4.1 of the Notice of Motion; it is sufficient to say at this point that they are not factors for “disjoinder” or refusing leave to join.

8. I turn now to the submission that the claim against Dr Keung is beyond the jurisdiction of this Court and/or that as pleaded it discloses no reasonable cause of action against him. My reasons in this respect will dispose not only of paragraph 2 of the notice of motion but also with paragraph 3.

9. Dr Keung did not pursue the submission that the claim against him is beyond the jurisdiction of this Court. Plainly, in the circumstances of this case it is not (see s 32 Federal Court of Australia Act 1976 (Cth)).

10. Dr Keung did pursue the submission that the claim against him did not disclose a reasonable cause of action.

11. As far as the breach of confidence claim is concerned the salient allegations in the Further Amended Cross Claim are as follows:

    1.In late 1996 or early 1997 Hamilton provided to AMC and Dr Keung information about the production formula for the production of commercial quantities of Urederm (the “Urederm Production Formula”) and the manufacturing method for the production of Urederm (the “Urederm Manufacturing Method”).

    2.The information was provided for a limited purpose, namely, to enable Dr Keung and AMC to arrange the product registration of Urederm in Vietnam which AMC would subsequently hold on Hamilton’s behalf.

    3.AMC and Dr Keung knew, or ought reasonably have known, that the information was provided to them for the limited purpose, was not to be disclosed to third parties other than for the registration purposes and were not to be used for their own benefit.

    4.An aspect of the Urederm product formula and the Urederm Manufacturing Method is confidential information.

    5.AMC and Dr Keung knew, or ought reasonably have known, that the information was provided to them in confidence.

    6.AMC and Dr Keung misused the confidential information by providing it to Sphere and Tabco in October 2006.

    7.AMC has breached the equitable obligation of confidence, or, alternatively, an express obligation of confidence in cl 28 of the Distribution Agreement.

    8.Dr Keung has breached the equitable obligation of confidence as a principal or, alternatively, has knowingly participated in AMC’s breach of confidence.

    9.Hamilton claims an account of profits against AMC and Dr Keung.

12. Counsel for AMC and Dr Keung submitted that the pleadings against Dr Keung were deficient. In the course of oral submissions it was submitted that:

    1.The pleadings failed to plead a claim for breach of confidence against Dr Keung as a principal wrongdoer;

    2.The pleadings failed to plead a claim for breach of confidence against Dr Keung as an accessory because there was no allegation of “dishonesty” against Dr Keung as that term is understood in this area of the law; and

    3.The pleadings were wholly inadequate in that they did not identify what it was that was said to be confidential about the Urederm Production Formula.

13. In its written submissions AMC and Dr Keung submitted (as I understood it) that as pleaded the conduct of Dr Keung was attributed to AMC and that there was no suggestion that he acted in a “personal capacity”. It was submitted that in those circumstances it had not been pleaded that he was liable as a principal. It was further submitted that he could not be liable as an accessory absent a plea of a contravention of the Trade Practices Act 1974 (Cth) and the operation of an accessory section such as s 75B of that Act.

14. The elements of a breach of confidence action in equity are well-established: Corrs Pavey Whiting and Byrne v Collector of Customs (1987) 14 FCR 434; Coco v AN Clark (Engineers) Ltd [1969] RPC 41; Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203.

15. I did not understand counsel for AMC and Dr Keung to pursue an argument that as a matter of law Dr Keung could not be liable as a principal wrongdoer when it is his conduct which Hamilton seeks to attribute to AMC and which is said by Hamilton to be the basis of its claim for breach of confidence against AMC. Despite the limited submissions made to me on this point, I am inclined to think that Dr Keung could be held liable as a principal wrongdoer; it is certainly not possible for me to say that the proposition is unarguable.

16. It seemed the thrust of the submissions advanced by AMC and Dr Keung was that in view of Hamilton’s plea attributing Dr Keung’s conduct to AMC, an allegation that Dr Keung was a primary wrongdoer would need to be made quite clearly and that had not been done. I do not accept that submission. I think the four elements of a breach of confidence claim are pleaded against Dr Keung as a primary wrongdoer (see Corrs Pavey at 443 per Gummow J).

17. As to the further submission made by AMC and Dr Keung (see [13] above), the weight of authority suggests that a third party who knowingly participates in a breach of confidence by another may be held liable (R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4^th ed, 2002) [41-110]).

18. The other matters raised by AMC and Dr Keung – difficulties concerning the pleas as to the confidential nature of the Urederm Production Formula or Dr Keung’s knowing participation in AMC’s breach of confidence – are matters for particulars, not reasons for concluding that the pleadings do not disclose a reasonable cause of action against Dr Keung.

19. In my opinion, the application for the orders sought in paragraphs two and three of the notice of motion should be refused. An order that Hamilton have leave, nunc pro tunc, to join Dr Keung to the within proceeding by cross-claim should be made.

20. I turn now to the order sought in paragraph 4.1 of the notice of motion. This order seeks a separate and later trial of the breach of confidence claim against AMC and Dr Keung. AMC and Dr Keung did not submit that AMC’s claim should be adjourned to a later date. AMC were previously opposed to any adjournment and an oral application by Hamilton for an adjournment of the trial date on 22 April 2008 was opposed by AMC and abandoned by Hamilton shortly after it was made. It is true that there is only a fairly short period between now and the date fixed for the commencement of trial. Hamilton submitted that any delay by it in bringing forward the claim for breach of confidence was due to late discovery by AMC, and that AMC and Dr Keung were given notice of the claim for breach of confidence in late March and April 2008. Those assertions by Hamilton may well be correct but I do not think they are decisive of the present issue.

21. I accept that in the relatively short period between now and the date fixed for the commencement of trial there may be a request for particulars by AMC and Dr Keung, but I have no reason to think that that matter could not be dealt with reasonably quickly. Counsel for AMC and Dr Keung submitted that there would be insufficient time for his clients to obtain expert evidence with respect to issues raised by the breach of confidence claim, and otherwise to prepare their defence to the claim. I have given that submission anxious consideration, but I have concluded that in the absence of clear evidence that AMC and Dr Keung cannot be in a position to meet the breach of confidence claim at trial, on the date presently fixed for its commencement, no special order for the hearing of that claim should be made. The order sought in paragraph 4.1 of the notice of motion is refused.

22. I will hear the parties as to the appropriate orders on the notice of motion.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Associate:

Dated:       3 June 2008

Counsel for the Cross-Claimant/Respondent:	Mr P McNamara QC with Mr T Cox
Solicitor for the Cross-Claimant/Respondent:	Crawford Legal
Counsel for the First Cross-respondent/Applicant and Second Cross-Respondent:	Mr I Robertson with Ms A Barnett
Solicitor for the Cross-Respondent/Applicant and Second Cross-Respondent:	Piper Alderman

Date of Hearing:	30 May 2008
Date of Judgment:	3 June 2008