Pan Pharmaceuticals Ltd (in liq) v Selim
[2008] FCA 416
•2 April 2008
FEDERAL COURT OF AUSTRALIA
Pan Pharmaceuticals Limited (In Liquidation) v Selim [2008] FCA 416
EVIDENCE – expert evidence – opinion rule – admissibility of experts’ reports under section 79 of the Evidence Act 1995 (Cth) – whether evidence is based on specialised knowledge based on training, study or experience – whether the facts and assumptions upon which the opinions are based are adequate – whether evidence is more than a bare ipse dixit
EVIDENCE – general discretion to exclude evidence – section 135 of the Evidence Act 1995 (Cth) – leave to file evidence out of time – whether probative value is substantially outweighed by prejudicial effect – whether admissible opinion evidence is of significant probative value if the facts and assumptions upon which the opinion are based are inadequately detailed in an expert’s report – effect of expert’s involvement in preparation of one party’s case including involvement in drafting of that party’s statement of claim – whether expert is sufficiently independent
Evidence Act 1995 (Cth) ss 79, 80, 135
Therapeutic Goods Act1989 (Cth)Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313
HG v The Queen (1999) 197 CLR 414
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd (2000) 120 FCR 146
R v Tang (2006) 65 NSWLR 681IN THE MATTER OF PAN PHARMACEUTICALS LIMITED (IN LIQUIDATION) & ANOR v JAMES SELIM
NSD 489 OF 2004
EMMETT J
2 APRIL 2008
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 489 OF 2004
IN THE MATTER OF PAN PHARMACEUTICALS LIMITED (IN LIQUIDATION)
BETWEEN:
PAN PHARMACEUTICALS LIMITED
First PlaintiffANTHONY MCGRATH AND CHRISTOPHER HONEY AS LIQUIDATORS FOR PAN PHARMACEUTICALS LIMITED
Second PlaintiffAND:
JAMES SELIM
Defendant
JUDGE:
EMMETT J
DATE OF ORDER:
2 APRIL 2008
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 489 OF 2004
IN THE MATTER OF PAN PHARMACEUTICALS LIMITED (IN LIQUIDATION)
BETWEEN:
PAN PHARMACEUTICALS LIMITED
First PlaintiffANTHONY MCGRATH AND CHRISTOPHER HONEY AS LIQUIDATORS FOR PAN PHARMACEUTICALS LIMITED
Second PlaintiffAND:
JAMES SELIM
Defendant
JUDGE:
EMMETT J
DATE:
2 APRIL 2008
PLACE:
SYDNEY
REASONS FOR JUDGMENT
BACKGROUND
THE LIQUIDATORS’ CASE AGAINST MR SELIM
THE DISPUTED REPORTS
RELEVANT PRINCIPLES AS TO ADMISSIBLITY
THE GMP REPORTMr Williams Training, Study and Experience
Section 2 of the GMP Report
Section 1 of the GMP Report
Sections 3 and 4 of the GMP report
Sections 5, 6 and 7 of the GMP Report
The Deficiencies of the GMP ReportTHE REMEDIATION COSTS REPORT
THE CLARK REPORTDr Clark’s Lack of Objectivity
Dr Clark’s Lack of Specialised KnowledgeCONCLUSION
BACKGROUND
The second plaintiffs, Anthony McGrath and Christopher Honey (the Liquidators), are the liquidators of the first plaintiff, Pan Pharmaceuticals Limited (Pan). The Liquidators have brought this proceeding in the name of Pan and in their capacity as liquidators of Pan. I shall refer to all plaintiffs as the Liquidators.
The defendant, Mr James Selim, was the chief executive officer of Pan. The Liquidators are claiming damages against Mr Selim on the basis that he breached the duties that he owed to Pan as its chief executive officer. More specifically, the Liquidators say that Mr Selim failed to ensure that Pan adopted and applied good manufacturing principles (GMP).
The proceeding has been on foot for some years and it is presently fixed for hearing commencing on 2 June 2008. Questions have arisen concerning the extent to which the Court should permit the Liquidators to rely upon expert evidence concerning aspects of the operations of Pan that are alleged to have resulted in breach of duties by Mr Selim, including opinion evidence under ss 79 and 80 of the Evidence Act 1995 (the Evidence Act). The questions arise in a context where the Liquidators have failed to comply with the Court’s directions in relation to the filing of such evidence.
On 9 June 2006, the Court ordered that, by 1 December 2006, the Liquidators serve, inter alia, all affidavits, both lay and expert, on which they wish to rely. On 16 November 2006, because the Liquidators were unable to comply with that order, the Court ordered that that order be vacated and that, by 31 May 2007, the Liquidators serve all lay affidavits on which they intend to rely and all expert affidavits on which they intend to rely. However, on 12 March 2007, those orders were also vacated and the Court ordered that the Liquidators serve all lay affidavits on which they intend to rely and all expert affidavits on which they intend to rely by 31 May 2007.
The Liquidators failed to comply with the directions of 12 March 2007 so far as they concern expert opinion evidence. No satisfactory explanation has been provided for the failure, other than that the task was more complex and the identification of appropriate experts was more difficult than had been anticipated. It is somewhat surprising that no attempt was made by the Liquidators and their advisers, until well after 31 May 2008, to have the matter relisted for the purpose of proffering some explanation and seeking an extension of time for compliance with the directions.
Notwithstanding that they failed to comply with the directions, the Liquidators indicated at a directions hearing on 25 September 2007 that they wished to rely on three reports (the Disputed Reports), relating to expert evidence, as follows:
·reports of Stephen John Williams dated 3 September 2007 (the GMP Report) and 10 October 2007 (the Remediation Costs Report); and
·a report of Dr Julian Maxwell Clark dated 6 September 2007 (the Clark Report).
The Court ordered the Liquidators to file and serve a motion in relation to variation of the then current orders for filing the Liquidators’ evidence, together with any supporting affidavits on which they wish to rely. The motion and affidavits were to be filed by 3 October 2007 and the motion was initially listed for hearing on 12 October 2007.
In addition, each party was directed to serve on all other parties an outline of the opinion or expert evidence on which that party proposed to rely as follows:
·The Liquidators: by 19 October 2007;
·Mr Selim: by 5 November 2007; and
·All other parties (cross-respondents): by 22 November 2007.
The Liquidators filed an outline pursuant to that direction, explaining the reliance that they wished to place on the Disputed Reports.
The material in the Disputed Reports is voluminous and detailed. Reliance upon the material is vehemently opposed by Mr Selim. Mr Selim, for reasons related to his health, is anxious that the proceeding be heard as soon as reasonably practicable and contends that he would be placed under unfair pressure and stress by having to respond, at this stage, to the material on which the Liquidators now seek to rely. Apart from the failure of the Liquidators to comply with the Court’s directions, Mr Selim also opposes the admission of the Disputed Reports on the bases that much of their contents is irrelevant or of little weight, that they do not satisfy the requirements of s 79 of the Evidence Act for the admission of opinion evidence and that, even if some of the material is otherwise admissible, it should be rejected under s 135 of the Evidence Act. Under s 135, the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing; or
(c) cause or result in undue waste of time.Before examining in detail the content of the Disputed Reports and the bases upon which Mr Selim objects to them, it is desirable to outline the case that the Liquidators seek to establish against Mr Selim
THE LIQUIDATORS’ CASE AGAINST MR SELIM
Pan was a manufacturer of therapeutic goods. By reason of the provisions of the Therapeutic Goods Act 1989 (Cth) (the TG Act), Pan was not permitted to manufacture therapeutic goods unless it was the holder of a licence under the TG Act. Under the TG Act, the Secretary of the Department of Health and Ageing (the Secretary) had power to suspend or revoke a licence if the holder failed to comply with any conditions of the licence.
Pan was the holder of a licence under the TG Act until April 2003. The conditions of that licence included that Pan must observe the requirements of the 1990 Australian Code of Good Manufacturing Practice for Therapeutic Goods – Medicinal Products (the Code) and that the person nominated as having control over quality control measures must maintain such control. The Code included requirements that the quality assurance manager be promptly notified of all departures from the master formulae for products, that the quality assurance or quality control department should participate in the investigation of deviations and that Pan have in place a documented procedure for the review of reports of such deviations, the assessment of whether a significant problem exists and the allocation of tasks for corrective action.
Most of the goods manufactured by Pan were either registered or listed on the Australian Register of Therapeutic Goods (the Register) kept under the TG Act. Such goods had to be manufactured in compliance with the information provided as part of the application for listing or registration. The Secretary had power to cancel the registration or listing of goods on the Register if it appeared to the Secretary that the quality, safety or efficacy of the goods was unacceptable.
On 5 February 2003, the Therapeutic Goods Administration (TGA), which is part of the Department of Health and Ageing, identified a number of alleged critical deficiencies in Pan’s compliance with the Code and, as a result, a delegate of the Secretary imposed a new condition on Pan’s licence, preventing it from manufacturing certain products. Following that, the TGA conducted a broader audit of Pan’s operations, which led to an audit report in April 2003 that identified additional alleged critical deficiencies in Pan’s compliance with the Code. As a result of those reports, and on the recommendation of an expert advisory group appointed by the TGA, Pan’s licence was suspended by a delegate of the Secretary on 28 April 2003.
Mr Selim was the only director of Pan with executive management responsibility and he was involved in various aspects of Pan’s manufacturing operations. Prior to the listing of Pan for quotation on the Australian Securities Exchange (the ASX) in 1999, Mr Selim was aware of serious problems with product quality, compliance with the Code and quality assurance and quality control procedures. He was aware that serious problems of that type continued to occur from the time of Pan’s listing on the ASX up until April 2003.
Paragraphs 69 and 70 of the second further amended statement of claim filed by the Liquidators (the Statement of Claim) assert that a person in the position of Mr Selim would have ensured or, alternatively, would have taken reasonable steps to ensure, that he was regularly and sufficiently informed as to whether or not Pan was acting in compliance with the Code and the conditions of Pan’s licence. The reasonable steps would have included the following action:
·Requiring that Pan’s quality assurance manager provide Mr Selim with written monthly reports detailing various matters.
·Requiring that Pan’s general manager provide Mr Selim with written monthly reports dealing with other specified matters.
·If Mr Selim had delegated any of his powers in relation to Pan’s compliance with the Code and the conditions of its licence to the general manager, requiring that the general manager provide him with such written reports as when necessary to ensure that the general manager was exercising the powers in conformity with the duties alleged in the statement of claim.
·Requiring copies of minutes of regular meetings between managers and from time to time attending such meetings.
Paragraph 72 of the Statement of Claim then asserts that, had Mr Selim ensured that he was regularly and sufficiently informed as to whether or not Pan was acting in compliance with the Code and the conditions of its licence or, alternatively, taken the steps pleaded in paragraph 70, Mr Selim would, by no later than May 2002, have known, inter alia, each of the following matters:
·Pan’s General Manager was regularly authorising that raw materials that failed specification be released for use in manufacturing and that finished products that failed specification be released for sale.
·From time to time Pan’s General Manager was authorising the release of raw materials for use in manufacturing and the release of finished products for sale prior to the completion of all the testing required by the Code.
·From time to time raw materials specified in the registered formulation for a product were substituted for other raw materials.
·From time to time, finished products were released and dispatched without the completion of any or all quality control testing of the raw materials utilised.
·One of Pan’s standard operating procedures (SOPs), dealing with the acceptance of finished products and raw material analytical results which are outside specification, was in breach of a requirement of the Regulations made under the TG Act, requiring that control over quality control measures remain with Pan’s quality assurance manager.
·There was an entrenched practice at Pan of changing formulations of products to enable a satisfactory product to be made.
·Pan’s Validation Master Plan had been implemented only in limited respects.
·The computer controls at Pan were inadequate and there had been no validation of the computer system.
·There were serious deficiencies in the measures employed at Pan to present cross contamination.
·There were significant deviations in the products manufactured by Pan.
·There were instances of poor GMP practices throughout Pan’s operations.
·There was a practice by which the control by Pan’s quality assurance manager over quality control matters was regularly overridden by Dr Brennan, Pan’s general manager.
·There was an inadequate number of staff to carry out all the quality assurance and quality control testing required by the Code.
·Pan did not implement reasonable procedures for the regular audit of its compliance with GMP.
·Pan did not have in place adequate training procedures.
·Pan did not have in place or did not adequately implement certain identified systems, practices, procedures and policies.
·Correspondence between Pan on the one hand and the TGA concerning a proposed validation master plan.
The Liquidators claim that a reasonable person having the same position and responsibilities with Pan as Mr Selim had, in order to fulfil his duties as chief executive officer, was required to take reasonable steps to ensure that:
·Responsibility for and authority over all quality control measures remained at all times with the quality assurance manager;
·Pan at all times employed adequate staff to carry out the testing required by the Code in relation to the products it manufactured;
·Pan implemented reasonable procedures for the internal audit of its compliance with the Code;
·Pan had in place reasonable procedures for the training of its staff;
·Pan had various other systems, procedures, policies and/or practices in place to ensure compliance with the Code;
·Pan adopted a validation master plan in the form proposed by a Mr Humphreys, an external GMP consultant, and had in place such resources as were reasonably required for the purposes of implementing that plan;
·He was regularly and sufficiently informed of whether Pan was complying with the Code and the conditions of its licence.
The Liquidators claim that, in breach of his duties, Mr Selim failed to take reasonable steps to ensure each of those seven matters. The Liquidators say that that alleged breach by Mr Selim of his duties caused the adverse findings in the audits conducted by the TGA, leading to the loss of Pan’s business.
THE DISPUTED REPORTS
The GMP Report begins with an executive summary section, running to four pages, which is followed by a background section, running to five pages. There are then seven sections dealing with each of the seven aspects identified in the instructions and the questions, running to some 88 pages. Thus, the total GMP Report is 97 pages in length, ignoring the table of contents.
The Liquidators seek to rely on the GMP Report in two distinct ways as follows:
·As counterfactual evidence of the recommendations that would have been made to Pan had Mr Selim engaged a quality assurance consultant in May 2002 to conduct a full GMP audit of Pan and commissioned that consultant to prepare a corrective action plan.
·As expert opinion evidence of Pan’s non-compliance with the Code.
The Remediation Costs Report follows on from that first purpose, by providing estimates of the likely costs, as at May 2002, of implementing the corrective action identified in the GMP Report.
The Clark Report itself, without its attachments and annexures, consists of 192 paragraphs running to some 76 pages, ignoring the table of contents. The Clark Report was originally to be relied upon by the Liquidators as being expert evidence as to:
·what a reasonable chief executive officer in the position of Mr Selim would do in relation to particular areas of operation;
·the steps that would be practicable for someone in the position of Mr Selim to take as regards improving Pan’s GMP compliance and quality assurance and control; and
·considerations that would bear on whether taking such steps was warranted or necessary.
The Liquidators now seek to rely only on parts of the Clark Report and to rely on those parts on a much more limited basis, namely, as evidence:
·that the measures identified in the extracted parts were reasonably practicable to implement for a pharmaceutical manufacture in the assumed circumstances of Pan in the period 2000 to 2003; and
·of the considerations that would be relevant to a chief executive officer of a firm in the assumed position of Pan in deciding what measures to adopt.
The Liquidators say that the rejection of the Disputed Reports would be highly prejudicial to their case and that the interests of justice dictate that they be permitted to rely upon them, notwithstanding the very significant and almost contumelious failure to comply with the Court’s orders. Mr Selim responds that the rejection of the Disputed Reports would not be unduly prejudicial to the Liquidators’ case because they are either entirely, or for the most part, inadmissible or, to the extent that they are admissible, they would have so little weight that their rejection would not prejudice the Liquidators’ case to any significant degree.
Mr Selim’s complaints concerning the Disputed Reports may be summarised as follows:
·They do not identify the basis upon which it could be found that the relevant witness has the requisite specialised knowledge for the purposes of s 79 of the Evidence Act: Mr Williams does not give any indication on when he has performed a similar exercise or seen one performed in relation to his opinions; Dr Clark’s credentials and experience are extraordinarily insufficient for the purpose for which he is being put forward.
·They do not establish what it is that the opinions are based on.
·They are not reports based on opinions derived as a result of an explanation of how a defined field of specialised knowledge possessed by the witness, by reason of training, study or experience, and on which the opinion is wholly or substantially based, applies to the facts established or assumed, so as to produce the opinion. Rather, the Disputed Reports are, in many respects, an adoption, without more, of a highly detailed, lengthy set of assumptions, the drafting of which results in their being nothing more than answers to grossly leading questions.
·In the case of the Clark Report, Dr Clark does not possess the necessary and required degree of independence, in so far as his initial retainer was to assist the Liquidators’ legal team to draft the claim against Mr Selim: in undertaking that role, Dr Clark prepared parts of the statement of claim and the schedules to it; further, he provided advice to the Liquidators, in respect of which the Liquidators claim legal professional privilege and which they have declined to provide to Mr Selim or his legal advisors, and Dr Clark incorporated substantial parts of the advice that he gave into the Clark Report.
In order to focus attention on the opinion evidence on which the Liquidators seek to rely, I directed them to prepare a document extracting the opinions in the Disputed Reports in respect of which the Liquidators rely on s 79 of the Evidence Act, identifying for each opinion:
·the reasoning in support of the opinion,
·the specialised knowledge on which the opinion is based ; and
·the training, study or experience on which the specialised knowledge is based.
On 21 December 2007, the Liquidators filed a document in relation to each of the Disputed Reports, extracting opinions on which the Liquidators wish to rely (the Extracts Documents).
RELEVANT PRINCIPLES AS TO ADMISSIBLITY
Four separate functions have been identified as being performed by so called expert witnesses, as follows:
·generalising from experience,
·acting as librarian,
·acting as statistician, and
·acting as advocate.
(See Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313 at 350-352).
A person experienced in a particular discipline may, in the course of a lifetime, accumulate a mass of material about the subject of the person’s expertise, from his or her own practice, from journals, from newspaper reports and from discussion with fellow practitioners, much of which the person may not be able to recall but which enables him or her to express an opinion more accurately than one who has examined only the facts regarding particular instances. Such a witness may base an opinion on his or her experience, without having to prove by admissible evidence all the facts on which the opinion is based. Such witnesses regularly generalise from experience, calling in aid all their training and professional experience in expressing an opinion upon a matter within their field (see Arnotts at 350-1).
In many instances, a witness who has experience in a particular discipline may not himself or herself know the answer to a particular problem from his or her own study or experience. However, being trained in the relevant discipline, the witness may be able to refer to works of authority in which the answer is given. In that sense, the witness may be said to be acting as a librarian. In that function, the witness is not giving evidence of his or her own opinion, except to say that, in his or her opinion, the books to which reference is made are of sufficient standing to be accepted by the Court (see Arnotts at 351.).
The third function of such a witness can be to apply statistical methods to material available from various sources in order to draw relevant conclusions. The statistical expertise and experience of the witness may be brought to bear on material otherwise in evidence (see Arnotts at 351-2).
However, it is not permissible for such a witness to take over the role of advocate, although a witness having expertise in a particular discipline may have a legitimate role of advocacy in that the evidence given by the witness may include arguments as to the conclusions that can be drawn, and perhaps should be drawn, from the facts that the witness is asked to assume. Nevertheless, the extent to which opinion evidence, if so given, will have greater or less weight will depend upon the extent to which the witness furnishes specific detail as to the actual experience of the witness. Even if the witness is not required to prove by admissible evidence all the facts on which an opinion is based, those facts ought to be stated with sufficient specificity to enable them to be tested by cross examination (see Arnotts at 352).
Before opinion evidence will be admissible pursuant to s 79, two prerequisites must be satisfied as follows:
·Specialised knowledge derived from training, study or experience must be identified.
·The opinion sought to be relied upon must be shown to be wholly or substantially based on that specialised knowledge.
Knowledge is “more than subjective belief or unsupported speculation”: it refers to “any body of known facts or any body of ideas inferred from [known] facts or accepted as truth on good grounds” (see R v Tang (2006) 65 NSWLR 681 at 712). Further, under s 80, evidence of an opinion is not inadmissible only because it is about a fact in issue or an alternate issue or about a matter of common knowledge.
The prerequisites contained in s 79 may well have the practical effect of emphasising the need for attention to requirements of form. By directing attention to whether an opinion is wholly or substantially based on specialised knowledge, which is in turn based on training, study or experience, the section will not be satisfied unless the opinion is “presented in the form that makes it possible to answer that question” (HG v The Queen (1999) 197 CLR 414 at 427). The Court must be furnished with the necessary scientific criteria for testing the accuracy of the conclusion.
Opinion evidence must go beyond a bare ipse dixit (Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 745 and R v Tang at 715). Before opinion evidence will be admissible under s 79, the witness must explain how the field of specialised knowledge in which the witness is expert by reason of training, study or experience and on which the opinion is wholly or substantially based applies to the facts assumed or observed so as to produce the opinion given. Unless those two prerequisites are satisfied, the opinion evidence will be of no value to the Court, in the sense that it would be accorded no weight. It should not be left to the cross-examiner to attempt to illicit the facts or assumptions upon which opinions are based. The evidence must demonstrate an identifiable reasoning process against which the conclusions can be tested (Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd (2000) 120 FCR 146 at 151).
In considering the weight of so-called expert evidence, it is necessary to consider two aspects of the evidence. The first aspect is the expertise or experience of the expert. In considering the expertise or knowledge of the expert, it is easy enough to identify disciplines such as the following:
·hard science, such as pathology, chemistry, physics and the like;
·technical or applied science, such as engineering, medicine and the like;
·social sciences, such as economics, anthropology and the like;
In addition, an expert witness may have expertise or special knowledge resulting from particular education or learning, such as in the case of lawyers, medical practitioners and the like, where some technical study or education has been undertaken.
Alternatively, such special knowledge or expertise might be the result of experience, where no particular technical study or education has been undertaken by the witness, such as in the case of managers and the like. Such evidence will often have less weight afforded to it. While it may be admissible as opinion evidence, because of the provisions of ss 79 and 80, the Court may often be in as good a position as the so-called expert to assess such matters if it simply goes to ordinary experience.
The second aspect to be considered in assessing the weight of expert evidence is the nature of the evidence that the expert is to give. An expert witness might give evidence in the following categories, which are non exhaustive:
·opinion evidence as to what actually happened in particular circumstances, on the basis of assumptions that the expert is asked to make, as when a pathologist expresses an opinion about cause of death;
·opinion evidence as to what might be likely to happen in the future, on the basis of assumptions that the expert is asked to make, as when an economist might predict the effect of identified phenomena on a market;
·evidence of what is normally done in particular circumstances experienced by the expert, as when a legal practitioner says what is normally done in a conveyancing transaction ;
·evidence as to what can be done in particular circumstances that the expert is asked to assume, and which the expert has not experienced, as when an engineer says what could have been done to avoid a failure of a particular structure;
·evidence concerning special usage of language or terms in the field of the expert’s expertise, as when a chemist explains special usage of terms that have a different meaning in everyday speech;
·opinion evidence about what should or ought to have been done in particular circumstances that the expert is asked to assume, as when a legal practitioner says what enquiries ought to have been undertaken in a particular transaction, as distinct from what enquiries are ordinarily undertaken;
·opinion evidence as to whether particular conduct that the expert is asked to assume satisfies or falls short of some legal standard, as when a medical practitioner says that a particular procedure was conducted negligently.
Very little, if any weight, should ever be accorded the last category of opinion evidence. It may be admissible by reason of the operation of s 80, however, in so far as it is an opinion by reference to a legal standard, it will be essential, before it can be admissible and certainly before any weight can be afforded to it, that the expert’s understanding of the relevant legal standard be established and be shown to be in accordance with the law.
Thus, an opinion as to whether conduct satisfies or falls short of a particular standard, such as whether particular conduct was in breach of a duty of care entails an examination as to what the expert’s understanding is of the duty of care. Where the so-called opinion is proffered as to whether conduct satisfies or falls short of a statutory requirement, such as the Code, the expert must make clear just what his understanding of the effect of the Code might be. Unless the witness makes perfectly clear what he understands the Code to mean, his evidence as to whether particular conduct satisfies or falls short of it cannot be tested and can have no weight.
THE GMP REPORT
The GMP Report of 3 September 2007 was furnished in response to instructions of 11 May 2007 given to Mr Williams by the Liquidators’ solicitors. The letter of instructions enclosed:
·a list of questions;
·a Statement of Assumptions;
·nine volumes of documents referred to in the Statement of Assumptions;
·the Court’s Guidelines for Expert Witnesses.
The letter of instructions also informed Mr Williams that the Liquidators’ solicitors wished to meet with him before he commenced drafting his report.
Mr Williams was asked to assume that the Code set out the relevant quality principles with what Pan was required to comply. It also informed him that the questions related to aspects of Pan’s operations and quality control that generally correspond with the Liquidators’ allegations concerning Mr Selim’s failure to take reasonable steps, as outlined above.
For each of those seven aspects, Mr Williams was asked to provide his opinion on what he would have advised in a report to Pan had he been retained by Pan as a consultant on GMP, in or about May 2002, and requested to conduct a full GMP audit of Pan and to prepare, in conjunction with Pan’s own quality assurance manager, a plan of corrective action to ensure the compliance of Pan’s practices and procedures with the Code and the conditions of Pan’s licence. He was also asked to provide an explanation as to what matters he would take into account in giving that opinion and the reasons for that opinion, together with his opinion and reasons on whether a number of particular actions specified by the solicitors in the questions should have been taken.
The questions in relation to each matter were in a similar form. Each matter was the subject of two questions. The first question was as follows:
Would your report have included recommendations regarding measures relating to [the relevant matter]? If so:
(a) identify the steps that you would have recommended be taken; and
(b) explain why those steps would have been recommended.
Thus, the attention of Mr Williams was drawn expressly to the question of whether, in providing such a report to Pan, he would have included recommendations regarding measures relating to each of the seven aspects that are the subject of the Liquidators’ complaint in the Statement of Claim. That of itself has the consequence that the Court does not have the benefit of Mr Williams untutored evidence as to what such a hypothetical report from him would have included. One of the very significant questions that will fall for decision by the Court was thus pre-empted, namely, whether, if such a hypothetical report had been sought by Mr Selim at the relevant time, any of the seven aspects complained of would have been the subject of such a report.
That difficulty is exacerbated by the form of the second question in relation to each of the seven matters. The form of the second question in relation to each aspect was as follows:
If the answer to [the previous question] is affirmative, please indicate (giving reasons) whether the steps you would have recommended be taken would have included any action in relation to any of the matters set out below:
[here followed references to the very specific particulars set out in the Statement of Claim in relation to the relevant matter]
In answering the above question with reference to each of the particular matters ...
·If in your opinion an action would have been taken, please describe that action and the reasons for it.
·If in your opinion no action would have been taken, please explain why.
Thus, the attention of Mr Williams was drawn specifically to the matters particularised by the Liquidators as being breaches by Mr Selim of his duties as chief executive officer. Accordingly, the Court would not have the benefit of Mr Williams’s untutored evidence as to whether in his hypothetical report, Mr Williams would have had regard to those specific questions.
Attached to the Statement of Assumptions was a schedule listing relevant officers and employees of Pan and another schedule containing a glossary of terms used in the Statement of Assumptions. The assumptions that Mr Williams was invited to make for the purposes of his opinion went through several versions. The version attached to the GMP Report is dated 27 August 2007 and runs to 49 pages.
The Statement of Assumptions is a detailed statement of facts relating to Pan and its operations containing the kind of detail that it would be necessary for the Court to include in its findings in the course of its reasons for judgment. The Statement of Assumptions also contains legal propositions concerning Pan’s regulatory environment, statements concerning Pan’s contractual arrangements with parties with whom Pan had entered into written supply agreements and statements concerning Pan’s potential liability to consumers under the Trade Practices Act 1974 (Cth).
The Statement of Assumptions contains material under the following further rubrics:
·Overview of the structure of operations of Pan;
·The office held by [Mr] Selim and [Mr] Selim’s responsibilities within Pan;
·Audits, GMP meetings and reports on quality assurance [at Pan];
·Other sources of knowledge concerning quality assurance [at Pan].
Throughout the Statement of Assumptions there are references to the nine volumes of documents provided by the solicitors to Mr Williams with the letter of instructions. The GMP Report itself also cross-refers to both the Statement of Assumptions and the nine volumes of other documents.
In the section of the GMP Report entitled “Background to the Report” Mr Williams defined the following terms:
(a)Critical deficiency: A deficiency that has produced, or may result in a significant risk of producing, a product which is harmful to the user.
(b)Major deficiency: A non-critical deficiency [that]:
·… has produced or may produce a product which does not comply with its marketing authorisation … ; and/or
·indicates a major deviation from [the Code]; and/or
·indicates a major deviation from the terms of the manufacturing licence … ; and/or
·indicates a failure to carry out satisfactory procedures for release or batches; and/or
·indicates a failure of the person responsible for QA/QC to fulfil his/her duties; and/or
·consists of several other deficiencies, none of which on its own may be major, but which may together represent a major deficiency and should be explained and reported as such.
(c)Other deficiency:
·A deficiency, which cannot be classified as either critical or major, that indicates a departure from good manufacturing practice.
·A deficiency may be “other” either because it is judged as minor, or because there is insufficient information to classify it as major or critical.
·One-off minor lapses or less significant issues are usually not formally reported, but are brought to the attention of the manufacturer.
Mr Williams asserted that his definitions are consistent with definitions of the TGA in place in May 2002. He does not refer to any TGA material in support of that assertion.
Having regard to the detail of the material placed before Mr Williams and the detail contained in the GMP Report itself, the analysis of the GMP Report, and the testing of the opinions contained in it, many of which will be contested by Mr Selim, would occupy a very considerable amount of Court time as well as judicial time out of Court. I do not propose to deal exhaustively with the whole of the GMP Report. However, in order to explain the nature of the evidence and the deficiencies in the material, I shall say something about the various sections of the GMP Report. Since particular attention was focussed on Section 2, I shall begin with Section 2 as exemplifying the GMP Report and its deficiencies. However, before dealing with the detail of the GMP Report, I shall say something about Mr Williams expertise and experience.
Mr Williams Training, Study and Experience
A detailed curriculum vitae of Mr Williams was annexed to the GMP Report. That shows that Mr Williams has been employed in the pharmaceutical industry since 1971. During that period he held line management positions in quality assurance, quality control, production and packaging in Australian based multinationals such as CSL Limited and Faulding (Mayne Pharma and now Hospira). During the period, Mr Williams prepared for and hosted a number of GNP audits including audits from sponsors, the TGA, the United Kingdom’s Medicines and Health Care Regulatory Authority and the United States’ Federal Drug Agency (FDA).
In his role as a quality assurance manager in industry, Mr Williams has overseen and been responsible for the following areas:
·compliance with the Code;
·quality assurance programs development and administration;
·facility and process validation;
·quality control testing laboratories; and
·GMP training programs.
Since 1989, Mr Williams has been a full time professional consultant in GMP and quality assurance within the pharmaceutical industry. In that role he has generally been required to conduct the following analyses and project roles for clients:
·assessing GMP compliance for a range of codes, including the Code;
·preparing clients for regulatory audits;
·assisting clients in responding to TGA and FDA deficiencies; and
·preparing remediation programs to bring clients into compliance.
In the area of compliance training as a consultant, Mr Williams has had the following experience in the past 18 years:
·developing multiple training packages for industry and clients in the areas of quality assurance, GMP, validation and good auditing practices;
·analysing client compliance training programs; and
·developing training programs and conducting training programs in GMP, validation and quality assurance.
Mr Williams says that he has consulted to a range of companies including:
·MediHerb,
·Golden Glow,
·Parke Davis,
·Pharmaction/Probiotec, and
·Herron Pharmaceuticals.
He says that his contact with those companies was in fields directly related to quality assurance, GMP compliance, training and validation.
Following Mr Selim’s complaints, the Liquidators filed an affidavit, affirmed by Mr Williams on 29 November 2007, in which Mr Williams expanded on:
·his experience as a consultant in relation to GMP;
·the standards that he applied in making the observations and recommendations set out in the GMP Report;
·the standards that were applied by other consultants who offered GMP consultancy services; and
·the standards of GMP compliance of pharmaceutical and manufacturing companies.
In the affidavit, Mr Williams also answered a series of further questions posed to him by the Liquidators’ solicitors.
Mr Williams said that he has been a fulltime consultant, specialising in providing advice and training in relation to GMP since 1989. About 75% of his work involved consulting to manufacturing companies within Australia. The balance involved consulting to manufacturing companies in South East Asia.
During the period of twelve years prior to May 2002, Mr Williams provided services of the following types:
·Advice on GMP compliance, validation and quality assurance, entailing the provision of professional services and advice to clients regarding compliance with various codes of GMP in relation to improving compliance with such codes, strengthening quality assurance systems and implementing validation programs.
·Developing and delivering GMP, good laboratory practices, quality assurance and validation training packages, for prescription, over the counter and complimentary manufacturers.
During the period from 1990 up to May 2002, Mr Williams provided consultancy or auditing services to approximately twenty clients that manufactured complimentary medicines and over the counter products, including:
·MediHerb, a manufacture of complimentary medicines with a staff of around 20 to 30 people and a range of over 100 products.
·Golden Glow, a manufacturer of complimentary medicines with a staff of around 30 to 40 and a range of in excess of 100 products.
·Parke-Davis, a manufacturer of over the counter and prescription products with in excess of 250 staff and a product range well in excess of 150 products.
·Probiotech, formerly PharmAction, a contract manufacturer of prescription, over the counter and complimentary medicines with in excess of 80 staff manufacturing in excess of 150 products.
·Herron Pharmaceuticals, a manufacturer of complimentary medicines and over the counter products with in excess of 150 staff and a product range in excess of 250 products.
In the period up to May 2002, Mr Williams was engaged, either by himself or with another consultant, on around 15 occasions to carry out a full GMP audit and recommend any corrective action. Those occasions related to one or other of the above clients, other than Probiotech.
During the period from 1989 onwards, Mr Williams has worked for SeerPharma Pty Ltd (SeerPharma) and its predecessor, Pharma Systems International (PSI) Pty Ltd. As at May 2002, SeerPharma had active projects for around 30 to 40 companies to whom consultancy services regarding GMP validation training on quality systems were being provided on a continuing or ad-hoc basis. Mr Williams had direct experience with approximately 20 to 25% of those projects.
Mr Williams said that there is extensive discussion between the GMP consultants in relation to the projects on which they are working, which involves a discussion in relation to the nature of manufacturing practices and operations. In the two years up to May 2002, Mr Williams had direct or indirect experience, as I have described, with more than 30 manufacturing companies. Over the five year period to May 2002, he had direct or indirect experience with more than 100 manufacturing companies.
Mr Williams was cross examined on his affidavit of 29 November 2007. In particular, he was asked about the statements made in paragraph 49 of the GMP Report. He said that, before he formed and expressed that opinion, he turned his mind to an industry survey that he was asked to carry out by Bristol-Myers on their quality assurance and quality control levels. He surveyed three other companies and compared them to Bristol-Myers. The other three companies that he surveyed were Sigma, Parke-Davis and Pfizer. Mr Williams also said that his consulting experience at Herron, Parke-Davis and PharmAction and his experience when he was a quality assurance manager and a quality control manager were matters to which he turned his mind when considering staffing levels. Mr Williams said that he turned his mind to the staff levels in the quality assurance department in each of Herron Pharmaceuticals, Parke-Davis, PharmAction and Sigma.
Section 2 of the GMP Report
Section 2 of the GMP Report deals with “Quality Assurance And Quality Control Staffing Levels”. The questions put to Mr Williams in relation to that aspect were as follows:
3.Would your report have included recommendations regarding measures relating to staffing levels in the quality control department? If so:
(a)identify the steps that you would have recommended be taken; and
(b)explain why those steps would have been recommended.
4.If the answer to question 3 is affirmative, please indicate (giving reasons) whether the steps you would have recommended be taken would have included any action in relation to any of the matters set out below:
(a)Any mechanisms by which Selim would be kept informed as to whether Pan was employing adequate members of staff to carry out the testing required by the GMP Code (eg by reports, meeting or minutes).
(b)Employing mechanisms such as “key ratio” systems.
(c)Any investigating or reporting obligations that were appropriate for Mr Elia [Quality Assurance Manager] in relation to the adequacy of Pan’s quality control resources.
(d)The number of staff to be employed for testing raw materials, process controls, finished products, stability and validation.
(e)Actions upon identifying any deficiency in the number of staff.
In answering the above question with reference to each of the particular matters (a) to (e):
·If in your opinion an action would have been taken, please describe that action and the reasons for it.
·If in your opinion no action would have been taken, please explain why.
Section 2 of the GMP Report begins as follows:
Paragraph 48: My report would have included recommendations regarding measures relating to staffing levels in the quality control department.
Paragraph 49: With respect to the staffing levels within the Quality Assurance area and Quality Control laboratories I would advise that the QA and QC groups were significantly understaffed for the rate of new products being introduced, and the number of raw materials/finished products being tested each month. The basis for my opinion is primarily the range of activities required under the [Code], the large production/testing throughput and the large volume of existing products having to be maintained compared to the low number of staff employed within the QA/QC departments and in comparison to industry norms.
The GMP Report then sets out recommendations as follows:
Paragraph 49.1: … An external consultancy should conduct a full analysis of the resource requirements for both the QA department and the QC testing laboratory, matched to the volume of new products being introduced and the number of batches of raw materials and finished products being tested and maintained …
Paragraph 49.2: … The external consultancy should establish key ratios … for the resource loads and Pan management should use these ratios for future QA/QC budgeting purposes …
Paragraph 49.3: … The QA Manager should re-introduce monthly reporting by the QA Manager to the General Manager and ensure that those monthly reports include key ratio metrics on such items as testing throughput, backlogs, constraints and resource requirements. …
Paragraph 49.4: … In the event that the laboratory and/or the QA Manager could not meet their requirements the General Manager should confer with the CEO in regard to provision of more permanent staff, a pool of contract staff or out-sourcing work to qualified contract testing laboratories. …
Clearly enough, the recommendations made by Mr Williams are in response to the specific matters referred to in Question 4.
The GMP Report then proceeds to say why those steps would have been recommended. He says that, in relation to the staffing levels within the quality assurance and quality control laboratories, he had the following concerns:
Paragraph 50.1: There is no formal system for assessing or matching resource levels to the workloads in the QA and QC departments. …
Paragraph 50.2: In relation to laboratory staffing levels the number of staff in my opinion was inadequate for the required workload …
Paragraph 50.3: In relation to quality assurance staffing levels have I two concerns regarding the effective functioning of the Quality Assurance Department, based on its resource levels:
(a)in my opinion there are insufficient QA staff to adequately complete the expected responsibilities of the department …
(b)The introduction of new products regularly, and the resources required for maintenance of existing products, would make it extremely difficult, in my opinion, to effectively maintain the products in compliance with the [Code] and registration obligations …
Section 2 ends with the observation that the matter of staffing levels was “rated a major deficiency” because the resource levels for the Quality Assurance Department (the QA Department) and the Quality Control laboratory (the QC Laboratory) were not matched to the resource requirements and therefore did not comply with cll 302 and 802 of the Code. Mr Williams quoted extracts from cll 302 and 802, which relevantly require that key personnel should be “adequate in number” and that provision for the management of quality should include “an adequately staffed laboratory”. However, no criteria for adequacy are stated in the Code.
In the Extracts Document for the GMP Report, the Liquidators set out the opinions of Mr Williams that they seek to have admitted pursuant to s 79 of the Evidence Act. In relation to Section 2 of the GMP Report, the first opinion is the following statement in the GMP Report:
Paragraph 50.1(c): Based on the information I have reviewed there is no key ratio reporting system for the laboratory so, in my opinion, it would be very difficult for the General Manager or CEO to be assured that the staffing levels were governed properly to the volume of work. Since QA and QC activities are often seen as an operating overhead it is important to have metrics in place to justify resource levels.
There appear to be two statements of opinion in that extract as follows:
·It would be very difficult for the general manager or chief executive officer to be assured that the staffing levels were properly governed by the volume of work; and
·It is important to have metrics in place to justify resource levels.
The balance of the extract appears to be part of the reasoning leading to those opinions.
The Extracts Document endeavours to explain Mr Williams’ reasoning as follows:
·The Code requires quality assurance and quality control staffing to be adequate;
·At least a certain number of tests must be conducted on each batch of products and, at most, a certain number of batches can be tested by any one analyst in any one day, so that the main factor in terms of adequacy of staff is volume of production.
·Examples of key ratios include the following:
§number of tests required and completed per analyst per week;
§average labour hours required and expended per test;
§backlog tracking;
§number of quality assurance staff per product/annum;
·Mr Williams has not seen any such system in the material provided to him in relation to Pan;
·It would therefore be difficult to ensure that “staffing levels were governed properly to the volume of work”.
In one sense, the first opinion leads nowhere. The Liquidators did not put forward the statement contained in para 49, which is set out above, as an opinion of Mr Williams upon which they would rely. That statement was that the quality assurance and quality control groups were significantly understaffed for the rate of new products being introduced and the number of raw materials/finished products being tested each month. The present absence of key ratios is simply a mechanism whereby one determines the adequacy of staff level.
The second opinion in the Extracts Documents from Section 2 of the GMP Report is the following:
Paragraphs 50.2 and 50.2(b):
In relation to laboratory staffing levels the number of staff in my opinion was inadequate for the required workload. In my opinion both the QA and the QC staffing levels were well below industry norms, even allowing for a mix of complementary and registered medicines.
Different reasoning is advanced in relation to quality assurance staffing levels, on the one hand, and quality control staffing levels, on the other hand.
As regards quality control staffing levels, the reasoning is said to be as follows:
·The normal functions of a QC Laboratory include a number of activities.
·According to the Statement of Assumptions, the number of employees in quality control, which means a combination of quality assurance and quality control staff, was fourteen as at December 2001.
·According to the Statement of Assumptions, the laboratory needed to test somewhere between 1,100 and 1,700 batches per month.
·As a minimum, no less than five tests would normally be conducted on any batch on average and, accordingly, a reasonable estimate of the number of tests would be around 7,000 per month.
·On the assumption that there were approximately eight laboratory staff, every analyst had to test up to 200 lots per month or up to ten per day: if each lot or batch required five tests, that amounted to 50 tests per day or 6 per hour.
·The staff levels in the laboratory must have been grossly inadequate to handle the testing volume required: in running laboratories analysts generally manage at best three to four batches per day.
·Therefore, key personnel responsible for managing and supervising manufacture, quality assurance and quality control were not adequate in number.
The only question of opinion that is contained in the reasoning and the conclusion is the assertion that analysts generally manage at best three to four batches per day. Mr Williams asserts that conclusion is based on studies that he has previously conducted relating to laboratory staffing loads and on his experience. However, he does not identify in the GMP Report those studies or the particular experience that gives rise to that opinion.
As regards quality assurance staffing levels, the reasoning appears to be as follows:
·Pan had a quality assurance staff of no more than three people, including the quality assurance manager.
·According to cl 805 of the Code, the QA Department is responsible for a number of separate tasks.
·Pan had a library of over 4,000 products, each of which required quality assurance approvals, oversight and maintenance of product related documents.
·It is usual for a QA Department with a large portfolio of products to have subordinate managers for:
(i)master batch records and specifications maintenance,
(ii)compliance and internal auditing,
(iii)complaints management,
(iv)change control/validation oversight,
(v)failure investigations, deviations and corrective actions, and
(vi)release for supply offices plus clerical and technical assistance.
·The QA Department would need somewhere between seven to ten staff to manage and maintain the product portfolio effectively.
·The introduction of a new product, even if it is a variation of an existing product, required at least some twelve separate steps.
·It would take two to three full time quality assurance staff just to manage the documentation associated with that activity.
·Given the number of subordinate managers required to deal with the activities referred to above and the number of staff required to deal with the activity connected with the introduction of a new product, the staffing levels of the QA Department were inadequate.
The gravamen of the reasoning is that Pan needed a group of subordinate managers. No specific or concrete examples are given of the use of such managers by companies comparable to Pan. The assertion is not susceptible of testing.
The third opinion in the Extracts Document from Section 2 of the GMP Report is as follows:
Paragraphs 50.2(e) and (h):
…as a minimum no less than about five tests would normally be conducted on any batch on average; analysts generally manage a best [three to four] batches per day.
The Liquidators say that that opinion is based on studies conducted by Mr Williams in relation to staffing loads and on his experience. However, as I have already said, the studies and the particular experience are not identified in the GMP Report.
The Liquidators assert that Mr Williams’ opinion concerning the number of tests that would normally be conducted and the number of batches that could be managed by an analyst per day is based on Mr Williams’ specialised knowledge of such matters. They say that such knowledge is based on his experience in working in and running laboratories and in preparing resource budgets, his experience in consulting to companies in relation to their laboratory operations and a specific study he has conducted of four pharmaceutical manufacturers, which involved assessing their level of staffing relative to their level of production.
The GMP Report says that it is normal industry practice for functional departments, such as the QA Department and the QC Laboratory, to report formally to a general manager on a regular basis, usually monthly. In a subsequent affidavit, Mr Williams says that, in his experience, around eighty percent of manufacturing companies have such a practice in place. However, he does not identify any such company.
The GMP Report also states that the level of staff in Pan’s QA Department and its QC Laboratory was below “industry norms” and that high numbers of staff were required to cope with the volume of tests and the documentation that needed to be maintained. However, the GMP Report says nothing of the so called industry norms. In his later affidavit Mr Williams says that that:
I formed this opinion based on my experience as a manager of QA/QC departments where I was required to prepare resource budgets, based on my experience in reviewing the operations of QA/QC departments as part of consulting with a number of manufacturers of complementary medicines and [over-the-counter] products, such as Herron Pharmaceuticals and Pharmaction, and based on a survey conducted by SeerPharma of [three to four] manufacturers in 2004 to ascertain their levels of staffing relative to their level of production.
Significantly, the results of the survey were not produced and the manufacturers were not identified.
The next opinion extracted from the Section 2 of the GMP Report is as follows:
Paragraph 50.3(a): …there are insufficient QA staff to adequately complete the expected responsibilities of the department … the number of QA staff resourced to [the responsibilities of the QA department under cl 805 of the Code] was inadequate. ... It is usual for a QA department with a large portfolio of products to have sub-ordinate managers for:
(i)master batch records and specifications maintenance;
(ii)compliance and internal auditing;
(iii)complaints management;
(iv)change controls/validation oversight;
(v)failure investigations, deviations and corrective actions; and
(vi)release for supply officers plus clerical and technical assistants.
My best estimate, based on my experience in running and consulting to QA departments, is that the QA department would need somewhere between [seven to ten] staff to effectively manage and maintain the product portfolio.
The Liquidators also seek to rely upon the affidavit of Dr Clark affirmed on 6 December 2007. In that affidavit, Dr Clark responded to a series of questions posed by the Liquidators’ solicitors. In particular, paragraphs 48 to 55 of the affidavit contain Dr Clarks response to a request to “identify the range of general considerations that a reasonably competent and careful CEO (or equivalent responsible senior executive) would take into account, when making decisions regarding GMP and Quality Issues” (my emphasis). In addition, the Liquidators seek to rely on paragraphs 57 to 62 of Dr Clark’s affidavit as evidence of the fact that senior executives of specific companies identified in the affidavit adopted the practices and procedures identified in the paragraphs at the relevant time.
Paragraphs 56 to 62 of Dr Clark’s affidavit purport to respond to a question in the following terms:
In your First Report, you describe steps which a Reasonable Officer would have taken on the Assumptions in relation to various areas of operation. With respect to each step identified below, do you have any basis for expressing a view as to the extent (if at all) the step was consistent with generally observed standards or practices (as at May 2002) amongst CEOs of pharmaceutical manufacturing companies:
(i)The Reasonable Officer should require the QA Manager to report to the Reasonable Officer regularly in writing (Report, paragraph 26);
(ii)The Reasonable Officer must ensure that that there is a clear operational and management distinction between manufacturing, marketing and quality assurance (Report, paragraph 31);
(iii)The Reasonable Officer should ensure that all senior managers follow the directives and decisions of the QA Manager, and any disagreement with the QA Manager’s decisions must be taken up in discussion with the Reasonable Officer together with the QA Manager (Report, paragraph 38);
(iv)The Reasonable Officer would require that the QA Manager held regular QA meetings with senior management, typically monthly (Report, paragraph 52);
(v)The Reasonable Officer would have reporting mechanisms in place, such as headcount key ratios, so that resource constraints could be identified, communicated, prioritised and addressed (Report, paragraph 53);
(vi)The Reasonable Officer would insist that the QC laboratory and batch records specifically were audited more than once a year and such audits would be unannounced (Report, paragraph 73);
(vii)The Reasonable Officer would ensure follow-up of internal audits, making sure that corrective actions have been taken and there is an improvement plan in place to remedy deficiencies (Report, paragraph 75);
(viii)The Reasonable Officer would ensure that there was a written GMP training program in place, and would require regular reporting on the training program (Report, paragraphs 98-99); and
(ix)The Reasonable Officer, faced with the information available to Mr Selim as at May 2002, would have engaged an external consultant to conduct a full GMP audit of the company, and to develop with the QA manager a plan for corrective action (Report, paragraph 181).
For example, paragraph 56 is as follows:
I adopted the measures set out in paragraphs (i)-(viii) above at both the Salisbury and Mulgrave manufacturing plants during my time as head of the Development and Operations Unit of Faulding. I am aware that my predecessor in the equivalent role at Faulding… also adopted those practices prior to my appointment.
The material contained in the affidavit of 6 December 2007 should not be admitted. It is no more than bald assertion by Dr Clark. It would have been possible for him to give evidence about what he actually observed in the particular companies to which he refers in his affidavit. Rather, the question to which paragraphs 56 to 62 are a response to pick up the language of the Clark Report.
Thus, the first two steps identified in the question are:
(i)The reasonable officer should require the QA manager to report to the reasonable officer regularly in writing;
(ii)The reasonable officer must ensure that there is a clear operational and management distinction between manufacturing, marketing and quality assurance.
Dr Clark’s response, the bald assertion that he adopted the measures set out in those paragraphs, has no real weight at all.
In relation to paragraphs 56 to 62 of Dr Clark’s affidavit of 6 December 2007, Mr Selim makes the following complaints:
·The assertions about the measures he adopted at Faulding are conclusionary in form.
·There is no evidence of what in fact occurred and the assertions are general as to be incapable of being tested.
·As to at least two of the eight matters that he says he adopted at Faulding, he cannot confirm whether they were maintained at Faulding after he left.
·As to half of the matters, he cannot say whether they were in place at Cenovis and Golden Glow, which were acquired by Faulding.
·Dr Clark accepts that he was never in fact faced with a situation involving information that he was asked to assume was faced by Mr Selim.
·To the extent that Dr Clark says that he engaged consultants to prepare a GMP audit, he has produced no evidence of the form that the audit took.
·Significantly, Dr Clark concedes that he was not in a position to observe whether chief executive officers of pharmaceutical companies outside the Faulding group observed any of the practices to which he refers and the matters were never raised in discussions with other chief executive officers.
Thus, Mr Selim says, Dr Clark’s evidence is mere conclusory assertion, incapable of being tested, about practices that were in place in Faulding up to 1999 and in part in place in two companies acquired by Faulding. Such evidence does not establish any industry norm or standard. There is great substance and merit in those complaints, which would be bases for rejection of the affidavit.
I do not regard Dr Clark’s report or his affidavit of 6 December 2007 as having any significant evidentiary weight on the limited basis upon which the Liquidators seek to have the material admitted. In order to test the assertions made by Dr Clark, it would be necessary for Mr Selim’s counsel to spend an inordinate time in cross-examining Dr Clark as to the specific matters about which he makes broad generalisations. That is both unfair for Mr Selim and a substantial waste of time and costs, particularly in circumstances where the Clark Report was produced some four months and the affidavit some six months after the time fixed by the Court for the filing of expert evidence.
CONCLUSION
To the extent that the Disputed Reports contain admissible evidence, they should be accorded very little, if any, weight. On the other hand, the admission of the Disputed Reports at this stage would be unfairly prejudicial to Mr Selim. In addition, substantial judicial and court time, involving substantial cost, would be occupied by the examination of the content of the Disputed Reports. Accordingly, in circumstances where the Liquidators failed to comply with the Court’s explicit directions, I do not propose to admit the Disputed Reports, although I may, at an appropriate time, to a limited extent, admit them as submissions.
I certify that the preceding one hundred and one-hundred and seventy-one (171) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 2 April 2008
Counsel for the Plaintiffs: Mr J Sheahan SC, Mr H Stowe, Mr S Nixon Solicitor for the Plaintiffs: Blake Dawson Counsel for the Defendant: Mr J Gleeson SC, Mr P Kulevski, Mr J A Watson Solicitor for the Defendant: McLachlan Thorpe Partners Counsel for the Commonwealth: Mr R J Webb SC, Mr D Brogan Solicitor for the Commonwealth: Australian Government Solicitor Dates of Hearing: 5, 6, 7, 10 and 11 December 2007 Date of Last Submission: 7 February 2008 Date of Judgment: 2 April 2008
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