Smith Kline & French Laboratories (Australia) Limited v The Secretary to the Department of Community Services and Health; v The Secretary to the Department of Community Services and Health

[1991] HCATrans 235

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S43 of 1991

B e t w e e n -

SMITH KLINE & FRENCH
LABORATORIES (AUSTRALIA)
LIMITED A.C.N. 0071580;
SMITH KLINE & FRENCH
LABORATORIES LIMITED;
SMITHKLINE BEECHAM CORPORATION;
LABORATOIRE SMITH KLINE &
FRENCH SA and SMITH KLINE

DAUELSBERG GmbH

Applicants

and

THE SECRETARY TO THE DEPARTMENT

OF COMMUNITY SERVICES AND

HEALTH

Respondent

Office of the Registry

Sydney No S44 of 1991

B e t w e e n -

SMITH KLINE & FRENCH
LABORATORIES (AUSTRALIA)
LIMITED A.C.N. 0071580;
SMITH KLINE & FRENCH
LABORATORIES LIMITED;
SMITHKLINE BEECHAM CORPORATION;
LABORATOIRE SMITH KLINE &

FRENCH SA and SMITH KLINE

DAUELSBERG GmbH

Applicants

and

THE SECRETARY TO THE

DEPARTMENT OF COMMUNITY SERVICES AND HEALTH and ALPHAPHARM PTY LIMITED

Respondents

Applications for special leave

to appeal

Smith Kline(4) 1 30/8/91

BRENNAN J
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 30 AUGUST 1991, AT 10.02 AM

Copyright in the High Court of Australia

MR R.J. ELLICOTT, QC: If the Court pleases, I appear with

MR M.R.J. ELLICOTT for the applicant in each of those matters. (instructed by Minter Ellison)

MR D.K. CATTERNS:  May it please the Court, I appear for the

Secretary who is the respondent in the first matter and the first respondent in the second matter.

(instructed by the Australian Government Solicitor)

MR J.J.J. GARNSEY, QC:  May it please the Court, I appear

with MR R.W. DUNSTAN, for Alphapharm Pty Limited,

the second respondent in first proceedings.

(instructed by Mallesons Stephen Jaques)

BRENNAN J: Yes, Mr Ellicott.

MR ELLICOTT:  Your Honours, these applications for special

leave raise two matters of substantial public

importance: one is, what is the obligation of

government in circumstances where confidential

other is, whether a law entitling government to use	information is supplied to government, and the
information is an acquisition of property and otherwise than on just terms. So neither of those matters has been the subject of real consideration
by this Court. There has been consideration of the use of information of the government, where the
government has been the plaintiff, as Your Honours
will know. On the other hand, the use of
information by the government in cases where the
government is the defendant, have not really come
to this Court before. So it is a very important
issue in the light of questions of privacy. The
question of the use of information is particularly important in this day, having regard to proposals, for instance, to establish data banks and emphasis

Smith Kline(4) 2 30/8/91

on the word "banks"; also for the use of
information of customers of banks by government;
needless to say, in some circumstances that may be
dealt with by statute, but this case raises the

question, what those obligations are - - -

GAUDRON J: Is that right or does it really raise the

question of what is the precise nature of the

confidentiality that attaches to the information in

this case?

MR ELLICOTT: Well, it does do that, Your Honour, but it

must reflect on other cases where information is

given to government and there is no statutory

provision that says that the government is entitled

to use the information, because the Court can only

look at the issue case by case; it is not going to

get a broad question to look at, but the question

which arises here is clearly, in our submission,

broad enough to be a matter of public importance.

Now, the questions in other areas obviously

will depend on their own facts, but the principles

which have to be applied have not been elucidated

by this Court as yet. The extent to which the

principles of confidential information; the

equitable principles of confidence; any issue of

estoppel for instance; those are not matters that

have been considered by this Court in relation to

this type of information.

BRENNAN J: But there is no broad question of how government

may use information, is there? It is only a

question of whether there is anything to prevent

government from using information?

MR ELLICOTT:  One would never obtain such a question. It

will only come up in individual cases and this is a

case in which it comes up in circumstances where

there is no statutory requirement or compulsion

that enables the government to just use the

information.

BRENNAN J:  No, I think we are at cross purposes. What I

was putting to you is that there was no problem

here which can be identified as a problem of

whether government can use information; the problem

here is whether there is anything to prevent

government from using information.

MR ELLICOTT:  Oh yes. I agree with that, Your Honour.

BRENNAN J:  And does that not take you back to

Justice Gaudron's question then?

MR ELLICOTT: It is really the limits within which

information can be used by government.

Smith Kline(4) 3 30/8/91

BRENNAN J:  To which this information can be used.

MR ELLICOTT: This information, but it will inevitably

reflect on other cases where information is given

to government. It will be a precedent. It will

analyse those issues and it will consider the

relevant principles to apply. So that when

information is given to government in other areas,

for all I know, for instance, in relation to

primary products or other matters, the relevant

issues, the extent to which implications might be

made as to the use of material, will be assisted by

the considerations in this case.

So that it does raise, in our submission, a

very important question.

GAUDRON J:	What is the matter of principle to which you would subscribe, Mr Ellicott?
MR ELLICOTT:	The matter of principle to which we subscribe

is simply this, that when information is given to

government for a specific purpose, that is one

principle.	It should not be used for any other
purpose.

GAUDRON J: But you have got findings of fact against you as

to that.

MR ELLICOTT:  I will come to those, Your Honour. The other

principle is that where information is given to

government there are implications, and one

implication is that it will not be used by the

government, unless there is a clear situation to

the contrary, unless there is agreement or some

statutory provision, it will not be used by the

government to benefit third parties.

GAUDRON J: Is this a limitation on the powers of government

regardless of the intention, express or implied, of

the person providing the information?

MR ELLICOTT: It will always arise out of the circumstances

in which the information is given because we are
not dealing with a statutory situation; we are
dealing with an ordinary factual situation where

information is given to government.

Can I just refer Your Honours to what was said

by Lord Reid in Conway v Rimmer. If I can hand up

at the same time references to another case, the

case of Marcel v Commissioner of Police.

Your Honours are very familiar with Conway v

Rimmer. The relevant dictum is found in

(1968) AC 845 at page 946 where His Lordship said:

Smith Kline ( 4) 4 30/8/91

In Williams v. Star Newspapers Co Ltd

the Hone Office successfully objected to the

production of a report regarding a post-mortem

examination by Sir T. Stevenson, but

apparently did not object to his giving

evidence as to what he had found; and the same

course was taken by the War Office in Anthony

v Anthony. No doubt if a report contains more

than a statement of the facts there may be

reasons at least for withholding that part

which ought not to be disclosed, but I fail to

see what public interest is served by

permitting evidence to be given but

withholding the contemporary report of the

witness about the facts. If it is really

against the public interest that the facts

should be disclosed then it may be proper to

prevent the witness from giving any evidence

about them -

And then he goes on:

In re Joseph Hargreaves Ltd the Inland

Revenue objected to producing documents

submitted to them in connection with income

tax. That seems to me to have nothing to do

with candour.

And he makes this statement:

If the state insists on a man disclosing his

private affairs for a particular purpose it

requires a very strong case to justify that

disclosure being used for other purposes.

That is a statement, I would submit, of

considerable importance for citizens dealing with

government.

In Marcel v Commissioner of Police, (1991)

1 All ER 845, that particular dictum was referred

to by the Vice-Chancellor Browne-Wilkinson at
page 853.	He says:

I was not referred to any case in which

it has been held that a public authority

which has obtained information or documents

under compulsory powers has been held to come under a duty of confidence enforceable by the person who has been required to produce such

documents or information. But in principle I

can see no legal reason why such duty should

not arise. As I have said, the existence of

the duty does not depend on contract but can

arise from the relationship between the

parties and the circumstances of the

communication. If a public authority is given

Smith Kline(4) 30/8/91

compulsory powers to obtain information or

documents for a limited purpose only and the
carrying out of that purpose does not require

the communication of such information to third

parties, in my judgment the duty not to use

such information or documents by communicating

to third parties is inherent in the

relationship between the parties.

Although there is no authority

establishing the existence of a private right

of confidence in such cases, there are cases

which support the existence of such a right.

Then he goes on to refer to the dictum from

Lord Reid's judgment in Conway v Rimmer. Now, it

is true to say that this specific case is relating

to disclosure to third parties.	Now, can I just
indicate how we would use it in this case.	There

is no debate here that the information, the Bl

data, was given in confidence. That is not in
debate. It is confidential information. Nor is

there any debate that it would be a breach of that

confidence to disclose it to third parties. One of

the issues that was considered below was whether

the information could be used in applications made

by third parties and we argued that it could not be

so used.

Another question which arose was whether there

was any in between situation. By that I simply

means this: could the information be used in

relation to the protection of public health and
safety but nevertheless not be used in order to be

to the commercial advantage of a third party.

Now, saying that I have to distinguish between

things and indicate some facts. In relation to the

question of detriment, Mr Justice Gummow said that

he was satisfied there would be detriment to us,

because if the information was used by the

department in the course of determining the

application by Alphapharm, then that could result

in Alphapharm obtaining a better product. Now

there was no dispute below that the purpose of not

giving it to a third party was because it could be

to their commercial advantage and to our clients,

commercial disadvantage.

So, what has happened is that the trial judge

has held that we could suffer a detriment because
the information, when used, could result in our

competitor getting an advantage, that is an

improved or better product.

DEANE J:  How would that happen without disclosing - - -

Smith Kline(4) 6 30/8/91

MR ELLICOTT: Well, the way in which it would happen would

be this: if our information is used, and of course

the Bl data that is referred to is extremely

valuable information; it is what satisfies the

department, to a large degree, that our product was

safe, but it involves trials and all sorts of

things. Now, that information may indicate that a

particular element of a product needs to be there in order to protect the public. That element may

be perhaps a substance, I do not know, or it may be

some limitation of impurities, for instance. Now

it does not seem to have been in debate that the

information that we supplied, the Bl data, if used

in the Alphapharm application, could result in a

benefit; that is a better product, because they

would say to them, using the information, not
telling them, but saying to them, well, from that

Bl data we know that it is unwise for the

impurities to be greater than, let us say, 2 per

cent. And they would simply say to them, your

impurities are 4 per cent, we notice; now you

reduce them to 2 per cent and that will satisfy our

requirements.

Now, in order to do that, they have relied on

our information. Had they not had that

information, had they not used it, who knows what
they would have done; they may have allowed it with
the 4 per cent impurities, but the fact is, that by
having 2 per cent in the hypothetical example, the

applicant not only gets the benefit of the

Department allowing the application on that

particular issue, but also has an improved product,

because its impurities are at 2 per cent.

GAUDRON J: There is a difficulty with that though, is there

not; that detriment is also the public benefit?

MR ELLICOTT: Well, not really. It is a commercial

advantage to the competitor. Now unless private

rights are going to be thrown out the window, then

the question of whether public benefit or private

right are to be balanced in some particular way in

an instance like that, is clearly a matter of

principle that this Court ought to look at.

DEANE J:  Where did Mr Justice Gummow say that, Mr Ellicott?

MR ELLICOTT: About detriment, Your Honour?

DEANE J: About effectively disclosing information obtained

from your product.	The heading "Detriment" is at
page 93.

MR ELLICOTT: Yes, Your Honour, that is the passage. Is

Your Honour looking at the appeal book or the -

Smith Kline(4) 30/8/91

DEANE J:  I am looking at the only thing I have got. The

application book, yes.

MR ELLICOTT:  A slip of the tongue, "appeal book",

Your Honour. Yes, Your Honour. On page 95 he

says:

In any event, I would have accepted as

sufficient "detriment" the apprehended

prejudice to Smith Kline & French from the

presence on the market of a rival (and

cheaper) cimetidine product, the evaluation of

which may have reached a higher standard by
the apprehended use of the innovator Bl data
in the manner foreshadowed by the Department's

witnesses.

Now that, we would submit, is - - -

DEANE J: That does not say much to me, I must confess.

MR ELLICOTT: Well, it says a lot, Your Honour.

DEANE J:	I obviously - - -
MR ELLICOTT:	It potentially says a lot. Now if we go to

page 33.

DEANE J: What my question was directed to is, where does

His Honour effectively say that it is all right for them to disclose something like your hypothetical

case, that you have got impurities of 4 per cent;

we insist on 2 per cent, because that is safer when

MR ELLICOTT:  Page 33, I would suggest, Your Honour. He

says at line 5:

The practice of having regard in this way

to the Bl data of the innovator is based upon

a concern with quality, safety and efficacy of

the generic product. There may be reason to	suspect an error in the Bl generic data or a
fault with the product, such that it is useful to compare the innovator's information.

That is the Bl data that the Alphapharm has to put

in -

Thus, if an impurity were observed in the

generic product to significant levels, it

would be appropriate for the evaluator to

check whether this was detected in the
innovator product. If it were known that the

innovator product caused a particular form of

adverse reaction, the evaluator would be bound

to ensure that the question was covered in the

Smith Kline(4) 30/8/91

submission on the generic product. There will

be many occasions where recourse to the

innovator data leads to nothing. There will

be some occasions where it will lead to some

action, and on a small number of occasions it

will lead to very important action.

In this sense, comparisons between the

innovator and generic data generally work to
the detriment of the generic applicant, by

making rougher rather than smoother the path

to the grant of marketing approval.

But the word there is "generally".

There is no suggestion that at the stage

reached by the Department with evaluation of

the Alphapharm Bl data ..... it already had been

necessary to have regard to the

Smith Kline & French Bl data. The point put

is that if henceforth regard may not be had to

the innovator data, there is a risk of an

inadequate evaluation in a field where one

would expect as little margin for error and

omission as circumstances allowed.

So, in saying that, His Honour is indicating - and

that is the basis of his later finding on

detriment - he is saying that our information could

be used to improve a product. He says generally it

works to their disadvantage. Well it may be a

disadvantage that you have to, say, reduce the
impurities, but it is also an advantage

commercially, because you get a better product.

Now, what we are really saying is this, that if

information is given in these circumstances and if

it is conceded that it is confidential information

and that it shall not be given to a third party,

there is likewise an obligation not to use it for

the commercial benefit of a third party.

DEANE J: But what if there were two applications being

processed contemporaneously and one was obviously a

lot more effective than the other, could not the

Department say to the other, "Well if we were back

in the 19th century, that would be a very good
product to be marketing, but in current

circumstances, we think there is a much better

product available, and we are simply not going to

licence you with this."

MR ELLICOTT: Well that posits a use of the information, but

we are not saying that the information - on this

argument, we are not saying that the information

cannot be used by the Department in the interests
of public safety and security; we are not saying

that. What we are saying is that, if its use gives

Smith Kline(4) 9 30/8/91

a commercial advantage to a third party, then it

shall not be used so as to confer on them that

benefit, but that the public interest is satisfied,

under the regulations, by looking at their
application and not using our information for the

purposes of improving their product.

DEANE J: Well, all I was trying to direct my question to

is, it seems to me there is a gap between what I

put to you and the Department saying to the other product, "We think there is a much better product

and if you want to get a licence, you better add

some iodine and some potassium permanganate and so

on, because we have seen, from our experience, that

makes a better product." If this case is the
second case, I can see the force of what you are

saying.

MR ELLICOTT: Well this is the second case.

MR ELLICOTT: This is the second case.

DEANE J: Well now, I have not seen anything in what you

have shown that indicates a threat by the

Department to disclose to whoever is the other

product - the thing that begins with "a" - the

content of your information.

MR ELLICOTT: Well, it is implicit in what they say they can

do that they are threatening that if the

circumstances arise, they will do just that.

DEANE J: There is somewhere where they have said, they will

not only say to the other person, "You cannot have

a licence", but that they will also say to him,

"You cannot have a licence, because" and in the

"because" communicates some of your confidential

information.

MR ELLICOTT: Yes, that is implicit. They will not say to

him, "Oh because Smith Kline & French Bl data

discloses so-and-so", but what they will do is say,

"because of such-and-such and such-and-such" and

then that "such-and-such", in fact, is derived from

the Smith Kline information. There is no doubt

that the Department - and that is fundamentally

what this case is about - regards itself as free to

use Smith Kline's information for the purposes of

communicating it, not as Smith Kline's information

as such, but for using it to say to the other

applicant, "Well, if you want to get this, you had better do that." But the other applicant does not

know that it is Smith Kline's information, but the

fact is that by using it, it is to their commercial

advantage. Now that is implicit in what the

Department is saying it can do. It says, "There is

no restraint". That is what the case is about. No

Smith Kline(4) 10 30/8/91

restraint whatsoever, other than non-disclosure to

a third party; that is, non-disclosure directly to

them, saying "Well, this is the information we got

from Smith Kline & French", just that simple case.

They do not deny that the - - -

DEANE J: Well, to take the extreme, does the Department say

it is entitled to say to the third party, "We

reject your application for a licence and if you

want a licence in this field, you will need to

modify the product so that it has got the following
components" and then give them Smith Kline's

components, but not identifying them as Smith

Kline?

MR ELLICOTT: Yes.

DEANE J: Well, what is the clearest statement of that,

because I have not appreciated that when I read the

documents in the application book?

MR ELLICOTT:  Your Honour, that is implicit at page 33.

There is not a shadow of a doubt that that is what

they are claiming to do.

GAUDRON J: But page 33 is only about evaluation; it is

nothing to do with communication to the Alphapharm

people.

MR ELLICOTT: Yes, but the whole system is based on

evaluation; that is how these things happen.

DEANE J:  I mean, what I first put to you was that if they

go to evaluate Alphapharm's product and they say,

"Oh, for heaven's sake, this is a sham when you

compare it to Smith Kline's product; it has not got

a,b,c or d"; that is one thing, but that to my mind
is miles apart from what I was putting to you and

that is, if they then go and say to Alphapharm,

"You cannot have a licence, but add elements a,b,c

and d, and your product will be brought up to

standard and you can have a licence."

MR ELLICOTT: Yes, well that is what they are saying they

can do.

DEANE J: Well, that is not on page 33. It may be in the

evidence, Mr Ellicott.

MR ELLICOTT:  Your Honour, can I take you back to page 27 at

line 10:

The Secretary's position is that the

Department should be at liberty, in accordance

with its usual practice in such cases, to
consult and have regard to the SK&F Bl data

for the purpose of the Secretary discharging

Smith Kline(4) 11 30/8/91

the Bl data of the SK&F applicants was furnished to the Department on the footing

his functions under the Regulations with

respect to the Alphapharm application. The

that it would not be disclosed to third

parties, in particular competitors of SK&F,

without SK&F's consent. Further, the evidence

shows that the Secretary and his Department

have regarded such disclosure to third parties

as something forbidden, absent extraordinary

and urgent considerations of public safety.

The SK&F applicants sought to test the worth of such assurances by reference to various matters, none of which threw doubt upon those assurances.

In the past, there may have been

inadvertent passing on to generic applicants

of information derived from innovator Bl data

and in other cases it might have been possible

for a generic applicant to deduce the cause of

inquiry to it by the Department as lying in

some particular information drawn from

innovator data held by the Department.

However, there is no threat of disclosure to third parties made out in the present case.

Now, that is disclosure direct.

It is true that provision is made in the

Regulations for the giving of reasons for

certain decisions.

DEANE J: Well, I read that sentence as saying, this is not

a case of the kind we were referring to.

MR ELLICOTT:

In the past, there may have been

inadvertent passing on to generic applicants

of information derived from innovator Bl data and in other cases it might have been

inadvertent -

possible for a generic applicant to deduce the

cause of inquiry to it by the Department as

lying in some particular information drawn

from innovator data held by the Department.

However, there is no threat of disclosure to third parties made out in the present case.

Now, that third parties, that is a reference back

to page 27 line 18.

Smith Kline(4) 12 30/8/91

BRENNAN J:  Mr Ellicott, in the way in which you have been

answering His Honour you put it that the

information would be disclosed, as it were, by way

of giving reasons for the refusal of the licence

and the last two sentences in that paragraph on

page 28 deal expressly with that matter, the first

paragraph on page 28:

But care would be taken to avoid disclosure of

innovator data to another party. In any
event, in my view, any disclosure that did
take place would be in discharge of the

functions provided for in the Regulations -

MR ELLICOTT: Yes. But that is not saying that the

information itself - that is that impurities ought to be no more than 2 per cent - that is not saying

that that is not communicated.

BRENNAN J: But if the reasons given for the decision were,

"Your application is refused because impurities

exceed 2 per cent", the inference from that that

Alphapharm might draw is that the Smith Kline

product, which has been approved, has impurities of

2 per cent or lower.	Now, that would be the
relevant communication.

MR ELLICOTT: That could be one way of doing it. They may

have no -

BRENNAN J:  What other way is possible in the state of the findings? What other way are you able to establish

MR ELLICOTT: Simply by using it; simply by saying, "Now,

let us have a look at this application." Before I

answer Your Honour, does Your Honour mind if I just

read the next couple of pages. It is just that I

would like Your Honours to understand the

evaluation system and what happens and it is

described.

The Drug Evaluation Branch, in the

discharge of its functions, engages on a
contractual basis outside experts, styled
"external evaluators", to assess NDF4 data.
But the practice is to take from those persons

a written undertaking to treat on a

confidential basis material with which they

are supplied or to which they are given

access. The degree of use of external

evaluators is largely dependent upon the

availability of the Department's own

evaluators from time to time.

The Drug Evaluation Branch relies also

upon the Australian Drug Evaluation Committee

Smith Kline(4) 13 30/8/91

("ADEC"). ADEC is established pursuant to

reg. 19 of the Therapeutic Goods Regulations

and comprises persons who are eminent medical practitioners or pharmacologists. ADEC meets

five or six times a year. It is not given any
function by the Regulations to advise the

Secretary with regard to NDF4 applications.

It is given (by reg. SG) a central role in

advising the Minister in "appeals" against

decisions by the Secretary. However, ADEC's

functions as set out in reg. 19 of the

Therapeutic Goods Regulations include the

making of medical and scientific evaluations

of goods for therapeutic use, if, in the opinion of ADEC, it is desirable that it

should do so. In recent years, evaluations of

NDF4 applications, whether for innovator or

generic products, have been presented to ADEC

by the Drug Evaluation Branch. In a practical

sense, ADEC has become the ultimate decision

making body for drug marketing applications.

It was not suggested that any obligation of

confidence owed by the Secretary and officers

of his Department ..... was not also binding

upon ADEC.

Now, one other aspect is regulation SF, if I

may just take Your Honours to that, which is found

at page 85. It says:

Where the Secretary of the Department of

Community Services and Health or an authorised

person -

(a) .....

(b) refuses a person permission .....

( C) • ., • •

(d) .....

(e)	Refuses a licensed importer who has
applied for approval to dispose of a designated therapeutic substance -

that is in (e) and that is this case, as I

understand it, or (f), then:

the Secretary of the Department ..... shall
furnish to the person or licensed importer, as
the case may be, a statement, in writing,
setting out his reasons for the refusal or

revocation, as the case may be.

At page 87, at line 11, Mr Justice Gurnrnow said:

The Regulations thus contemplate that the

written reasons given by the Secretary may

deal with material upon which the Secretary

has acted, not being simply data provided by

the applicant pursuant to a request by the

Smith Kline(4) 14 30/8/91

Secretary under regs. SB or SE. Further, whilst ADEC is given by reg. SG a vital part in the procedure for appeals to the Minister

and may request the person who applied for

permission to import a designated therapeutic

substance ..... to furnish it with relevant

information, it is not suggested that in
furnishing the advice to the Minister, ADEC is
limited to consideration of that information

or information earlier supplied to the

Secretary. And the involvement of a highly

skilled body such as ADEC is indicative of the

concern in the Regulations with questions of

quality, safety and efficacy of therapeutic

substances.

Now, it is quite clear, according to

His Honour's finding, that therefore, in the course

of giving his reasons, the information as such
could be disclosed, and he would say, the reason is

that I have information that so-and-so and

so-and so, and they would be entitled to know that
information under the regulations. That is what

those regulations are purporting to say.

BRENNAN J:	Why do they purport to say - that is reasons should be, "I have information that" as distinct
from, "Your product does not measure up to the
following standard"?

MR ELLICOTT: Because, His Honour says that they contemplate

that the written reasons given may deal with

material upon which the Secretary has acted.

BRENNAN J: Quite.

MR ELLICOTT:  And that material would include information or

could include, it would not necessarily include,

but could include information which was Bl data

supplied by, in this case, Smith Kline & French.

Now, what - - -

BRENNAN J:	How do you reconcile that proposition with the findings to which I drew your attention on page 28
line 8?
MR ELLICOTT:	Your Honour, first of all, the statement:
But care would be taken to avoid disclosure of innovator data to another party.

That just would not happen in the given

circumstances.	Care would not be taken, because
presumably it would be disclosed.	It would be

disclosed as information; not as information that

came from Smith Kline & French, and in the second

sentence where he says:

Smith Kline(4) 15 30/8/91

any disclosure that did take place would be in discharge of the functions provided for in the

Regulations and be justifiable on that ground. Well, in our submission, if the information is

given with a limitation on its use, then it would

not have to be disclosed and we are seeking to draw

the line at a point where he cannot disclose the

information.

GAUDRON J: But you have to go back further, do you not, to

avoid that paragraph; you have to say, they cannot

make use of the information for themselves, without

any disclosure at all.	I mean, quite apart from
disclosure.

MR ELLICOTT:  No, it is sufficient for us to say that they

cannot make use of the information for the benefit

of a third party; they just cannot do it.

GAUDRON J: Well, in this case, they cannot make use of it

for the purposes of evaluating Alphapharm's

application.

MR ELLICOTT: If that gives them a commercial advantage.

GAUDRON J: Well is there a finding to that effect really?

MR ELLICOTT: Well it is implicit in what I have read, that

the Department is claiming the right and if the

Court does not accept this, it will not be

accepting a fundamental part of this litigation,

":hat the -

GAUDRON J: But, is it not hypothetical? I mean, are we not

at the stage where it cannot be any more than

hypothesis whether Alphapharm is going to get a

better product if your Bl data is used in its

evaluation?

MR ELLICOTT:  Your Honour, it is always hypothetical, in one

sense. That is to say, one cannot know, with

confidential information - this is a problem, this

is why the equity court intervenes before it is

used - because the damage that may occur is not

we are trying to prevent the use of the information for the benefit of a third party. We are not trying to say the information - - -

assessable and therefore the court will intervene proceedings;

at the point before the use of the information.

DEANE J: But that straddles the question; I mean, just

reading the judgments, I had thought the sort of

thing involved in this case was whether the

Department could look at Alphapharm's thing and

say, "Oh, this is the same as the product we

Smith Kline(4) 16 30/8/91

evaluated 12 months ago, which we found to be OK.

That being so we can give this a licence." Well

now that obviously would benefit Alphapharm in that

it would be processed more quickly, but the other

side of that is, should the Department be required

to go through a useless procedure for the second

time to do what it has already done, because- it

cannot observe the fact that it is the same product

it has evaluated before.	Now that is one
situation.	The other situation is the one I have

been asking you about, because I did not appreciate

it was involved in the case, and that is that there

is a suggestion that the Department is in effect

entitled to say to Alphapharm, "We refuse you a

licence because your product is unsatisfactory and

to make it satisfactory you have got to add iodine,

a,b,c and d, in these percentages.

MR ELLICOTT: Yes, that is involved in these proceedings.

That is, at the end of the day, the real issue in these proceedings.

DEANE J:  It seems to me the Full Court at least, and on my

reading of Justice Gummow's judgment, did not

apprehend that that was the issue in the case.

MR ELLICOTT:  Your Honour, it is implicit in the passage at

page 33.

DEANE J:  I have read that three times. There is not

much - - -

MR ELLICOTT:  He says it will generally work to the

detriment of the generic applicant.	And when he
says later on at page - - -

DEANE J: Is there anything in the Full Court judgment about

this?

MR ELLICOTT: They add very little, Your Honour; if

anything, it detracts from the matter. They seem

to become more concerned about whether the

information was confidential. But when he says:

I would have accepted as sufficient

"detriment" the apprehended prejudice to SK&F

from the presence on the market of a

rival ..... product, the evaluation of which may

have reached a higher standard by the

apprehended use of the innovator Bl data in the manner foreshadowed by the Department's witnesses.

Now, that cannot mean anything other than that they said that they could use the information in such a

way that it would lead to the product reaching a higher standard. Now, they may not say, "Unless

Smith Kline(4) 17 30/8/91

you increase this or that, or put this or that in

it, we will reject the application.", they may say,

"We have evaluated this and we are not prepared to

register it now, but if it contains such-and-such

and such-and-such or its percentage of impurities

is such-and-such" - and that is a use of the Smith

Kline & French information - well, obviously if

those are things which this applicant can do, the

result is that the evaluation of it:

may have reached a higher standard by the

apprehended use of the innovator Bl data in the manner foreshadowed by the Department's witnesses.

BRENNAN J:  Mr Ellicott, is there any finding that there will be any communicat between the Department

and Alphapharm otherwis than pursuant to

regulation SF and for the purposes of

regulation SF?

MR ELLICOTT:  The threat is that there could be such use.

You see, Your Honour, the application is actually

in fact, as Your Honour knows, being evaluated. It

is being evaluated now by an evaluator and that

evaluator, as Your Honour learned, from our

previous application, has got information inside
him about it, and the question arises as to whether

he will use it or not use it, as the case may be,

in his evaluation. Nobody knows because the report

has not yet been received and no doubt we will not

see it.

DEANE J:  Do you want to stop him using it? Putting aside

all question of communicating anything, is your

case that he is not entitled to use it?

MR ELLICOTT:  Our case is that the Department ultimately is

not entitled to use it, and if his use of it involves the use, the offending use, but the

Department is not entitled to use it to give them

an approval if its use gives them a commercial

advantage.

DEANE J:  Does that mean that your case is that if the

Department looks at it and says, "This is as good
or better than Smith Kline's, and we have evaluated
Smith Kline's and given it a licence.", the

Department is in breach of some obligation to your client?

MR ELLICOTT: If it involves a use of that information to

improve their product - - -

DEANE J:  No, that is not what I asked you. I said, if the

Department looks at it and says, "This product is

as good or better than Smith Kline's, and therefore

Smith Kline(4) 18 30/8/91

we will give Alphapharm a licence.", thereby giving Alphapharm a licence a bit sooner, but says nothing

at all to Alphapharm about Smith Kline - it will

not have to say anything, is your case that that is

wrong, in breach of your client's rights, or -

MR ELLICOTT:  Your Honour, our case below was that that was

wrong, but - - -

DEANE J: That was what I had understood the case below was

about.

MR ELLICOTT:  The case below was also about the question

whether there was some point at which information

would be used for the commercial advantage.

DEANE J:  What I put to you, the information would be being

used.

MR ELLICOTT:  It would in one sense, but it would not be

used to further the - in other words, it would be
used - and we would say under the argument that we

did put below that its use was outside the purpose

for which it was communicated - but that on a

secondary basis, that if there was some public

safety reason why it could be used by the

Department, then the Department can.use it for that

purpose, that is to say, "No, we will not grant it
because you do not have this.", but they cannot

say, "If it has this and this in it, then we will

let it through", this and this coming from our

information.

Now, that was also involved in the debate

below and that is the area where neither

Mr Justice Gummow - and it comes under whether they

ought to have known, really, that is the area of

debate and what the relationship was between the

parties - it comes under particularly that area,

not so much what was known about the obligation of

confidence but what they ought to have assumed or
ought to have known.	We say that they ought to

have known that to use it in those circumstances, that is to use it for the commercial advantage of

another party, that was offensive to the

relationship of confidence, that was involved, and

if we be wrong in our first submission, then so be

it.

But on the second we submit that that is the

critical line that we are clearly entitled to draw

and the court below did not draw it.	Now, can I
just - - -

GAUDRON J: Could I ask this, Mr Ellicott. When you come to

your second point, could that happen, other than

pursuant to regulation SF?

Smith Kline(4) 19 30/8/91

MR ELLICOTT:  I am sorry, Your Honour, I do not - - -

GAUDRON J: Could your second situation of which you

complain, that is, giving to Alphapharm of some

information, could it happen other than pursuant to

SF?

MR ELLICOTT:  No, it could happen before that.

BRENNAN J: Very well, have you any finding - - -

MR ELLICOTT:	And we are trying to stop it from happening.
BRENNAN J:	- - - that there is any possibility of a

communication of the information derived from your

Bl data to Alphapharm, otherwise than pursuant to

regulation SF?

MR ELLICOTT: Yes, Your Honour -

BRENNAN J: Where do we find it?

MR ELLICOTT:  - - - and it is implicit in what I have read

at page 95; it is implicit in that; it is what they

are saying.

BRENNAN J: Well, I find it inconsistent with the explicit

finding on page 28. Perhaps you can tell me why it

is not?

MR ELLICOTT: Well, that is not necessarily against us.

BRENNAN J: That if the finding is that "care would be taken

to avoid disclosure of innovator data to another

party", that seems to me to run in the teeth of the

proposition that there was a risk of communication,

otherwise than under SF of your Bl data to

Alphapharm.

MR ELLICOTT: Yes, he is saying there, any disclosure would

be in discharge of the functions.	Now, he is
talking about disclosure of the information,

apparently, that he relied upon. That is to say,

he would be disclosing that this information came

from Smith Kline & French. Now, I am not talking,

with respect, about that; I am talking about - and I think, with respect, Mr Justice Deane has put to
me what my client is concerned about - and that is

that the information, without naming it as

Smith Kline information, is indeed used to evaluate

the other product and if it is used, then, not just the broad statement, "Oh well, Smith Kline & French have got a satisfactory product", but a statement

that says, "There have been other products and they

have been satisfactory and yours is not", but a

statement that says, relying on what has been seen

in the document that we provided, the innovator

Smith Kline(4) 20 30/8/91

data, "Put your iodine in or put this in or put

that in or keep your impurities down to so-and-so"

relying on that information, that is making use of
our information, and when it comes to the
regulation stage, it has to be revealed that that

is our information. We were not able to stop it.

But in any event, the damage is already done,

because they have a better product, to their

commercial advantage, than they would have had if

our information should not be used.

BRENNAN J:  Mr Ellicott, I might say that for myself I am

endeavouring to keep separate what I understand

your submissions would conflate: one thing is the

use by the Department in reaching a decision; the

second is the communication by the Department of

any information, however described, to Alphapharm.

MR ELLICOTT: Yes.

BRENNAN J:  Now, thus far, there seem to me to be two

questions: one, is the Department entitled to use

it internally for the purpose of evaluating the

Alphapharm application, assuming for this purpose

that there is no communication to Alphapharm; the

second question is that if they do so use it, and

then subsequently communicate something to

Alphapharm resulting from their evaluation, is

there any finding of fact that there is any
possibility of the communication of your Bl data

otherwise than in discharge of the statutory

obligation under regulation SF?

MR ELLICOTT: Yes.

BRENNAN J:  Now those two questions - - -

MR ELLICOTT: There is and what is said at page 28 is not in

conflict with what is said at page 95. If it is,

well, it is something that this Court ought to

consider, if it is going to turn on such a matter,

but it is implicit in saying: 

the evaluation of which may have reached a

higher standard by the apprehended use of the
innovator Bl data in the manner foreshadowed

by the Department's witnesses -

it is implicit in that that the witnesses have said

that they feel free to use the information by

communicating it, if you like, or using it, to

evaluate the Alphapharm application and thereby

result in a higher standard product or a commercial

advantage. That has to be implicit in it, because

it is not communicated as Smith Kline & French

information as such, but it is taken from their

data and it is used to say to the Alphapharm people

Smith Kline(4) 21 30/8/91

at a stage, do this or do that, with a result -

they do not say this - but the result would be that

there would be a product of a higher standard.

GAUDRON J: But Mr Ellicott, that is not what it says. It

says "the evaluation ..... may have reached a higher

standard". It does not say that the product may

have reached a higher standard.

MR ELLICOTT: Well, the product reaches a higher standard if

the evaluation results in a higher standard. In

other words, if the evaluation uses the information

and says - perhaps the answer to what Your Honour

is putting to me is that, with respect, the word

"evaluation" there is talking about a process; it
is not talking about the report, for instance, that

the evaluator gives to the Department and that then

apparently goes to ADEC. It is talking about the

evaluation process, and that evaluation process can

involve the communication of information which

comes from the Smith Kline & French information and

results in a higher standard product. That is what

is meant by "the evaluation of which may have

reached a higher standard". In other words, at the

moment of approval it is a better product than it

was when the application was put in.

That is what the Department is claiming to do.

That is what this is about and the ultimate

point - I mean, if the Department is not going to

do that, they will tell Your Honours, but that is

implicit in what they have threatened that they are

able to do. They say that short of disclosing this

information to third parties in the ordinary sense of writing to them and giving them the information

and saying, "This is what Smith Kline and French

told us", they say they can use it in the course of

the performance of their duties.

The Full Court, we would submit, has made an

extraordinary statement in relation to that. If

Your Honours go to the foot of page 153: The test of confider's purpose will not

ordinarily be inappropriate where each party's

interest is quite different, and known to be

so. Here, the confider's purpose is simple

and narrow, the confidee's much broader.

Well, that in itself is hardly a reason for

accepting that it is not given for a limited

purpose but, neverthelesst

SK&F had only the purpose of having its

applications approved.

Smith Kline(4) 22

That is not exactly what Mr Justice Gummow found

but that does not matter:

A person supplying confidential information to

the government for the purpose of obtaining a licence (or a permission or concession) would

ordinarily assume that the government would

not destroy the application file after the
confider had attained his purpose. The
confider would probably expect that the

information would be kept against the day when

it might be needed to serve the government's

legitimate interests: for example, to provide a record in case the decision is challenged as

improper; to enable statistical information to

be collected; or, acting directly against the

interests of the confider, to compare the

information supplied with the confider's

subsequent performance, in determining whether

to cancel the licence.

Now, if the words "government's legitimate

interests" mean that they can do precisely what

they like with it consistent with the government's

broad duties, for instance, to collect information,

well that surely, we would submit, is too broad.

He does go on to refer to Heinemann's case but that

was a case where - Mr Justice McHugh was in it in

the Court of Appeal - the government was the

plaintiff and not the defendant and the statement

made there, which Their Honours are seeking to use

against us, is actually in a different setting. It

is the case where the government is trying to stop

others from using its information and saying,

"Well, the position of the government is different

than the private citizen", but where there is a

relationship between the private citizen and the

government and the private citizen is providing the
information, well at that point we submit that the
ordinary principles of equity in relation to the

supply of confidential information are applicable

and that you cannot stop, as these judgments do, at

simply limiting the obligation - and this is

another way of putting our case - there is no doubt
that the judgment from which we are appealing and
the judgment of Mr Justice Gummow have said that
the only restriction is that they would not

disclose it to third parties.

There is obviously a point of difference

between that and what we are putting to the Court,

and what we are putting to the Court was never, in

our submission, properly dealt with by the court

below. Can I give Your Honours an instance of

where some attempt was made to deal with it? At

page 132 at about line 8:

Smith Kline(4) 23 30/8/91

As amended, the SK&F application sought

certain declarations and, as well, injunctions

restraining the respondent from using certain

confidential information for any purpose other

than the exercise of statutory powers in

relation to versions of cimetidine submitted

by SK&F. The application also sought an order

for delivery up and destruction of the

relevant documents. During the course of the

hearing in this Court, it was pointed out that

evidence adduced below on behalf of the

appellants made it clear that, in some

circumstances, use of the information the

subject of these proceedings otherwise than

within the limits sought to be imposed would

be essential - a matter of life and death.

After some discussion, counsel for the appellants put forward, without abandoning the

application made below, an alternative version

of the relief sought. This was as follows.

The injunction sought was - and this was put up to

indicate a middle situation that was different to

that which we had put and it was our indication of

how far one could go. It said:

except where

1) an officer of the Department has, at the

time of such dealing, use or application,

decided that, subject to checking that nothing

in the Bl data causes it to reconsider its
decision, permission to import or dispose of

the Generic Brand for certain purposes would

be granted on certain conditions, and

2) the Bl data is used only for the purpose of
deciding whether giving permission to import

or dispose of the Generic Brand for those

purposes and on those conditions could result

in a danger to public safety, and the Bl data

approval of the firstnamed Applicant. is not disclosed to other persons without the

Now, that was an endeavour and I am not suggesting

that is necessarily the form of an order which

ought to be made to protect this situation, but it

was designed to deal with that situation. What it

was saying, in effect, was "Yes, the Department may

have duties. It certainly has duties in relation
to public health and safety under the relevant

regulations", and if it is entitled to use the

information other than for the purposes of the

Smith Kline and French applications, then the limit

of that should be this: that, first of all, the

Department should evaluate the other application

without reference to the Smith Kline information.

Smith Kline(4) 30/8/91

And having done so, if they reject it, they

can then, in effect, tell them that they reject it;
they are not going to accept it on that basis.

Then they can look at the information and they can

decide - if they first decide that they will

approve it, they can then look at the information

for the purposes of deciding whether, in the

interest of public health and safety, that they

should reject it. Now that was an attempt to

define a way in which the information of Smith

Kline & French could be protected.

BRENNAN J:  Mr Ellicott, you would appreciate that this is

an application for special leave and this aspect,
which is only the first aspect of your argument,

turns to no little extent upon the findings of fact

that you have canvassed, and I think you have been

apprised of the difficulties which members of the

Court feel with regard to them. Have you anything

really substantial to add to this part of your

argument?

MR ELLICOTT:  Your Honour, I feel so strongly, as counsel,

that I have not satisfied Your Honour of something

which is in the evidence below, that Your Honours

do not appear to be accepting, that I should ask

Your Honours for the opportunity, because I have

not come here with the references to transcript, to be able to put before the Court those references to

transcript which would satisfy, in our submission,
that the Department is actually saying, "We are

entitled to do this very thing". That is to say,

to use our information to communicate it to the

other side, for the purposes of leading to their

commercial advantage and I do not appear to have

satisfied Your Honours in relation to that, but it

is such a serious - -

BRENNAN J: But the difficulty in the way of it,

Mr Ellicott, is that we are dealing here with an

application for special leave, and if it is

necessary to go to the transcript, behind the

findings, then the application for special leave

must rest on some challenge to the findings. Now,

if that is so, there are difficulties in the way of

a grant of special leave for that purpose.

MR ELLICOTT:  No, my difficulty is a different one,

Your Honour; my difficulty is that the words that

are used here are plain to me, but they are not

plain to Your Honours. So it is my difficulty and

I fear that this matter may be dealt with on a

basis that would be contrary to the true situation,
because Your Honours do not appear to be prepared

to accept a statement which I believe to be merely

reflecting the factual situation which was not in

debate below, and that is that - - -

Smith Kline(4) 25 30/8/91

DEANE J: That being that beyond compliance with the

regulation, the Department is entitled to disclose

the content of your confidential information as

long as it does not disclose whose confidential

information· it is?

MR ELLICOTT: Yes.

DEANE J: Well, the judgments do not say that, and there is

nothing in them that says that.

MR ELLICOTT: Well, Your Honour, what does "disclosure"

mean? "Disclosure" surely is not a narrow matter;

the relevant word ought to be used.

DEANE J: Well no, because your primary case was, the

judgments indicate, that the Department cannot use

your information for evaluating the other product.

Well now, I fully understand how that case was made

and I understand what is involved in it, but in

that context one passes from "use" to "disclosure".

Now what these judgments do not say is that the

Department is entitled to disclose your

confidential information to an extent not required

by the performance of its statutory duty, as long

as it does not disclose that it is your

confidential information.

MR ELLICOTT:  Your Honour, I said that the relevant word may

be "use" and I said it for this reason, that "use"

is, in one sense, broader than "disclosure" in the

sense that I suspect Your Honour is using it. Our

objection is to the use of the information. That

information can be used, either by taking it and

disclosing it, if the information was, "We have discovered that the impurities should be no more than 2 per cent". That would be disclosing the information, but it would also be using it. There may be some information there also which leads to a conclusion and it is used to lead to that conclusion and it is properly used to lead to that	conclusion; it is not some great discovery, but it	is just used for that purpose, and then a statement
is made to them which has the effect of giving them
a commercial advantage. Now that is a use of the
information. Now, both those situations are
implicit in what is threatened by the Department,
because, in the course of evaluation, the product
may reach a higher standard by the use of the innovator Bl data and the use may be by disclosure or it may be by some other method of use, which
would, we would say, be equally offensive, because
it is based on our confidential information.

BRENNAN J:  Mr Ellicott, could you articulate precisely the

use which, in your submission, the Department is

not entitled to make of the information, being a

Smith Kline(4) 26 30/8/91

use which has not been excluded as a possibility by

the findings in the courts below.

MR ELLICOTT:  The use which the findings below would permit

would be use which involved the disclosure of the
information to Alphapharm, but without revealing
the source of it - that is one thing; the other

would be the use of the information as the basis of

making a statement to Alphapharm, and in both cases

leading to a commercial advantage to Alphapharm - potentially commercial advantage. We are dealing

with a threatened situation not an actual situation
of fact.

BRENNAN J: In either of those cases, are you postulating that the judgments in the court below leave open such a communication otherwise than pursuant to the

statutory obligation under regulation SF?

MR ELLICOTT: Yes. I am postulating that the judgments

below permit that to be done.

BRENNAN J: Otherwise than -

MR ELLICOTT: Otherwise than by under regulation SF(4), yes,

that is what we are saying, Your Honour. That is

their claim. That is what they say they are

entitled to do and we say that at the end of the

day that is wrong and a breach of a duty which they

had to us.

BRENNAN J: 

If we were to construe the judgments in the

court below as precluding such use, would that be
the end of the matter?

MR ELLICOTT: It probably would, yes, it would be, because

at the end of the day we are concerned about

somebody else getting commercial advantage from the

use of our information in the ways in which I have

indicated. That is the concern not only of, say,

one pharmaceutical company, but the concern of all

pharmaceutical companies that are engaged in
expensive research.	I do not see why, although it

may be used in the public interest, it should be used to give a commercial advantage to a generic

competitor who has not done that work or

contributed to that research. It is a rather

natural reaction on the part of companies.

We have also objected below to the use of the information for the purpose of saying that the

product is all right and it is on that basis that I

said a moment ago, probably. That is a step

further back and Mr Justice Deane put it to me, but

at the end of the day there is an ultimate

objection related to the use to give advantage to

other parties.

Smith Kline(4) 27 30/8/91

BRENNAN J:  I do not understand what you just said,

Mr Ellicott. I thought that you were not objecting

to the Department's use of the material for the

purpose of performing its duty under the

regulations of evaluating the Alphapharm

application.

MR ELLICOTT:  No, what I said was - I am sorry, Your Honour.

I indicated, first of all, two propositions: that

it should not be used to give a commercial

advantage. It can be given commercial advantage by

being communicated to them without telling them its be used as a basis of some statement which is communicated to them and leads to their commercial

advantage.

There is another situation which was argued

below, quite clearly, and that was this - and we do

not resile from this in any appeal, we would want

to put this to the Court - that it should not be

used for the purposes of evaluating and approving

the product, apart from what I have just

said, because it gives them the commercial

advantage of getting approval.

GAUDRON J: Could it be used for the purpose of evaluating

and rejecting?

MR ELLICOTT: Well, in the passage that I read from the Full

Court judgment at page 132 and page 134, that is exactly what we were - we were trying to draw a

line where it could be used in the public interest,

but nevertheless, not for their benefit by saying,

"Well evaluate it and if you are not satisfied with

it, get rid of it, reject it, then look at our

information and if you accept it, and see whether

you should, on the basis of our information, reject

it". Now, the Full Court had difficulty with that because they said people would not be able to keep the information separate but we were, indeed,

trying to meet that position.

I am mindful of what Your Honours have said to

me about - and I am mindful generally that this is

a special leave application - and that we are

taking a little time. Your Honours may have read a

judgment of Mr Justice Mason the Chief Justice in

relation to this matter, and in it he expressed

certain reservations about our likelihood of

getting leave to appeal.

DEANE J:  But that will not have any influence on us. I

mean, he did not hear the application for leave; we

are hearing it.

Smith Kline(4)	28	30/8/91
MR ELLICOTT:	I appreciate that, Your Honours.	In the

course of it he did refer to certain passages in

the judgments. Now, in order to remove

His Honour's view, I would have to go through those and I find that that would take me some time and I

DEANE J: Well speaking for myself, I think you can assume

that the hour and a half that we have spent

discussing, has put all recollection of any

detailed statement in the Chief Justice's

interlocutory judgment right out of my mind; I

think it has put it out of everybody's mind.

BRENNAN J:  I think there is at least a majority for that

view. It is unanimous.

MR ELLICOTT:  Your Honours, one matter that I have not taken

Your Honours to is the actual regulation under

which - it is at well to look at that. That is on

page 81, Your Honours.	And that goes on to the
relevant part which is found at page 83.	It is
sub-regulation (3A) of SE:

The Secretary of the Department of Community

Services ..... shall not refuse to grant an application ..... except for reasons relating

to:

a) the quality of the therapeutic substance

including the procedures adopted by the

manufacturer .....

(b) the safety and efficacy of the substance

for the purposes for which it is to be used;

(c) the dangers associated with the use of

the substance; or

(d) if the substance is to be used for

experimental purposes only ....

Now, that involves a requirement earlier than that

evaluation, which is set out at page 81:	The secretary ..... may request an applicant	under the last preceding sub-regulation to
furnish him with such information, not being information furnished by the licensed importer
in connexion with a previous application under
this regulation relating to the designated therapeutic substance to which the application
relates, with respect to -
(a) the method of manufacture of the designated therapeutic substance;
(b) the investigations that have been carried
out by the applicant and by other persons
concerning the safe use of the substance; and

Smith Kline(4) 29 30/8/91

(c) if the substance is to be used for
experimental purposes only -

(i)       the investigations into the use of

the substance that are proposed to be

carried out;

(ii) the persons who propose to carry

out the investigations.

Now, Your Honours, I simply wanted to put

this, that the circumstances in which the

information is given and the purposes are fairly

clear. One would deduce from that, we would

submit, a fairly cautious interpretation of the use

to which the Department could put the information;

prima facie, at least, one would thing the

information could only be used for the purposes of determining the specific application and any other matter that may flow from it at a later date. That

is to say, for instance, if there is some

improvement to a substance, whether it is five

milligrams or 25 milligrams, et cetera, there has

to be a new application. Well obviously the

information can be used there, but I would submit that, prima facie, one would need to be convinced as to why it should go beyond use for that

particular application. Now here the finding is,

of course, that there is no restriction, other than

it shall not be disclosed to third parties, which

meant that it would not be conveyed to a third

party such as Alphapharm, but other than the sense

in which I have been discussing with Your Honours

earlier.

Your Honours, the other point of public

importance was the question as to whether the

information, if it was property, was properly

acquired by the Commonwealth otherwise than on just

terms? Now this is a question which has not come

before this Court before, in our submission, and it

raises an important question, first of all, as to

whether information is property, and

Mr Justice Gummow held that it was and the Full

Court did not debate it, and I would submit that

Your Honours should accept that as sufficient

reason for treating that as a very important issue

and one that ought to be looked at, because if one
gets to the point of whether it is property or not,

then the question arises whether it is an

acquisition.

Now the width of the acquisition power has

been discussed from time to time and, as Your

Honours will be aware in the Dam's case,

Your Honour Mr Justice Deane did say that a freeze

could be an interference with property rights. least the idea that something other than

Smith Kline(4) 30 30/8/91

conventional notions of property has been

introduced into the debate in this Court, on the

question of acquisition on just terms. Now, if

information is property, the question then arises

whether the use of it is offensive to the

particular placitum.

Now, in the United States, there has been a

debate in relation to that matter and if I can just

quickly take Your Honours to pages 109 and 110 of

Mr Justice Gummow's judgment.

BRENNAN J:  What is the consequence of success on this

argument, Mr Ellicott?

MR ELLICOTT: That the regulations would be invalid because

- if the regulations are sufficient to justify the
acquisition of the information and the use of it by
the Commonwealth for Commonwealth purposes or by

the Commonwealth through the Department of Health

for health purposes, however broad or narrow it may

be, then the regulations are invalid because they

are an acquisition on otherwise than just terms,

because we gave the information for a limited
purpose, the limited purpose being to determine our

application, or perhaps the use in relation to

subsequent applications, but it is implicit in the

regulations that once we give it, it can be used
for wider purposes and, we say, that if part of our

property has been taken, then under the

regulations, and the regulations do not compensate

us for that, then those regulations are invalid.

The question has arisen in the United States -

BRENNAN J:  What flows from that - that the regulations are

invalid?

MR ELLICOTT:  What flows from that is that we would say that

any right to use the information was non-existent.

Any right to use it other than for the strict

purposes of our application are non-existent.

BRENNAN J: That is your application

MR ELLICOTT: For the registration or the approval in

relation to cimetidine, or any - - -

BRENNAN J: That is under a regulation which, itself, falls?

MR ELLICOTT: Yes, well, that regulation would not fall

unless it was implicit in it that it was acquiring

the information for purposes - - -

BRENNAN J: Is that not the regulation under which - - -

MR ELLICOTT: Well, it would be one of those regulations,

yes, Your Honour.

Smith Kline(4) 31 30/8/91

BRENNAN J:	Has a notice under section 78B been given?
MR ELLICOTT:	Yes, it was given, Your Honour.
DEANE J:	It would probably lead to a reading down of the

regulation so that it was irrelevant to the extent

of use and disclosure.

MR ELLICOTT: Yes, but it does not provide a problem so far

as we are concerned. It provides a remedy because

we would then be able to seek a consequent order

that it could not be used except for the purposes

of our application, there being no other proper use

of it that was permissible. In the United States,

I think they refer to it as a "taking'', but the

passage at the foot of 109:

However, the statutory scheme took a

different form between 1972 and 1978. The

respondent had been given an opportunity to

protect its trade secrets from disclosure by

designating them ..... It was held that the
explicit governmental guarantee to applicants
of confidentiality and exclusive use during

this period formed the basis of a "reasonable

investment-backed expectation", so that if EPA

were now to disclose such trade secret data or

to consider it in evaluating the application

of another party, its actions would frustrate

the respondent's "reasonable investment-backed

expectation". The question would then be

whether just compensation was paid for the

loss in the market value of the respondent's

data suffered because of the consideration of

it by EPA in connection with another

application.

I mean, obviously, confidential information ceases

to be valuable once it is communicated to others:

The Supreme Court held that any taking of

private property that might occur in

connection with EPA's use of data submitted

between 1972 and 1978 was a taking for a

"public use" rather for a "private use". This

was so even though subsequent applicants might

be the most direct beneficiaries.

So that we would submit that that is obviously an

important matter. It is an issue which has not

been determined by the Court and one which arises

in these proceedings and by itself is a separate
ground for special leave, and in considering that

matter, it would first be necessary for the Court

to consider the nature of the obligation which was

created in relation to the communication of the

information in the first place, in other words, the

Smith Kline(4) 32 30/8/91

constitutional issue turns upon the facts in the

case to some degree. You cannot just isolate it

and decide it apart from those facts.

Your Honour, the passage in the cross-

examination which does deal with this - it is only

one instance - but would Your Honours mind if I

just read it.

BRENNAN J: Yes, Mr Ellicott.

MR ELLICOTT:  I realize I do not have copies at the moment,

but Mr Campbell, who appeared for our client:

Q. To take the sort of example that you have

dealt with earlier concerning impurities, if a

raw material specification by a generic

applicant concerning cimetidine said nothing
about there being an impurity in the

cimetidine, and if there was an impurity that

is called aluminium chloride, for the sake of

a name, in the Smith Kline cimetidine, and

that was something regarded as significant by

the evaluator, to be able to correct the
generic applicant's application, would not it
be necessary for the evaluator to say to the
generic applicant, please devise a proper test

for aluminium chloride?---It might too say,

have you tested for, if we were just to say

aluminium, have you tested for aluminium.

Q. Well please devise a test?---Yes, and that

I think is spelt out as what the practice has

been.

Q. That would similarly be disclosing to the

generic applicant that the Department had

reason to believe that there could be

aluminium in the cimetidine?---Yes.

Q.	And if the Department was very vague in
its request to the applicant and said, "Please

improve your test procedures" and the generic
applicant did not know what to do about that

and the application were to be rejected

because you were not satisfied about the test

procedures, the generic applicant would then

be entitled to a statement of your reasons for

rejecting it, would he not?---Yes.

Q. And if the real reason was that you knew

there was aluminium in Smith Kline's

cimetidine and the generic applicant had not

picked up any aluminium in his, that is what

you would have to tell him in your statement

of reasons, is it not?---You may be correct in

law, in terms of administrative law; I am not

Smith Kline(4) 33 30/8/91

sure that the situation arose in my time or

was encountered or was contemplated.

Q. You are familiar with the provision in the

Regulations that enables a person who has had

an application rejected, to apply -

and it goes on to deal with those matters and that

is Mr McEwen, who was a former head of the

Department of Health and is referred to in the

reason, and that is at - - -

DEANE J: But that has been put to him that it was the

obligation under the Regulations.

MR ELLICOTT:  No. What is being put to him was that, having

told them - - -

DEANE J:  No, the last bit you read - - -

MR ELLICOTT: Yes.

DEANE J:  - - - it had been put to him, was the obligation

under the Regulations?

MR ELLICOTT: Yes, that is under SF.

DEANE J:  And he was going for a narrower view of the

Regulations and Mr Campbell was going for a wider view.

MR ELLICOTT: Well he may have been, Your Honour, but we do

not have to take his evidence on that, but the
important thing was, that for the purposes of
dealing with the generic applicant, the Smith Kline

& French information would be communicated, not as such, and used, but the facts, it was being put to

him that later on - - -

DEANE J:	I heard what was said earlier.
MR ELLICOTT: Well, Your Honour, we submit, this is a proper

case in which to grant special leave.

BRENNAN J: Thank you, Mr Ellicott. Mr Catterns, before the

Court considers what course it should take, there are two matters which perhaps we could ask you ..... the first is, does the Department contend for any entitlement to use the Bl information or rather to

communicate any of the Bl information to

Alphapharm, otherwise than pursuant to its duty

under Regulation SF?

MR CATTERNS:  No, Your Honour, it does not and, in my

submission, that is made clear at page 27.

Smith Kline(4)	30/8/91
BRENNAN J:	And, the second question is, what is your response in general terms to the question of
acquisition on just terms?
MR CATTERNS:	Your Honour, our submission on that is that it

does not arise because the analysis required by a

court of equity of determining whether the
obligation of conscience arises is an analysis of

all the circumstances. In all of these

circumstances, including the fact that the

Department has a duty to process applications, no equitable duty arises not to use it in the way

which we want to use it, therefore, there is no law

acquiring property. Regulation SE does not say the

Department may use information provided by Smith

Kline & French in assessing Alphapharm's

application. It simply does not acquire it. The

regulation is one of the facts - - -

BRENNAN J: Mr Catterns, I do not think we need to trouble

you any further on this aspect at this stage, but

perhaps you could indicate what your view is as to

Mr Ellicott's suggestion that we should perhaps

adjourn to enable some further consideration to be

given to the evidence as distinct from the

judgments?

MR CATTERNS:  Yes, Your Honour. That is opposed for this

reason

DEANE J: Well, that was all that you were asked.

BRENNAN J:  What is your response, Mr Garnsey, to that

second question?

MR GARNSEY: Well, we also oppose it unequivocally and

strongly, if Your Honour pleases.

BRENNAN J:  The Court will adjourn briefly to consider what

course it should now take.

MR ELLICOTT:  Would Your Honour hear me just for a moment?

BRENNAN J: Yes, Mr Ellicott.

MR ELLICOTT:  I am sorry to interrupt. My friend just said

they do not want to communicate it other than under

that regulation. I find difficulty in the word

"communicate" and what Mr Catterns, or the

Department, may understand by that word

"communicate". I only say that because it may be a

matter of debate at some other stage if it is not

stated with clarity as to what he understands by

the word "communicate". I have used a distinction between "use" and "communication", as Your Honours

know, and I do not know whether he uses it that

Smith Kline(4) 35 30/8/91

way, in a strict sense, in other words, or in a

broad sense.

BRENNAN J:  Do you wish to say anything in response to that,

Mr Catterns?

MR CATTERNS:  May it please the Court. The Department wants

to use the information in the sense about which

there was a great deal of evidence by the head of

the relevant section. He does not want to

communicate it. Having used the information, it

sometimes make requisition on the generic applicant

but His Honour Justice Gummow held that did not

amo·nt to disclosure, so the Department wants to

use it but not to disclose it.

BRENNAN J:  Not to disclose it otherwise than by making

requisitions?

MR CATTERNS:  Your Honour, in my submission, His Honour held

that the making of requisitions did not amount to

disclosure and that is the passage at 283.

DEANE J: But you cannot draw a clear, fast line - I mean,

if, for example, the Department said, "What do you

say about impurities in your product?", that is a

requisition. If it said, "Does your product

contain 7 per cent this, 8 per cent that, 9 per

cent that?", taking the formula of the opposition

product, that would be a requisition in one sense
but it would obviously pass over the line to

disclosure in that it simply invites - well, where

they have got that from obviously - and you would

accept, I presume, that the second, even though it
is in the form of a requisition, involves

disclosure, even if they do not put in the bottom

sentence, "that being Smith Kline's formula".

MR CATTERNS:  Yes, Your Honour, I would accept that that

would be a disclosure but there was a lot of

evidence about that and we rely on the finding

We never say, "Do you have potassium permanganate that, in fact, we do not disclose it in that way. in it?".

GAUDRON J: Where, precisely, is that finding, Mr Catterns?

MR CATTERNS:  Page 28, line 5.

GAUDRON J: Thank you.

MR CATTERNS: There are four classes of possible disclosure

dealt with: the first being that; the second being

appeals and so on.

Smith Kline(4) 36 30/8/91

BRENNAN J:  The Court will adjourn briefly to consider what

course it should take.

AT 11.52 AM SHORT ADJOURNMENT

UPON RESUMING AT 12.11 PM:

BRENNAN J:	Mr Ellicott, in the light of the opposition of the other parties to your application for an
adjournment, the Court does not propose to accede
to that application.

MR ELLICOTT: If Your Honour pleases.

BRENNAN J:  Mr Catterns, in response to a question from the

bench did make some submissions. Have you anything

that you wish to say in reply to those?

MR ELLICOTT: Well, in relation to - does Your Honour mean

on the - - -

BRENNAN J:  On any matter which - - -

MR ELLICOTT:  On anything. Your Honour, he said something

in relation to information being communicated and

the difficulty we have with the use of the word

"communicated" is that information can be

communicated in many ways. We would understand his

statement as trying to confine it merely to saying

to somebody what they read in a particular document

or what they were told by somebody and was written

down, but without saying who said it, but there

would be many ways of communicating information

other than just by restating what somebody said,

problem that we have in relation to the argument and that is not an answer to say that to the	that we have put, namely that information can still
be used and can still be, in effect, communicated,
even though it is not a word for word statement of
something that is in a document or even the substance of what is in a document, because it is used in order to tell somebody something which could only be said as a positive to a negative, for
instance. That sort of thing; that is what I mean.
And it would flow from that that we would say that
the Court should not regard that as a sufficient
answer, because that is a sense in which my friend
has construed that word "disclosure" in paragraph
28 and that is a narrow sense. In other words,
there is no finding against us on that and the
passage at page 95 in relation to "detriment" we

Smith Kline(4) 37 30/8/91

say is a clear exposition of a situation where

information could be used and therefore would be, we would submit, inconsistent with the notion for
which we are contending, that is that information
should not be used against us for the benefit of

the third party.

So far as the constitutional matter is

concerned, Your Honours, we would submit that it is

no answer to say that there was no equitable duty

not to use it. The fact is that the information is

required pursuant to regulations and that is the

statutory authority for them and that use is given in connection with an application; the application

is then dealt with. If the result of those

regulations is that the use is beyond the

particular purpose for which we gave it and gave it

in order to get a benefit for ourselves, if the use

is beyond that, then we say that that is an

acquisition of property and it is clearly not on

just terms and therefore, to that extent, the

regulations are invalid and it is not to the point

to say that there was no equitable duty not to use
it and the constitutional point arises both in

relation to the construction of the regulations, if

they are construed as entitling one to use it

beyond the particular purpose, but it is also used

in the context of the facts of the case, so that

one first has to determine - I mean, my friend says

that there is no equitable duty not to use it, but

one first has to define that and therefore, that is

to say, what is the limit of the equitable duty not
to use it and therefore that takes one to the facts

of the case.
So the constitutional question relates, not only to the regulations as one issue, but it arises

there, separately, but it also arises separately in

relation to the nature of the obligation and

therefore involves a consideration of the facts of
the case and we would submit that there is no

answer either in the proposition that there is no	regulation not to use it. That is not the point.
If the effect of the regulation is an
unconstitutional taking of property, then that is
the end of it. For those reasons we would ask
Your Honour not to treat those as grounds for
rejecting special leave.

BRENNAN J:  We need not trouble you, Mr Catterns, nor you,

Mr Garnsey.

In the context of the findings made by the learned trial judge and accepted by the Full Court,

we are not persuaded that the actual decision of

the courts below, in relation to the first matter

which the applicant wishes to raise on appeal, is

Smith Kline(4) 38 30/8/91

attended with sufficient doubt to justify the grant

of special leave. We note that we do not see the

decision of the courts below as involving any

finding that the Department is entitled to disclose

to Alphapharm the applicant's Bl information,

beyond what is necessary in the discharge of its
duty under Regulation SF of the Customs (Prohibited

Import) Regulations. Our views in that regard are

confirmed by the statement made by counsel for the

Department as to the limits on the use of the Bl

information, which the Department sees itself as

being entitled to make.

As to the second matter which the applicant

wishes to raise on appeal, we co~sider that the actual decision of the courts below is correct. Accordingly, special leave is refused.

MR CATTERNS:  Would the Court make an order for costs?

BRENNAN J: Application for special leave is refused, with

costs.

AT 12.19 PM THE MATTER WAS ADJOURNED SINE DIE

Smith Kline(4) 39 30/8/91