Smith Kline & French Laboratories v Department of Community Services & Health

[1990] FCA 206

Re: SMITH KLINE and FRENCH LABORATORIES (AUSTRALIA) LIMITED;
SMITH KLINE and FRENCH LABORATORIES LIMITED; SMITHKLINE
BEECHAM CORPORATION; LABORATOIRE SMITH KLINE and FRENCH S.A and
SMITH KLINE DAUELSBERG GmbH
And: THE SECRETARY TO THE DEPARTMENT OF COMMUNITY SERVICES and HEALTH
Re: ALPHAPHARM PTY LIMITED
And: THE SECRETARY TO THE DEPARTMENT OF COMMUNITY SERVICES and
HEALTH; SMITH KLINE and FRENCH LABORATORIES (AUSTRALIA) LIMITED;
SMITHKLINE BEECHAM CORPORATION; LABORATOIRE SMITH KLINE and FRENCH
S.A. and SMITH KLINE DAUELSBERG GmbH
Nos. G561 of 1987 and G344 of 1989
FED No. 206
Equity - Administrative Law - Constitutional Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J.(1)

CATCHWORDS

Equity - confidential information - data concerning therapeutic substance furnished to regulatory authority by applicant for marketing approval - use by regulatory authority of that data in evaluation of another application by another applicant - whether obligation of confidence bound regulatory authority - effect upon content of any such obligation of statutory powers and duties of the regulatory authority - whether regulatory authority knew or ought to have known of limited purpose for which data initially furnished to it - necessity for applicants to show "detriment" - "public interest" defence in Australia.

Administrative Law - exercise of statutory powers and duties by regulatory authority - when duty arising at general law will be imputed to that authority - relationship between such duty and the "fettering" of exercise of powers by the authority.

Constitutional Law - provision of data to regulatory authority by applicant for marketing approval of therapeutic substance - subsequent use by authority for another purpose - whether confidential information may be "property" - whether there was "acquisition" thereof, so as to require "just terms" - relevance of United States authorities.

Acts Interpretation Act 1901

Customs Act 1901

Judiciary Act 1903

Designs Act 1906

Pharmaceutical Benefits Act 1947

Patents Act 1952

National Health Act 1953

Therapeutic Goods Act 1966

Therapeutic Goods Act 1989

Copyright Act 1968

Trade Practices Act 1974

Federal Court of Australia Act 1976

Administrative Decisions (Judicial Review) Act 1977

Freedom of Information Act 1982

Foreign States Immunities Act 1985

The Constitution

Supreme Court Act 1970 (N.S.W.)

Federal Insecticide, Fungicide, and Rodenticide Act 1947 (U.S.)

The Constitution of the United States

Customs (Prohibited Imports) Regulations

Therapeutic Goods Regulations

Statutory Rules 1970

Federal Court Rules

Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119

Queensland Medical Laboratory v Blewett (1988) 84 ALR 615

Franklin v Giddins (1978) Qd R 72

Ex parte Celotex Corporation (1937) 57 CLR 19

Concept Television Productions Pty Ltd v Australian

Broadcasting Corporation (1988) 12 IPR 129

McIntyre v Perkes (Full Court of the Federal Court, 6 April 1990)

Re Dawson dec'd (1966) 2 NSWR 211

Catt v Marac Australia Ltd (1986) 9 NSWLR 639

Ruckelshaus v Monsanto Company 467 US 986 (1984)

The Commonwealth v John Fairfax and Sons Limited (1980) 147 CLR 39

Lord Ashburton v Pape (1913) 2 Ch 469

Boardman v Phipps (1967) 2 AC 46

Consul Development Pty Limited v D.P.C. Estates Pty Limited (1975) 132 CLR 373

Pacifica Shipping Co Ltd v Andersen (1986) 2 NZLR 328

Lac Minerals Ltd v International Corona Resources Ltd (1989) 16 IPR 27

Fractionated Cane Technology Limited v Ruiz-Avila (1988) 1 Qd R 51

Coco v A.N. Clark (Engineers) Ltd (1969) RPC 41

Corrs Pavey Whiting and Byrne v Collector of Customs (Vic.) (1987) 14 FCR 434

Thomas Marshall (Exports) Ltd v Guinle (1979) Ch 227

Pioneer Concrete Services Ltd v Galli (1985) VR 675

Torrington Manufacturing Company v Smith and Sons (England) Limited (1966) RPC 285

Moorgate Tobacco Co. Limited v Philip Morris Limited (1982) 64 FLR 387

Moorgate Tobacco Co. Limited v Philip Morris Limited (No. 2) (1984) 156 CLR 414

Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1975) 2 NSWLR 104

Attorney-General for the United Kingdom v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86

Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 51 FLR 184

In re Smith Kline and French Laboratories Ltd (1989) 2 WLR 397

Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24

Luu v Renevier (1989) 91 ALR 39

The Queen v Australian Broadcasting Tribunal; Ex parte 2HD Proprietary Limited (1979) 144 CLR 45

O'Sullivan v Farrer (1989) 89 ALR 71

Ansett Transport Industries (Operations) Pty Limited v The Commonwealth (1977) 139 CLR 54

Commissioners of Crown Lands v Page (1960) 2 QB 274

I Congreso Del Partido (1983) 1 AC 244

Minister for Immigration and Ethnic Affairs v Kurtovic (Full Court of the Federal Court, 7 February 1990)

Small v Smith (1884) 10 App Cas 119

Willcocks v Shire of Wallarobba (1911) 13 CLR 326

British Medical Association v The Commonwealth (1949) 79 CLR 201

Regina v Licensing Authority Established Under Medicines Act 1968, Ex parte Smith Kline and French Laboratories Ltd (1988) 3 WLR 896

Attorney General v Guardian Newspapers Ltd (No. 2) (1988) 3 All ER 545

David Syme and Co. Ltd v General Motors-Holden's Ltd (1984) 2 NSWLR 294

W v Egdell (1990) 2 WLR 471

Beatty v Guggenheim Exploration Co. 122 NE 378 (1919)

Wolf Mountain Coal Limited Partnership v Netherlands Pacific Mining Co. Inc. (1988) 31 BCLR (2d) 16

Johnson v Agnew (1980) AC 367

Dalgety Wine Estates Proprietary Limited v Rizzon (1979) 147 CLR 552

Clunies-Ross v The Commonwealth (1984) 155 CLR 193

Trade Practices Commission v Tooth and Co. Limited (1979) 142 CLR 397

Murphyores Incorporated Pty Ltd v The Commonwealth (1975) 136 CLR 1

The Commonwealth v Huon Transport Proprietary Limited (1945) 70 CLR 293

British Medical Association v The Commonwealth (1949) 79 CLR 201

The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1

Worthing v Rowell and Muston Pty Limited (1970) 123 CLR 89

Corn Products Refining Company v Eddy 249 US 427 (1919)

PruneYard Shopping Center v Robins 447 US 74 (1980)

First English Evangelical Lutheran Church of Glendale v

County of Los Angeles, California 96 L Ed 2d 250 (1987)

United States v Causby 328 US 256 (1946)

Poulton v The Commonwealth (1953) 89 CLR 540

United States v Great Falls Manufacturing Company 112 US 645 (1884)

Grace Brothers Proprietary Limited v The Commonwealth (1946) 72 CLR 269

Penn Central Transportation Co. v New York City 438 US 104 (1978)

Westinghouse Electric Corporation v United States Nuclear Regulatory Commission 555 F 2d 82 (1977)

Thomas v Union Carbide Agricultural Products Co. 473 US 568 (1985)

R. v Toohey; Ex parte Meneling Station Proprietary Limited (1982) 158 CLR 327

E.I. du Pont de Nemours Powder Company v Masland 244 US 100 (1917)

National Starch Products Inc. v Polymer Industries Inc. 79 NYS 2d 357 (1948)

Chan v Cresdon Pty Ltd (1988) 64 ALJR 111

Booth v The Commissioner of Taxation (1987) 164 CLR 159

Best Australia Ltd v Aquagas Marketing Pty Ltd (1989) 13 IPR 600

O'Brien v Komesaroff (1982) 150 CLR 310

In re Keene (1922) 2 Ch 475

Morison v Moat (1851) 9 Hare 241; 68 ER 492

Struthers v Hospital Products Ltd (Supreme Court of New South Wales, Kearney J., 25/2/84, unrep.)

Malone v Metropolitan Police Commissioner (1979) Ch 344

Wheatley v Bell (1982) 2 NSWLR 544

National Provincial Bank Ltd v Ainsworth (1965) AC 1175

Sonenco (No. 77) Pty Ltd v Silvia (1989) 89 ALR 437

Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525

Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25

HEARING

SYDNEY

#DATE 16:5:1990

Counsel and Solicitors for the J.C. Campbell QC
Applicants in Matter G561 of 1987 and M.R.J. Ellicott Esq.
and the second, third, fourth, instructed by
fifth and sixth Respondents in Messrs Minter Ellison.
Matter G344 of 1989:

Counsel and Solicitors for the D.K. Catterns Esq.
Respondent in Matter G561 of 1987 (with R.J. Webb Esq.
and the first Respondent in on 12 March 1990)
Matter G344 of 1989: instructed by the

Australian Government Solicitor.

Counsel and Solicitors for the J.J. Garnsey QC
Applicant in Matter G344 of 1989: and P.J. Dunstan Esq.

instructed by Messrs Mallesons Stephen Jaques.

ORDER

MATTER No. G561 of 1987

The Court orders that the matter stand over to a date to be fixed for the bringing in of short minutes of orders to give effect to the reasons for judgment delivered today.

MATTER No. G344 of 1989
The Court orders that the matter stand over to a date to be fixed for the bringing in of short minutes of orders to give effect to the reasons for judgment delivered today.

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

JUDGE1

Introduction

These proceedings were heard together. In matter No. G561 of 1987 ("the SK and F proceedings") the Court tried all the issues going to liability, but not all those going to remedy. Pursuant to an order made 20 December 1989 in matter No. G344 of 1989 ("the Alphapharm proceedings"), claims in tort and for breach of duty, being issues arising (i) from para. 18 of the Amended Statement of Claim in combination with para. 15A and (ii) from paras. 17 and 18 in combination with para. 16, were excluded from present consideration.

1. In each matter, the respondent Secretary to the Department of Community Services and Health ("the Department") for the time being was sued in his own name rather than by his office. This should not have been done; see Acts Interpretation Act 1901, s. 20 ("the Interpretation Act"), Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 at 121. Accordingly, I have amended the title of the respondent in the SK and F proceedings, and of the first respondent in the Alphapharm proceedings. The Department was formerly the Department of Health.

2. The jurisdiction of this Court in respect of each matter is attracted by s. 39B of the Judiciary Act 1903 ("the Judiciary Act"). That being so, the Court may, if it otherwise is appropriate, grant declaratory relief under s. 21 of the Federal Court of Australia Act 1976: Queensland Medical Laboratory v Blewett (1988) 84 ALR 615 at 637. I should add that the Application in the Alphapharm proceedings also indicates reliance on the Administrative Decisions (Judicial Review) Act 1977, but at the trial no reliance was put upon that statute and no attempt was made to comply with the requirements of O.54 r.2 of the Federal Court Rules.

3. At the heart of the litigation is the claim by the applicants in the SK and F proceedings of breach, or threatened breach, by the Secretary and officers of his Department of an equitable obligation of confidence said to be owed to the applicants. The defences put for the Secretary are, in substance, supported by the applicant in the Alphapharm proceedings. How has this dispute arisen? To that question I now turn.

4. The first and second applicants in the SK and F proceedings are both companies incorporated in the United Kingdom, but the first applicant ("SK and F") is registered as a foreign company in the State of New South Wales. The third, fourth and fifth applicants are incorporated respectively in the United States of America, France and the Federal Republic of Germany. Together with the first and second applicants, they are members of the SK and F Group of companies which is ultimately owned by SmithKline Beecham Plc, a company incorporated in the United Kingdom.

5. The second applicant ("the Patentee") is the grantee of Australian letters patent No. 460,353 ("the Patent") granted 7 April 1975 under the provisions of the Patents Act 1952 ("the Patents Act"). The term of the Patent commenced 15 February 1972 and, unless extended, will have expired on 15 February 1988. A petition seeking an extension of the term of the Patent under Part IX of the Patents Act was filed in the Supreme Court of New South Wales on 13 August 1987. The petition has not yet been heard. The Patent was granted on a Convention application based upon two basic applications filed in the United Kingdom in 1971. The inventors were employees of the Patentee in its research institute at Welwyn Garden City in the United Kingdom.

6. The invention, the subject of the Patent, consisted of the disclosure of a new class of chemical substances of the general formula set out in the Complete Specification, and the disclosure of the valuable therapeutic uses of those compounds. In particular, the Patent discloses that these compounds block histamine receptors and thereby inhibit the secretion of acid in the stomach. In example 59 in the Complete Specification of the Patent, there is described a particular compound, together with the process of making it. The compound is now known as cimetidine. Cimetidine is a compound which falls within claims 1, 2, 5, 6, 7, 8 and 10 of the Patent and compositions containing cimetidine fall within claim 21.

7. Cimetidine has been a major advance in the treatment of peptic ulcers and related disorders. It heals both duodenal and gastric ulcers, and is of benefit in several other disorders of the upper gastrointestinal tract. Medicines containing cimetidine were first marketed in 1976 in the United Kingdom. Since then, they have been used in 123 countries, by more than 35 million patients.

8. Medicines containing cimetidine as their active ingredient have been clinically tested, made into dosage forms and sold by SK and F in this country under the registered trade mark "Tagamet". SK and F, among other activities, develops and markets in Australia pharmaceutical products emanating from other members of the SK and F Group. The active ingredient, cimetidine, has been imported by SK and F from a licensed manufacturer who has made the cimetidine according to the Patentee's standards.

9. On 9 February 1983, SK and F entered into an agreement with Commonwealth Serum Laboratories Commission ("CSL") for the supply to CSL for resale of tablets and ampules containing cimetidine which were prepared and packaged by SK and F under the trade mark "Duractin". Substantial sales have been made of the Tagamet and Duractin products. No other compound within the claims of the Patent has been sold commercially in Australia. Drug Houses of Australia Pty Ltd ("DHA") had proposed to market a cimetidine product following the expiry of the Patent in February 1988. The proposal was dropped in October 1988.

10. The importation into Australia of a therapeutic substance such as cimetidine is controlled by provisions of the Customs (Prohibited Imports) Regulations ("the Regulations") made pursuant to s. 50 of the Customs Act 1901 ("the Customs Act"). The power to relax the prohibitions imposed by the Regulations is relevantly reposed in the Secretary. It will be necessary to return to the text of the Regulations, which are of central importance in this litigation.

11. The evaluation of drugs for marketing approval, pursuant to the Regulations, is in the charge of the Drug Evaluation Branch of the Therapeutic Goods Administration Division of the Department. The grant of marketing approval does not exhaust regulatory control. The new product will be goods for therapeutic use within the meaning of the Therapeutic Goods Act 1966 ("the Therapeutic Goods Act") and the testing of the first batch of the new product will be conducted by staff of the National Biological Standards Laboratory ("the Laboratory"). Provision for the Laboratory is made in the Therapeutic Goods Regulations ("the Therapeutic Goods Regulations"). The staff of the Laboratory is within the Laboratories Branch of the Therapeutic Goods Administration Division. The present litigation primarily concerns regulatory control exercised not through the Therapeutic Goods Act, but through the Regulations.

12. Cimetidine is a substance that has a "therapeutic use" and is thus a "therapeutic substance" for the purposes of the Regulations. Further, for those purposes, (i) each form of a therapeutic substance is to be taken to be a separate and distinct therapeutic substance, (ii) a substance manufactured according to a particular formulation is to be taken to be a different therapeutic substance from the substance manufactured according to any other formulation, and (iii) a therapeutic substance having a particular strength is to be taken to be a different therapeutic substance from that having a different strength: sub-reg. 2 (2).

13. On various occasions, commencing 17 June 1975, SK and F delivered to officers of the Department documents containing information as to products proposed for clinical trials or for sale under the Tagamet or Duractin trade marks. Part of that information related to the chemistry and quality control of the said products. It was contained in Form A and section B1 of the documentation prescribed by the "NDF4 Guidelines For Preparing Applications For The General Marketing Or Clinical Investigational Use Of A Therapeutic Substance". This is the long title of a document first issued by the Department in about 1974 and in this case abbreviated as "NDF4". NDF4 is a document of some 50 pages. The Department has amended it from time to time.

14. The information supplied by SK and F in the said Form A and pursuant to section B1 of NDF4 has been called the "B1 data" and that portion for which protection is claimed was fully identified in the documents Exhibits 6A and 6B in these proceedings. The applicants' case is that this information had when supplied by SK and F and still retains the character or quality of confidential information. Voluminous material, over 20,000 pages in all, was also supplied dealing with reports of studies in vitro and in animals ("B2 data") and of studies in man ("B3 data"). The applicants' case initially was so pleaded as to embrace B1, B2 and B3 data within the terms of the relief sought. But as the case was opened at the trial and as it was pleaded in its final form, confidentiality was not claimed for B2 and B3 data. The case was fought on the B1 data as identified in Exhibits 6A and 6B.

15. The B1 data included information as to impurities present in the Tagamet and Duractin cimetidine products, the analytical tests used by SK and F for analysing cimetidine, the stability of the SK and F dosage forms, and bioavailability studies. Bioavailability is concerned with the question whether the active ingredient in a particular drug gets into the blood at a satisfactory rate to enable therapeutic effects to be achieved. It is to be noted that preparations with the same active ingredient do not necessarily have the same degree of efficacy and safety. Cimetidine from different sources of manufacture may display different impurities. No universally accepted analytical techniques exist for the separation and identification of all impurities in a given compound. But the impurities in Tagamet and Duractin have been revealed and considered after full toxicity and clinical studies.

16. On 17 June 1975, SK and F lodged with the Department, using NDF4, its first Australian clinical trial application in relation to cimetidine. On 8 September 1976, SK andF made the first Australian application for marketing approval. It was concerned with 200mg and 300mg tablets, and 200mg/2ml ampules, for injection. Bearing in mind the provisions of sub-reg. 2 (2), applications have been necessary from time to time for different formulations. Five such applications by SK and F were on foot as at 20 December 1988. The evidence indicates that the B1 data identified in Exhibits 6A and 6B was supplied on 17 June 1975, 8 September 1976, 3 October 1978, April 1981, May 1982, 17 July 1982, September 1983, 10 August 1984, August 1984, 21 May 1986, 26 June 1986, 26 November 1986, September/October 1987 and October 1987. This documentation comprised many hundreds of pages. The information contained in it was the product primarily of the labours of officers of the first and second applicants, but included also information emanating from the other three applicants.

1. In their Statement of Claim, the applicants in the SK andF proceedings allege:
   

"7. All of the Information so delivered to officers of the Department had been obtained by the applicants at great effort and expense. It was at the time of its delivery to the said officers (as they well knew or ought to have known, and as the respondent well knows or ought to know) confidential information which was delivered to them for the sole purpose of enabling officers of the Department to consider and decide upon applications made by SK and F for permission to conduct clinical trials with Tagamet products, or for permission for SK and F or CSL to market Tagamet or Duractin products. . . .

9. No part of the B1 data has since it was provided to the Department become available to the public and all the B1 data remains confidential."

The applicants then allege that, unless restrained by this Court, the Secretary and other officers of the Department intend to use and apply the information comprised in the B1 data for purposes other than those for which it was supplied.

1. Allegations to the same effect are made concerning a sample quantity of the active ingredient contained in the Tagamet and Duractin products, which SK and F supplied to the Department. Such samples are kept at the Laboratory. The samples are used by the Laboratory for initial and periodic testing thereafter of products in the form in which they are placed on the market, that is to say after general marketing approval has been given. It is not disputed that an obligation of confidence may subsist with respect to material, the composition or properties of which are secret: Franklin v Giddins (1978) Qd R 72.

2. In one incident, the Laboratory used the SK and F sample to test a sample of a cimetidine product submitted by the government of Papua New Guinea. But this was accepted by the Secretary as something which should not have been done without SK and F's consent and which should not be repeated. The evidence shows that the Department has not used and does not threaten to use the SK and F sample in evaluating the Alphapharm NDF4 application (to which I will come shortly) and that it is not the practice of the Department to use samples provided by innovators in connection with evaluation of generic applications or the later marketing of generic products. On that footing, the sample supplied by SK and F plays no significant part in the present case, and I would grant no relief in respect of it.
   The Alphapharm Application

3. It is here that one must turn to the Alphapharm proceedings. The applicant ("Alphapharm") is an Australian company, incorporated in 1982. Alphapharm has not held a licence of the Patent. It markets so-called "generic" pharmaceutical products. The expressions "generic manufacturer" and "generic product" were used in the evidence in these proceedings in contradistinction to "innovator" and "innovator product". The SK and F Group comprises "innovators" in the sense of those who are the first to introduce new medicines, under the cover, as in this case, of patent protection which is a reward for their research and development work. Alphapharm is not an innovator in this sense. It imports pharmaceutical materials and makes them up into tablet and capsule form; in some instances, Alphapharm imports and markets finished products in packaged form. Alphapharm has opposed the SK and F petition for extension of the Patent in the New South Wales Supreme Court; no doubt, if the petition were successful, Alphapharm would seek the protection of a "Celotex" order in relation to sales of cimetidine it might have made between the expiry of the Patent on 15 February 1988 and the date of the extension by way of re-grant (see Ex parte Celotex Corporation (1937) 57 CLR 19 at 25).

4. On 14 July 1988, Alphapharm applied, using NDF4, for general marketing approval pursuant to the Regulations in respect of a brand of cimetidine. This was to be marketed as "Cimet" in tablets as the dosage form and with cimetidine of 400mg strength as the active ingredient. The active ingredient was to be manufactured in Italy and supplied to Alphapharm by a firm in Jersey, in the Channel Islands. The tablets were to be compounded in Australia.

5. Alphapharm lodged three volumes of data with its application. One volume dealt with the chemistry and stability of the Cimet product and two with bioavailability. They were together submitted as B1 data. Alphapharm was not relying on B1 data previously supplied by SK and F or any other party. It did not submit B2 or B3 data.

6. SK and F holds marketing approval for the Tagamet brand of cimetidine of 400 mg strength. The Alphapharm product would be a "generic" in the sense that it was not devised by or with the licence of the originator of cimetidine and under the cover of patent protection. The active ingredient would be of the same strength, namely 400mg, but it would not share all the same physical characteristics, if, for example, it contained different impurities.

7. On 7 December 1988, Dr John McEwen, who gave evidence in the present proceedings and was then the Acting Head of the Evaluation Support Branch (now the Drug Evaluation Branch) of the then Therapeutic Division of the Department wrote to various officers concerning the significance for the Alphapharm application of interlocutory relief granted by this Court on 10 November 1987 in the SK and F proceedings; see the report of later proceedings, (1989) 89 ALR 366. The Drug Evaluation Branch deals with, inter alia, NDF4 applications. After referring to several SK and F applications which were on foot, Dr McEwen referred to the Alphapharm application and continued:
   

"The advice of Counsel is that we might proceed with the evaluation of the Alphapharm material but that we should seek legal advice if:

(a) there is any need for the evaluator to directly consult the data or samples which have been provided to us by SK and F or

(b) if the evaluator or any other person involved in the evaluation process . . . has any sense of relying on the experience which they have gained through evaluating SK and F material in the course of making the evaluation of the Alphapharm product."

1. On 20 December 1988, Dr Susan Walters, an officer of the Department with responsibility in pharmaceutical chemistry evaluation, and one of the addressees of Dr McEwen's memorandum, replied to him as follows:
   

"Concerning the advice provided by counsel, it would be a departure from the norm for the Departmental B-1 evaluator and/or his supervisor not to consult any recently completed evaluations on the same drug. The circumstances outlined in

(b) in your minute therefore apply. This may or may not result in the evaluator making reference to previous data . . . i.e. your (a) may be violated. Science 4 and Science 5 officers in this Section are unanimous 'in their view that the evaluation process must rely on (1) knowledge of chemistry and pharmaceutical quality control and (2) an accumulation of concepts and information gained as an evaluator, i.e. 'experience'. In all honesty, we feel that, except where a particular specific piece of information has consciously been used, it is not possible to reliably isolate a 'sense of relying on the experience . . . gained through evaluating' (a particular set of material)."

Dr Walters' position was that an evaluation of the Alphapharm application conducted under these restrictions would differ from the norm and she was most reluctant to conduct what she considered would be an incomplete evaluation. It was against this background on 31 January 1989 that Dr McEwen wrote to Alphapharm advising that the Department could not proceed with its application by reason of the interlocutory relief granted SK and F. The letter stated:

"The Department has obtained legal advice that it is unable to process your application if:

. there is any need for the evaluator to directly consult the data or samples which have been provided by SK and F, or . if the evaluator or any other person involved in the evaluation process has any sense of relying on the experience which they have gained through evaluating SK and F material in the course of making the evaluation of the Alphapharm product. While legal action is pending the Department could be found to be in contempt of court if it were to proceed to process your application and were found to come within either of the above circumstances."

1. I should add that in addition to the administration of the system founded upon the Regulations, the Department, pursuant to the National Health Act 1953, also administers the Pharmaceutical Benefits Scheme, whereby benefits are paid by the Commonwealth by way of subsidy of the cost to consumers of specific listed medicines. What is known as the PBS listing is important to the widespread prescribing of a drug and hence to the profitability of the drug. Once a generic product is given marketing approval, the Department usually seeks, as a condition of PBS listing, to set a selling price for the generic product which is lower than that charged by the innovator. The innovator may then lose its PBS listing unless it reduces its price to a comparable level.

2. Further, acceptance of tenders to hospitals and other public institutions for supply of medicines may be expected to go to the lowest tenderer. In this way also, the granting of marketing approval for the Alphapharm product reasonably might be thought by SK and F to carry with it the threat of increased competition and pressure for price reduction.

3. Over a ten year period ending August 1988, the total cost of Tagamet and Duractin cimetidine to the Pharmaceutical Benefits Scheme was of the order of $82.6 million. For the twelve months to April 1989, the dollar value of sales of SK and F cimetidine products was of the order of $12 million.

4. In evidence given to an inquiry by the Industries Assistance Commission into pharmaceutical products, which led to a report dated 4 April 1986, the Department indicated that applications for generic drugs destined for PBS listing were given priority treatment within the Drug Evaluation Branch of the Department on the basis of "economic savings to the Government". However, Alphapharm stated to the Commission that, in its experience, the period associated with obtaining marketing approval for a generic drug was still up to 18 months.
   The Issues

5. Alphapharm pleads that the Secretary and the officers under him are at liberty to use the information in question for the purpose of processing, considering and determining the application by Alphapharm for general marketing approval of its cimetidine product. It seeks an order in the nature of mandamus that the Secretary consider, assess and finally determine the Alphapharm application in accordance with law. Alphapharm also seeks declaratory relief to the effect that the alleged confidential information in the SK and F B1 data may be used or applied by any officer of the Department for the purpose of the exercise of decision making powers to deal with the application by Alphapharm for approval of its cimetidine product.

6. 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 and F B1 data for the purpose of the Secretary discharging his functions under the Regulations with respect to the Alphapharm application. The Secretary accepts in these proceedings that the B1 data of the SK and F applicants was furnished to the Department on the footing that it would not be disclosed to third parties, in particular competitors of SK and F, without SK and 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 and F applicants sought to test the worth of such assurances by reference to various matters, none of which threw doubt upon those assurances.

7. In the past, there may have been inadvertent passing on to generic applicants of information derived from innovator B1 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. It is true that provision is made in the Regulations for the giving of reasons for certain decisions (reg. 5F). 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 and be justifiable on that ground if the question arose.

8. 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.

9. The Drug Evaluation Branch relies also upon the Australian Drug Evaluation Committee ("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. 5G) 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 to the applicants in the SK and F proceedings was not also binding upon ADEC.

10. Between 1965 and 1985, Mr Green was an employee of SK and F. He assisted in the preparation of B1 data furnished to the Department. He described his present occupation as "Consultant". He was called for the SK and F applicants and gave evidence concerning procedures adopted by the Laboratory in testing goods for therapeutic use within the meaning of the Therapeutic Goods Act. As I have indicated, these procedures are not part of the drug evaluation process before the grant of general marketing approval pursuant to the Regulations. Those conducting these tests have access to B1 data. Mr Green, whose oral evidence was given in an oblique fashion, apparently because he apprehended that in giving evidence he was or might be breaking confidences, gave evidence of one incident involving such tests. Mr Green's evidence was given without identification of the products concerned, but I infer that they were not cimetidine products. The product of A was tested using a method previously disclosed by B for its comparable product. But the use of B's method was not disclosed to A. In any event, the Alphapharm application is at the much earlier stage of evaluation for marketing approval.

11. I have indicated, the position of the applicants in the SK and F proceedings is that the Department should not use or apply their B1 data, which is identified in Exhibits 6A and 6B, in evaluating the Alphapharm application. They allege that to do so would be in breach of obligations of confidence owed to them in equity by the Department. The applicants seek injunctive and declaratory relief together with an order for delivery up of documents prepared by or for the Department which contain any comparison between Duractin or Tagamet and any other cimetidine product.

12. The applicants wish to reserve for a later stage of the proceedings an inquiry as to any pecuniary loss suffered by the alleged breach of equitable obligation owed them by the Department. Their counsel described the basis for this pecuniary liability as resting in Lord Cairns' Act, by which I take him to mean s. 68 of the Supreme Court Act 1970 (N.S.W.) ("the Supreme Court Act") as he would have it applied in these proceedings by s. 79 of the Judiciary Act. I should have hoped that any controversy as to the applicability of Lord Cairns' Act and its derivatives to claims in respect of purely equitable rights (rather than tortious or contractual rights) had been quelled by the recent analysis by Mr Dean in his work, "The Law of Trade Secrets", 1990, pp 317-320, 329. I have indicated my views in Concept Television Productions Pty Ltd v Australian Broadcasting Corporation (1988) 12 IPR 129 at 136. This Court is, by statute, a court of equity as regards matters otherwise within its jurisdiction: McIntyre v Perkes (Full Court, 6 April 1990, per Gummow, Von Doussa JJ., p 18). This brings with it, in a case such as the present, the inherent jurisdiction to grant relief by way of monetary compensation for breach of an equitable obligation, whether of trust or confidence. After all, long before the birth of Lord Cairns, delinquent trustees were brought to book in Chancery and, independently of any tracing remedy in rem, were obliged to make up from their own pockets the value of trust funds which had been lost: Re Dawson dec'd (1966) 2 NSWR 211. And as to the personal liability of fiduciaries other than trustees, see Catt v Marac Australia Ltd (1986) 9 NSWLR 639. If it transpires that the applicants are entitled to an inquiry, it would, in my view, be on this basis in the inherent equitable jurisdiction and s. 68 of the Supreme Court Act would not enter into consideration.

13. Insofar as the Secretary relies upon the Regulations as affording authority to utilise the B1 data in relation to the Alphapharm application, the applicants in the SK and F proceedings submit that any such authorisation must flow from reg. 5E of the Regulations. They then contend that if on its proper construction (which they deny) reg. 5E has this effect, it and s. 50 of the Customs Act, the provision under which it was made, would have to be read down pursuant to ss. 15A and 46 of the Interpretation Act. If this were not done, then, the applicants submit, reg. 5E would be a law for the acquisition of property from them on other than just terms, within the meaning of s. 51 (xxxi) of the Constitution. The validity of sub-reg. 19 (5) of the Therapeutic Goods Regulations was also impugned on the pleadings in the SK and F proceedings, but the attack was not really pursued at the trial. As I have indicated, reg. 19 provides for the establishment and functions of ADEC. Sub-regulation 19 (5) does not deal with the furnishing of information by third parties such as SK and F. The appropriate notices under s. 78B of the Judiciary Act were given.
    "Generic" Products and "Innovator" Data

1. The Department has been dealing with applications in respect of "generic" products since the early 1970's. Dr Ashley, who since April 1988 has been the Director, Drug Evaluation Branch of the Therapeutic Goods Administration Division, in the Department, gave evidence. He joined the Department in 1970 as a medical officer evaluator. Dr Ashley's evidence shows that whilst he has been with the Department, in evaluating applications by generic manufacturers regard quite frequently has been had to B1 data held by the Department, being data as to the innovator's product or to related products from the same class of drugs, which were not necessarily the same chemical entity. Regard has been had only infrequently to the innovator's B2 and B3 data.

2. The practice of having regard in this way to the B1 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 B1 generic data or a fault with the product, such that it is useful to compare the innovator's information. 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 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.

3. 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. There is no suggestion that at the stage reached by the Department with evaluation of the Alphapharm B1 data before Dr McEwen's letter of 31 January 1989, it already had been necessary to have regard to the SK and F B1 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.

4. In their case, the applicants in the SK and F proceedings sought to diminish the need for or the prudence of the practice of the Department in having regard in this way to innovator's B1 data. They sought to do so, inter alia, by showing that other procedures might be possible to achieve the desired results without regard to the innovator data, and by criticising particular instances put forward by Dr McEwen as cases where recourse to the innovator data had led to significant action in dealing with a generic application. Having heard and read all that was said on the subject, I accept the propositions, agreed to by Dr Ashley in his evidence, that it would be bad scientific practice, and could be dangerous, to ignore innovator B1 data when evaluating a generic product which appeared to be identical to or closely related to the innovator product.

5. The practice of the Department in dealing with applications for generic products has been that in general it has not required submission by the applicant of B2 and B3 data. Nor, as I have indicated, does the Department usually have recourse to the innovator's B2 and B3 data. Given the lapse of time in making generic applications, often to allow for expiry of the innovator's patent rights, there will have been in the interim extensive experience in use of the drug. That experience will have a value and significance beyond that of any clinical trials such as those with which B2 and B3 data is concerned. The rationale for acquitting generic applicants of the need to supply their B2 and B3 data, and for the Department not having recourse to the B2 and B3 data of the innovator is that, in effect, toxicological and clinical studies have been conducted by the successful use of the innovator product subsequent to its marketing approval.

6. The Australian pharmaceutical industry (including SK and F) has for some years been aware that less data is required of applicants for generic products than of innovators. I already have referred to the Industries Assistance Commission report on pharmaceutical products issued 4 April 1986. The report shows that the industry's trade association, the APMA, had put in a submission dealing with existing drug evaluation procedures. Reference was made to "the absence of proprietary rights over clinical data submitted to the (Department) as part of a marketing application". The report referred to the United States position (which is exemplified in a decision to which I return later in these reasons, Ruckelshaus v Monsanto Company 467 US 986 (1984)), and said that the absence of "proprietary right protection" facilitated "speedier entry by generics to the market following the expiry of the patent". The premise appears to have been that there was no requirement to re-submit clinical data (i.e. B2 or B3 data) already submitted by the supplier of the "originator brand" product, because the generic suppliers had "access" to the trial data generated by the innovator. Any such understanding of the reason for not requiring fresh B2 and B3 data was, as the evidence in this case shows, inaccurate. However, what is apparent is that, certainly by the time of this inquiry by the Commission, the industry did not regard the Department as accepting that all innovator data would be used solely by the Department to evaluate applications by that innovator, to the exclusion of any use by the Department of any of the data in connection with later applications by generic suppliers.

7. As to B1 data, in general, information is required from generic applicants with respect to quality control of the active ingredient, formula of dosage form, description of dosage form, the identity of the manufacturers of the dosage form, the method of manufacture of the dosage form, quality control of the dosage form, the stability of the dosage form with the recommended storage and shelf life of the dosage form and labelling. As a general rule, the Department does not require all of the elements specified in para. 6 of Form A of NDF4 under the heading "Chemistry of Active Ingredients". As a consequence of the practices I have described, submissions in respect of generic applications are generally considerably shorter than those for innovator drugs.

8. It is important for the purposes of the present case to appreciate, as I have already indicated, that in evaluating a generic application such as that by Alphapharm, the Department does not relieve the applicant of the obligation to supply B1 data, on any footing that it will simply be sufficient for this purpose for the Department to have regard to B1 data previously supplied by the innovator.

9. Professor Roberts was an expert retained by the applicants in the SK and F proceedings. In para. 4 of his affidavit sworn 12 December 1989, he set out nine matters to which he said it was necessary for an evaluator of the safety and efficacy of a proposed new drug to have regard. With one possible exception, applicants for generic products are not relieved of the obligation to supply data on these matters listed by Professor Roberts. The qualification concerns information as to the synthetic pathway by which the proposed new drug is manufactured. This has not been universally required of applicants for generic drugs. It may have been requested if there was a problem which became evident to the evaluator during the course of the evaluation. The Department now has a proposal to require provision of information as to the synthetic pathway in respect of all generic drugs with effect from 1 July 1990. Dr Brennan, an officer of SK and F, agreed that the result of the Department's practices was that in terms of the B1 data, the generic applicant was not saved any work.
   The Alleged Obligation of Confidence

10. In The Commonwealth v John Fairfax and Sons Limited (1980) 147 CLR 39 at 50, Mason J. adopted the statement of principle by Swinfen Eady L.J. in Lord Ashburton v Pape (1913) 2 Ch 469 at 475, that a court of equity will "restrain the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged". It will be observed that in that formulation, confidential information improperly or surreptitiously obtained, on the one hand, and information imparted in confidence, on the other, are treated as two species of the same genus. This accommodates, within the general rubric of the equitable jurisdiction, cases of eavesdropping or theft, for example, Franklin v Giddins, supra. The present case is put as one of the second species, namely of information "imparted in confidence".

11. Where the information has passed between parties already linked by a pre-existing fiduciary relationship, special considerations may apply, which determine the extent of the duty of fidelity owed by one party to the other. These considerations will flow from the nature and content of the fiduciary relationship in question. This aspect of the law of confidence is discussed by Mr Dean in "The Law of Trade Secrets", 1990, pp 179-181; see also the treatment of confidential information in Boardman v Phipps (1967) 2 AC 46 at 89-92, 102-103, 106-107, 115-118, 127-129 and Consul Development Pty Limited v D.P.C. Estates Pty Limited (1975) 132 CLR 373 at 399-400, 414. These were both cases of alleged breach of fiduciary duty involving failure to observe an obligation of fidelity, and may be compared with Pacifica Shipping Co Ltd v Andersen (1986) 2 NZLR 328, and Lac Minerals Ltd v International Corona Resources Ltd (1989) 16 IPR 27, which were cases where the plaintiff sought to found liability both in breach of fiduciary duty and breach of confidence, as distinct subject matters. The present case is not alleged to involve the imparting of confidential information in the course of a subsisting fiduciary relationship.

12. Nor is the present case propounded as one of contract. It would be unfortunate if the broad question of whether in a particular case information had been imparted in confidence, so as to bind the conscience of the defendant in a particular way, was to be approached as if the issue was one of formation of contract, involving notions of offer and acceptance and animus contrahendi. The question, as McPherson J. pointed out in Fractionated Cane Technology Limited v Ruiz-Avila (1988) 1 Qd R 51 at 67 (affd 13 IPR 609), is whether, independently of contract, the circumstances are such as to attract the intervention of equity. Equity will only intervene if the information has been communicated in circumstances importing an obligation of confidence. That was how Megarry J. put it in Coco v A.N. Clark (Engineers) Ltd (1969) RPC 41 at 47-48, thereby directing attention to the issue of what in the whole of the relevant circumstances would suffice to impose upon the defendant an equitable obligation of confidence. The Supreme Court of Canada recently approached the matter in a similar fashion: Lac Minerals Ltd v International Corona Resources Ltd supra, at 33, 74-77.

13. The B1 data for which protection is sought is identified with specificity in Exhibits 6A and 6B. But counsel for Alphapharm and for the Secretary pointed to alleged deficiencies in the case made against them by denying that the B1 data identified in Exhibits 6A and 6B had about it the necessary character or quality of confidence within the sense of the well known passage in the judgment of Megarry J. in Coco v A.N. Clark (Engineers) Ltd supra, at 47; see also Dean, "The Law of Trade Secrets", 1990, pp 105-107.

14. The task of segregating the B1 data, for which the applicants in the SK and F proceedings seek protection, fell upon Dr Brennan. He is the author of the documents which, after some amendments, became Exhibits 6A and 6B. He joined SK and F in July 1985. Counsel for Alphapharm and for the Secretary submitted there had been insufficiently thorough efforts in the applicants' case, both to establish that all of the information identified in Exhibits 6A and 6B had been confidential in character and to show that none of it had now entered the public domain. The evidence presented for the applicants in the SK and F proceedings by Mr Perrin, Mr Pickford, Dr Davies and Dr Seville, in addition to that of Dr Brennan, satisfies me that the applicants have made out their case both as to the initial subsistence of confidentiality in the B1 data identified in Exhibits 6A and 6B, and as to the continued existence of confidentiality in relation to that material. It is the product of detailed and costly work, is inherently valuable and has been kept secret. As the hearing developed, it became apparent that the real issues lay elsewhere.

15. A general formulation apt for the present case of an equitable obligation of confidence has four elements: (i) the plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge), (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information, without the consent of the plaintiff. The authorities from which these elements are drawn are collected in Corrs Pavey Whiting and Byrne v Collector of Customs (Vic.) (1987) 14 FCR 434 at 443. In addition, it has been suggested that the breach must inflict or be likely to inflict "detriment", a matter to which I will return later in these reasons. As I have indicated, I am satisfied that the applicants in the SK and F proceedings have made out their case as to elements (i) and (ii). The central issue concerns element (iii). If the applicants succeed also as to element (iii), then what the Secretary on his own case wishes to be at liberty to do would amount to a sufficient threat for element (iv).

16. The central issue is whether the Secretary and those involved in evaluating the Alphapharm application for the Cimet product are bound by an obligation of confidence owed to the applicants in the SK and F proceedings not to use for the purpose of the evaluation of the Alphapharm application, and in the particular manner I have described, the B1 data disclosed on various occasions since 17 June 1975 in relation to various applications for SK and F and CSL cimetidine products.

17. The Secretary's principal submission was that engagement in the conduct which the applicants in the SK and F proceedings seek to have the Court restrain would not breach any obligation of confidence. The applicants plead (in para. 7 of their Statement of Claim, which I set out earlier in these reasons) that the B1 data was provided to the Department for the sole purpose of enabling consideration and decision upon applications made by SK and F for permission to conduct clinical trials with Tagamet products, or for permission for SK and F or CSL to market Tagamet or Duractin products. The content of the alleged obligation of confidence is said to be not to use the information other than for that sole purpose. It is alleged that the Department "well knew" of that limited purpose. Alternatively, it is submitted that the Department "ought to have known" of it.

18. The Secretary and Alphapharm submit that while SK and F's officers considered at relevant times that the B1 data was confidential in a general sense, no-one in the applicants' camp turned his mind to the question of use by the Department for the purposes the subject of this case, until Mr Perrin, the then Managing Director, turned his mind to the question late in 1986. Further, it is submitted that the applicants have failed to establish any knowledge or acceptance on the part of the Department of the "sole purpose" as pleaded by the applicants in the SK and F proceedings. It is then submitted that it has not been shown that the Department ought to have had that knowledge.
    "Knew or ought to have known" - the facts

19. It is necessary first to deal with various questions of fact some of them disputed.

20. Since at least 1975, SK and F had known of the availability on the market in Australia of generic drugs. The Patent was due to expire on 15 February 1988. Certainly by March 1985, Mr Perrin, the then Managing Director of SK and F (who gave evidence) appreciated that applicants with generic products had an easier task in the provision of information to the Department than those with innovative products. On 15 March 1985, SK and F put in a written submission to the Industries Assistance Commission, stating that "generic products are already required to jump far fewer regulatory hurdles to obtain approval", which Mr Perrin, who approved the submission as Managing Director of SK and F, understood to be pointing to an easier task in the provision of information to the Department. SK and F also stated that:
    

"(W)e cannot, indeed should not, roll back the tide of generic products now being introduced as patents run out. Australia's system of drug approval will generally prevent the introduction of defective generic products . . ."

Mr Perrin became concerned that the Department might use data, previously supplied by SK and F, to assist the evaluation of applications for approval of generic cimetidine products. He also was interested to explore the significance for SK and F of the Freedom of Information Act 1982 ("the FOI Act")

1. On 16 October 1986, SK and F sought access pursuant to the FOI Act to any NDF4 applications by DHA in respect of cimetidine. The Department refused the application under the FOI Act, stating in its letter of 5 February 1987 that the B1 data supplied by DHA was received on an understanding of confidentiality and that "(d)isclosure of the data would be an unauthorised use of the information supplied by (DHA)". (In the event, in October 1988, DHA was to withdraw its application for a generic cimetidine product.)

2. On 8 April 1987, Mr Perrin wrote to the Department stating, inter alia, that information disclosed by SK and F in and in connection with its NDF4 applications might not, without the consent of SK and F, be used by the Department for its own purposes, particularly in considering products other than those of SK and F. Mr Perrin sought an acknowledgment by the Department that it accepted the position as described in his letter. On 20 July 1987, Dr Hall, Medical Services Advisor in the Drug Evaluation Branch of the Department, wrote to Mr Perrin referring to his letter of 8 April 1987. He said he noted Mr Perrin's statement that the NDF4 applications and associated materials were submitted to the Department in confidence. The balance of Dr Hall's letter indicates that he was looking at the matter through the prism of s. 45 of the FOI Act, which provides that a document is an exempt document if its disclosure under the FOI Act would "constitute a breach of confidence". Section 45 was to be construed by the Full Court in Corrs Pavey Whiting and Byrne v Collector of Customs (Vic.) (supra). Dr Hall was not dealing with a situation of use of the material within the Department rather than disclosure to an applicant under the FOI Act. Earlier, on 19 June 1987, Mr Perrin had written again to the Department seeking an acknowledgment of its acceptance of the position as he had described it in his letter of 8 April 1987. On 17 August 1987, Dr Hall wrote once again to Mr Perrin. He acknowledged the letter of 19 June 1987, but said that he did not wish to add anything to his response of 20 July 1987.

1. In the meantime, in June 1987, the rejection of the FOI application made by SK and F in February 1987, had led to a hearing in the Administrative Appeals Tribunal. In his affidavit sworn 9 June 1987 for those proceedings, Dr Hall said there was an implicit understanding between the pharmaceutical companies and the Department that the information submitted in the NDF4 applications would be kept confidential. He went on to say that "because of the very nature of the information, it has never been considered necessary for this to be spelled out". He said that the confidential nature of the material was impressed upon external consultants employed to review such data and upon staff of the Department having access to it. Dr Hall went on to say that the B1 data, which had been supplied by DHA in support of its cimetidine application, had been "provided by the company and accepted by the Department on an understanding of confidentiality".

2. In para. 38 of his affidavit, Dr Hall stated the information in question was considered by him to be exempt from disclosure under sub-para. 43 (1) (c) (i) of the FOI Act. He continued:
   

"(T)he Drug Evaluation Branch's function is to review applications to market or conduct clinical trials with drugs to ensure their quality, efficacy and to assess their safety. This function is designed, in part, to protect the Australian Community from unsafe or ineffective drugs. For the Branch to effectively achieve the aims of this function, it is essential that the information which is provided from applicants (usually from the pharmaceutical industry) is complete and frank. Companies will only feel free to provide full and frank information to the Department if they can be assured that the information will be used only for the purpose for which it is given, and will be kept in confidence. I consider that the disclosure of the commercial information contained in the disputed documents would be expected to prejudice the future supply of information to the Department for the purposes of the review of applications. I therefore consider that the information is exempt from disclosure under sub-para. 43 (1) (c)

(ii) of the FOI Act."

Paragraph 43 (1) (c) of the FOI Act renders a document an exempt document if its disclosure under that Act would disclose information (to which paras. (a) and (b) do not apply), being information concerning, inter alia, the business affairs of an organisation, the disclosure of which could reasonably be expected unreasonably to affect that business or to prejudice the supply of information to the Commonwealth for the purpose of the administration of a law of the Commonwealth.

1. In his oral evidence before the Administrative Appeals Tribunal, Dr Hall said that it certainly had been the case since 1973 that the understanding of confidence as he had described it had applied to NDF4 information, whether supplied by innovator companies or by producers of generic drugs. However, it is apparent, in my view, that when Dr Hall both in his affidavit and in his oral evidence refers to the receipt of information in confidence and of the harmful effects of disclosure, he was not directing his mind to the immediate situation that arises in the present litigation, namely use within the Department rather than disclosure to third parties such as trade competitors of the party supplying the information to the Department.

2. I should add that the evidence shows that Dr Ashley had been at a meeting held in 1974 at the Wentworth Hotel in Sydney at the time when the new NDF4 guidelines had been introduced. The purpose of the meeting was for representatives of the Department to explain the new procedures to the representatives of the pharmaceutical industry. There was some discussion in the course of the meeting as to whether the Department would regard as "confidential" information that was submitted to it, and it was indicated, for the Department, that the data would be kept as "confidential".

3. Eventually, on 13 October 1987, Mr Perrin wrote to the Secretary referring to the history of the correspondence, with particular reference to the letter of 8 April 1987, and seeking a formal undertaking. This was that when considering any application for approval of clinical trials or for marketing cimetidine in Australia the Department would not, without the prior written consent of SK and F, use, inter alia, any confidential information in relation to cimetidine which had been disclosed to the Department by SK and F whether directly or through CSL. Mr Perrin also sought an undertaking that the Department had not already made any use or disclosure of such information in considering any other party's application for approval in relation to cimetidine products. No such undertaking was received and the present proceedings, as I have indicated, commenced in November 1987.

4. In September and October 1987, whilst these events were unfolding, but remained unresolved, SK and F had gone ahead and had provided to the Department further B1 data, which is included in that now identified by Exhibits 6A and 6B.

5. The Secretary must be treated as having known since the receipt of Mr Perrin's letter of 8 April 1987, that SK and F regarded the Department as not being at liberty, without the consent of SK and F, to use NDF4 data, previously supplied by SK and F, for the purpose of evaluating applications made by other companies. On the other hand, the assurance sought by SK and F by its letter of 8 April 1987 had not been given at the time of the final request in the letter of 13 October 1987. Accordingly, when SK and F supplied further B1 data in September and October 1987, it did so in circumstances where the Department, the recipient of the data, had so far declined to accept SK and F's statement of the basis on which the data was furnished. In that situation, the applicants in the SK and F proceedings cannot successfully make out a case that this further B1 data was received in circumstances such as to import the obligation of confidence for which SK and F was so far unsuccessfully contending in its dealings with the Department. Rather, SK and F should be regarded as having taken the risk that the Department would not give the assurance sought of it in the correspondence which had commenced on 8 April 1987 and would, as proved to be the event, reject the obligation of confidence for which SK and F contended.

6. What of the position of the Department and SK and F in the years between 1975 and 1987 when the great bulk of the B1 data in question was furnished to the Department? The conclusion I have reached is that the Department did not know that the B1 data was furnished for a purpose which excluded the use to which the Secretary now seeks to have it put in evaluating the Alphapharm application. After dealing with further factual matters which support that conclusion, it will be necessary to determine whether the Department nevertheless ought to have had that knowledge.

7. I accept Dr McEwen's evidence that the practice of the Department in using innovators' B1 data in the manner I have described was undertaken and continued over this period without any awareness that it might be wrongful. I also accept the evidence that it was not until 1987 (or perhaps until what was revealed in April 1986 in the passage I have described in the report of the Industries Assistance Commission dealing with the APMA submission) that the Department was aware that some companies would question the use it made of NDF4 data supplied to it by innovators. I accept that the position was accurately put by Dr Hall in his evidence before the Administrative Appeals Tribunal to the effect that over these years from 1975 there had been an understanding, implicit rather than explicit, between pharmaceutical companies such as SK and F and the Department that NDF4 information would be kept confidential in the sense that it would not be disclosed to any other pharmaceutical company lest use be made of it to the commercial disadvantage of the company which had supplied the information.

8. In relation to the provision of B1 data in the period between 1975 and 1987, I find that the Secretary and his officers did not know that the information was supplied to them for the sole purpose of evaluating applications made by SK and F, so as to exclude any subsequent use by the Department (including within that description external evaluators and ADEC) in the way in which the Department contends it is at liberty to have recourse in evaluating the Alphapharm application.

9. I also find that when SK and F furnished the B1 data between 1975 and 1987, it did so on the implicit understanding I have described. SK and F did not furnish the B1 data with any other purpose which could be described as a "sole" purpose, so as to exclude use within the Department in the course of evaluating other products. I have approached the matter on the footing that if SK and F had had the "sole" purpose contended for, this would have sufficed for the other applicants as well, but that if it fails to demonstrate that purpose, then they fail with it.

10. The position is if officers of SK and F had turned their minds to the question over this period from 1975, they would have said that they regarded the NDF4 information as "confidential" in the sense that it was not to be disclosed to competitors or potential competitors, without the prior permission of SK and F. But no one, before the steps taken by Mr Perrin which I have described, focused attention upon the question of use by the Department of B1 data in the manner which is the subject of this case.

11. There was by 1985 a view, erroneously held, in the industry that those evaluating generic applications, had access to the B2 and B3 innovator data. SK and F believed generic producers had an easier task in the provision of information to the Department than it had as an innovator. There was an understanding, perhaps stemming from what was said at the meeting in 1974 at the Wentworth Hotel, but over the years essentially implicit, to the effect that there would be no disclosure, without permission, to third parties. It appears to have been an awareness by Mr Perrin of the import of the FOI Act, coupled with an awareness of the imminent expiry of the term of the Patent and the concurrent threat from generic producers, that led him, as he put it in his oral evidence, to test the water in October 1986 by seeking access under the FOI Act to any application for marketing approval by DHA in respect of cimetidine. It was not until 8 April 1987 that Mr Perrin's appreciation of the possibilities had developed to the stage where SK and F was seeking from the Department an acknowledgment concerned not only with disclosure, but with use within the Department of SK and F's NDF4 data. Mr Perrin's initial purpose had been to test the Department's attitude to disclosure to third parties in the light of the apparent exemption provisions of the FOI Act.

12. If he had turned his attention to the question of use by a Departmental or external evaluator of confidential information in his hands as the result of an earlier application by another party, Mr Perrin would have drawn a distinction between use of that material for the commercial advantage of another party and use of the information to protect the interests of the health of the population; the evaluator being remiss in his duty if he used the information to the commercial advantage of the other party but remiss in his duty if he failed to use it for purposes going to matters of public health. This is the effect of his oral evidence on the subject, something to which I will return later in these reasons.

13. It therefore becomes a question of whether the relevant officers of the Department over this period ought to have known that the B1 data furnished by SK and F was disclosed for a limited purpose excluding the practice adopted by the Department over the whole of this period of use of innovator B1 data in evaluation of generic applications. Various matters are relied on to be taken together as making good the submission that there ought to have been this knowledge. Indeed, on 28 March 1990, in the course of the trial, the applicants in the SK and F proceedings gave particulars on the point which, with some overlapping and repetition, extend to 21 paragraphs.

14. They commence with what was said at the meeting at the Wentworth Hotel in 1974, and latch upon the term "confidential". It is undoubtedly true that that term may well be understood as embracing both non-disclosure to third parties and limited use by the disclosee. On the other hand, in some contexts, a distinction has been drawn between use and disclosure; see, for example, the covenants construed in Thomas Marshall (Exports) Ltd v Guinle (1979) Ch 227 at 247 and Pioneer Concrete Services Ltd v Galli (1985) VR 675 at 710-711, 714-715, and cf. Torrington Manufacturing Company v Smith and Sons (England) Limited (1966) RPC 285 at 301-302. In the circumstances of the case, including the evidence of Dr Hall, I would regard "confidential" as reasonably to be understood as used with reference to disclosure to third parties, particularly trade rivals.

15. The leading witness for the applicants in the SK and F proceedings was Mr Perrin. In addition to Mr Perrin and Dr Brennan, oral evidence also was given by Dr Davies, Mrs Balnaves, Dr Balmer, Dr Seville, Mrs Goldner, Mr Green, Mr Crawford and Dr Pasaribu. As I have mentioned, Dr Brennan joined SK and F only in 1985. Broadly, the concern with confidentiality displayed by these witnesses had been with non-disclosure to third parties. Some of them, like Dr Seville, did not have any relevant dealings with the Department and did not know how the Department used the SK and F information.

16. Dr Pasaribu was employed by SK and F between September 1983 and June 1988 in a position which directly involved him with the submission to the Department of B1 data in relation to cimetidine. He said the terms of NDF4 had never conveyed to him that the Department might use the B1 data to evaluate a generic application. He had never discussed that view with any officer of the Department. Dr Pasaribu gave his oral evidence with much brio. It is my strong impression from his demeanour that his views are strongly influenced by hindsight.

17. It is submitted that the Secretary "ought to have known" in the relevant sense because it was reasonably foreseeable that use of the SK and F B1 data in assessing a generic application "might enable the generic manufacturer to get an approval it otherwise would not get, or to get an approval more easily or more quickly than it otherwise would". It is true that as regards B2 and B3 data, the generic applicant is, as I have indicated, afforded a "fast track". But this is not as a result of use of innovator data. And the present case is concerned with B1 data. As I have indicated, the effect of the use to which the Department puts innovators' B1 data generally is not to smooth the path of the generic applicant.

18. It is then said that it was reasonably foreseeable that use of the innovators' B1 data in assessing a generic application, such as that by Alphapharm, might result in the generic applicant having a better product. However, this raises issues of functions of the Secretary under Regulations as regards evaluation of quality, safety and efficacy, a subject to which I will return.

19. Reliance was placed upon an ADEC minute of a meeting in 1988 (Exhibit 4) as an admission on the part of the Department as to its understanding of the basis on which it received data from innovators. The minute deals with the problem of unacceptability of an equivalent bioavailability study where the generic drug had been tested against an overseas formulation of the brand of the drug that was the Australian market leader. The minute was prepared after the commencement of the SK and F proceedings and, as is apparent, is a response at least in part to the situation that followed the institution of those proceedings. It is of no real assistance to the applicants in the SK and F proceedings in showing what the Department "ought to have known" over the years in question.

20. It is further submitted that even if it were true that no-one in SK and F turned his mind until comparatively recently to the question of use by the Department for the purpose the subject of this case (i.e. evaluating an application by a competitor) that circumstance is irrelevant. The contention is that a party making a disclosure of its confidential information cannot be required to contemplate the specifics of every possible misuse of the data in order to be protected against such misuse. It is said that if that were so, then the more outrageous the breach of confidence the less prospect the confider would have of restraining it, simply because it had never occurred to him that there could be such a misuse.

21. In many situations, where a plaintiff establishes a case of disclosure of confidential information for a sole purpose, then any use of it for any other purpose including disclosure to any other party will be a breach of confidence; Gurry, "Breach of Confidence", 1984, pp 113-114. On the other hand, Mr Perrin conceded that over a period commencing several years after 1975 he appreciated that the Department in dealing with applications for generics had as a critical aspect of its procedures comparison between a generic product and the existing innovator product. As I have indicated, in March 1985, SK and F made a submission to the Industries Assistance Commission in response to a background paper issued by that body dealing with pharmaceutical products. It is apparent from what was there said that SK and F appreciated that applicants for approval of generic products had an easier task in the provision of material to the Department.

22. Mr Perrin also appreciated that after the success of the first application by SK and F for general marketing approval of a cimetidine product, there had been about ten further applications, and with each such application data that had already been submitted to the Department with earlier applications was not re-submitted. This was because it went without saying that the Department would look back at data that had already been submitted. The same position applied with applications for products to be marketed by CSL. The pleaded expression "sole purpose" has to be understood with this in mind. SK and F also appreciated that the evaluation by the Department of applications might involve it in going beyond information supplied by the applicant, at least to published sources.

23. The considerations relied upon by the applicants in the SK and F proceedings do not make good their submission that the Department ought to have had the alleged "knowledge". Further, one would be cautious in attributing to one party a belief as to the purposes of another when that other party could not show that it had turned its mind to the crucial element in those alleged purposes, here, use as against disclosure.

24. Moreover, and this is a significant point, in assessing whether the Department ought to have had the "knowledge" alleged, one should have regard to the effect of the legal framework within which the parties were dealing. One would be slow to attribute to a regulatory authority knowledge that a party dealing with it expected it to act in a manner which would inhibit it in the exercise of its legal powers and obligations. One would be slow also to attribute to that party a purpose which if fulfilled would inhibit the regulatory authority in this way. Such conduct would not readily be regarded in accord with equity and good conscience.

"It is one thing to say that a law which is merely regulatory and does not provide for the acquisition of title to property is not a law with respect to acquisition of property. It is quite another thing to say that a law which does provide for the compulsory acquisition of title to property and which also happens to be regulatory is not a law with respect to the acquisition of property."

Thus, one is returned to the initial question indicated above, of whether the constitutional guarantee applies to a law providing for the furnishing of proprietary information (to use that expression for present purposes) in response to a request by an officer of the Commonwealth from whom the party furnishing the proprietary information seeks grant of a permission under that legislation.

1. In Trade Practices Commission v Tooth and Co. Limited, supra at 416-417, Stephen J. said:
   

"The reference to 'just terms' throws light upon the particular meaning of 'acquisition' in the placitum. Despite early dicta to the contrary it is now well established that pl. (xxxi) contemplates acquisition by 'the method of requisition', not by 'the method of agreement' (John Cooke and Co. Pty Ltd v The Commonwealth (1924) 34 CLR 269 at p 282 and see Poulton v The Commonwealth

(1953) 89 CLR 540 at p 573, per Fullagar J.). Thus in British Medical Association v The Commonwealth (1949) 79 CLR 201 at p 271, Dixon J. contrasted acquisition under pl. (xxxi) with the case of a voluntary sale, speaking of the former as involving the taking of property from him 'against his will without just compensation'."

The passage cited by Stephen J. from the judgment of Fullagar J. had been approved on appeal by the Full Court: 89 CLR at 603-604.

1. The Pharmaceutical Benefits Act 1947 established a scheme under which members of the public were entitled to obtain certain medicines and appliances, free of charge, on the prescription of a medical practitioner presented to pharmacists approved by the Director-General of Health. Regulations provided for rates of payment to pharmacists for materials so supplied. In British Medical Association v The Commonwealth (1949) 79 CLR 201, the plaintiffs, inter alia, unsuccessfully submitted that the effect of the legislation was to make an acquisition on terms that were not just insofar as the rates of payment were entirely within the discretion of the Executive, and there was no obligation to fix fair and reasonable prices or market prices. The difficulty with the submission was that the legislation did not provide for the compulsory acquisition by the customer of medicines from the pharmacist. The legislation left the pharmacist free to supply prescribed goods or not as he wished. Dixon J. said (79 CLR at 270-271):
   

"There is here no compulsory acquisition by the customer of the drugs he obtains from the chemist when he presents a medical prescription. The chemist is legally free to supply them or not as he pleases. I do not think that the risk he may run of his approval being revoked if he refuses, or the business consequences of the revocation, can make the acquisition compulsory. Its legal character is a voluntary sale. The protection which section 51 (xxxi) gives to the owner of property is wide. It cannot be broken down or avoided by indirect means. But it is a protection to property and not to the general commercial and economic position occupied by traders. The essence of a chemist's relation to the plan is that, as a trader, he must decide whether at the prices fixed by the Commonwealth he will or will not supply a commodity which he buys and sells, the law having brought about a situation in which it is likely that there will be little or no other trade for him in that commodity. If the prices are too low he may suffer in his trade, but that is not within the protection of section 51 (xxxi). But it does not appear to me that it is a case of taking his property from him against his will without just compensation."

See also per Latham C.J. at 241, per Williams J. at 291, and per Webb J. at 295.

1. I accept the submission that the constitutional guarantee does not apply where in response to a request by the Secretary proprietary information is furnished to the Secretary by an applicant for a permission under reg. 5E which would relax a prohibition otherwise imposed upon the applicant. This is so notwithstanding that the existence of the prohibition may provide a strong economic incentive to furnish the information. It may be that a particular applicant furnishing the information does so with an incomplete or inaccurate appreciation of the operation of the legislation establishing the regulatory system which includes reg. 5E. The applicant may have an incomplete or inadequate understanding of the uses to which that information may properly be put subsequently by the Secretary in evaluating applications under the Regulations by other parties in respect of therapeutic substances. But the degree of understanding of the law which is possessed by a particular party which responds to a request under the law by an officer for the Commonwealth to furnish certain information cannot of itself turn the request for and receipt of that information into an exercise of legal compulsion.

2. I have expressed my conclusions that in exercising his powers under reg. 5E in relation to licensed importers, and in relaxing any equivalent condition imposed upon a non-licensed importer under para. 5A (4) (a), the Secretary (i) is bound to have regard to matters going to the quality, safety and efficacy of the therapeutic substance in question and (ii) in paying regard to such matters when dealing with an application for a generic product, may properly have regard to B1 innovator data held by him in the manner in which he proposes to use the SK and F B1 cimetidine data in the evaluation of the Alphapharm application. That an applicant in the position of SK and F did not fully appreciate that this was the scope of the regulatory system established by the Regulations would not mean that there was an acquisition of property, in the constitutional sense, when the B1 data was furnished in response to a request by the Secretary and as a step towards obtaining relaxation of a prohibition imposed upon that applicant by the Regulations. Unless what the legislation in question effects can properly be regarded as an "acquisition of property", one will not enter the area which has been made the exclusive domain of para. 51 (xxxi) of the Constitution: The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 282 per Deane J.

3. Counsel referred to a number of United States decisions. The Fifth Amendment to the Constitution of the United States provides that "private property" shall not "be taken for public use, without just compensation". On a number of occasions, the High Court has indicated that caution is necessary in applying the reasoning in the United States decisions to the Australian constitutional guarantee. See, most recently, The Tasmanian Dam Case, supra at 144 (per Mason J.), 247-248 (per Brennan J.) and 284 (per Deane J.).

4. There is a number of reasons for this caution. They include the following. First, whilst para. 51 (xxxi) has a dual function granting power to make laws with respect to the acquisition of property and limiting the exercise of such power by requiring the provision of just terms, the Fifth Amendment is expressed simply in the form of a negative, assuming that there is inherent or implied legislative power to take private property for public use: Worthing v Rowell and Muston Pty Limited (1970) 123 CLR 89 at 99-100 per Barwick C.J., and see Baker, "The Compulsory Acquisition Powers of the Commonwealth" in Else-Mitchell, Ed., "Essays on the Australian Constitution", 1961, pp 193-194. Secondly, the material part of the Fifth Amendment, "the taking clause", follows the due process clause and cannot be dissociated from it, so that in some decisions the question has been whether there has been a taking without due process, or just compensation, as the case might be; e.g. Corn Products Refining Company v Eddy 249 US 427 at 431-432 (1919). Thirdly, many of the United States decisions turn upon the Fifth Amendment as made applicable to the States by the Fourteenth Amendment; e.g. PruneYard Shopping Center v Robins 447 US 74 (1980); First English Evangelical Lutheran Church of Glendale v County of Los Angeles, California 96 L Ed 2d 250 (1987). Fourthly, as Mason J. pointed out in The Tasmanian Dam Case, supra at 145:
   

"The emphasis in section 51 (xxxi) is not on a 'taking' of private property but on the acquisition of property for purposes of the Commonwealth. To bring the constitutional provision into play it is not enough that legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be."

Fifthly, as is illustrated by United States v Causby 328 US 256 at 267, 269-271 (1946), the long retention by the United States of its sovereign immunity against claims in tort encouraged the treatment of what were primarily, if anything, claims in tort, as claims arising from the taking of private property, thereby characterizing them as claims founded upon the Constitution of the United States, against which there was no sovereign immunity; see "Prosser and Keeton on Torts", 5th Ed., 1984, pp 1033-1034. In Australia, the provisions of ss. 56 and 64 of the Judiciary Act have meant that the Australian constitutional guarantee has been expounded in quite a different setting. Sixthly, para. (xxxi) does not confer upon a person an enforceable right to claim just terms in respect of an acquisition of property; the law in question will be invalid and action taken in reliance upon it may be tortious: Poulton v The Commonwealth (1953) 89 CLR 540 at 569; The Tasmanian Dam Case supra at 289-290. In Australia, unlike the United States, there is no action to recover "just compensation" as a claim "founded on the Constitution" because it imposes an obligation by implying a promise to make the compensation: see United States v Great Falls Manufacturing Company 112 US 645 at 656-657 (1884); First English Evangelical Lutheran Church of Glendale v County of Los Angeles, California, supra, at 264. Seventhly, "just compensation" is not the same concept as "just terms": Grace Brothers Proprietary Limited v The Commonwealth (1946) 72 CLR 269 at 290-291, per Dixon J. Eighthly, the course of decision in the United States has produced the result that the Supreme Court has generally been unable to develop any "set formula" for determining when economic injuries caused by public action must be deemed to be a compensable "taking"; the inquiry into whether a "taking" has occurred has become essentially an "ad hoc, factual" inquiry into the circumstances as they affect each litigant: Penn Central Transportation Co. v New York City 438 US 104 at 123-124 (1978). Ninthly, in the United States decisions, governmental action which appears to be "regulation" may amount to a "taking", on the footing that an object of the taking clause is to bar government from forcing some persons in particular to bear burdens which should be distributed across the community. In that regard, in The Tasmanian Dam Case, supra at 247-248, Brennan J. said:

If this Court were to construe section 51

(xxxi) so that its limitation applies to laws which regulate or restrict use and enjoyment of proprietary rights but which do not provide for the acquisition of such rights, it would be necessary to identify a touchstone for applying the limitation to some regulatory laws and not to others . . . In this Court, the limitation in par. (xxxi) has not been thought hitherto to apply to a regulatory law that did not effect an acquisition of property."

Cf. supra at 283-292 per Deane J.

1. In their article "The Trade Secret Status of Health and Safety Testing Information: Reforming Agency Disclosure Policies" (1980) 93 Harv. L. Rev. 837 at 865, Professors McGarity and Shapiro, expressed the view that on the assumption that health and safety data were "private property" within the meaning of the taking clause, nevertheless disclosure, as a condition of receiving a licence or registration, need not constitute an unconstitutional "taking". They referred to the decision of the Court of Appeals (3rd Circuit) in Westinghouse Electric Corporation v United States Nuclear Regulatory Commission 555 F 2d 82 at 95 (1977), where it was said:
   

"A voluntary submission of information by an applicant seeking the economic advantages of a license can hardly be called a taking."

There followed the decision of the Supreme Court in Ruckelshaus v Monsanto Company 467 US 986 (1984), to which it will be necessary to refer in some detail.

1. In determining whether legislation has gone beyond mere "regulation" and effects a "taking", the Supreme Court has had regard to several "factors". These include "the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations": PruneYard Shopping Center v Robins, supra at 83. It was this last "factor" (which is significant in an inquiry that, as I have indicated, does not directly arise with the Australian constitutional guarantee) that proved decisive in the Ruckelshaus Case.

2. In that case, the respondent was a producer of pesticides and the appellant was the administrator of the United States Environmental Protection Agency ("EPA"). The Supreme Court held that the respondent had a property interest protected by the taking clause of the Fifth Amendment in the health, safety and environmental data it had submitted to the EPA with applications for registration of pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act 1947, 61 Stat. 163 ("FIFRA"). At issue was whether the taking clause applied to use by EPA of data, submitted by the respondent in the evaluation of the application of a subsequent applicant, and to public disclosure by EPA of some of the submitted data. The FIFRA legislation pursuant to which EPA acted took a different form over three relevant periods.

3. Before 1972, FIFRA was silent as to EPA's use and disclosure of data submitted to it in connection with an application for registration. The majority of the Supreme Court (O'Connor J. dissenting) held that the respondent had no reasonable investment-backed expectation that its information submitted to EPA before the 1972 amendments would remain "inviolate" in EPA's hands, and that the possibility was substantial that the federal government at some future time would find disclosure to be in the public interest. Therefore, there was no case for the application of the "taking clause" of the Fifth Amendment.

4. 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 as such at the time of submission to EPA. 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. 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.

5. In 1978, the legislative scheme was changed again. Applicants were now granted a ten year period of exclusive use for data on new active ingredients contained in pesticides registered after 1978; during this period the data might not be cited without the consent of the original applicant. EPA was authorised to use all other data, submitted after 1969, by an applicant for registration, in the evaluation of the application of a subsequent applicant and to disclose publicly some of the submitted data. There were provisions for arbitration to fix the amount of compensation, but with very limited access to judicial review. In subsequent litigation, it was held that Article III of the Constitution of the United States did not prohibit the Congress from selecting binding arbitration with only limited judicial review as the mechanism for resolving disputes between parties to FIFRA's pesticide registration scheme: Thomas v Union Carbide Agricultural Products Co. 473 US 568 (1985).

6. In the Ruckelshaus Case, supra, the Supreme Court held, as regards the 1978 amendments, that the respondent knew that for a period of ten years from the date of submission of its data EPA would not consider it in evaluating the application of another party, without the permission of the respondent, and that once that period had expired, EPA could use the data without its permission. The regulation by the federal government of the marketing and use of pesticide was a burden that the community had to bear in exchange for the advantage of living and "doing business" in a civilized community, and the respondent was willing to bear this burden in exchange for ability to market pesticides. There was voluntary submission of data by the respondent in exchange for the economic advantages of registration, the conditions under which the data was submitted were rationally related to a legitimate interest, and the respondent was aware of them. It followed, in the Supreme Court's judgment, that there was no "taking" of the data.

7. The Ruckelshaus Case was referred to extensively by all counsel, each, in one way or another, seeking to draw some comfort from it. No doubt the legislation there in question has some resemblances to the Australian regulatory scheme with which the Regulations are concerned. But, in truth, the decision is illustrative of the need for caution in applying reasoning in the United States decisions too readily in construing the operation of para. 51 (xxxi). I have dealt with the case in this detail in response to the stress laid upon it but without, as I have indicated, deriving any immediate profit from it.

8. However, what I have said earlier is sufficient to dispose of the constitutional argument, in favour of those upholding the legislation. Nevertheless, in response to the detailed arguments that were submitted on the point, I should deal also with the question of whether the concept of "property" as understood in para. 51 (xxxi) extends to information which is of sufficient substance to be the subject of an equitable obligation of confidence.
   Property

1. In the United States, whilst the meaning of "private property" as used in the Fifth Amendment is a federal question, the term normally will obtain its content by reference to State law: United States v Causby, supra at 266. In the Ruckelshaus Case, the respondent had its operations based in the State of Missouri, and the Supreme Court held that the data in question comprised a trade secret property right under the law of that State with the result that that property right was protected by the "taking clause" of the Fifth Amendment.

2. The word "property" was described by Hohfeld as a term with no definite or stable connotation; see the discussion by Professor Cormack, "Legal Concepts in Cases of Eminent Domain", (1931-32) 41 Yale L.J. 221 at 221-223. Rights created by or pursuant to statute may be proprietary in character: R. v Toohey; Ex parte Meneling Station Proprietary Limited (1982) 158 CLR 327 at 342-344. The rights granted to a patentee are classed as personal property: Patents Act 1952, s. 152. So also copyright (Copyright Act 1968, s. 196) and designs (Designs Act 1906, s. 25C). It has been said that within the sense of para. 51 (xxxi), "property" embraces "intellectual property": Trade Practices Commission v Tooth and Co. Limited, supra at 434 per Murphy J. Whether or not confidential information would necessarily be regarded as "intellectual property" is a matter for debate.

3. The authorities establish that para. 51 (xxxi) is to be given the liberal construction appropriate to a constitutional guarantee. The concept of "property" is not to be narrowly confined and comprehends "innominate and anomalous interests", in addition to those estates in land or those interests in land or in a chattel or in a chose in action which are recognised at law or in equity. The free enjoyment of property rights so various in nature may be affected by a variety of laws, but the paragraph extends only to those laws for the acquisition of proprietary rights: The Tasmanian Dam Case supra at 246-247 per Brennan J.

4. It was submitted for the Secretary and for Alphapharm that as a matter of general law, one could not correctly characterize as "property", confidential information the misuse of which would be restrained by equitable remedies. The well known aphorism of Holmes J. in E.I. du Pont de Nemours Powder Company v Masland 244 US 100 at 102 (1917), was prayed in aid. What his Honour there said has to be understood in the particular procedural context in which the case was decided, something analysed in National Starch Products Inc. v Polymer Industries Inc. 79 NYS 2d 357 at 361-362 (1948). This context has been used to diminish the significance of the aphorism of Holmes J; see "Milgrim on Trade Secrets", 1989 Rev., 1.01. But even if taken at face value, that aphorism does not, as equity has developed in this country, have the significance sought to be made of it in this case.

5. Holmes J. said it was a "primary fact" that "the law makes some rudimentary requirements of good faith". The application of the term "property" to trade secrets was stigmatized as "an unanalyzed expression of certain secondary consequences" of that "primary fact". But in various fields, if one takes the primary fact of equitable intervention and analyses the secondary consequences thereof, one may well describe them as indicative of equitable proprietary rights. The authorities dealing with the position in equity of the parties to an agreement for lease which is susceptible of specific performance provide one example; see Chan v Cresdon Pty Ltd (1988) 64 ALJR 111 at 115. Those dealing with assignments for value of property not yet in existence provide another; see Booth v The Commissioner of Taxation (1987) 164 CLR 159 at 165-166. What is required, in relation to equitable protection of confidential information, is an analysis, something which Holmes J. did not have to make.

6. It seems clear enough that knowledge per se is not proprietary in character; see Moorgate Tobacco Co. Limited v Philip Morris Limited (1982) 64 FLR 387 at 404-405, affd. (1984) 156 CLR 414; Boardman v Phipps (1967) 2 AC 46 at 89-92, 102-103, 127-129, but compare 106-107, 115. Further, it is clear in Australia that the equitable jurisdiction to grant relief against an actual or threatened abuse of confidential information, not involving any tort or breach of contract, fiduciary duty, copyright or trade mark, is based not in pre-existing proprietary right, but in an obligation of conscience arising in the circumstances of the case: Moorgate Tobacco Co. Limited v Philip Morris Limited (No. 2) supra. Thus, where the activity sought to be restrained as misuse of confidential information takes place outside the territorial limits of the jurisdiction of a court of equity, nevertheless that court, in exercise of its in personam jurisdiction over a party before it, may grant injunctive relief: Best Australia Ltd v Aquagas Marketing Pty Ltd (1989) 13 IPR 600.

7. However, in order to attract equitable intervention, the information must be "confidential in quality" and of a "confidential nature": Coco v A.N. Clark (Engineers) Ltd, supra at 47; The Commonwealth v John Fairfax and Sons Limited, supra at 51; O'Brien v Komesaroff (1982) 150 CLR 310 at 326. Further, trade secrets may devolve by operation of law, as upon bankruptcy (In re Keene (1922) 2 Ch 475) and by testamentary provision (Morison v Moat (1851) 9 Hare 241 at 241, 265; 68 ER 492 at 493, 502). It should be noted that In re Keene (supra) the secret formulae had never been committed to writing. A secret process employed in a business may be held in trust in connection with a trust of the business (Scott on Trusts, 4th Ed., 1987, 82.5) and may be the subject of an equitable charge given to a creditor (Struthers v Hospital Products Ltd, Supreme Court of N.S.W., Kearney J., 25/2/84, unrep.). And, in some circumstances, the obligation to observe an obligation of confidence may be extended to a third party: Malone v Metropolitan Police Commissioner (1979) Ch 344 at 361; Wheatley v Bell (1982) 2 NSWLR 544.

8. In National Provincial Bank Ltd v Ainsworth (1965) AC 1175 at 1247-1248, Lord Wilberforce said that before a right or interest can be admitted into the category of property, it must be definable, identifiable by third parties, have some degree of permanence or stability, and be capable in its nature of assumption by third parties. This dictum has been applied in Australian decisions, for example, R. v Toohey; Ex parte Meneling Station Proprietary Ltd supra, at 342-343; Sonenco (No. 77) Pty Ltd v Silvia (1989) 89 ALR 437 at 445, 457. The degree of protection afforded by equitable doctrines and remedies to what equity considers confidential information makes it appropriate to describe it as having a proprietary character. This is not because property is the basis upon which that protection is given, but because of the effect of that protection; cf. Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525 at 548 per Williams J.; Boardman v Phipps, supra at 127-129 per Lord Upjohn.

9. To reach that conclusion is not to engage in the circularity of reasoning to which Windeyer J. referred in Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25 at 34, namely, by saying that equity intervenes in a particular class of case by injunction or other remedy, and by concluding that the reason for the remedy lies in the protection of an equitable proprietary interest. Here, the source of the equity is that described by Deane J. in the Moorgate Tobacco Case supra, and is not based in property, but the effect of the protection given by the legal system is as I have described.

10. Accordingly, I would reject the submissions on this point made by counsel for the Secretary and for Alphapharm. But, in any event, in passing beyond the general law to construe the constitutional guarantee, one should lean towards a wider rather than narrower concept of property, and look beyond legal forms to the substance of the matter. Looked at in this way, the B1 data with which this case is concerned would, in my opinion, plainly answer the description of "property" within the meaning of para. 51 (xxxi) of the Constitution. That, of course, is not to say that all information supplied by a licensed importer to the Secretary pursuant to sub-reg. 5E (2) would necessarily be proprietary in character, so as to attract the operation of the constitutional guarantee, if it were otherwise applicable.

11. In my view, the attack in this case on validity fails on this as well as on the other grounds I have discussed.
    Result

12. It is unnecessary to decide whether, if para. (xxxi) were otherwise applicable to the Regulations, the attack on constitutional grounds nevertheless would have failed because the use to which the Secretary might put information furnished pursuant to reg. 5E would involve not an acquisition of any interest in the information, so much as an adverse effect upon the value or utility of the information to the party by whom it had been furnished to the Secretary. There is authority indicating that such injurious affectation would be insufficient: The Tasmanian Dam Case, supra at 145, 247-248, but cf. at 283-284. Nor is it necessary to determine whether "just terms" would be afforded by the provision of authority for the Secretary to lift from the applicant a relevant prohibition after the information in question had been furnished pursuant to reg. 5E.

13. The SK and F proceedings should be dismissed. In the Alphapharm proceedings, the applicant should have declaratory relief to the effect that the Secretary, officers of his Department, members of the Australian Drug Evaluation Committee, and external evaluators who have signed undertakings in or to the effect of Exhibit 2 in these proceedings, have been and remain at liberty to use or apply the information, documents and material, which are identified in Exhibits 6A and 6B in these proceedings, in the course of evaluating, pursuant to the Customs (Prohibited Imports) Regulations, the application for general marketing approval in Australia of a cimetidine product which was made by the applicant on 14 July 1988. I would not grant against the Secretary relief by way of mandatory injunction or in the nature of mandamus. It will be sufficient that the position of the interested parties is established by the declaration.

14. I will hear the parties in the Alphapharm proceedings as to the course to be followed for the balance of those proceedings. I will also hear the parties in both proceedings, as to costs. The only orders to be made today are that each matter stand over to a date to be fixed for the bringing in of short minutes of orders to give effect to these reasons.

15. Finally, I note that counsel drew my attention to the Therapeutic Goods Act 1989, which received the Royal Assent on 17 January 1990, but had not commenced when these proceedings were tried. This statute repeals the Therapeutic Goods Act. It contains, in s. 61, provisions for the use of "therapeutic goods information" which has been provided to the Department in relation to another matter, but these provisions have no bearing upon the present proceedings.