Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd

[1992] FCA 71

Re: STERLING PHARMACEUTICALS PTY. LIMITED
And: THE BOOTS COMPANY (AUSTRALIA) PTY. LIMITED
No. G738 of 1991
FED No. 71
Practice and Procedure
(1992) 34 FCR 287

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Practice and Procedure - Grant of interim stay pending proceedings in another jurisdiction - appropriate forum where same issues to be determined.

Federal Court Rules: Order 20 rule 2

HEARING

SYDNEY

#DATE 28:2:1992

Counsel for the Applicant: T.E.F. Hughes QC and Dr G.A. Flick

Solicitors for the Applicant: Freehill Hollingdale and Page

Counsel for the Respondent J.T. Gleeson

Solicitors for the Respondent: Minter Ellison

ORDER

This proceeding be adjourned to Thursday, 5 November 1992 at 9.30 a.m. for further directions.

The further hearing of the motion of the respondent that the proceeding be stood out of the list or stayed be also adjourned to that day.

Either party be at liberty to restore the proceeding (including the motion) to the list on seven days notice.

The costs of the respondent of the motion up to and including today be the respondent's costs in the proceeding.

The applicant pay on an indemnity basis the costs, charges and expenses of Rochelle Louise Fehsenfeld relating to her attendance in court to give evidence on the hearing of the motion including her expenses of travelling between New Zealand and Australia to attend the hearing of the motion for the purpose of giving evidence and accommodation expenses in Sydney and pay to Messrs Bells, Gully, Buddle, Weir, solicitors of New Zealand, their fees with respect to the attendance of Rochelle Louise Fehsenfeld in Sydney for two days for the purposes of the hearing of the motion.

The applicant pay on an indemnity basis the costs, charges and expenses of Ian Geoffrey Robinson relating to his attendance in court to give evidence on the hearing of the motion.

Failing agreement, the costs, charges and expenses mentioned in orders 5 and 6 above be taxed by the proper officer of this Court and then paid in accordance with that officer's certificate.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is a motion by the respondent, The Boots Company (Australia) Pty Limited ("Boots Australia"), for orders that this proceeding, brought by the applicant, Sterling Pharmaceuticals Pty Limited ("Sterling Australia"), against Boots Australia be stood out of the list or alternatively stayed until the hearing and determination of proceedings pending in the High Court of New Zealand between companies associated with Sterling Australia and Boots Australia, namely, Sterling Pharmaceuticals (NZ) Limited ("Sterling New Zealand") as applicant and The Boots Company (New Zealand) Limited ("Boots New Zealand") as respondent. The essential ground of the motion is that the primary issue between the parties in both proceedings is the same. The motion is opposed by Sterling.

1. Each company involved in the litigation, both in Australia and New Zealand, is a subsidiary of its overseas parent which in the case of the Sterling companies is based in New York and in the case of the Boots companies in the United Kingdom. Sterling Australia and Sterling New Zealand, though separate entities in law, operate to a degree through common management and control; for example, the general manager of Sterling New Zealand reports to the chief executive of Sterling Australia.

2. Sterling Australia supplies in Australia a medicine in tablet and capsule form bearing the brand name Panadol which consists of the analgesic drug Paracetamol. Panadol is marketed in packets containing twelve, twenty-four and forty-eight tablets or capsules. Boots Australia supplies in this country a medicine in tablet form bearing the brand name Nurofen which consists of an analgesic drug of the non-steroidal anti-inflammatory type, namely, Ibuprofen. Nurofen is marketed in packets containing twelve, twenty-four and forty-eight tablets.

3. The exterior cover of each packet of Nurofen bears printing which includes on the back of the packet words which include the following:
   

"Nurofen is gentler on the stomach than Aspirin and is as well tolerated as Paracetamol.

However, as with other pain relievers, Nurofen should not be taken by patients with a stomach ulcer or other stomach disorder.

Patients receiving regular treatment with other drugs should be advised to consult their doctor before taking Nurofen.

Asthma sufferers and anyone allergic to Aspirin should only take Nurofen after consulting their doctor. As with all drugs, it is recommended that

Nurofen should not be taken during pregnancy,

except under medical supervision."

1. By letter dated 22 September 1989 Sterling Australia complained to Boots Australia about the statement on the packaging of Nurofen "Nurofen ... is as well tolerated as Paracetamol" (to which I shall for convenience refer as "the Nurofen statement") which was said to be against all the established and accepted scientific evidence and false. Complaint was not made about the statement that "Nurofen is gentler on the stomach than Aspirin". The letter stated that Sterling Australia had been advised that the conduct of Boots Australia in making this representation on its packaging was infringing the Trade Practices Act 1974 ("the Australian Act"), in particular ss. 52 and 53. Sterling Australia asked Boots Australia to immediately stop the sale of Nurofen in the packaging containing the Nurofen statement and to withdraw the statement from all existing packaging of Nurofen.

2. Boots Australia replied by letter of 4 October 1989 denying that Nurofen's packaging infringed the Australian Act. It stated that it did not intend to make any modifications to the Nurofen packaging. In addition Boots Australia asserted that certain conduct of Sterling Australia with respect to a product Niapren was confusing to consumers and should cease. The solicitors for Sterling Australia replied by letter of 9 October 1989 saying that they were seeking their client's instructions and would let Boots Australia have the client's response to the assertions of Boots Australia shortly. By letter of 18 October 1989 the solicitors for Sterling Australia denied that the advertisements relating to Niapren were confusing to customers and stated that it was not intended to alter or withdraw the advertisements of their product. They said that there would be a reply sent shortly with respect to the matters raised by Boots Australia concerning the labelling of Nurofen. Boots Australia received no further communication from Sterling Australia or its solicitors until the solicitors for Sterling Australia wrote to Boots Australia on 14 November 1991 threatening to commence this proceeding if an undertaking to discontinue the impugned conduct was not given. The undertaking was not given and this proceeding was commenced by Sterling Australia on 19 November 1991.

3. In its statement of claim Sterling Australia asserts that the making of the Nurofen statement is false and constitutes misleading and deceptive conduct in contravention of s. 52 of the Australian Act. The assertions are put in the alternative in the statement of claim reflecting a variety of possible meanings that may be attributed to the Nurofen statement; but the basic complaint is that it concentrates or draws attention in particular to the stomach when it says that "Nurofen ... is as well tolerated as Paracetamol". Boots Australia's case is that this statement is a general statement covering all parts of the body and is true.

4. The Australia proceeding had reached the stage of completion of pleadings before the filing of Boots Australia's motion for a stay.

5. Sterling New Zealand commenced the New Zealand proceeding against Boots New Zealand in the High Court of New Zealand on 9 November 1990. Sterling New Zealand applied for an interim injunction. That application was heard in March 1991 before Hillyer J. of the High Court of New Zealand at Auckland and judgment given on 27 March 1991. Although the application for interim injunction initially complained of more statements than the Nurofen statement, by the conclusion of the opening address of counsel for Sterling New Zealand, it had confined its complaint for the purpose of the application for interim injunction to the Nurofen statement. The complaint in the New Zealand proceeding was based on alleged contravention of ss. 9, 10 and 13 of the Fair Trading Act 1986 of New Zealand ("the New Zealand Act") which have their counterparts in the Australian Act; but the principal thrust of the claim of Sterling New Zealand is alleged contravention of s. 9 of the New Zealand Act which is in identical terms to s. 52 of the Australian Act except that the Australian provision is confined to corporations because of constitutional considerations.

6. Hillyer J. made, of course, no final determinations with respect to any questions of fact or law that were before him on the application for interim relief, but his Honour said in the course of his reasons (now published at (1991) 2 NZLR 634) with respect to Sterling New Zealand's complaint about the Nurofen statement:
   

"I would have thought that a statement that

Nurofen was as well tolerated as Paracetamol was a general statement covering all parts of the

body, and therefore the stomach as well, ..."

1. His Honour declined to grant an interim injunction. He said that any possibility of danger to the public from the publication of the Nurofen statement and the use of the drug Nurofen would be a very minimal one. He also said that the statement complained of had been published to professionals, their staff and the public since 1985 without any complaint until a letter was sent by Sterling New Zealand in June 1990. He held that the balance of convenience did not favour the grant of an interim injunction and accordingly refused the application.

2. Extensive affidavit evidence was filed in the New Zealand proceeding for interim relief. Twelve affidavits from medical experts were filed on behalf of Sterling New Zealand. Of those twelve deponents, ten were Australian doctors and two were from New Zealand. Boots New Zealand relied on eight affidavits from medical experts, five of which were sworn by doctors from the United Kingdom, one from an Australian doctor, one from a New Zealand doctor and one from a doctor resident in the United States. Sterling New Zealand filed seven affidavits from medical experts in response to the affidavits from Boots New Zealand, six of which were sworn by Australian doctors and one by a doctor from the United Kingdom.

3. Since the determination of Sterling New Zealand's application for interim relief, several interlocutory applications relating to procedural matters have been dealt with the High Court of New Zealand; as a result, the pleadings have been amended. Sterling New Zealand has served a list of documents on the solicitors for Boots New Zealand, the list being dated 13 December 1990; and it is expected by the solicitors for Boots New Zealand that its list of documents will be completed in the near future.

4. It appears from the evidence before this Court that provided the parties to the New Zealand proceeding, proceed with diligence, the remaining interlocutory steps could be completed by about May this year and that the final hearing of the New Zealand proceeding (which is expected to take up to about twenty-one days) could take place before the end of this year.

5. The Court has a general power to control its own proceedings, and that power extends to enable it to order a temporary stay of proceedings in various circumstances including the case where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first: L. Grollo Darwin Management Pty Limited v Victor Plaster Products Pty Limited (1978) 33 FLR 170 at 177; Hughes Motor Service Pty Limited v Wang Computer Pty Limited (1978) 35 FLR 346 per Bowen C.J. at 351-4; Muller v Fencott (1981) 53 FLR 184 per Toohey J. at 189; Bond Corporation Pty Limited v Thiess Contractors Pty Limited (1987) 14 FCR 193 per French J. at 203. The Court has power specifically conferred by Order 20 rule 2 to order that a proceeding in the Court be stayed or dismissed generally, where no reasonable cause of action is disclosed or the proceeding is frivolous or vexatious or an abuse of the process of the Court; but this power is not the Court's sole source of power to stay proceedings in the Court. The Court is a superior court of record and obviously may control its own proceedings including, where appropriate, the exercise of a power to grant a stay. Bowen C.J. gave a helpful list of relevant factors to be considered on an application for a stay of this kind in Wang Computer at 353 which I have considered.

6. In my opinion relevant consideration is to be taken into account in the present case includes the following:-
   . Which proceeding was commenced first. . Whether the termination of one proceeding is likely to have a
   

material effect on the other.

. The public interest. . The undesirability of two courts competing to see which of them

determines common facts first.

. Consideration of circumstances relating to witnesses. . Whether work done on pleadings, particulars, discovery,

interrogatories and preparation might be wasted.

. The undesirability of substantial waste of time and effort if it

becomes a common practice to bring actions in two courts involving substantially the same issues.

. How far advanced the proceedings are in each court. . The law should strive against permitting multiplicity of

proceedings in relation to similar issues.

. Generally balancing the advantages and disadvantages to each party.

1. Although the two Sterling companies and the two Boots companies are different entities, the reality is that each of the Sterling companies and each of the Boots companies comes from the same family, the ultimate holding company of the former being in the United States and of the latter in the United Kingdom. It is true that Sterling Australia and Sterling New Zealand have different management; but as mentioned earlier the general manager of Sterling New Zealand reports to the chief executive of Sterling Australia and there are other links between the two corporations. Doubtless the resolution of the issues in New Zealand or Australia will not give rise to an issue estoppel in the other country because the parties are different. But it would be quite unreal to regard companies from the same international group as if they were totally independent of each other such that the success or reversal of one of them in proceedings in one country would not materially, as a practical matter, affect the conduct of their associates in another country where the proceedings involve similar issues.

2. The issues in the two sets of proceedings are not precisely the same. The critical issue in the Australian proceeding is whether, by making the Nurofen statement, Boots Australia has contravened s. 52. Declarations and injunctive relief are sought by Sterling Australia against Boots Australia. The correctness of the Nurofen statement is also the principal issue in the New Zealand proceeding. Indeed, on the hearing for interim relief there was, as Hillyer J. found, some reduction in the number of statements complained of, so that when counsel for Sterling New Zealand came to the end of his opening submissions the statements complained of for the purposes of interim relief consisted solely of the Nurofen statement. Having perused the amended statement of claim in the New Zealand proceeding and the statement of defence it seems to me that the basic issue is the same in each proceeding. I take into account, however, the fact that in the New Zealand proceeding Sterling New Zealand complains of other statements in the advertising, packaging and leaflets adopted by Boots New Zealand; but the main issues for determination in the New Zealand proceeding seem to me to be the meaning of the Nurofen statement and the medical issue of the comparative tolerability of Paracetamol and Ibuprofen.

3. So there is a substantial identity of issues in the two proceedings, though the issues in the New Zealand proceeding are wider. However, the resolution of the questions which arise in the New Zealand proceeding concerning the accuracy of the Nurofen statement and the medical issue of the comparative tolerability of Paracetamol and Ibuprofen should for all practical purposes solve that issue between them for the purposes of both proceedings. Common sense leads me to conclude that, unless there is some serious deficiency in the evidence of the unsuccessful party in the New Zealand proceeding, the resolution of issues there should determine the result of those issues in the Australian proceeding. Indeed, whether the parties to the Australian proceeding do or do not agree to accept the result of the New Zealand proceeding, this Court will be able to control the future conduct of the Australian proceeding by giving directions with the benefit of the findings in New Zealand which may substantially reduce the scope of the issues in the Australian proceeding, in particular, the medical issues.

4. If the Australian proceeding continues in the normal course at the same time as the New Zealand proceeding is being conducted there is likely to be a substantial measure of duplication in the preparation for and the conduct of the final hearing of the two proceedings in respect of the same or substantially the same issues, in particular the construction of the Nurofen statement and the medical issue as to the comparative tolerability of Paracetamol and Ibuprofen. Such duplication in the preparation and conduct of the final hearing in relation to medical evidence on the latter issue would be likely to be especially burdensome to both parties and their expert witnesses. It is clear that many of the expert witnesses will give evidence in both cases. I have already referred to the large number of medical expert witnesses who have already sworn affidavits, though for the purposes of interim relief, in the New Zealand proceeding. It is likely that many or most of them will give evidence at the final hearing in New Zealand. There will be increased costs and burden to the parties in endeavouring to obtain the co-operation and attendance of numerous busy expert witnesses from different parts of the world (Australia, the United Kingdom, the United States and New Zealand) for the preparation and hearing of trials in two countries instead of one. The resulting inconvenience for those expert witnesses themselves is obvious. Also it cannot be right that necessary calls are made upon the resources of this Court or the High Court of New Zealand in relation to the final hearing of the issues substantially common to both proceedings. There is also evidence, which is not controverted, that certain officers of Boots Australia and its United Kingdom parent would have undue burdens placed upon them when preparing affidavits and being cross-examined in different countries. The position is probably the same so far as officers of Sterling Australia or its United States parent are concerned.

5. Both proceedings are public interest proceedings rather than proceedings to protect proprietary rights of corporations. In his judgment on the interlocutory hearing before Hillyer J. in New Zealand, his Honour concluded, after hearing evidence and submissions, that the matter which caused him most cause for concern was the possibility that there would be some danger to the public in the continuation of the Nurofen statement if it was ultimately held to contravene the Fair Trading Act. His Honour considered this concern in the light of other matters to which he referred at p 638 of the report of his decision and led him to conclude that the possibility of danger to the public "would be a very minimal one". His Honour relied on certain other matters which may or may not apply in Australia on this issue of danger to the public; but I am not persuaded that any different conclusion should be reached with respect to the Australian proceeding at least for the time being. The evidence suggests that it is possible that the New Zealand proceeding will be heard on a final basis late this year, though I realise that because the exigencies of litigation and the problems that confront court lists are much the same in many countries of the world including Australia and New Zealand this expectancy may not be realized.

1. The Sterling interests chose to commence the New Zealand proceeding first. The Australian proceeding was commenced many months after the complaint had been made by Sterling Australia against Boots Australia about the Nurofen statement appearing on the packaging distributed in Australia. It appears that Sterling Australia had received advice in September 1989 that the conduct of Boots Australia was infringing ss. 52 and 53 of the Australian Act. Yet it was not until November 1991 that the Australian proceeding was commenced and in the meantime the New Zealand proceeding was commenced in November 1990. This delay was relied on strongly by counsel for Boots Australia in argument as indicating delay akin to laches such as should lead this Court in its discretion to stay the proceeding here until the determination of the proceeding of the New Zealand proceeding. Evidence was given in the witness box by Mr Tucker, a senior officer of Sterling Australia, in effect that the primary reason for any delay in instituting the Australian proceeding was because it was thought by Sterling Australia that the public health regulatory authorities in this country would take action against Boots Australia to stop the conduct later complained of in this proceeding. I make no finding in this motion as to whether Sterling Australia was guilty of undue delay in bringing its claim in this Court; but it is relevant that the complaint about Boots Australia's conduct alleged by infringing s. 52 was first made as long ago as September 1989 and that it took more than two years before that complaint assumed juridical form in this country.

2. The two sets of proceedings raise very similar issues of construction of packaging and leaflets etc.. The identical statement is presented to consumers in Australia on the reverse of the packet in which Nurofen is sold and to consumers in New Zealand on a label inside the packet and an accompanying leaflet. The case in each forum ultimately turns on questions of construction of the Nurofen statement and the acceptance of expert evidence. Neither case appears to raise questions of fundamental construction of either the Fair Trading Act of New Zealand or the Trade Practices Act of Australia; ultimately the issues in both courts seems to turn on questions of fact and the construction of documents.

3. I am alive to the fact that a party who has properly invoked the jurisdiction of an Australian court is prima facie entitled to have his case heard and determined by that Court notwithstanding that he institutes proceedings in a foreign court. I have approached the case on this prima facie assumption. However, in all the circumstances, having balanced the advantages and disadvantages to each party in the Australian proceeding, I am satisfied that the interests of justice are best served by acceding to the motion of Boots Australia. I do not think it necessary however that the Australian proceeding be stayed even on a temporary basis. I think it preferable that the Australian proceeding be stood out of the list to a date late this year with liberty being reserved to either party to restore the matter to the list on reasonable notice in the event that circumstances change. If the matter is not restored to the list then the Court will be able to determine later this year what is the appropriate course to take in the light of the circumstances then existing, including the then position of the New Zealand proceeding. In this way the interests of both parties are best served as well as the interests of justice generally including the interest of the contestants in the New Zealand proceeding.

4. In conclusion, it was submitted by counsel for Sterling Australia that the principles expounded by the High Court in Oceanic Sunline Special Shipping Co Inc v Fay (1988) 165 CLR 197 and more recently in Voth v Manildra Flour Mills Pty Limited (1990) 171 CLR 538 relating to the stay of proceedings in Australia where there are other proceedings pending in a foreign country between the same parties for the same cause of action apply to a motion of the kind presently before this Court. I do not agree. There is obviously a substantial difference between a motion for a permanent stay or dismissal of a proceeding and a motion for a temporary stay or lengthy adjournment of a case. (As to stay of proceedings or dismissal see also Australian Commercial Research and Development Limited v ANZ McCaughan Merchant Bank Limited (1989) 3 AllER 65.) The Court remains in full control of the proceeding before it when it is stayed only temporarily or where, as I propose, the proceeding will be stood out of the list for a substantial time until later this year.

5. Boots Australia asks that the costs, charges and expenses of Rochelle Louise Fehsenfeld and Ian Geoffrey Robinson be paid by Sterling Australia in any event. Both persons swore affidavits on behalf of Boots Australia. Ms Fehsenfeld is a solicitor employed by Messrs Bell, Gully, Buddle and Weir who act for Boots New Zealand in the New Zealand proceeding. She was required by notice from Sterling Australia to attend this Court to give evidence on the hearing of the motion. Ms Fehsenfeld therefore flew from Auckland to Sydney and her return air fares and her accommodation expenses for two days in Sydney were incurred that would not have otherwise been incurred. Also her employer makes a charge in respect of her time spent in complying with the notice to attend for cross-examination. Mr Robinson is the Medical Director of Boots Australia and Boots New Zealand. He too swore an affidavit on behalf of Boots Australia and was required by Sterling Australia to attend court for cross-examination. Mr Robinson resides in Sydney, but expenses were incurred in his compliance with the notice requiring his attendance to attend for cross-examination. Neither witness was cross-examined on the hearing of the motion.

6. I make no criticism of the fact that these two witnesses were required to attend for cross-examination and were not in fact cross-examined as events turned out because the process of decision making in the conduct of litigation is necessarily fluid. But the fact is that they were required to attend and someone has to pay the costs of their compliance with that requirement. I have been referred to certain correspondence (exhibit 3) between the solicitors for the parties which relate to the notices to these two witnesses to attend for cross-examination and have taken their contents into account. I have also taken into account the other evidence in the motion and the submissions made to me; but am of the opinion that Sterling Australia should pay the costs, charges and expenses of both witnesses on an indemnity basis in respect of their having been required to attend for cross-examination.

7. The Court orders:-
   1. That this proceeding be adjourned to Thursday, 5 November 1992 at
   

9.30 a.m. for further directions;

2. That the further hearing of the motion of the respondent that the

proceeding be stood out of the list or stayed be also adjourned to that day;

3. That either party be at liberty to restore the proceeding

(including the motion) to the list on seven days notice;

4. That the costs of the respondent of the motion up to and including

today be the respondent's costs in the proceeding;

5. That the applicant pay on an indemnity basis the costs, charges

and expenses of Rochelle Louise Fehsenfeld relating to her attendance in court to give evidence on the hearing of the motion including her expenses of travelling between New Zealand and Australia to attend the hearing of the motion for the purpose of giving evidence and accommodation expenses in Sydney and pay to Messrs Bells, Gully, Buddle, Weir, solicitors of New Zealand, their fees with respect to the attendance of Rochelle Louise Fehsenfeld in Sydney for two days for the purposes of the hearing of the motion;

6. That the applicant pay on an indemnity basis the costs, charges

and expenses of Ian Geoffrey Robinson relating to his attendance in court to give evidence on the hearing of the motion;

7. That, failing agreement, the costs, charges and expenses mentioned

in orders 5 and 6 above be taxed by the proper officer of this Court and then paid in accordance with that officer's certificate.