Astrazeneca Limited v Commerce Commission HC WN CIV 2007-485-002580

[2008] NZHC 2324

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2007-485-002580

UNDER  the Judicature Amendment Act 1972

IN THE MATTER OF     an application for judicial review

BETWEEN  ASTRAZENECA LIMITED Applicant

ANDCOMMERCE COMMISSION First Respondent

AND  PHARMAC

Second Respondent

Counsel:         M Dunning and T P Mullins for Applicant

K L Clark QC and B Hamlin for First Respondent
R E Brown for Second Respondent

Judgment:      13 May 2008 at 11.45am

JUDGMENT OF PANCKHURST J RE STAY OF PROCEEDINGS

A stay of proceeding

[1]      In a judgment dated 16 April 2008 I dismissed an application for judicial review brought by AstraZeneca in which it challenged the lawfulness of a s98 notice. Such notice was issued under the Commerce Act 1986 and required AstraZeneca to supply documents which the Commission required to ascertain whether anti- competitive behaviour had occurred in the course of negotiations between the company and Pharmac.

[2]      The gist of the invalidity argument was that s53 of the New Zealand Public

Health and Disability Act 2000 provided an exemption in relation to conduct which would otherwise be anti-competitive under Part 2 of the Commerce Act.   Such

ASTRAZENECA LIMITED V COMMERCE COMMISSION HC WN CIV 2007-485-002580  13 May 2008

statutory exemption avails Pharmac and suppliers in negotiation with it, for the purpose of concluding an agreement for the supply of a subsidised pharmaceutical. AstraZeneca contended that the exemption clearly applied and therefore the s98 notice was redundant and invalid.

[3]      On 1 May 2008 AstraZeneca filed a notice of appeal against my decision.  It also sought an order staying the decision and in particular a direction that:

Pending final determination of this proceeding, or an order of the Court of Appeal, the [Commission] is not to read, copy or make further use in any way whatsoever, for the purposes of an investigation of the applicant, [of] any of the documents or information provided by the appellant in response to the s98 notice dated 31 October 2007.

The Commission, and Pharmac, oppose the granting of a stay.

The contentions of the parties

[4]      The   parties   approached   the   stay   application   with   reference   to   four considerations: whether absent a stay AstraZeneca’s right of appeal would be rendered nugatory, whether the Commission would be injuriously affected by the grant of a stay, whether the appeal is bona fides and whether the balance of convenience favours one side or the other.  I am content to adopt this approach.

[5]      Mr Dunning contended that, even if AstraZeneca’s right of appeal may not be rendered nugatory, it reasonably required relief in order to preserve its position in the particular circumstances which prevail.   Late last year the issue of interim relief arose with reference to the period before the substantive hearing in this court.  In the result AstraZeneca supplied the documents required in terms of the s98 notice in a sealed box and subject to the Commission’s undertaking:

… that, upon receipt of the applicant’s response to the notice, pending final determination of this proceeding, or further order of the Court, the Commission will not read, copy or make further use in any way whatsoever, for the purposes of any investigation of the applicant, [of] any of the documents or information received in response to the notice.

As can be seen the relief now sought essentially replicates the terms of this undertaking.

[6]      Counsel  contended  that  the  undertaking  naturally  extended  to  cover  the situation until final determination of the proceeding, including a decision of the Court of Appeal.  At that point, should AstraZeneca’s appeal fail, the Commission will be able to immediately assess the information which is already in its control. Since the negotiations which are the subject of the Commission’s investigation, occurred in mid-2007, the Commission will not be prejudiced by the delay until an appeal decision is given.  A half day appeal can be accommodated within the next few months.  It followed, said Mr Dunning, that relief was appropriate.

[7]      Counsel also urged upon me the view that if the documents were inspected in the interim, and subsequently the appeal is successful, there could be no guarantee that AstraZeneca’s rights would not have been infringed.   In that situation, even upon  a  return  of  the  documents,  there  must  remain  a  real  risk  that  residual knowledge adverse to the company would remain in the minds of investigators with the Commission.

[8]      Ms Clark QC in resisting a stay accepted the bona fides of the appeal and that the appeal is likely to be resolved within a period of months.  Nonetheless, counsel submitted that the Commission was entitled to the fruits of its victory and, more importantly, that it was inappropriate in principle that a regulator be restrained from fulfilling its legitimate functions when this Court has upheld the validity of the s98 notice.  In this sense the Commission would be injuriously affected by the grant of a stay,  and  it  was  contrary to  the  public  interest  that  the  proper  investigation  of suspected  anti-competitive  conduct  be  delayed.    On  this  basis  relief  should  be denied.

Evaluation

[9]      There is no question that the appeal is bona fides and that AstraZeneca is prosecuting it with due diligence.  I anticipate that a half day fixture will be available within a few months and a decision soon thereafter.

[10]     To my mind the pivotal consideration involves the competing contentions as to the likely impact of a stay.  These two viewpoints were captured by reference to authorities upon which counsel placed reliance.

[11]     AstraZeneca drew attention to Hammond J’s decision in Tranz Rail Limited v The District Court at Wellington (No. 2) Wellington CP 84/01, 10 July 2002, which concerned a stay in relation to documents seized pursuant to a search warrant.  The Commerce Commission executed that warrant and lifted a volume of material.  The challenge to the warrant failed in the High Court and a stay was sought pending an appeal.  Hammond J observed at p 5:

… if this Commission is found to have unlawfully procured and executed a search warrant, it will be required to hand the relevant material back, and it is unthinkable that it would not fully comply with its obligations in that respect.  It was less that kind of concern, as I understood Mr Smith, which exercises Tranz Rail.  It is rather that if documents are looked at at all, in one way or another, a residuum of understanding, or even “leads”, can be left in the mind of the holder which can then be subsequently investigated.

[12]     In effect Mr Dunning advanced the same argument in this instance.  He also emphasised the circumstance that AstraZeneca had surrendered its documents in response to the s98 notice in the belief that they would remain under seal until final determination of the proceeding.   Had the company known that a stay would be opposed at this stage of the proceeding, it may well have run the risk of not surrendering the documents within the time prescribed and relied on the “reasonable excuse” qualification contained in the Act.

[13]     Mrs Clark cited Unison Networks Limited v The Commerce Commission and Powerco Limited CA161/05, 24 August 2005.   This case concerned the judicial review of a decision of the Commission to embark upon the process which may result in a declaration of control governing the operation of a large electricity lines business.   In the High Court MacKenzie J declined interim relief pending a substantive hearing.  Unison appealed against that decision.

[14]     Central  to  the  Commission’s  argument  was  a  contention  that  it  was inappropriate for a regulator to be restrained in relation to its statutory function.  The Court said:

[29]     We can hardly ignore the reality that utility operators often (and perhaps  usually)  resort  to  litigation  when  affected  by  regulatory  action. Such regulatory action customarily involves staged processes.   There is obvious scope for distortion of such processes if the courts insist that a challenge to one step in a statutory procedure must be fully resolved before any subsequent procedural steps can be completed.   Waste of resources arguments, as advanced by Mr Goddard, can almost always be invoked in this context..  When this consideration was put to Mr Goddard, he responded primarily by referring to the particular circumstances of the case and especially the imminence of a fixture for the substantive hearing.   But recognising, as we do, that each case must be addressed on its merits, we consider it would be wrong to overlook the broad public interest associated with the smooth implementation of regulatory processes in the manner contemplated by Parliament.   So, although the Commission has not put a dollar  value  on  the  consequences  of  being  wrongly  prevented  from continuing the present statutory process, this does not mean that there is no appreciable prejudice to balance against the wasted resources and costs argument advanced by Mr Goddard for Unison.

[15]     Here, Mrs Clark submitted, a similar situation obtained.   The investigatory process has already been on hold for a number of months.   Further delay is not warranted.  It will occasion operational difficulties for investigators who should be free to progress the investigation at this point.

[16]     In my view the Commission’s affidavit evidence concerning the difficulties which will flow from further delay, was overstated.   The relevant events occurred about 12 months ago.  The period available in which to take regulatory action is at least three years, and perhaps more.  No doubt it is desirable for the investigation to be progressed as soon as possible, but this consideration is to be balanced against the potential for harm to AstraZeneca if the documents are inspected in the meantime and the appeal is subsequently allowed.

[17]     The matter is relatively balanced.  But, at the end of the day I conclude that the balance lies in favour of AstraZeneca.  I consider it is preferable that the status quo pertains in the meantime.   The intent of the Commission’s undertaking is not altogether clear.   I consider it is arguable that AstraZeneca is right to view the undertaking as extending to an appeal.  I am also influenced on account of the fact that the documents are in the control of the Commission and will be immediately available to its investigators when an appeal decision is given, unless of course the documents are to be returned.

Result

[18]     For these reasons I grant a stay of proceeding in the terms sought (refer para

[3]).  The applicant is entitled to costs which I allow on a 2B basis.

Solicitors:

Lee SalmonLong, Auckland for Applicant

Commerce Commission, Wellington for First Respondent

Bell Gully, Wellington for Second Respondent