In a case involving one of the most profitable drugs in the world, a claim for $60 million in damages, confidential agreements, and the Australian government, Nicholas J in the Federal Court of Australia has held that a settlement deed between various Sanofi and Apotex parties is partly unenforceable on public policy grounds.
Overview
In the latest instalment of the clopidogrel damages saga, Commonwealth of Australia v Sanofi [2017] FCA 382, Nicholas J considered whether the Commonwealth was – in connection with its pending application (scheduled for hearing on 28 August 2017) seeking compensation against Sanofi resulting from an earlier undertaking as to damages provided by Sanofi – prevented from accessing certain of Apotex’s witnesses in its claim for damages against Sanofi by reason of the provisions in a settlement deed between various Sanofi and Apotex parties.
In short, the answer was “no” – his Honour found that elements of clause 6 of the settlement deed “[have] a tendency to interfere adversely with the administration of justice”. While his Honour observed that a witness “may be bound by an obligation of confidence that prevents him or her from disclosing certain information”, the finding had the effect of rendering unenforceable a contractual obligation upon Apotex to the extent that the clause prevented it from releasing any witness or prospective witness from any obligation of confidence in respect of information that relates to the Commonwealth’s claim for compensation.
Justice Nicholas reviewed the relevant authorities and identified five propositions relevant to determining the interaction between the enforceability of an obligation of confidence as a private right and the public interest in the administration of justice.
- There are some contracts that are void because their purpose and effect is to interfere adversely with the administration of justice. These contracts are void at common law on the basis that they have a tendency to interfere with the proper working of the machinery of justice.
- There are other contracts that are not void but which may be unenforceable to the extent that they have a tendency to interfere adversely with the proper administration of justice.
- It may be necessary for the Court to weigh competing public policy considerations when determining whether or not to decline to enforce a contract on the ground that it has a tendency to interfere adversely with the administration of justice.
- A court is required to exercise extreme caution and reserve before finding a contract void as against public policy and may only do so when the contract in question is “incontestably and on any view inimical to the public interest”. The “public interest” in this context refers to some definite and recognizable public interest that transcends the private interests of the parties to a particular dispute.
- A party cannot prevent a witness giving evidence in legal proceedings. Subject to any valid objection to evidence, the opposite party is entitled to call the witness and adduce evidence from them. The opposite party is also entitled to interview the witness if he or she agrees to such an interview. However, “[t]hat does not mean … that the right of a party to call evidence in court operates so as to permit or require a potential witness to breach an obligation of confidence other than in the giving of evidence.”
The background facts are provided in more detail below. The parties have been ordered to participate in mediation, to conclude by 1 August 2017. Failing that, the Commonwealth’s claim for damages against Sanofi is listed for a six week hearing commencing 28 August 2017.
With the Productivity Commission’s recommendation that settlement agreements be put under closer scrutiny in the pharmaceutical patent field, parties to patent litigation should expect that such agreements are likely to increasingly and more consistently be the subject of some kind of review going forward.
The factual landscape
Following proceedings in which Sanofi’s clopidogrel patent was ultimately held invalid (with special leave to appeal to the High Court refused), Apotex and the Commonwealth of Australia sought compensation under the “usual undertaking as to damages” (see practice note CM-14, now replaced by practice note GPN-UNDR) given by Sanofi. In exchange for Apotex giving an undertaking not to introduce a generic clopidogrel product or take any steps to obtain listing under the Pharmaceutical Benefits Scheme (PBS) until the final determination of the proceeding, Sanofi’s undertaking required it to:
submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the order or undertaking or any continuation (with or without variation) thereof; …
See our article here regarding the Commonwealth’s entitlement to claim damages under the usual undertaking as to damages.
Apotex and Sanofi settled the compensation dispute by entering into a confidential settlement deed on 4 November 2014.
The Commonwealth argued that, as a result of Apotex not introducing a generic clopidogrel product, it had been forced to purchase Sanofi’s product at a premium price and had therefore suffered losses of $60 million.
Relevantly, before reaching settlement with Sanofi, Apotex had filed evidence in support of its claim for damages from 12 witnesses, including its Managing Director, Roger Millichamp.
The Commonwealth sought to rely on that evidence and to have access to those witnesses in order to seek to further establish its entitlement to compensation.
Clause 6 of the Settlement Deed
The relevant part of clause 6 of the settlement deed is provided below (amended to refer to the relevant parties in the context of this proceeding):
6. Assistance to others
Otherwise than by compulsion of law, [Apotex] agree[s] not to voluntarily assist in any way or encourage:
(a) the Commonwealth in relation to the Commonwealth Compensation Claim by way of waiving any claim for legal professional privilege that [Apotex] may have, or releasing any third person from any obligation of confidence in respect of information relevant to the Commonwealth Compensation Claim or the Apotex Compensation Claim, or by the provision of documents;
Nicholas J determined that clause 6, if enforceable, would prevent Apotex from voluntarily assisting or encouraging the Commonwealth in relation to its claim for compensation by:
(a) releasing others from any obligation of confidence in respect of information relevant to the compensation claims;
(b) waiving any claim for legal professional privilege relevant to claims; and
(c) providing documents.
The arguments concerning each of these three categories of conduct are addressed below.
Principles of justice and confidentiality
Nicholas J cited the uncontested general principles that:
- there is no property in a witness;
- interference (including preventing reasonable attempts to identify and interview potential witnesses) with a witness is a contempt of court;
- it is in the public interest to protect and enforce confidences and contractual bargains, specifically including contracts to settle legal disputes and proceedings;
- it is for people approached as witnesses to determine whether they wish to co-operate in giving evidence; and
- witnesses may be bound by an obligation of confidence not to disclose certain information.
Arguments and findings regarding the three categories of conduct
Obligations of confidence
Sanofi argued that it was open for the solicitors for the Commonwealth to discuss with Mr Millichamp the contents of his written evidence because Apotex had already impliedly released him from any obligation of confidence relating to that material by filing and serving his evidence. Sanofi relied on principles of waiver of privilege in support of this contention.
Nicholas J did not accept this argument. His Honour considered that any waiver of obligation of confidence was limited to what was already disclosed rather than all information relevant to those issues. His Honour also did not consider that principles of waiver of privilege were relevant to non-privileged confidential information. It followed that his Honour considered the effect of the clause, if enforceable, would be to prevent the Commonwealth’s solicitors from obtaining information from the Apotex witnesses relevant to the Commonwealth’s proceeding against Sanofi on the basis that there exist obligations of confidence owed to Apotex (but not Sanofi) but which Apotex may have no genuine interest in enforcing.
In light of this, and his Honour’s observations with respect to the circumstances under which clause 6 came into existence (which he assessed as being, primarily, to prevent or hinder any attempt by the Commonwealth to interview the Apotex witnesses), Nicholas J held that the clause was contrary to the public interest because of its “strong [propensity] to prevent or hinder the Commonwealth’s legal representatives’ efforts to interview the Apotex witnesses and discuss with them matters relevant to their written evidence”.
Waiver of legal professional privilege and provision of documents
Sanofi argued that clause 6 did not prevent Apotex employees from divulging any information relevant to the Commonwealth’s case, as Apotex had already waived any relevant privilege by including the information in their affidavits. Rather, according to Sanofi, the clause was designed to prevent the Commonwealth from obtaining information that might assist it in making new claims against Sanofi.
Nicholas J disagreed, finding that Apotex had not waived privilege to all the information referenced in the affidavits, meaning that the clause if enforceable would in fact prevent the Apotex witnesses from discussing many matters relevant to the Commonwealth’s case which were still protected by privilege.
Further, Nicholas J observed that the position with respect to the provision of documents was complicated because two of the Apotex entities were foreign corporations, and the effect of clause 6 was that it was likely that the Commonwealth would have to obtain a Court ordered subpoena in order to obtain documents from them.
However, his Honour considered that these difficulties were not contrary to the public interest. They were difficulties of the kind that litigants such as the Commonwealth would encounter in the normal course of litigation – litigation is usually conducted on the assumption that one party will not assist an opposing party by voluntarily waiving privilege or providing documents unless the first party is of the view that it is in its interests to take either of those steps.
The Commonwealth’s application for damages is set down for hearing commencing 28 August 2017.