Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Limited

1. The legal professional privilege issue 2 Amongst the myriad of matters in issue in this proceeding is the question whether the respondent Hamilton was in breach of the exclusivity provisions of its Distribution Agreement with AMC, that agreement relating to the sale by Hamilton to AMC of certain pharmaceutical products for distribution in, inter alia, the Hong Kong market. Hamilton tendered in its case five emails from Lo & Lo, a Hong Kong law firm, to its own legal advisers together with attached invoices of sales of Hamilton products alleged to have been the subject of parallel importation into Hong Kong. Lo & Lo's client, Forward Company, is being sued by AMC in Hong Kong in separate proceedings arising out of the alleged parallel importation. The invoices in question were issued by Forward Company. 3 The first of the emails dated 4 July 2008 stated: Referring to your mail received this morning, I would like to attach 6 copy invoices issued by my client for sale of the subject product to WKM and 3 other wholesalers and/or drug stores for your information. 4 When Hamilton sought to tender the emails, objection to the tender was taken by AMC on the grounds that the tender would be unfair unless the email from Hamilton's lawyers which elicited the responses from Lo & Lo was also tendered. Hamilton indicated that it would claim privilege in any event in its lawyers' email. The short question now before me is whether in the circumstances privilege attaches to that email. For present purposes I am prepared to assume that the email could attract client legal privilege under s 119 of the Evidence Act 1995 (Cth). I should emphasise that because the question is whether the email ought to be adduced into evidence as part of the tender of the responsive emails, the matter falls to be resolved under the provisions of the Evidence Act and not at common law. 5 Section 126 of the Evidence Act provides: If, because of the application of section 121, 122, 123, 124 or 125, this Division does not prevent the adducing of evidence of a communication or the contents of a document, those sections do not prevent the adducing of evidence of another communication or document if it is reasonably necessary to enable a proper understanding of the communication or document. 6 Put shortly, AMC's case is that it is necessary for a proper understanding of what Lo & Lo produced to understand what they were asked to produce by the respondent. Hamilton's contention is that the invoices speak for themselves and it is not necessary to have the Hamilton email disclosed to understand those invoices. 7 Section 126 has been the subject of little judicial consideration although it has been usefully considered by Sackville J in Towney v Minister for Land and Water Conservation (NSW) (1997) 76 FCR 401. For present purposes it is sufficient if I note that in that case his Honour indicated that the section contemplated the application of an objective standard. His Honour went on to observe at 414: In applying the standard specified by s 126 of the Evidence Act, it is to be borne in mind that the expression "proper understanding" is by no means narrow. The dictionary definition of "proper" includes "complete or thorough"; the definition of "understand" includes "to apprehend clearly the character or nature of" and "to grasp the significance, implications or importance of" (Macquarie Dictionary). It may or may not be correct to say that the test stated in s 126 of the Evidence Act, is, or appears to be, narrower than the principles governing implied waiver under the general law: cf Cross on Evidence (Aust ed), par 25300. Any precise assessment of the scope of s 126 must await further decisions. However, I think it fair to say that, if a privileged document is voluntarily disclosed for forensic purposes, and a thorough apprehension or appreciation of the character, significance or implications of that document requires disclosure of source documents, otherwise protected by client legal privilege, ordinarily the test laid down by s 126 of the Evidence Act will be satisfied. 8 While it is true that each of the invoices on its face requires no explanation of its contents (other than the need for translation from Chinese), the invoices themselves bear upon a number of potential questions. There is sharp disagreement between the parties over the incidence, effects and duration of the alleged parallel importation. The invoices that have been produced relate to a quite confined period in 2001 and 2002. For my own part I am satisfied that the significance properly to be attributed to them can only be discerned if one also is aware of the nature of the request that was addressed on Hamilton's behalf to Lo & Lo. Whether it was quite specific or quite general in character, for example, could markedly affect how one would forensically evaluate the significance of the invoices. Hamilton, having tendered the Lo & Lo emails and attachments, cannot now in my view properly resist putting into evidence its own lawyers' request. 9 In the circumstances I am satisfied that client legal privilege has been lost in relation to that request because the disclosure of the request itself is reasonably necessary to enable a proper understanding of the invoices.

2. Leave to amend the reply 10 The Distribution Agreement which it is alleged was breached by Hamilton is pleaded as being partly written and partly oral. The principal oral terms, which might be thought to be inconsistent with express terms, related (a) to what is called the rolling five year term (see clause 8) and (b) to the operation of the termination provision of the agreement (see clause 41). Importantly for present purposes clause 50.1 of the agreement provides: All negotiations and correspondence between the parties that have taken place prior to the signing of this Agreement shall be considered null and void as from the day of its signing. 11 The clause that became clause 50 was proposed by Dr Ovcharenko of Hamilton by a fax of 27 May 1999 to Dr Keung of AMC. That fax referred both to a proposed clause providing a bonus offer to AMC and to the addition of two further clauses including the now clause 50. Both Dr Keung and Dr Ovcharenko were cross-examined on the email and on the termination provision and it was that cross-examination which has led to the application for leave to amend. Dr Ovcharenko's cross-examination, I would note, occurred on the 26th day of a projected 27 day hearing. For reasons which I need not enter into, a further day was set aside to complete the giving of evidence. That occurred yesterday and it was when the issue of leave was raised with me, albeit it had been flagged I understand to the respondent some time previously. 12 The terms of the proposed amendment insofar as presently relevant and for that matter the declared purpose sought to be secured by it are as follows: 8.6 Ovcharenko represented to Dr Keung in trade and commerce that the reason for inserting the proposed clause 52.1 (now clause 50.1 of the Distribution Agreement) into the Distribution Agreement, was to incorporate a bonus offer in Schedule 5 ("the clause 50 representation"). Particulars 8.6.1 Facsimile from Dimitri Ovcharenko dated 27 May 1999. 8.7 AMC was induced by the clause 50 representation to agree to the incorporation of clause 50.1 into the Distribution Agreement to secure the bonus offer. 8.8 the clause 50 representation was false in that: 8.8.1 the true purpose for the incorporation of clause 50.1 was to purport to exclude the operation of the clause 8 representation and clause 41 representation; 8.8.2 Hamilton now relies on clause 50.1 to assert that the terms of the Distribution Agreement are wholly written. 8.9 by reason of the conduct referred to in paragraphs 8.6 to 8.8, inclusive, Hamilton has engaged in misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act, 1974; 8.10 seeks an order pursuant to s.87(1) and (2)(a) or (2)(ba) of the Trade Practices Act declaring clause 50.1 to be void or refusing to enforce clause 50.1 to exclude the operation of the clause 8 representation and clause 41 representation. 13 It is AMC's contention that the significance of the 27 May facsimile only became apparent when the above cross-examination occurred and it relies primarily upon the evidence given in cross-examination as substantiating the claim it now seeks to bring albeit by way of defence. 14 The respondent opposes the amendment on the grounds that to allow it at this stage would be unfair and prejudicial to it. It does not, and could not, dispute that there was cross-examination on the facsimile and on the termination provisions. What it does contend is that that cross-examination was not conducted with a focus upon a pleaded and precise cause of action with the consequence that the evidence adduced and the manner of its adducing did not have the ingredients of a Trade Practices Act claim in mind. 15 It is well accepted that the aim of the court's power to amend under O 13 r 2 of the Federal Court Rules is to allow all the issues which arise in a proceeding to be determined and for a decision to be given on the real matter in controversy. Hence it has been emphasised that amendments to pleadings should be allowed if it not be unjust to do so: see Lactos Fresh Pty Ltd v Finishing Services Pty Ltd [2006] FCA 219 at [122]. The imperative in favour of amendment has been long accepted and is illustrated, for example, in the observations of Stephen, Mason and Jacobs JJ in Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446 where their Honours said: If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was the duty of the trial judge to leave the issue of negligence to the jury. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence which had emerged … Now, and for many years past, a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties in the cause of action. 16 Turning to the present matter, it cannot properly be said that the case has been conducted in such a fashion that the amendments should be permitted so that the pleading reflects the conduct of the trial and the issues actually litigated between them. Nonetheless, AMC contends that the relevant evidence establishing the proposed defensive claim is there and is manifest in the cross-examination on that issue to which I have made reference. Accordingly it is said the amendment should be allowed although it is accepted that it may be necessary to permit the respondent to cross-examine further on the proposed claim and its ingredients. 17 While I am satisfied that the particular claim proposed only presented itself during the course of the trial, it is the case that the potential significance of clause 50 was obvious from the outset. Given the course of this proceedings and its considerable lengthening, that the applicant had closed its case and the respondents had called their last witness and that the timetable for submissions etc has been fixed and cannot be varied without a considerably longer delay to the finalisation of this matter, I am unprepared to take a course that would permit further cross-examination and, hence, further delay. 18 It may well be the case that the cross-examination that has been conducted of the two witnesses so far as it goes is suggestive of a possible contravention of s 52 of the Trade Practices Act 1974 (Cth). Nonetheless, I am not satisfied that the evidence that has so far been adduced could properly be said to establish that contravention such that relief under s 87 could be claimed. I equally am satisfied of the real likelihood that the cross-examination of Dr Keung by Hamilton would have been conducted differently especially in relation (a) to the questions of inducement and (b) to Dr Keung's understanding of Dr Ovcharenko's alleged reason for inserting the proposed equivalent of clause 50.1 if it had been conducted with the proposed claim in mind. I equally consider it likely that evidence-in-chief given by Dr Ovcharenko in light of a pleaded s 52 claim could well have been differently focussed. In short I accept Hamilton's submission of prejudice which in the circumstances in my view is not able to be remedied. Accordingly, I refuse leave to amend the reply. 19 However, there is a further proposed amendment to the reply which is not opposed and I will grant leave in respect of it. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Counsel for the Applicant/Cross-Respondents: Mr I Robertson SC with Ms A Barnett

Solicitor for the Applicant/Cross-Respondents: Piper Alderman

Counsel for the Respondent/Cross-Claimant: Mr P McNamara QC with Mr T Cox

Solicitor for the Respondent/Cross-Claimant: Crawford Legal