Commonwealth of Australia v Sanofi

THE COURT ORDERS THAT: The Commonwealth of Australia pay the respondents 85% of their costs of the application for compensation filed 1 April 2013. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

NICHOLAS J: 1 I previously made orders dismissing the Commonwealth of Australia's ("Commonwealth") application for compensation. I also made orders for the filing of written submissions in relation to costs: Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543. Each party filed submissions in chief and in reply. 2 The respondents ("Sanofi") submitted that, in circumstances where the Commonwealth's claim for compensation was dismissed, they should be awarded the costs of and incidental to the Commonwealth's claim for compensation. They acknowledged that the costs that would be payable pursuant to such an order would be on a party/party basis only. No claim was made for any different costs order. 3 The Commonwealth accepts that there should be an order made that it pay some of Sanofis' costs but submitted that the order should reflect the fact that Sanofi were unsuccessful on a number of significant issues which were discrete, and which contributed significantly to the costs of the proceeding. The Commonwealth submits that an appropriate order is that it pay 50% of Sanofis' costs. 4 Both parties accepted that the award of costs is in the discretion of the Court and that the ordinary rule is that costs follow the event. However, in its submissions, the Commonwealth emphasised that, in an appropriate case, the discretion may be exercised to require a party who had succeeded overall in the litigation to pay some of the costs of the unsuccessful party; alternatively, a successful party may be awarded less than its costs, or have its costs apportioned, based upon success on particular issues. 5 The Commonwealth submitted that an accepted category of case justifying departure from the ordinary rule that costs follow the event is where the successful party was unsuccessful on issues that were discrete, especially where those issues caused the parties to incur significant additional costs: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]-[34]; Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 ("Anchorage") at [22]-[23]; Hockey v Fairfax Media Publications Pty Limited (No 2) (2015) 237 FCR 127 at [91]. An issue in this sense "does not mean a precise issue in the technical pleading sense but any disputed question of fact or law": Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]. 6 The Commonwealth also referred to Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 ("Bowen Investments") in which Finkelstein and Gordon JJ said at [3]-[5]: To date the award of costs on an issue by issue basis has only been accepted in limited cases and then only when the circumstances are exceptional. This approach is, if we may be permitted to say so, quite unfair. Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful… Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule. 7 The Commonwealth submitted that the paragraphs above highlight the "modern, flexible approach" to assessing costs which I should adopt. Sanofi submitted that the statement by Finkelstein and Gordon JJ in Bowen Investments does not mean that the "traditional approach" is to be abandoned and that costs are ordinarily to be apportioned by reference to success or failure on individual issues. Sanofi submitted that the mere fact that the Court does not accept all of the successful parties' arguments does not make it appropriate to deal with costs on an issue by issue basis. 8 Sanofi referred to the costs decision of the Full Court in Queensland North Australia Pty Ltd and Others v Takeovers Panel and Others (No 2) (2015) 236 FCR 370 (Dowsett, Middleton and Gilmour JJ) which was a proceeding concerning a takeover by the first appellant (Queensland North) of another company and an application to the Takeovers Panel for a declaration of "unacceptable circumstances" made in relation to the affairs of its subsidiary pursuant to s 657A of the Corporations Act 2001 (Cth) that the Full Court held was applied for, and made, out of time: Queensland North Australia Pty Ltd v Takeovers Panel (2015) 230 FCR 150. After setting out s 43 of the Federal Court of Australia Act 1976 (Cth), the Full Court said at [18]-[19]: [18] The section does not mention costs following the event. In Ruddock, Bowen Investments and Sportsbet, the Court proceeded on the basis that ordinarily, the successful party may reasonably expect to receive its costs, whether that outcome be described as costs following the "event" or otherwise. The question of costs is within the Court's discretion. As we have said, relevant factors include the extent of a party's success, the extent of its success or failure on individual issues and its conduct of the proceedings. [19] Once it is accepted that failure on some issues is not necessarily a basis for depriving Queensland North of its costs, one must ask why, in this case, such failure should result in the discretion being exercised so as to deprive it of the bulk of them. Whilst we accept that the presence of the additional grounds probably increased time spent in preparation, and in the hearing at first instance and on appeal, it is difficult to quantify such increase. In Sportsbet, the Court observed at [8] that "[i]t cannot be supposed that the issue in question was unreasonably raised at trial or on appeal". We understand the "issue in question" to be an issue on which the successful party failed. In this case no attempt has been made to demonstrate that any of the unsuccessful grounds was unreasonably advanced. However it may be inferred from the late abandonment of some grounds of appeal, that a decision which should have been taken at an early stage was unduly deferred. That may be cause for some reduction in the costs to be recovered by Queensland North. It concedes as much. As the second of those paragraphs makes clear, the parties which had defended the appeal had sought an order that would have deprived the appellants (which included Queensland North) of the bulk of their costs. As it happened, the Full Court ordered that they pay the appellants 80% of the costs of the appeal (based upon a concession made by Queensland North) and the whole of the appellants' costs at first instance. 9 More recently, the Full Court in Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 said at [3]: The power of the Court in relation to costs is well established. Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court's discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]). 10 This statement was referred to with approval by the Full Court in Anchorage at [22]. If some apportionment of costs is appropriate, the object of the exercise is to arrive at a result that best reflects the interests of justice in the overall circumstances of the case: EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9]. 11 Sanofis' submissions did not go so far as to suggest that the Court could not reduce an award of costs in their favour unless it was satisfied that they had advanced defences or arguments unreasonably. The weight of authority is clearly against there being any such limitation on the Court's discretion to reduce costs payable to a party which, although successful in terms of the relevant event, was unsuccessful in relation to a particular issue. The nature of that issue, including its relationship to other issues on which the successful party succeeded, and the time and costs expended in litigating it, are all relevant to the question whether there should be any reduction in the costs awarded to the successful party and, if so, in what amount. 12 Sanofi submitted that in a case where the Court is invited to reduce the costs that would otherwise be awarded to the successful respondent were the ordinary rule to be applied: it is necessary to consider whether the issues on which the successful party failed were clearly "dominant or separable" and whether the issues involved different factual enquiries in the one proceeding; in considering the case of a successful respondent, it is to be borne in mind that the respondent was required to incur costs in defending a claim which the Court has rejected and that, in those circumstances, it may be appropriate that the respondent have costs associated with reasonable defences, even if they ultimately prove to be unsuccessful and severable; and the separability of one or more issues on which the successful party failed is not, without more, sufficient to warrant a departure from the general approach because "justice may not be served if parties are dissuaded, by the risk of an adverse costs order, from canvassing all issues that might reasonably be raised in the conduct of a proceeding": Roadshow Films Pty Ltd v iiNet Ltd (No 2) (2011) 91 IPR 482 at [3]. 13 The last of the propositions referred to by Sanofi goes too far. The Full Court in Roadshow Films did not lay down any such absolute rule. The Full Court said at [3]: Under s 43(2) of the Federal Court of Australia Act 1976 (Cth), the Court has a general discretion to award costs. Ordinarily costs follow the event, and a successful litigant receives its costs in the absence of circumstances that would justify some other order. Where a litigant succeeds on only a portion of its claim, the circumstances may make it reasonable that that litigant bear the expense of litigating the portion upon which it has failed. A successful party who has failed on certain issues may not only be deprived of the costs of those issues, but may also be ordered to pay the other party's costs in relation to those issues. On the other hand, justice may not be served if parties are dissuaded, by the risk of an adverse costs order, from canvassing all issues that might reasonably be raised in the conduct of a proceeding. Against that consideration is the community interest in greater economy and efficiency in the conduct of litigation, which may properly be reflected in a qualification of the presumption that a successful party is entitled to all of its costs. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory, and the exercise of the discretion will often depend upon matters of impression and evaluation (see Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2). 14 Sanofi succeeded on the following issues: Whether Apotex Australia's clopidogrel products would have been listed on the Pharmaceutical Benefits Scheme ("PBS") on 1 April 2008 but for the interlocutory injunction granted by Gyles J on 25 September 2007; Whether the Commonwealth's loss flowed directly from the existence of the interlocutory injunction; Whether the appropriate counterfactual was the "continuous" or the "interrupted" supply counterfactual; Whether, in the interrupted supply scenario, the Commonwealth would have reversed the 12.5% price reduction; and Matters relating to the quantification of the Commonwealth's alleged loss. The Commonwealth succeeded on the following issues: Whether an application by Apotex Australia for a PBS listing of its clopidogrel products from 1 April 2008 would have been approved; Whether such a listing would have had an impact on price negotiations between the Commonwealth and Sanofi regarding clopidogrel / aspirin combinations; Whether the Commonwealth was "adversely affected" and suffered "compensable loss"; and Whether the Commonwealth's claim should be rejected on discretionary grounds. 15 Sanofi submitted that none of the issues on which the Commonwealth succeeded was dominant or severable and none was unreasonably raised by Sanofi. With regard to the defence to the Commonwealth's claim on discretionary grounds, there were three distinct matters relied on by Sanofi. The first of these was the matter of the Commonwealth's delay in asserting its claim; the second was the matter of copyright infringement; and, the third was the matter of infringement of the Canadian patent. I found that none of these matters justified the rejection of the Commonwealth's claim in whole or part. 16 In its submissions the Commonwealth also identified a number of other issues on which it said it was successful. These included, first, whether or not the Commonwealth's loss was foreseeable; second, whether the Commonwealth was required to show that no other generic was deterred by the interlocutory injunction; and third, whether the Commonwealth would have been entitled to interest on any compensation awarded to it. In my view the first and second matters were not sufficiently discrete to warrant the making of any adjustment to the costs order. As to the argument concerning interest, this involved a legal point of narrow compass. 17 However, the question whether an application by Apotex Australia for a PBS listing of its clopidogrel products from 1 April 2008 would have been approved was, in my view, a discrete issue which received a great deal of attention in the evidence and submissions. In my view it is appropriate to reduce the costs payable to Sanofi on account of their lack of success on that issue. 18 In my view it is also appropriate to reduce the costs payable to Sanofi on account of their lack of success in relation to their defence on discretionary grounds. 19 Taking into account the time and effort devoted to the issue of copyright infringement, it is my strong impression that this matter contributed significantly to the costs of this litigation on both sides. Sanofi was put to proof of the subsistence and ownership of copyright. The Commonwealth ultimately conceded on both these matters. But given the nature of the copyright material relied upon and the relevance of originality to both questions of subsistence and infringement, it seems to me that there was nothing unreasonable about the Commonwealth putting Sanofi to proof of such matters. It is not so easy to arrive at the same conclusion in relation to Sanofis' reliance upon copyright in circumstances where it was not suggested that Sanofi would have sought to resist the listing of Apotex Australia's clopidogrel products on the PBS on the basis of any alleged infringement of copyright in any relevant counterfactual scenario. 20 The other two matters relevant to discretion also appear to me to have occupied a significant amount of time both in Court and in the parties' preparations. In circumstances where I consider it is appropriate to reduce the costs to be awarded to Sanofi to take into account its lack of success in relation to the copyright issue, I think it is in the interests of justice to make an adjustment that makes some allowance in respect of all of the discretionary matters that were relied upon by Sanofi. 21 In my view none of the other issues on which the Commonwealth succeeded should attract any reduction in the amount of costs payable to Sanofi. 22 I have had regard to the written and oral evidence that was deployed at the final hearing of the proceeding in relation to PBS listing and discretion and the attention devoted to those issues in the parties' written and oral submissions. In my view this is a case in which it is appropriate to reduce the successful parties' costs in respect of some of the issues on which they were unsuccessful. In this case I think there should be a reduction of the costs that would otherwise be awarded to Sanofi in the amount of 15%. 23 Accordingly, there will be an order that the Commonwealth pay 85% of Sanofis' costs of the Commonwealth's application for compensation filed on 1 April 2013. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.