Merck Sharp & Dohme (Australia) Pty Ltd v Peterson

REASONS FOR JUDGMENT 1 Representative proceedings have been commenced by Mr Graeme Peterson against Merck Sharp & Dohme (Australia) Pty Ltd ("Merck") and what we understand to be its parent company incorporated in the United States of America. In these reasons it is only necessary to refer to Merck. The matter is listed for "trial" commencing on 30 March 2009. The trial judge has set aside approximately 3 months for that purpose. In late November 2008, Merck filed a notice of motion seeking orders to the following effect. The first was an order pursuant to s 33N of the Federal Court of Australia Act 1976 (Cth) that the proceeding no longer continue as a representative proceeding. Alternatively, Merck sought an order under s 33ZF of the Federal Court Act, requiring Mr Peterson to specify "each of the matters that the Court is being invited to determine for all alleged group members through a trial of the Applicant's claim". 2 Merck's notice of motion was dismissed. It has sought leave to appeal against its dismissal in relation to both the order sought under s 33N and also the order sought under s 33ZF. The hearing of the application for leave to appeal and any consequential appeal was expedited. At a hearing on 17 February 2009 we refused leave insofar as Merck sought to challenge the refusal to make the order under s 33N but granted leave in relation to Merck's challenge to the refusal to make an order under s 33ZF. 3 It is necessary to deal with this matter expeditiously. Accordingly these reasons are expressed with some economy. The nature of the proceeding has been sufficiently described by the trial judge in his reasons published on 9 January 2009: Peterson v Merck Sharp & Dohme (Australia) Pty Ltd (No.3) [2009] FCA 5. Generally, for the reasons his Honour gave, it was inappropriate to make an order under s 33N. The question of whether orders should be made under s 33ZF is more problematic. We granted leave to appeal because the issue is an important one not presently directly addressed by authority and, as will be apparent shortly, we have some misgivings about the trial judge's approach. 4 That approach was encapsulated in the following passage from his Honour's reasons for judgment (at [54]‑[57]: Counsel for the applicant resisted the suggestion that the court should attempt to embark upon any such exercise [that the court should specify the "issues" which were to be determined as part of the applicant's case, including the issues that he contended were common to himself and to other group members]. They submitted that, in accordance with the scheme of things contemplated by Part IVA of the Federal Court Act, the applicant would conduct his case this year as though he were a conventional litigant. That case would necessarily involve general questions about the marketing of, the research into and the science concerning, Vioxx, the risks associated with Vioxx, and the information actually or constructively available to the respondents at various times with respect to those risks (amongst others). Such matters would be relevant at trial not because they were "issues" which were common to all group members, but because they necessarily arose in the proof of the applicant's own case. At the conclusion of the applicant's case, the court would make findings which were relevant thereto, and the other group members would be able to rely upon, and would be bound by, those findings. How the court proceeded in the circumstances then obtaining would depend on what those circumstances were. Counsel submitted that the court would have a flexible discretion to do justice according to the needs of the parties, having recourse, to the extent necessary, to s 33Q of the Federal Court Act. I accept the broad characterisation of a Part IVA proceeding given by counsel for the applicant. In my view, the obvious course is for the applicant's case to be conducted within the confines of his pleading. I would not exclude the realistic possibility that, in the course of the conduct of that case, some evidence might be admitted which would not be strictly relevant if the proceeding related to the applicant alone. However, that prospect is not sufficient to justify the court in departing from the long-established convention that it is the content of the parties' pleading that give definition to the matters to be litigated at trial. Earlier in these reasons, I set out extracts from the parties' memoranda of significant issues thought to be presented by this proceeding. To an extent, those memoranda are tendentious. There are respects in which they pass each other like ships in the night. This is not intended as a criticism of the parties, and, indeed, their memoranda valuably cast light upon their own perceptions of the dynamics of the litigation as a whole. However, as a structural framework for the definition of matters to be litigated at trial, they are no substitute for the parties' pleadings. I take the view that any attempt on the part of the court to draw up an inventory of matters or issues to which the trial would be confined would serve only to provide considerable scope for later argument, particularly with respect to the admissibility of evidence. Questions which ought to be resolved by reference to the pleadings might then, in the contention of one or other of the parties, have to be resolved also by reference (or rather by reference) to the inventory. In other words, any such inventory would introduce a layer of complication, with the additional delays and costs necessarily attendant thereon. It would, in my view, inevitably generate more heat than light. I propose to conduct the trial according to a conventional template, subject only to such modifications as are, in particular respects, seen to be desirable in the light of the circumstance that the proceeding is a representative one. 5 The difficulty with this approach is that the pleadings allege that Merck is liable in damages and for compensation in relation to Mr Peterson and all members of the group. It was common ground before us and, we apprehend, before the trial judge, that the "trial" scheduled to commence shortly will not involve determination of liability concerning, and any damages or compensation payable to, anyone other than Mr Peterson. Plainly the "trial" will not involve a determination of all issues raised in the pleadings. 6 In our opinion it is desirable, if not necessary, to identify precisely what issues will be determined in the "trial" (and those that will not be determined) on the assumption, which the parties did not gainsay, that at the end of the "trial", orders will be made which reflect the determination made by the trial judge on both questions of fact and law or mixed questions of fact and law. That the "trial" will result in a determination of Mr Peterson's claim (personal to him), is a given. As Sackville J did in Courtney v Medtel Pty Ltd (2003) 126 FCR 219 (by making orders on 16 August 2002 posing a number of questions which were partly answered on 3 March 2003 [2003] FCA 129), an order can be made identifying Mr Peterson's claim as a matter (in the sense of subject matter entailing questions of fact and law) to which the trial will be directed. 7 Also, common issues can be determined. There is plainly a controversy about which issues are common. Merck disputes that the issues pleaded in Mr Peterson's statement of claim are, in truth, common questions. However, it is tolerably clear that the scheme of Part IVA of the Federal Court Act is that whilst a proceeding continues as a representative proceeding, the Court should, in the ordinary course (at least in relation to proceedings involving a sizable group where liability may depend on each member's individual circumstances), initially deal with issues that are common to all members of the representative group or a sub‑group of that group. So much is apparent from ss 33Q and 33R. Indeed an important procedural step is contemplated by that latter section whereby an individual group member might, by direction, be permitted to appear in the proceeding for the purposes of determining an issue that relates only to the claims of that member. At the very least the Court would need to consider whether such a direction is made before determining an issue which was not a common issue and might be characterised as an issue that relates only to the claims of a particular member. 8 It seems to us that given that there is controversy about what are the common issues, it would be desirable to structure the "trial" by identifying what might be the common issues for determination, though on the footing that if it became apparent from the evidence and the submissions that they were not common, they would not then be determined lest they be "an issue that relates only to the claims of [one particular] member". If the issues are framed as questions, orders can be made answering them. At that point a party disaffected by the determination would be in a position to challenge those answers by way of appeal as contemplated by s 33ZC(1). Broadly described, one outcome could be that Mr Peterson failed in his own personal case and such issues as were found to be common either were not answered at all or, in some critical respect, were answered in a way propounded by Merck. Alternatively, another outcome, broadly described, could be that Mr Peterson succeeded in his own personal case and such issues as were found to be common were answered either in whole or in part in a way propounded by Mr Peterson. In the former situation and probably in the latter, it would be desirable that the disaffected party then had the opportunity to challenge the trial judge's conclusions if so minded. Certainly in the latter case it is probably desirable that such a challenge occur before the circumstances of other individual members of the group were then considered. If there is no judgment, in a technical sense, at the end of the trial then the disaffected party would not be in a position to maintain such a challenge. 9 In addition, orders of the type we are discussing will provide a touchstone for rulings in relation to the evidence and perhaps other procedural issues which will arise during the "trial". If the matter simply proceeded on the pleadings, alleging as they do liability in relation to each group member, the pleadings would not provide that touchstone. That is because they raise issues (potentially peculiar to individual group members) which will not fall to be determined during the "trial". 10 When dealing with Merck's notice of motion, the trial judge was put in the almost intolerable position of being asked by Merck to make an order requiring Mr Peterson to specify matters the Court was being invited to determine during the "trial" in circumstances where Merck probably knew or at least apprehended that the articulation by Mr Peterson of such matters would be controversial and with which it would not agree. What, one might ask, would Merck have done if the order had been made? Mr Peterson presumably would have complied with the order which would have then provoked another controversy. 11 A less obdurate approach would have been for Merck to have formulated draft orders identifying the issues, having regard to the pleadings, that it thought should be determined in the "trial" so as to facilitate a structured and focused discussion with the trial judge about what should occur and what orders should be made. A similarly obdurate approach was taken by Mr Peterson in the appeal, seemingly conceding that it was not inappropriate for some orders to be made articulating the issues to be determined at the "trial" but refusing to engage in the process voluntarily in the hope of persuading us that leave should not be given or the appeal dismissed. Parties to any proceedings in this Court are entitled to take positions on legitimate issues. However, the times are quickly passing if they have not already passed, where parties to litigation can refuse to co-operate with a view to removing or narrowing issues which might, with a measure of maturity, be resolved by discussions between legal practitioners or presented as the true issues for determination by a judge. The need for this to occur can be particularly acute in representative proceedings. 12 At our direction, the parties have formulated orders which could be made by us in the event that the appeal was successful. In our view, the appeal should be allowed. However we have decided, on reflection, that the making of the actual orders should be a matter for the trial judge. Nonetheless, the draft orders proposed by Merck appear to us to be far too narrowly cast. The draft orders proposed by Mr Peterson appeared to us to provide an appropriate template, although on the clear understanding that the orders would operate on the basis that, in relation to each alleged common issue, there would be a preliminary question about whether it was a common issue. Only if that question was answered in the affirmative would the common issue then be determined. 13 The appeal from the trial judge's orders in so far as the claim for relief sought in par 2 of the motion (the relief sought) was dismissed should be allowed. The orders should be set aside in so far as they relate to the relief sought. We will remit the relief sought to the trial judge for further hearing. The costs of the application for leave to appeal and the appeal should be costs in the cause. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore, Sundberg and Tracey.