Smith Kline & French Laboratories Ltd v Inter-Continental Pharmaceuticals

The relevant issue in the action is whether the respondents infringed one or other of the patents in suit by selling in Australia nitrofurantoin tablets. The appellants claim that these patents cover all economic means of manufacture of nitrofurantoin and its intermediaries.

According to the reasons for judgment of Kitto J. the interrogatories which the appellants sought leave to deliver dealt only with one new question (not on a topic included in the previous interrogatories). The question is in effect by what process is the nitrofurantoin in the allegedly infringing goods manufactured. The question in the appeal is whether the appellants ought to have been given leave to interrogate on this question and in addition to be allowed to deliver it to be answered by Mr. Sieczko.

In Potter's Sulphide Ore Treatment Ltd. v. Sulphide Corporation Ltd. [1] , Griffith C.J. said:

The object of interrogatories, I suppose, is to discover the truth. It has also the advantage of saving expense. When inquiry is made as to a matter which is entirely within the knowledge of the defendant and not within the knowledge of the plaintiff, and is relevant to the case, I do not know of any rule why the defendant should not be interrogated about it. By way of objection to giving leave to exhibit an interrogatory seeking discovery of the process in question it is said that such an interrogatory might have been asked in the first instance. It seems to me that it would be inequitable to allow this objection. I think that a strong consideration against it is that the action might not be heard upon its merits if the appellants have not the opportunity of further discovery: Goding v. Queensland Newspapers Pty. Ltd. [2] . 1. (1911) 13 C.L.R. 101, at p. 111. 2. (1965) 113 C.L.R. 170, at p. 174.

In a letter before action the first-named respondent admitted it intended to sell nitrofurantoin in Australia but said it was not manufactured by a process covered by the patents in suit. When asked what were the patents relating to the process "you claim to use" the first-named respondent replied that it was "contacting our suppliers in Europe" for information. Later, in a letter from Aitan Ian Tobias who, as mentioned above, is general manager and a director of the first-named defendant, it was stated that the nitrofurantoin which his company is marketing in Australia is manufactured by a process which does not infringe the patents in suit and that the particular process is patented in the United Kingdom under a certain patent the number of which is stated. The first-named respondent, by its counsel, offered at the hearing to make an admission in the terms of this letter and to supply it on oath. The High Court Rules do not provide that the Court or a judge in giving leave to administer interrogatories shall take into account any offer made by the party to be interrogated to make an admission. (Cf. the English Rules of the Supreme Court, 1965, O. 26, r. 1 (3); Rules of Supreme Court of Victoria, O. 31, r. 2.) In my opinion in the case of such a body corporate an admission, if made on oath, is not a valid substitute for an answer by affidavit to an interrogatory made pursuant to O. 32, r. 4. The secretary or other proper officer, agent or servant of a body corporate who makes an affidavit in answer to interrogatories pursuant to that rule does so as the alter ego of the body for that purpose.

"He must, in like manner, not only answer as to his own individual knowledge, but also get information from the other servants of the company who have personally conducted the transaction or acquired the necessary knowledge in their capacity as such servants, but he is not bound to give information which has come to his or their knowledge outside the course of their employment. The answer of the officer or member is the answer of the corporation, company, or body, and can be read against it, and binds it as an admission.": Halsbury's Laws of England, 3rd ed., vol. 12, Pt 1, s. 2, par. 13. The proposed admission on oath is not required to embody the information of other officers of the company.

It is stated in the affidavit of B. M. Graham filed on behalf of the appellants that they do not consider the statement in the letter written by Mr. Tobias the subject of the offer made by counsel for the first-named appellant on its behalf is correct and it was for that reason they commenced the action.

I was at first inclined to the view that in the interests of getting at the truth Mr. Sieczko, as one of the central figures if not the central figure in a collection of interlocked businesses, including the defendant's business, was pre-eminently the person to be required to answer the question. But if he were to answer it he would be giving a personal answer of his own as distinguished from the answer of the defendant, whereas the function of interrogatories administered to a defendant is to obtain answers which may properly be received at the hearing as the defendant's answers. If, under an order made pursuant to O. 32, r. 4 (2), the appellants delivered to Mr. Sieczko an interrogatory as to the process of manufacture of the nitrofurantoin in the allegedly infringing tablets, he would not be bound to give information which has come to his knowledge outside the course of his duty as a director of the first-named defendant.

I would set aside the order under appeal and in lieu thereof order that the appellants be at liberty to deliver to the first-named respondent a set of interrogatories relevant only to the process of manufacture of the nitrofurantoin in the tablets of that substance which the respondents have been selling in Australia and that the said respondent be at liberty to deliver such interrogatories to be answered by Zygmunt Sieczko.

I have read the judgment of Owen J. in which there is set out a full account of the proceedings with which the Court is here concerned. I will do no more than state shortly my conclusion and the reasons for it.

It is my opinion that Sieczko was a more appropriate officer than Tobias to make answer on behalf of the defendant company to the plaintiff's interrogatories and I think that, had an application been made at the right time under O. 32, r. 4 (2), upon the material now before the Court, for an order that the plaintiff's first set of interrogatories should have been answered by Sieczko, there would have been good ground for granting it. The complication that, in accordance with the decision of the Court of Appeal, Welsbach Incandescent Gas Lighting Co. v. New Sunlight Incandescent Co. [1] , Sieczko, in answering, may have been put to the task of distinguishing between the sources of his knowledge about the subject matter of the interrogatories, would not, I think, have afforded a sound reason for not requiring his answers as the officer of the defendant company in the best position to answer for it.

However, we are now faced with an entirely different situation.

The first set of interrogatories was answered by Tobias and this involved no departure from the Rules. In substance, what the plaintiff now desires is a second answer to the same interrogatories, with one further interrogatory, but an answer by Sieczko. At the hearing of the appeal I was concerned to find out whether the answers which had, in fact, been given opened up, as it were, subject matter warranting the further interrogation of the defendant. Notwithstanding a submission that they did, it does appear to me that, if there were nothing more involved, the answers made by Tobias would not afford ground for further interrogation of the defendant. The additional matters relied upon are, however, (1) the desire of the plaintiff to obtain an answer by Sieczko and (2) the importance of an answer to the additional interrogatory. These matters do not seem to me to warrant an order under O. 32, r. 2, for liberty to interrogate a second time.

I have some doubt whether the rule is intended to cover a case where no more is sought than answers by an officer of the company other than the officer who has already answered in accordance with the Rules. In any event I agree that the plaintiff's wish to have answers by Sieczko does not justify the order sought in the circumstances of this case.

The weight of the second matter relied upon disappears when it is recalled that the plaintiff already has what is tantamount to an answer to the further interrogatory by a letter binding the defendant, and has rejected an offer to have that answer put on oath by Tobias.

In these circumstances I agree with Kitto J. that the application to interrogate further was not one to be granted.

What I take to be a governing principle in matters of this sort was stated by Sir Richard Webster, as Lord Alverstone then was, in Welsbach Incandescent Gas Lighting Co. v. New Sunlight Incandescent Co. [1] :

When an order is made upon a company to answer interrogatories, some officer of the company has to answer them, and the Court unquestionably has a discretion to say who shall make the answer, and in the exercise of that discretion the Court would, in my opinion, choose that officer who of his own knowledge knew most about the matters as to which the company was being interrogated. But the matters about which he is being interrogated still ought to be such as relate to the business of the company, and while I should apply to such an officer the rule which has been laid down in other cases with regard to the duty of answering to the best of his knowledge, information, and belief, still that must be knowledge, information, and belief as to the affairs of the company, and not as to any other affairs. 1. [1900] 2 Ch., at pp. 8, 9.

That case is the accepted authority for the proposition that an officer of a company answering interrogatories administered to the company is only bound to answer as to his own knowledge, gained in the course of his duties with the company; or from inquiries made by him of other officers and agents of the company with regard to their knowledge gained in the course of their employment, as distinct from knowledge acquired in some other capacity. These distinctions are not I think easy to make in the case of a director of a company who is also a director or servant of subsidiary or associated companies having business dealings with the company of which he is a director. Very many commercial and business enterprises are today carried on by complexes of companies - some of them wholly-owned subsidiaries of others, with interlocking and overlapping directorates - forming a single organization. If a director of one company in such an organization has some knowledge concerning that company's business, he is, by virtue of his fiduciary position, bound to use it for the benefit of the company whose affairs he directs - or so it seems to me. I think that, in answering interrogatories on behalf of his company, he should answer according to any knowledge that he has of its affairs, however he gained it, if it were knowledge which he would be bound to use in the discharge of his duties as a director. It is not only what a director learns in the board room, but what knowledge he brings there and must use there that counts. He may have been appointed a director simply because of his knowledge of the activities of the company. It would be different if his knowledge were of some matter which it would be outside his duty as a director to divulge to the company, as for example knowledge gained confidentially in his capacity as an officer or servant of some other, and dissociated, company maybe a rival in business (see Lord Blanesburgh's remarks in Bell v. Lever Bros. Ltd. [1] ) but that position is not likely to arise in the case of associated companies forming one business organization.

For these reasons I incline to think that, if in the present case the order originally sought had been that Zygmunt Sieczko should answer for the defendant, the application would not have had to be refused simply because for his answer he might have to use information which he had gained in his capacity as an officer or servant of some other company. But that does not mean that I think that any grounds were established on which the Court should set aside the refusal of Kitto J. to allow a second set of interrogatories to be administered now, coupled with a direction that they be answered by Sieczko. If his Honour had made the order asked, I do not say that it would have been set aside: it may be that Sieczko is better equipped, or capable more easily of becoming equipped, to answer than was A. I. Tobias. But the granting or refusing of the application was a matter for his Honour's discretion: and to refuse it was, I venture to say, the correct course in the circumstances. There are, in my opinion, several valid objections to the order which was sought and which his Honour refused.

First, it was not asked for originally. Two sentences from the judgment of Rigby L.J. in the Welsbach Incandescent Gas Lighting Co.'s Case [1] :

"I do not think", his Lordship said, "that, because you may suppose from the surrounding circumstances that a man who happens to be an officer of the company will also be able to tell you the truth about a particular matter, this will make him the proper officer to be interrogated, and, above all, I do not think you can go from one officer to another. You have had an answer from the secretary, and that ought to satisfy you." 1. [1900] 2 Ch., at p. 13.

Secondly, regard must be had to the question at issue in the action. The patents said to have been infringed are patents for processes of making a pharmaceutical product, nitrofurantoin, or certain intermediate products whence it is derived. A patentee who alleges that his process patent is being infringed by a defendant using it, may be permitted to interrogate the defendant as to whether what he is doing is an infringement - this within the limits, and for the reasons recognized in the Potter's Sulphide Ore Treatment Case [2] . In a case of that kind the relevant interrogatories should be answered by someone who knows of his own knowledge what the defendant is doing. I quote a passage which precedes the sentences I have already quoted from the judgment of Rigby L.J. [3] :

But it is said, you are always entitled to interrogate the person who knows about the matters in question. Within proper limits, that is no doubt the right principle. If, for instance, you are inquiring into the details of a manufacturing process, it would be idle to say you should go to the secretary of a company who probably would not know one process from another in the manufactory, when there may be an important officer or manager of the manufactory who could give you reasonable and plain answers. But in the present case it is not alleged that the defendants are infringing the plaintiffs' patents by themselves using the patented processes in Australia. What is said is that they are infringing by selling and offering for sale in Australia goods made elsewhere by the patented process. There is no evidence that Sieczko, of his own direct knowledge, knows anything more about the details of the processes of manufacture of the alleged infringing articles than does Tobias. For all that appears, each of them could only speak from inquiries made and information obtained from places overseas: and Tobias could, I assume, have sought information from Sieczko if in order to answer he had thought it would be helpful to him to do so. There is no evidence that, in relation to the manufacturing processes, Sieczko has any special qualifications to answer. It is not even shewn, I think, that he is an office bearer in any company engaged in the actual manufacture of chemical substances said to have been produced by the patented processes. He is no doubt closely concerned in an extensive drug-marketing organization, which has been called the Inter-Continental Pharmaceutical Group. The appellant thinks it relevant that he was described by Harman L.J. in the Court of Appeal as "the moving spirit behind what we may call the Inter-Continental Pharmaceutical Group": Hoffman-La Roche & Co. A. G. v. Sieczko [1] . And on the hearing of the present appeal he was several times described by counsel for the appellant as "the mind and nerve centre" of the first-named defendant. But a miscellany of incompatible metaphors does not supply the deficiency of evidence which would warrant the order which was sought. Certainly O. 32, r. 2, enables a justice to give leave for more than one set of interrogatories to be delivered. But some reason for departing from the general rule must be shewn; Goding v. Queensland Newspapers Pty. Ltd. [2] . In my opinion it does not appear in this case that, in the interests of justice and for the proper trial of the action, a set of interrogatories should be delivered, directed to be answered by Sieczko. I would dismiss the appeal. 1. (1911) 13 C.L.R. 101. 2. [1900] 2 Ch., at pp. 12-13. 3. [1968] R.P.C. 460, at p. 466. 4. (1965) 113 C.L.R. 170. Owen J.

In this action, which was commenced on 24th June 1966, the plaintiffs seek to restrain the defendants and each of them from infringing certain letters patent relating to processes of manufacturing a chemical substance called nitrofurantoin which it is claimed gave them the exclusive right to make, use and vend nitrofurantoin in the Commonwealth of Australia. The first-named defendant is incorporated in Australia and is an importer into and vendor in Australia of tablets containing nitrofurantoin, a chemical which, so the plaintiffs allege, is manufactured by processes which infringe their letters patent. The plaintiffs Smith Kline & French Laboratories Ltd. and Smith Kline & French Laboratories (India) Ltd. are incorporated in the United Kingdom and the plaintiff Norwich Pharmacal Co. in the State of New York. The first-named defendant Inter-Continental Pharmaceuticals (Australia) Pty. Ltd. is incorporated in New South Wales and the second-named defendant Inter-Continental Pharmaceuticals Ltd. is incorporated in the United Kingdom.

The first-named defendant (whom I will call the defendant) entered an appearance to the writ but the second-named defendant has not done so.

It appears that by letter of 8th December 1965 the manager of Smith Kline & French Laboratories (Australia) Ltd., a subsidiary company of the first-named plaintiff, wrote to the defendant stating that it understood that the defendant had offered to supply nitrofurantoin tablets to various persons and organizations in Australia. The letter went on to say that patents owned by Smith Kline & French Laboratories Ltd. and others owned by Norwich Pharmacal Co. covered all economic or feasible methods of making nitrofurantoin and that Smith Kline & French Laboratories (Australia) Ltd. was the only company in Australia licensed under those patents to manufacture and sell nitrofurantoin in Australia. On 6th January 1966 the defendant replied that "the nitrofurantoin which we intend to sell in Australia is manufactured under an entirely different process which is patented, and in no way conflicts with your own methods of manufacture". To this the reply was made asking to be informed of the patents relating to the processes "which you claim to use" and shortly afterwards the defendant wrote that it was "contacting our suppliers in Europe for further information which you require", and stated that as soon as this information was received "I will advise you". On 18th March 1966 the defendant wrote under the hand of a Mr. Tobias, the general manager and a director of the defendant, that:

I am pleased to inform you that the nitro-furantoin which my company is marketing in this country in the form of tablets of 50 and 100 mgm B.P. is manufactured by a process which does not infringe your patents. This particular process is patented in the U.K. under patent No. 991,644. This patent was not one of those with which the plaintiff companies were concerned.

After the action was commenced the plaintiffs, on 7th March 1968 under O. 32, r. 1, of the High Court Rules, delivered a list of interrogatories to the defendant. They asked (inter alia) whether the defendant had manufactured the substance known as "nitrofurantoin" in Australia under any of the patents mentioned in the statement of claim and, if so, whether it had compounded tablets containing the substance so manufactured. If so, what was the process employed to manufacture the nitrofurantoin and the tablets and where and by whom were such processes carried out on behalf of the defendant. They asked also when, where and by whom were the tablets manufactured and whether they were manufactured by the second-named defendant. Other questions related to the nitrofurantoin contained in the tablets, when, where and by whom was it manufactured, and when, where, from whom and at what price was the nitrofurantoin contained in such tablets obtained by the manufacturers of the tablets. It was further asked when, from whom and where were the tablets obtained by the defendant; where, from whom and at what price had the defendant purchased the tablets and whether the defendant knew the process by which the tablets were manufactured and, if so what was the process.

Two matters are to be noticed: first, that the only interrogatory which asked what process was employed to manufacture the nitrofurantoin used in the tablets was one which required an answer only if nitrofurantoin was manufactured in Australia by the defendant; and second, that many of the questions were directed not to the manufacture of nitrofurantoin but to the manufacture of the tablets. I assume that the somewhat limited nature of the interrogatories may have been due to the statements in the defendant's letters to which I have referred earlier that the nitrofurantoin used in the tablets sold by it in Australia was manufactured elsewhere than in Australia and that the suppliers in Europe from whom the defendant obtained its tablets had stated that the process used to manufacture nitrofurantoin was that stated in a patent issued in the United Kingdom, the number of which was given, a patent in which none of the plaintiffs had any interest.

The answers to the interrogatories were made in an affidavit made by Mr. Tobias. The substance of his answers appears to be as follows: the defendant was not and had not been the manufacturer of nitrofurantoin in Australia; it did not know when the tablets were manufactured; it believed them to have been manufactured in Dublin by Inter-Continental Pharmaceuticals (Eire) Ltd. and not by the second-named defendant; it did not know when the nitrofurantoin contained in the tablets was manufactured; it believed that it was manufactured in Jerusalem by Rafa-House Biological Laboratories Ltd. of Jerusalem; it did not know when, where, from whom or at what price the manufacturer of the tablets obtained the nitrofurantoin; it believed that from time to time since 1965 the manufacturer had obtained the nitrofurantoin contained in the tablets from Independent Research Laboratories Ltd. of London; it had purchased the tablets since 1965, initially from Inter-Continental Pharmaceuticals Ltd. and later from Inter-Continental Pharmaceuticals (Bletchley) Ltd. of London; and it did not know how the tablets were made but believed that a common commercial process was used.

No complaint was made about the answers given nor was any application made to the Court for an order under O. 32, r. 8, that the deponent answer further.

The plaintiffs then took out a summons, which was heard by Kitto J., seeking orders that the plaintiffs be at liberty to deliver a second set of interrogatories to the defendant and that these should be answered by one Zygmunt Sieczko who, amongst his many other activities, was a director of the defendant. No copy of the new set of interrogatories proposed to be asked is before us and neither counsel was able to tell us what were their terms but it seems plain enough from the reasons given by Kitto J. for refusing to grant the application that they covered the matters dealt with in the interrogatories already answered by Mr. Tobias, with one new question which, his Honour said, asked what was the process used to produce the nitrofurantoin used in the tablets which the defendant was importing and selling or proposing to sell in Australia. As I have said earlier, the defendant had, in its earlier correspondence with a subsidiary of the first-named plaintiff, in answer to a question asking to be informed of the patents relating to the processes used in the production of the nitrofurantoin contained in the tablets imported by the defendant, stated that it had been informed by its suppliers that the nitrofurantoin in its tablets was manufactured by a process "patented in the United Kingdom under patent No. 991,644". Although this question had not been asked in the interrogatories served and had therefore not been answered, counsel for the defendant during the hearing before Kitto J. offered to have this statement sworn to by Mr. Tobias and, at all times since, this offer has remained open but has not been accepted by the plaintiffs. Kitto J. formed the opinion, with which I agree, that the real purpose of the application was to have this question and the answers to the new set of interrogatories sought to be administered verified by the oath of Mr. Sieczko. The evidence shows that, while this gentleman is a director of the defendant, he is also associated with an interrelated group of other companies carrying on business in various parts of the world outside Australia, some of which were named in Mr. Tobias' affidavit in answer to the interrogatories and which appear to be concerned with the manufacture and disposal of chemical products. It is no doubt because of this fact that the plaintiffs now seek an order that Sieczko be ordered to answer the new set of interrogatories which they wish to administer and have them answered by Sieczko who, they suspect, may know more than does Mr. Tobias about the processes used in the manufacture of the nitrofurantoin which is contained in the tablets distributed by the defendant in Australia.

His Honour took the view that if Sieczko was ordered to answer the new set of interrogatories and in particular the question which asked what processes were used in manufacturing the nitrofurantoin used in the plaintiff's tablets and knew what those processes were - a fact as to which there was no evidence - his knowledge, if he had any, would probably not have been gained by him as a director of the defendant but from some one or more of the many other companies with which he was associated. For that reason and basing his decision upon what was laid down in Welsbach Incandescent Gas Lighting Co. v. New Sunlight Incandescent Co. [1] , his Honour dismissed the application.

I can see no reason to think that the learned judge erred in exercising his discretion in the way in which he did and I would dismiss the appeal.