Norbrook Laboratories Ltd v Bomac Laboratories Ltd

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Bingham of Cornhill
Judgment Date04 May 2006
Neutral Citation[2006] UKPC 25
Docket NumberAppeal No 41 of 2005

[2006] UKPC 25

Privy Council

Present at the hearing:-

Lord Bingham of Cornhill

Lord Hope of Craighead

Lord Carswell

Lord Mance

Sir Martin Nourse

Appeal No 41 of 2005
Norbrook Laboratories Limited
Appellant
and
Bomac Laboratories Limited
Respondent

[Delivered by Lord Bingham of Cornhill]

1

The issue in this appeal is whether the Court of Appeal of New Zealand was wrong to conclude that the respondent had not breached its contractual undertaking to the appellant to "maintain in confidence and not use" confidential proprietary information communicated to it by the appellant.

The agreed facts

2

Most of the facts central to the dispute between the parties have helpfully been agreed between them.

3

The appellant, Norbrook Laboratories Limited, is a company registered in Northern Ireland. It develops, manufactures and sells veterinary pharmaceutical products. In the late 1970s it developed an antibiotic intramammary dry cow remedy which it marketed as Bovaclox DC. It later developed a longer acting variant of Bovaclox DC which it marketed as Bovaclox DC Xtra. The only significant difference between the formulations for these two products is that in Bovaclox DC Xtra, but not in Bovaclox DC, the cloxacillin ingredient is coated with a prescribed percentage of lecithin, a complex chemical compound. This prescribed percentage was, and remains, confidential, and the issue in this appeal relates to it. To avoid disclosure of this figure, the Board will refer to it as "x%".

4

The respondent, Bomac Laboratories Limited, is a New Zealand company that develops, manufactures, markets and distributes animal health and nutritional products for sale in New Zealand and other countries. From 1984 to June 2001 Norbrook sold various veterinary pharmaceutical products to Bomac, which Bomac sold in New Zealand. One of these products was Bovaclox DC, which Bomac marketed from 1986 onwards under its own trade name, Dryclox DC. To do this, Bomac required a licence from the regulatory authority in New Zealand, then the Animal Remedies Board ("the ARB"), whose functions were discharged from July 2001 by the Agricultural Compounds and Veterinary Medicines Group of the New Zealand Food Safety Authority ("the ACVM"). To enable Bomac to obtain such a licence Norbrook sent Bomac a dossier in 1984 containing extensive information, some of it confidential, about Bovaclox DC.

5

In April 1988 Norbrook and Bomac made a written Secrecy Agreement. By clause 3 of this agreement Bomac undertook that for a period of 15 years from the date of receipt it would "maintain in confidence and not use, except as contemplated herein, any information provided by NORBROOK or its agents". It was to take the same precautions to prevent the unauthorised disclosure of information as it took regarding its own information of similar importance. The agreement applied to confidential proprietary information communicated by Norbrook to Bomac, but did not apply to information available to the general public otherwise than through the default of Bomac and information which Bomac already knew. It is this contract which Bomac are said by Norbrook to have broken, and it is not suggested that either of these exclusions applies.

6

In 1992 Norbrook sent Bomac a dossier containing extensive information, some of it confidential, about Bovaclox DC Xtra. Bomac submitted this dossier to the ARB to obtain a licence to market this product, and was duly licensed to do so. It marketed the product under its own trade name of Dryclox DC Xtra, later shortened to Dryclox Xtra.

7

In June 2001 the collaborative relationship between Norbrook and Bomac came to an end. Norbrook wished to enter the New Zealand market directly in competition with Bomac, and attempts over the preceding year to find a mutually acceptable accommodation proved unsuccessful.

8

The dry cow season in New Zealand runs from about February to May in each year. Thus promotion of dry cow products begins in about December for the forthcoming season and orders for dry cow products (such as Dryclox) are generally received from January.

9

At some time after the middle of 2000 Bomac began to explore means by which it could continue to sell Dryclox DC and Dryclox Xtra in New Zealand if its collaborative arrangement with Norbrook were to end. It sought products chemically equivalent to Dryclox DC and Dryclox Xtra from another manufacturer, because it could sell chemically equivalent products under its existing licences and continue to use the same trade names. On 28 August 2001 and 10 September 2001 Bomac met ACVM and discussed the steps which Bomac would have to take to change the manufacturer and formulations of Dryclox DC and Dryclox Xtra under its existing licences in time to be able to sell these products in New Zealand during the 2002 dry cow season. The ACVM advised it to submit a "C 1" application for a change in formulation of an already licensed product and to draw the attention of the ACVM to any possible differences between the Norbrook product and any substitute, so that the ACVM could compare the formulations to see if they were the same or sufficiently similar to enable Bomac to rely upon the existing registrations.

10

By this time Bomac was already in touch with the Instituto Rosenbusch SA, an Argentinian company with which Bomac had an existing relationship. Dr Balestrini was the company's managing director. Dr Iribarren and Dr Bisesti worked for the company as scientists. Some years before, Rosenbusch had prepared a small quantity of products materially the same as Dryclox DC and similar to, but not the same as, Dryclox Xtra. The Rosenbusch products, named Masticlox Forte, contained no lecithin-coated cloxacillin.

11

In June 2001 Bomac (by its chief executive officer, a director, Mr Leech) told Rosenbusch that lecithin-coated cloxacillin was required for the manufacture of Dryclox Xtra. The existence of the lecithin coating of the cloxacillin in Dryclox Xtra was, as a result of Bomac's marketing undertaken with Norbook's consent, information in the public domain. But the percentage of the lecithin coating (called "x%" above) was not in the public domain and remained confidential. It was information communicated by Norbook to Bomac in the Dryclox Xtra dossier.

12

On a date before 11 September 2001 Mr Leech and Dr Iribarren had an important conversation on the telephone. No record of this conversation was made, but Dr Iribarren (whose evidence the trial judge preferred to that of Mr Leech where they differed) gave evidence of it when cross-examined at the trial. The somewhat garbled transcript records the following exchanges:

"Q Yesterday you said first recollection that you have of discussion with Leech about lecithin was during telephone conversation?

A That's right.

Q 'During that telephone conversation Leech tells you, does he, that he wants you to make Masticlox vs. Forte with lecithin coated cloxacillin?

A What he requested, if we can produce the product cloxacillin coated, I told him it may be we have to phone our suppliers and look for their answers.

Q Did he tell you in that discussion that he had a vague recollection that he had seen something about the % being [x%]?

A No, he only request coated cloxacillin.

Q Do you say in that telephone conversation you told him that the % coating of cloxacillin would be [x%]?

A I told him that I believe it should be [x%] because our penicillin coating is [x%], but it has to request this information to the supplier.

Q All of that took place in course of one single telephone conversation?

A That's right.

Q Do you accept now that in fact you can get coatings of cloxacillin with lecithin at %s different to [x%]?

A No, I cannot accept, because people from chemo only coat with [x%].

Q But other manufacturers throughout world offer coatings at different %?

A Not to my knowledge, we have only 2 suppliers, one of them cannot supply and the one that can supply to us is with [x%], what other suppliers over the world do, I don't know."

He added in answer to a later question;

"I told him [x%] but I had to ask our supplier."

13

Dr Iribarren's reference to x% "gelled" or "clicked" with Mr Leech, as he testified in his evidence. He thought he had seen Bomac advertising material talking about that percentage of lecithin coating. Mr Leech believed at the time, as the parties agree, that the percentage of lecithin coating was in the public domain due to earlier advertising material, but he could not identify any such material and the Court of Appeal found there had been none.

14

On 12 September 2001 Mr Leech completed a spreadsheet which compared the Rosenbusch formulations with what he knew of the Norbrook formulations for Dryclox DC and Dryclox Xtra. The Norbrook formulation for Dryclox DC was not in any way confidential, and nothing turns on that part of the spreadsheet. The formulations for Dryclox Xtra were very similar, although not identical. Only one difference is material. The Norbrook formulation was shown as containing "lecithin x%". The Rosenbusch formulation was shown as containing lecithin, with no percentage. The spreadsheet recorded at the bottom: "Both products exactly the same except for the lecithin coat of the Xtra". Mr Leech faxed this spreadsheet to Rosenbusch on 12 September. On his own copy he wrote, against the Rosenbusch formulation: "Perfect but add lecithin coating".

15

Also on 12 September 2001 Mr Leech faxed a letter to Dr Balestrini in the absence of Dr Iribarren from Argentina. In this letter he wrote:

"Firstly, I had a very good meeting with the Ministry on Monday, but they insist that our product formulations are exactly the same as Norbrook, so I have sent by email the information that is available about the Norbrook formulations and compared them to the formulations you are presenting. You should note that both products...

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