Dear Colleagues;
The Full Court of the Federal Court of Australia has handed down a
significant decision in Merck Sharp & Dohme (Australia) Pty Ltd v
Peterson [2011] FCAFC 128 (12 October 2011)
http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/128.html dealing with
product liability and pharmaceuticals. The litigation is the "lead" case
in a class action over the claim that Vioxx caused heart attacks. The
trial judge had ruled in favour of the plaintiff on claims for "fitness
for purpose" and "merchantable quality" under the Trade Practices Act
1974. He had rejected claims in negligence, misleading conduct under
then-applicable s 52 TPA, and the "no-fault" product liability scheme
under the TPA due to a "state of the art" defence.
In the appeal the plaintiff lost on all counts. The core issue was
whether his heart attack had in fact been caused by the drug. The Full
Court held that the judge had not made sufficient evidentiary findings
to be satisfied that on the balance of probabilities, "but for" the
drug, the heart attack would not have occurred. The discussion of
causation at [96]-[105] ranges across Canadian and UK cases but
concludes, in line with the comments of Allsop P in Evans v Queanbeyan
City Council [2011] NSWCA 230 at [23]- [26] that Australian law does not
currently allow causation to be established by mere "increase in risk",
and that the "but for" test is a clear gateway before causation can be
established. As a result even the trial judge's findings on "fitness for
purpose" etc could not be made out, as the legislation required that
harm be caused by the alleged defect in the product.
An interesting sideline, however, is the clear rejection of an
alternative argument put forward by the drug company that their
compliance with the Federal regulatory regime "immunised" from a
negligence claim; see [161]ff:

[161] MSDA also argued that the regulatory regime based on the
Therapeutic Goods Act 1989 (Cth) (TG Act) precludes the legal
possibility of common law obligations co-existing with the legislation.
This argument may be disposed of briefly. It may be accepted that the
legislation is concerned to establish minimum safety standards for the
availability and use of regulated medicines in the public interest. We
are unable to discern in the legislation an intention to abrogate the
common law rights of individual consumers.
[162] We respectfully agree with the views of the primary judge
expressed at [792]-[795]:

The respondents’ submissions fell a good distance short of
persuading me that any such implication should be made. They contained
no such rigorous examination of the terms of the TG Act as would be
necessary to make good the point. In one respect at least, the
submissions overreached the actual terms of the Act. I refer to the
proposition that the TG Act provided for “a system for the provision of
information and warnings to doctors in a prescribed form”. The
respondents did not identify where the Act so provided. For my own part,
I have been able to find nothing in the TG Act which either mandated or
regulated the terms in which a drug manufacturer such as MSDA provided
information and warnings to doctors.


The effect of accepting the respondents’ submission would be
that, so long as the manufacturer of a prescription medicine complied in
good faith with the system for which the TGA provided, it could never be
held to have fallen short in the discharge of its duty of care to
consumers. The manufacturer, could, it seems, engage in all manner of
negligent promotion, communication or presentation without being exposed
to claims of the kind that the applicant now brings. A careless error in
the preparation of a particular production batch (ie a
snail-in-the-bottle problem) could never be held to constitute a failure
to discharge the duty of care. I highlight here, of course, the
circumstance that the respondents’ point fails to address quite
egregious negligent acts of commission. ...


By placing othe manufacturer of a prescription medicine, no less than the
manufacturer of any other product intended for human consumption,
establishes the setting for the creation of the relationship of
proximity from which the common law duty of care arises. I would be slow
to hold that a law which did not in terms deal with that very subject
implicitly qualified the manufacturer’s obligation – as it would
otherwise be defined by the common law – so as to permit it, in effect,
to act less than reasonably in the discharge of the duty, and to act in
a way that produced loss or damage, yet to be shielded from claims by
injured parties. There is, in my view, nothing unworkable or anomalous
about such a manufacturer remaining under an obligation to take
reasonable steps to avoid loss or injury to the end user at the same
time as being required to comply with the regulatory system for which
the TGA provided. The manufacturer’s obligation is not, in my view,
exhausted upon compliance with the statute – no more so than the
motorist’s obligation to take care in the driving of his or her vehicle
is exhausted upon compliance with road traffic regulations: see Sibley v
Kais [1967] HCA 43; (1967) 118 CLR 424, 427.


For the above reasons, I reject the respondents’ point that the
steps required in the discharge of their duty of care went no further,
as a matter of law, than to participate in the system of regulation for
which the TG Act provided. That conclusion does not, of a course,
exclude the prospect that, in identifying the steps required in the
discharge of the respondents’ duty of care, the requirements of that
system, and MSDA’s compliance with them, might not be relevant under the
general law. To the extent relevant, this is a matter to which I shall
turn in due course.


[163] We reject MSDA’s challenge to this aspect of his Honour’s
decision.

This approach to legislation as setting "minimum" standards rather than
a defence seems generally the sort of approach that Australian courts
would take. Note that unlike in the US it is not expressed as a matter
of "pre-emption" of State law by Federal law- this is essentially
because there is a unified body of tort law in Australia, applicable in
both Federal and State courts. Of course there might have been an
express exclusion of common law actions, or even a clear implication,
but the court held that none was present here.

Regards
Neil


Neil Foster
Senior Lecturer
Newcastle Law School
Faculty of Business & Law
University of Newcastle
Callaghan NSW 2308
AUSTRALIA
ph 02 4921 7430
fax 02 4921 6931

http://www.newcastle.edu.au/staff/profile/neil.foster.html

http://works.bepress.com/neil_foster/