Norbrook Laboratories Limited v Bomac Laboratories Limited

McGrath, Keith and Tipping JJ, Court of Appeal

CA 273/02, 5 May 2004

Bomac was previously the New Zealand distributor of a veterinary remedy produced by Norbrook.  Bomac had a contractual obligation to Norbrook to keep confidential certain information supplied to Bomac for the purpose of obtaining of regulatory approval in New Zealand for the remedy.

In June 2001, the commercial arrangement between the parties had ended.  In anticipation of this, Bomac had previously developed a contingency plan to obtain a chemically equivalent product from a third party supplier known as Rosenbusch.  The advantage of this plan was that a chemical equivalent could be sold under the regulatory licence already granted in respect of the Norbrook product. Without being certain that the products were actually equivalent, Bomac made a “speculative” application to the regulatory body involved which determined that the replacement product was in fact chemically equivalent and Bomac commenced selling it in competition with the Norbrook product. 

As a result, Norbrook brought an action based on a number of claims. This appeal dealt only with the claim that Bomac could not have sourced an equivalent product without misusing the confidential information supplied by Norbrook.  In particular, it was alleged that Bomac had disclosed to Rosenbusch the exact amount, as a percentage, of lecithin to be used to coat the active ingredient cloxacillin.  Bomac claimed that although the same amount of lecithin was used in the Rosenbusch product, this had arisen independently. 

The Court first considered the issue of onus of proof.  The plaintiff argued that in cases where a party was in possession of confidential information, disclosure of which would serve its interests, then there is a presumption of disclosure against that party.  This argument relied on cases in which the confidential information misused had been obtained in a fiduciary relationship.  The High Court had ruled below that, as there was no such relationship in this case, the normal onus of proof on a plaintiff remained.  The Court of Appeal upheld this and warned that to find a fiduciary relationship in a commercial agreement would excessively restrict competitive behaviour.

The evidence showed that in correspondence between Bomac and Rosenbusch, the first mention of the particular percentage of lecithin used was made by Rosenbusch.  Rosenbusch had informed Bomac that only that particular percentage was likely to be available from its usual supplier.  The chief executive of Bomac, Mr Leech, in subsequent correspondence indicated that this percentage ought to be used.  Leech had given evidence that this figure had “gelled” with him when it was mentioned by Rosenbusch even though the had misunderstood what the figure actually referred to.  The Court of Appeal concluded that the only possible source for this gelling was a “subconscious memory” of the confidential information supplied by Norbrook. 

Although Leech undoubtedly took comfort from the fact that the figure first suggested by Rosenbusch “gelled”, the Court of Appeal found that confidential information had not been misused.  Rosenbusch’s technical director had thought that the particular figure was probable even before the unwitting disclosure.  Mr Leech did not expressly convey that this provisional figure must be used.  Given that the regulatory application was speculative, and would have been made in any case, the evidence showed that Bomac simply accepted the lecithin percentage available to Rosenbusch from its usual sources.  No consideration of alternative percentages was made.  In the circumstances, Leech’s unconscious memory of the confidential information did not affect or alter the course of action taken by Bomac or Rosenbusch and therefore the information had not been misused.