Citation: R v Comax-Pharma Pty Ltd [2008] NSWDC 200
Court: District Court of New South Wales
Date: 18 September 2008
Judge(s): Goldring DCJ
Background
Comax-Pharma Pty Ltd was a licensed contract manufacturer of therapeutic goods. It held a licence under the Therapeutic Goods Act 1989 (Cth) to manufacture specified classes of products. The charges arose from its handling of two product batches: AB Isobone (a pain relief product) and Lior Red Grape Seed (a general wellbeing supplement), manufactured in late 2004.
When internal and external microbial tests on both batches returned fail results, senior managers at Comax deliberately substituted different samples for retesting. In the case of AB Isobone, a sample from a prior batch was submitted. For the grape seed product, a sample from an entirely different product made for a different customer was used. Both substituted samples passed, and false records were generated to reflect compliance.
The conduct was brought to light by two whistleblowers, including a Comax microbiologist who reported the matter to the Therapeutic Goods Administration (TGA) in late January 2005. Search warrants were executed, and a number of individuals connected to Comax were also charged as accessories. By the time of sentencing, the company had entered liquidation and ceased trading.
Legal Issues
- What penalty should be imposed on a corporation that pleaded guilty to two counts of manufacturing counterfeit therapeutic goods under s 42E of the Therapeutic Goods Act 1989?
- How should the court weigh the relevant factors, including the absence of actual harm, the deliberate falsification of records, the company's cooperation, and its subsequent insolvency?
- What weight should be given to the interests of unsecured creditors when sentencing a company in liquidation?
- How does the principle of totality apply where only two offences are before the court?
Decision
Goldring DCJ found that while the underlying fail results were not, in themselves, particularly serious, the deliberate submission of substitute samples for retesting and the creation of a false interim certificate of analysis were serious elements of the offending. The conduct reflected a reckless disregard for the law and for community safety at the highest levels of management, driven by commercial pressure to fulfil an export order.
The court drew on the sentencing remarks in R v Pan Pharmaceuticals Ltd (NSWDC, 12 December 2005) as a relevant comparator. It accepted a starting point of $500,000 per offence as appropriate in general terms but regarded the Comax offending as less serious than that in Pan because no actual harm to consumers had occurred and the culture of non-compliance was less entrenched. Nevertheless, the court characterised the conduct as a preparedness by senior managers to disregard safety and law in the pursuit of profit.
On the question of the company's insolvency and the potential impact on unsecured creditors, the court acknowledged that consideration as a relevant factor but held that the public interest in deterrence and in sending a clear message to the pharmaceutical industry outweighed the interests of individual creditors. The guilty plea attracted a discount of ten percent on each count.
The principle of totality was applied, but its reducing effect was modest given that only two counts were before the court. The maximum corporate penalty for each offence was $1.1 million (five times the $220,000 individual maximum), placing the fines imposed well below that ceiling.
Orders Made
- Count 1 (taking into account a further offence on a s 16BA Crimes Act 1914 (Cth) Form): fine of $270,000
- Count 2: fine of $252,000
- Total financial penalty: $522,000
Key Takeaways
- The District Court confirmed that the deliberate substitution of product samples to obtain false pass results, and the creation of false internal records, constituted serious elements of an offence of manufacturing counterfeit therapeutic goods under s 42E of the Therapeutic Goods Act 1989.
- A corporation's maximum penalty under s 42E is five times the individual maximum, producing a ceiling of $1.1 million per offence at the relevant time.
- Where a corporate offender is in liquidation, the interests of unsecured creditors are a relevant but not determinative sentencing consideration; the public interest in industry-wide deterrence can outweigh those interests.
- The absence of actual harm to consumers is a mitigating factor that distinguishes an offence from more serious instances of the same conduct, though it does not eliminate the gravity of deliberate falsification.
- Under the totality principle, the reducing effect on individual fines is smaller when only two offences are before the court, compared with cases involving a much larger number of charges.
Legislation and Cases Referenced
Legislation
- Therapeutic Goods Act 1989 (Cth), ss 3, 42E
- Crimes Act 1914 (Cth), s 16BA
Cases
- R v Pan Pharmaceuticals Ltd (NSWDC, 12 December 2005, Charteris SC DCJ)