Nguyen v Northern Sydney Local Health District

1. [1]

   BELL CJ: I agree with Leeming JA.

2. [2]

   LEEMING JA: Dr Nguyen appeals as of right from a judgment of Parker J in the Equity Division: Nguyen v Northern Sydney Local Health District (No 2) [2024] NSWSC 1533. In revised reasons based on ex tempore reasons delivered immediately following a seven day trial, his Honour awarded Dr Nguyen nominal damages of $1 against the first respondent for breach of a deed, but otherwise dismissed Dr Nguyen’s claims against the first and second respondent and made costs orders against him. The first respondent cross-appeals from the nominal damages order entered against it, but confirmed in oral submissions that this cross-appeal was not pressed if the damages ordered were to remain only nominal. The same position was taken in respect of the respondents’ Notice of Contention, which proposed additional grounds on which the appellant’s claims against the first and second respondents should have been dismissed. Although he was originally represented, Dr Nguyen represented himself at trial and in this Court. His grounds of appeal are prolix and overlapping.

Factual Overview

1. [3]

   Dr Nguyen is a former research scientist. Between 2005 and 2016, he worked at a research institute in the Northern Sydney Local Health District (LHD), which is a local health district constituted under s 17 of the Health Services Act 1997 (NSW), and the first respondent to the appeal. The LHD, which was prior to 1 July 2011 known as the Northern Sydney and Central Coast Area Health Service, admitted its capacity to be sued pursuant to s 22 of that Act. The second respondent is the State of New South Wales. There was some lack of clarity as to the precise relationship that existed between Dr Nguyen, the LHD and the State. The primary judge proceeded on the basis, and the respondents admitted, that Dr Nguyen was formally employed by the State through NSW Health, but worked at the LHD.

2. [4]

   Originally, Dr Nguyen had also brought proceedings against Professor Jonathan Morris, to whom he reported during his work at the LHD, and AIGD Biotech Pty Ltd (AIGD), but these proceedings were discontinued or dismissed before trial, leaving only the first and second respondents as defendants.

3. [5]

   The following history of the matter is uncontroversial and is reflected in [3]-[93] of Parker J’s reasons for judgment.

4. [6]

   In May 2005, Dr Nguyen commenced work in the Perinatal Research Group at the Kolling Institute, which was in the LHD and was affiliated with the University of Sydney. He worked under the two joint heads, Professor Morris and Professor Eileen Gallery. Dr Nguyen was employed on a series of fixed term contracts, none of which exceeded a year, although there were often months between the nominated expiry date of one contract and the issuance of the next. Although the LHD’s recurrent expenditure was funded by government allocation through NSW Health through a “General Fund”, that fund was insufficient to meet recurrent expenditure. Dr Nguyen’s salary was paid out of “soft money” — monies obtained from government grants and donations or bequests from the public — that was under the control of Professor Morris.

5. [7]

   Dr Nguyen’s research focussed on the therapeutic use of antibodies, which are protein molecules that play a critical role in the immune system by binding with target molecules and neutralising or altering them. Dr Nguyen’s research examined the use of antibodies to target immunoglobulin D, which is itself an antibody found on the surface of “B cells”, a type of white blood cell. The purpose of this research was to treat autoimmune conditions such as arthritis and lupus, which are caused by the immune system overreacting and generating inflammation.

6. [8]

   Dr Nguyen discovered that when a particular monoclonal antibody was administered to laboratory mice, it reduced inflammation associated with arthritis. Pursuant to the NSW Department of Health Intellectual Property Policy (NSW Health IP Policy), a record of this invention was made in early 2006 and four individuals were recognised as inventors and entitled to share in a one-third interest in the intellectual property of the invention: specifically, Dr Nguyen was entitled to 55% of this interest, and Professors Morris and Gallery and Dr Sharon McCracken were each entitled to 15%.

7. [9]

   The discovery of the effectiveness of the monoclonal antibody in mice did not automatically entail the development of an effective drug for the treatment of humans (or of other animals, for that matter). First, because mouse DNA differs from human DNA, the antibody had to be converted into one that would not be rejected by the human immune system, in what is known as a process of “humanisation”. And merely because the antibody was effective in mice did not entail the effectiveness of its humanised version. Further, even if the humanisation process was successful, commercialisation of a drug for treatment would also involve multi-phase human trials and seeking approval from the Therapeutic Goods Administration in Australia and the Food and Drug Administration in the United States.

8. [10]

   The Office of Commercialisation within the LHD, and in particular Dr Deborah Kuchler who was Team Leader of that office, was responsible for managing the commercialisation of the invention. The objective of commercialisation was to license the manufacture and distribution of a drug to a pharmaceutical company in return for royalties based on sales. The plan was to enter into an agreement with a commercial partner to fund the development of a drug.

9. [11]

   In April 2007, the LHD made applications for patents in Australia, the European Union, the United States of America and Canada, each of which were granted and registered at various points throughout 2013 to 2017.

10. [12]

    In 2010, Dr Nguyen and the LHD entered into negotiations regarding an agreement for the commercialisation of the invention that was the subject of these patent applications. Dr Nguyen and the LHD, acting through Dr Kuchler, had different views as to the extent to which the inventors should be involved in the commercialisation process, which the primary judge noted were “never fully resolved” (at [49]).

11. [13]

    However, in February 2012, Dr Nguyen entered into a “Deed of Agreement” with the LHD to commercialise the IP. The effect of this Deed of Agreement, the provisions of which are set out in more detail below, was to transfer Dr Nguyen’s 55% share of the inventors’ one-third interest in the IP to the LHD, oblige the LHD to use its best endeavours to commercialise the invention over a three-year period, oblige Dr Nguyen to assist the LHD with commercialising the invention, and provide for the reassignment of Dr Nguyen’s former interest to him if, by the end of the three-year period, the LHD decided not to continue with the commercialisation process and could not find a suitable commercialisation deal. The other inventors also transferred their interests to the LHD under similar arrangements. At some stage, the other two inventors assigned their rights to Dr Nguyen and Professor Morris so that those men had a former interest of 70% and 30% of the one-third inventor interest respectively.

12. [14]

    The period for the LHD to commercialise the invention expired in March 2015 (the parties agreed to a one-month extension of the three-year period) and no commercialisation deal had been entered into. Dr Nguyen’s conduct throughout this period, as the LHD attempted to find a commercialisation deal, was the subject of complaint by the respondents.

13. [15]

    Further, although negotiations then took place between Dr Nguyen and the LHD for the reassignment of the IP, no agreement was reached and the IP was not reassigned. Much correspondence had issued between the parties but relevantly, on 24 June 2015, the LHD had sent a without prejudice letter denying any obligation to transfer the patents to Dr Nguyen and the other inventors as had been suggested by Dr Nguyen, given his alleged breaches of the Deed of Agreement, but offering to grant an exclusive licence to a new company owned and formed by Dr Nguyen or his commercial partners. This proposal was rejected by Dr Nguyen who denied the alleged breaches. On 4 September 2015, the LHD had sent another without prejudice letter reiterating its view that it was not obliged to reassign the IP but making an offer to do so, on terms that included the inventors paying to the LHD the costs of filing, prosecuting and maintaining the patent rights (approximately $220,000 at the time) as well as 10% of all “Gross Commercialisation Proceeds” up to $1 million per calendar year and $5 million aggregate. Negotiations again ensued but relevantly on 21 December 2015 the LHD refused a revised agreement provided by Dr Nguyen, and on 22 December, Dr Nguyen provided his own version of a draft Assignment and Royalty Agreement which used a different definition of Gross Commercialisation Proceeds. This offer was not accepted by the LHD, and no further proposals were made.

14. [16]

    In mid-2016, the LHD assigned the IP to AIGD, a company of whom Professor Morris was a minority shareholder. The IP was assigned back to the LHD shortly before the trial.

15. [17]

    In August 2016, in part following a breakdown in the relationship between Dr Nguyen and Professor Morris, Dr Nguyen’s fixed-term contract expired and was not renewed. His complaints about the failure of the LHD to reassign him the IP were the subject of a non-binding expert determination which was not in his favour. He commenced proceedings in February 2021, principally claiming that the LHD had breached its obligations under the Deed by not reassigning the IP, and that had it done so, the inventors would have been able to commercialise it themselves. He also claimed that the LHD had breached its obligation to use its best endeavours to offer further employment to him. Although he initially sought specific performance for the reassignment of the IP, he did not press that claim before the primary judge, given it appeared to be too late in the day to undertake profitable commercialisation before the expiry of the patents. Instead, Dr Nguyen sought damages for his losses which he estimated in the sum of more than $1 billion, as well as salary payments.

Deed of Agreement

1. [18]

   The Deed of Agreement between the LHD and Dr Nguyen, who was referred to as the “Researcher”, contained the following substantive clauses relevant to this appeal.

2. [19]

   Clause 2 was headed “Project Intellectual Property” and relevantly provided:

3. [20]

   Clause 3 addressed the commercialisation obligations of the parties. It relevantly provided as follows:

4. [21]

   Of particular importance was cl 3.7:

5. [22]

   Clause 4 dealt with the reassignment of the IP to the inventors:

6. [23]

   Clause 5 relevantly provided for termination as follows:

7. [24]

   Pausing here, a number of matters arise on the face of the Deed of Agreement.

8. [25]

   First, cl 3.7 (and Recital A for that matter) refers to a relationship of employment. However, as was apparent from the earlier factual summary, the funding and employment arrangement in respect of Dr Nguyen was complex, and involved formal employment by the State but Dr Nguyen in practice working at the LHD, with his salary being paid through monies controlled by Professor Morris.

9. [26]

   Secondly, the meaning of “gross commercialisation proceeds” in cl 4.3, which was the subject of dispute between the parties, was not defined in the Deed of Agreement itself. Instead, the Deed of Agreement provided in cl 1.1 that the terms used had the meaning given in the NSW Health IP Policy as amended from time to time. That Policy in turn provided in cl 2.2:

10. [27]

    Thirdly, the LHD’s obligation to reassign the IP to “the Researcher and other creators” left many issues unanswered, especially when read with cl 4.3. Who was to pay the LHD its reasonable costs and the future benefit? What should happen if the creators disagreed as to the terms on which the IP should be reassigned? As will be seen, it is not necessary in this appeal to resolve all these issues.

Primary judge’s findings

1. [28]

   In short, the primary judge found that there had been no breach by the LHD in failing to reassign the IP pursuant to cl 4.1. The LHD had no obligation to reassign the IP unless Dr Nguyen had called for it and satisfied the conditions in cll 4.3 and 4.4, and Dr Nguyen had not made an offer to the LHD that satisfied the condition in cl 4.3. In particular, his offer of 22 December 2015 failed to meet the requirements of that clause. It was thus unnecessary for his Honour to decide whether the condition in cl 4.4, requiring that Dr Nguyen comply with the Deed, was also not satisfied, but his Honour said he was “inclined to think” that any breaches of cl 3.4 would not have been sufficient to mean that the condition in cl 4.4 was not met.

2. [29]

   The primary judge further said that even if there had been a breach of cl 4.1, no damage had been established. His Honour had, in an earlier interlocutory decision, found a report served as expert evidence by Dr Nguyen to be inadmissible: Nguyen v Northern Sydney Local Health District [2024] NSWSC 1299. No appeal was brought from this decision, nor did the present appeal extend to a challenge to it (cf Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; [2002] HCA 22 at [6]-[8]). At trial, Dr Nguyen invited the Court to rely upon material provided to the expert, but this material was also rejected as inadmissible. His Honour further considered that there was no evidence about the quantum of royalty or milestone payments that an interested pharmaceutical company might pay to acquire rights. The agreement with AIGD did not demonstrate any value in the patents in 2016, and in fact there was no evidence that the antibody could have been humanised, let alone developed into a successful drug in the time available. There was an evidentiary gap between demonstrating the scientific potential of the invention and proving that it had a quantifiable value in 2016.

3. [30]

   Finally, his Honour held that the LHD had breached its obligation in cl 3.7 to use its best endeavours to offer further employment to Dr Nguyen, but awarded Dr Nguyen only nominal damages for this breach on the basis that there was no evidence that performance of the obligation would have resulted in an offer of employment.

4. [31]

   The primary judge noted that no relief was or could have been sought against the State as it was not a party to the Deed of Agreement.

5. [32]

   The primary judge also made an adverse credit finding in respect of Dr Nguyen, which was not challenged on appeal. Both parties on appeal appropriately relied on the contemporaneous documents.

Notice of Appeal

1. [33]

   The Notice of Appeal contains 11 grounds, most of which are of substantial length and include submissions. Dr Nguyen’s submissions were thus contained in the 18-page Notice of Appeal, as well as in written submissions in chief and in reply.

2. [34]

   In summary, by appeal grounds 1-4, Dr Nguyen challenges the primary judge’s conclusion on breach of cl 4.1. By grounds 5-9, he challenges his Honour’s conclusion on damages with respect to that clause. And by grounds 10-11, he challenges his Honour’s refusal to award substantive damages for the LHD’s breach of cl 3.7.

3. [35]

   None of these grounds should be upheld.

4. [36]

   By this ground, Dr Nguyen alleges that the primary judge erred in not finding that the LHD had, by its letters of 24 June 2015 and 4 September 2015, “repudiated its obligation of cl 4.1”. Dr Nguyen contends that, given this repudiation, it was irrelevant whether his 22 December offer complied with cl 4.3: the LHD had already breached cl 4.1 by its letters of earlier dates.

5. [37]

   Although a party may repudiate a contract or deed by conduct such as to convey to a reasonable person renunciation either of the contract as a whole or of a fundamental obligation under it, what is repudiated is the contract or deed, rather than the particular obligation. Dr Nguyen is to be taken as alleging that the LHD repudiated the Deed of Agreement by evincing an intention not to comply with cl 4.1. Even so, this ground faces insurmountable hurdles.

6. [38]

   First, neither of the letters Dr Nguyen complains of evince any intention on the part of the LHD not to be bound by the Deed of Agreement or to comply with cl 4.1. The letter sent by the LHD on 24 June 2015 contains the following passage:

7. [39]

   However, that same letter went on to make a without prejudice offer to provide an exclusive licence to a company owned by Dr Nguyen or his commercial partners. Similarly, the letter of 4 September 2015 states that “in NSLHD’s view it is not obliged to make a reassignment under the terms of the Deed”, but then proceeded to make a without prejudice offer to reassign the IP.

8. [40]

   Rather than evincing the LHD’s intention not to be bound by the Deed of Agreement, these letters reveal only that the LHD was of the view that the Deed of Agreement did not have the effect or construction contended for by Dr Nguyen in terms of its obligation with respect to reassignment. Whether or not the LHD’s view was correct, it is well-established that repudiation will not be found where a party, although asserting an incorrect construction of a contract, is willing to perform the contract once its true construction is authoritatively enunciated: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432-3; [1978] HCA 12. On no view of the matter could the LHD be seen to have been evincing an intention not to be bound by the Deed or to comply with its obligations on the Deed’s proper construction. Indeed, in its September letter, the LHD put forward a proposal that was explicitly purporting to comply with cl 4, which can only evince its intention to act pursuant to the Deed, including stating:

9. [41]

   Secondly, even if there was a repudiation by these letters, it is clear that it was not accepted by Dr Nguyen, who continued to assert and rely upon the continued operation of the Deed until at least as late as July 2021, when in his Amended Statement of Claim he sought specific performance of the Deed.

10. [42]

    This ground is not made out.

11. [43]

    This ground commences by complaining that the primary judge should not have allowed the first respondent to rely on its letter of 4 September 2015, given it was sent on a without prejudice basis and was subject to privilege. That argument can be immediately disposed of. It was Dr Nguyen who tendered the document, and no objection was made to its tender on the basis it was privileged.

12. [44]

    However, in his submissions on this ground, Dr Nguyen proceeds to say that the primary judge erred in finding that the 22 December proposal was Dr Nguyen’s own version of the LHD’s offer on 4 September, or a counter-proposal. Dr Nguyen further contends that his 22 December proposal complied with the requirements of cl 4.3, claiming that there was “no prior clear definition of reasonable reimbursement of patent costs or GCP in cl 4.3(b)”.

13. [45]

    As the respondents submit, nothing turns on the primary judge’s description of the 22 December proposal, and in any event, it is quite clear that the proposal is a counter-offer by Dr Nguyen, made in response to the LHD’s offer on 4 September 2015.

14. [46]

    More significant is Dr Nguyen’s challenge to the primary judge’s conclusion that cl 4.3 was not satisfied by his 22 December proposal, the reasoning for which was set out at [105]-[108] of his Honour’s judgment:

15. [47]

    It will be recalled that cl 4.3 of the Deed relevantly provided that:

16. [48]

    As set out earlier, the Deed adopted in cl 1.1 the definitions used in the NSW Health IP Policy, which relevantly defined “gross commercialisation proceeds” as:

17. [49]

    In contrast, cl 3.1 of Dr Nguyen’s 22 December 2015 proposal imposed the following payment obligations on the inventors (the “Assignee”) in favour of the LHD as “Assignor”:

18. [50]

    The definition of “Gross Commercialization Proceeds” in that proposed deed was as follows:

19. [51]

    A simple comparison between the payment obligation sought to be imposed by the December 2015 proposal and that required by cl 4.3 reveals that the former falls far short of meeting both limbs of the latter. With respect to the first limb of cl 4.3, as a matter of ordinary meaning but also commercial common sense it must require that the LHD be paid its reasonable costs of protecting and maintaining the IP upfront. That is a conclusion confirmed by the existence of the qualifying words, “to date”, and further reinforced by the fact that the second limb commences “after these costs have been recovered”. There is nothing in that clause to suggest that the payment of those costs could be deferred until a later date, and such a deferral would make little sense in respect of costs specifically assessed as accruing up until the date of the agreement. However, Dr Nguyen’s proposal would have the LHD paid half of its registration costs “upon the initiation of a Phase 1 human clinical trial”, which is a circumstance that would only eventuate years after the transfer of the patents, if at all, noting that the process of humanisation was yet to commence. The other half of the registration costs were to be paid as a deduction from the gross commercialisation proceeds, which were defined by Dr Nguyen’s proposal as beginning to accrue after market launch of the drug, which again would only occur far into the future, if it eventuated at all.

20. [52]

    Pausing here, it should be noted that the relevant registration and maintenance costs were estimated in the order of $275,000 in a Patent Family Commercialisation Summary Report prepared by NSW Health in November 2014 (“Patent Costs” of $175,000 + “NSLHD OoC Asset Development Investment” costs of $100,000). The 4 September 2015 proposed Assignment and Royalty Agreement sent by the LHD put the registration costs of filing, prosecuting and maintaining the patent rights thus far at approximately $220,000.

21. [53]

    Significantly, in oral submissions, Dr Nguyen accepted that he was not, at the time of the relevant negotiations, in a position to pay these costs upfront (Tcpt 29.46-30.21):

22. [54]

    Accordingly, not only did Dr Nguyen’s December 2015 proposal not satisfy the condition in cl 4.3, but he was unable to satisfy that condition, and this drove the stance he took with respect to deferring payment of the relevant costs.

23. [55]

    Further to the above, Dr Nguyen’s proposal also failed to meet the second limb of cl 4.3. That is because cl 4.3 defined gross commercialisation proceeds widely, as including “all amounts receivable” including “lump sum payments made up-front or periodically”, while the definition in Dr Nguyen’s proposal limited these proceeds to monies accruing after market launch but before the expiry of the patents. That had the potential to result in the LHD being paid nothing at all for the transfer, noting that many hurdles stood between the transfer of the patents for the use of the antibody in mice and market launch of a drug approved for use in humans such that the latter event was not by any means a certainty. And Dr Nguyen’s proposal also excluded from the monies from which the LHD would be entitled to be paid any sums received prior to that market launch. The primary judge had noted at [44] that in commercial deals in this area, such early payments are possible:

24. [56]

    Enough has been said to show that the payment obligations countenanced in Dr Nguyen’s December 2015 proposal did not satisfy cl 4.3. The challenge to the primary judge’s conclusion on this point must be rejected.

25. [57]

    In his Notice of Appeal, and in written submissions in chief (and orally), Dr Nguyen alleged by this ground that the primary judge should have found that the LHD was estopped from denying that it had agreed to his December 2015 proposal. Dr Nguyen relied in particular on the LHD’s silence as to a 7 January 2016 date for acceptance of the December proposal, as well as on its silence as to the December proposal in a meeting on 25 February 2016.

26. [58]

    In his written reply, Dr Nguyen referred also to “estoppel by silence on cl 3.4 and cl 4.4”. This reflected an argument pleaded in the reply below to the effect that the LHD was estopped from relying on cll 3.4 and 4.4 as it had not objected to Dr Nguyen’s conduct throughout the 2012 to 2015 period.

27. [59]

    The primary judge disposed of Dr Nguyen’s cl 4.4 estoppel argument in one paragraph, noting simply that the argument was not developed at length by Dr Nguyen, was the subject of an unanswerable critique in the LHD’s written submissions and that the issue did not arise for final determination. Dr Nguyen did not cavil with his Honour’s statement that the estoppel argument had not been developed at length. Hence the primary judge is not to be criticised for his concision. To the extent that Dr Nguyen’s case continued to focus on cl 4.4, it suffices to say that even were he to establish that the LHD should be estopped from relying on or asserting his failure to satisfy the condition in cl 4.4, that would have no consequence for the outcome of his case in circumstances where the primary judge’s finding that Dr Nguyen had also failed to satisfy the condition in cl 4.3 had not been successfully challenged. That finding necessarily stands in the way of Dr Nguyen’s claim for breach of cl 4.1.

28. [60]

    On appeal, Dr Nguyen’s estoppel case was principally directed to Dr Nguyen’s own December 2015 proposal, which was the focus of his oral submissions on this ground. It does not appear that such an argument was advanced at first instance, but it can nonetheless be simply dealt with here.

29. [61]

    There was no finding by the primary judge, and no evidence to support a finding, that the LHD had given a clear and unequivocal representation that it had agreed to the terms of the December 2015 proposal or that it would act in accordance with that proposal, that the LHD had induced Dr Nguyen in any way to adopt such an assumption, or that the LHD expected or intended, or must reasonably have expected or intended, Dr Nguyen to act in reliance upon such an assumption: see Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429; [1988] HCA 7; Kramer v Stone [2024] HCA 48 at [37]-[38]. To the contrary, in an email sent by Dr Nguyen on 15 March 2016, he described the outcome of the February meeting in the following terms:

30. [62]

    That email makes plain that no agreement had yet been reached; rather, a new proposal was to be sent “for discussion to reach an agreement”. That dispels any suggestion that Dr Nguyen was labouring under any assumption that the parties had agreed on the December proposal, or that the LHD had made a representation to that effect or knew or intended that Dr Nguyen would act in reliance on such an assumption. The same can be said of an email sent by Professor Morris on 14 April 2016 to a NSW Health employee, which is also inconsistent with the notion that any agreement had been reached:

31. [63]

    It should also be said here that Dr Nguyen was found to be an unreliable witness by the primary judge. His claims that representations were made or agreement reached based on his recollections above at that meeting do not permit this Court to set aside the findings of the primary judge.

32. [64]

    No estoppel is made out. This ground must fail.

33. [65]

    By this ground, which was not developed in oral submissions, Dr Nguyen alleged that the LHD breached cl 4.6 by failing to provide him with a final draft document with revised terms of the December 2015 proposal, as had been allegedly agreed in the meeting on 25 February 2016. Dr Nguyen says that the primary judge erred in “ignor[ing]” this fact. However, a breach of cl 4.6 was not pleaded or argued at first instance and in any event, as was observed by the respondents in their written submissions, cl 4.6 only operated in the circumstance that the LHD had made a decision to reassign the IP.

34. [66]

    It follows from the rejection of the foregoing four grounds that the challenge to the primary judge’s finding that there was no breach of cl 4.1 must fail. The subsequent five grounds, which challenge the primary judge’s findings on damages for breach of cl 4.1, do not arise. But nonetheless these non-dispositive grounds, which were fully argued, are addressed below, consistently with the approach to such grounds of appeal stated in Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8] and [101].

35. [67]

    This ground alleged that the primary judge “erred in procedural fairness and in application of the laws” by failing to consider evidence of damages. Dr Nguyen relied for this ground on evidence of his efforts to restart his research career from 2017 to 2021, which he claimed were “futile” due to the breach of cl 4.1. He said he was entitled to damages for loss of a chance or wasted expenditure.

36. [68]

    This ground must be rejected. First, Dr Nguyen did not point to any aspect of the conduct of the trial or proceedings which would have amounted to a denial of procedural fairness or natural justice. Secondly, Dr Nguyen did not, in his Amended Statement of Claim, seek any damages relating to failed efforts to restart his research career. The affidavit evidence he relies upon refers to failed applications for research positions and funding. That evidence falls far short of establishing the kind of causal link that would be necessary to support a claim of damages in respect of these alleged lost opportunities. The claim for wasted expenditure is addressed in ground 9 below.

37. [69]

    By this (apparently twofold) ground, Dr Nguyen first complained that the primary judge failed to consider two expert reports “submitted” by the LHD (one by Professor Denis Wakefield and one by Mr Paul Richard Davies). Dr Nguyen also said that the primary judge erred in drawing inferences about the value of the invention based on AIGD’s failure to commercialise it, that pharmaceutical companies had expressed interest in the invention which demonstrated that commercialisation was available and feasible, and that the fact that AIGD held onto the IP suggested that the invention was commercially valuable.

38. [70]

    The complaint in respect of the failure to rely on the expert reports can be simply disposed of. Although the LHD did serve two expert reports, it chose not to call those experts at trial and their evidence was not read. Dr Nguyen was on notice of this. At the commencement of the respondents’ case, counsel for the respondents indicated the likely state of play as follows:

39. [71]

    Counsel concluded the respondents’ case without calling either expert. In oral closing submissions at trial, Dr Nguyen was made aware of the resulting position:

40. [72]

    It is not now open to Dr Nguyen to complain that the primary judge did not rely upon expert evidence that was not before him. Dr Nguyen was unrepresented, but each of counsel for the defendants and the primary judge made it transparently clear that the LHD’s expert evidence was not read.

41. [73]

    Turning then to Dr Nguyen’s complaint in relation to his Honour’s reasoning on the value of the IP and the agreement with AIGD, it is helpful to set out the relevant passage of his Honour’s reasoning (at [138]):

42. [74]

    Contrary to Dr Nguyen’s submissions, the fact of the agreement with AIGD was not sufficient evidence that the invention had commercial value, let alone that Dr Nguyen had suffered compensable loss as a result of the LHD’s failure to reassign the IP to him and the other inventors. As the primary judge observed, AIGD did not pay consideration for the transfer of the IP to it. The agreement with AIGD is thus not demonstrative of any commercial value of the invention.

43. [75]

    Furthermore, despite Dr Nguyen’s claims about the interest shown in the invention by pharmaceutical companies, the evidence in fact suggests the opposite. Specifically, a Patent Family Commercialisation Summary Report prepared by the LHD in November 2014 but referring to approaches made in 2009 or 2010 revealed that the vast majority of companies that had been approached by the Office of Commercialisation were not interested in a deal to commercialise the invention. By way of example, AstraZeneca’s response was “declined (too early stage, come back with [Proof of Concept])”, Bristol Myers Squibb’s was “looks promising but too early, need more data”, and Pfizer Australia’s was “Interested but too early stage, come back with more data and [Proof of Concept]”. Dr Nguyen relied upon the more positive response from Medical Research Council Technology UK (MRCT) which was “interested in partnership to develop humanized [antibody] with view to find a commercial partner to conduct a trial”, and which “ha[d] technology to humanize the antibody but envision[ed] a partnership with the possibility of licensing to big Pharma at a later stage”. Its interest was “in partnering on commercial basis for humanising antibody, rather than commercialising technology”. Notably, there was no interest from pharmaceutical companies in entering into a commercial venture in relation to the invention at this stage; these companies generally either declined the LHD’s approach or required more data or a proof of concept. And it can be inferred from the absence of any later agreement with MRCT, or indeed any other company that had initially expressed some interest, that this did not eventuate into a concrete commercial deal.

44. [76]

    In oral address, Dr Nguyen also pointed to a confidentiality agreement between the LHD, Panorama Research Inc and Crombie Enterprises (VIC) Pty Ltd t/a Concept2Clinic Consulting, which contained the following clause:

45. [77]

    That clause is not indicative of any commercial value in the IP. Rather, it merely reveals the expenditure of the LHD on the invention thus far. The expenditure at an early stage cannot be used to derive an estimate of an invention’s commercial value. Indeed, Dr Nguyen himself accepted on appeal that the most likely result of attempts to commercialise the invention was that it would not even reach the human trial phase (Tcpt 43.30 – 43.50):

46. [78]

    Dr Nguyen’s criticisms of the primary judge’s reasoning as to the lack of commercial value of the invention cannot be accepted.

47. [79]

    This ground takes issue with the primary judge’s finding that there was no evidence as to the quantum of royalty or milestone payments which a pharmaceutical company might pay, as to the market for inventions of this type, and in general as to the quantifiable value of the invention to the inventors.

48. [80]

    However, the primary judge was correct to say that there was no evidence substantiating the quantum of loss alleged to have been suffered by Dr Nguyen. As set out earlier, Dr Nguyen’s own expert evidence was rejected as inadmissible, and that decision was not the subject of any appeal. Dr Nguyen also sought to rely upon the material provided to that expert, but this material was also rejected as inadmissible. And the respondents declined to call their experts at trial, leaving the primary judge with no expert evidence as to quantum of loss.

49. [81]

    In terms of other evidence of quantum of loss, although Dr Nguyen sought to rely upon the clause in the confidentiality agreement between the LHD, Panorama Research Inc and Crombie Enterprises (VIC) Pty Ltd discussed above, for the reasons given earlier that clause did not have the import for which Dr Nguyen contended. And similarly, as above, the interest that Dr Nguyen claimed was shown by various pharmaceutical companies was in fact shown by very few companies, was in those cases often conditional on further data being provided, and was not in any event interest that appears to have been maintained on any of the evidence.

50. [82]

    Dr Nguyen also pointed to “publicly available data” on pharmaceutical markets, in apparent criticism of the following passage in the primary judge’s reasons (at [137]):

51. [83]

    Specifically, Dr Nguyen pointed to an annual report by JP Morgan as an example of “publicly available data”. That submission misses the point. As is apparent from the foregoing paragraph of the primary judge’s reasons, the conclusion that there was no evidence on market value followed not from the lack of publicly available data, but rather from the absence of such material in the evidence before the primary judge. The report by JP Morgan was not in evidence, and his Honour did not err in failing to consider it.

52. [84]

    Finally, Dr Nguyen also contended that cl 4.3 of the Deed, which capped the future benefit to be paid to the LHD at 10% of the gross commercialisation proceeds up to a maximum of $1 million per year for 5 years, demonstrated an agreed understanding or expectation between himself and the LHD that the gross commercialisation proceeds could potentially be in the order of $50 million in the next 5 years ($1 million x 5 x 10). That submission must be rejected. The natural and ordinary meaning of that clause is that it provides a cap on the payment that must be made to the LHD in consideration for the reassignment of the patents. It does not reveal any understanding on the part of either party as to the value of the patents, still less is it probative of the value of the invention. At most, and consistently with Dr Nguyen’s submission, it could suggest that the parties thought $50 million in proceeds could “potentially” eventuate.

53. [85]

    The primary judge was correct to find that there was no evidence of quantum of loss. This ground of appeal must fail.

54. [86]

    By this ground, Dr Nguyen maintained that the primary judge should have found that he lost a valuable commercial opportunity due to the LHD’s breach of cl 4.1. He says that damages should be assessed pursuant to the principles in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4, by reference to the most probable of three “scenarios” he proffers, which are each in fact different proposed methods of calculating his loss.

55. [87]

    The first method proceeds by reference to the cap on the proportion of gross commercialisation proceeds to which the LHD is entitled pursuant to cl 4.3 of the Deed, which Dr Nguyen submitted is indicative of the value assigned to the opportunity by the LHD. It also relies upon the JP Morgan report referred to earlier, and the interest Dr Nguyen claims to have been shown by pharmaceutical companies in the invention. These submissions and methods of valuation have been dealt with, and disposed of, above.

56. [88]

    The second method relies upon the clause in the confidentiality agreement between the LHD, Panorama Research Inc and Crombie Enterprises (VIC) Pty Ltd, which has also been rejected above.

57. [89]

    The third method argues that “it would be possible that the approved antibody drug product could reach US$2 billion in annual global sales”, relying on a Business Insider website as well as the agreement between the LHD and AIGD. As with the JP Morgan report discussed earlier, Dr Nguyen’s submission again misapprehends that material such as the Business Insider website was not in evidence before the primary judge, nor was there any evidence before his Honour to support the assertion that the commercialised drug could or would have this value. The agreement with AIGD is not probative evidence of the value of the invention, for the reasons already given.

58. [90]

    Setting aside these three “scenarios”, it is clear that the primary judge committed no error in finding that Dr Nguyen would not be entitled to damages for loss of a valuable commercial opportunity. Such damages are awarded in accordance with the approach set out in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643; [1990] HCA 20 (which was endorsed in Sellars at 350 as applying to the assessment of damages for loss of a commercial opportunity):

59. [91]

    This Court in Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151; [2023] NSWCA 294 at [323]-[324] noted the importance of context in interpreting the High Court’s use of the word “speculative” and gave further meaning to this approach:

60. [92]

    However, the commercial opportunity here is in turn far removed from the example of the company developing a drug given in Anderson, and can fairly be regarded as being a very remote possibility. The antibody the subject of Dr Nguyen’s invention had only been shown to be effective in mice, and was yet to be humanised. That process itself was not guaranteed to be successful, and even if it were, a drug still had to be developed which then had to pass various testing phases and approval processes. It was certain that the process would take many years and be very expensive. As noted above, Dr Nguyen himself acknowledged that the most likely outcome of this process was that no drug would ever reach the phase of human trials and that the invention was worth nothing. Furthermore, Dr Nguyen also acknowledged that he was not in a position, at the time of negotiations with the LHD as to reassignment, to pay upfront the costs ($275,000) of registering and maintaining the patents. It is thus clear that he would have required external funding for the process of commercialisation. But as has already been said, there was a lack of real interest from pharmaceutical companies to make a deal with the LHD, and it is not apparent why their attitude might be different to Dr Nguyen or indeed how else he could have funded the process.

61. [93]

    When the foregoing is coupled with the fact that there was no evidence before the primary judge as to the potential value of a drug or the likelihood of such a drug being created and approved for human use, it is readily apparent that the primary judge did not err in rejecting Dr Nguyen’s claim for damages for loss of a valuable commercial opportunity.

62. [94]

    Finally on the challenge to the primary judge’s finding with respect to damages for breach of cl 4.1, Dr Nguyen says that the primary judge did not consider his claim for wasted expenditure pursuant to the principles in Commonwealth v Amann Aviation (1991) 174 CLR 64; [1991] HCA 54 and Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17.

63. [95]

    No claim for damages for wasted expenditure was made in the Amended Statement of Claim or in Dr Nguyen’s written submissions of 27 October 2024, or at trial. Dr Nguyen’s closing submissions of 10 November 2024 contain the following two paragraphs referring to damages for wasted expenditure:

64. [96]

    The primary judge is not to be criticised for not addressing a claim that was not pleaded or fully developed in argument.

65. [97]

    In any event, the submission advanced in the closing submissions is bad in law. It is a claim for “the waste of my own research times”. It is not a claim for wasted expenditure at all. So far as the evidence discloses, Dr Nguyen was paid for his time through those years.

66. [98]

    The challenge to the primary judge’s finding that no damages would be awarded for any breach of cl 4.1 must fail. By the remaining two grounds, Dr Nguyen challenges the primary judge’s equivalent finding with respect to cl 3.7.

67. [99]

    The gravamen of these grounds is that the primary judge should have awarded Dr Nguyen substantial damages for the LHD’s breach of its obligation in cl 3.7 of the Deed to use its best endeavours to offer further employment to him at an appropriate salary level, if it decided to continue with the commercialisation process at the end of 3 years. By ground 10, Dr Nguyen says that his Honour erred in not considering evidence that Dr Nguyen had lost employment income as a result of this breach. Dr Nguyen also contends that his efforts to obtain other funding and employment and to restart his research were “futile” given the failure on the part of the LHD to reassign the IP. Finally, Dr Nguyen says that both the LHD and the State had the financial and legal capacity to fund Dr Nguyen’s research. By ground 11, Dr Nguyen contends that the primary judge erred by failing to consider evidence that the LHD’s breach of cl 3.7 denied him the opportunity to apply for government research grants.

68. [100]

    The entirety of the primary judge’s reasoning on damages for breach of cl 3.7 was at [152]-[154]:

69. [101]

    Grounds 10 and 11 both rely upon the premise that LHD using its best endeavours to secure him employment would have led to his continuing to be employed at the same salary, and with the opportunity and ability to apply for government research grants. The conclusion of the primary judge to the contrary is not the subject of convincing challenge by Dr Nguyen. He makes the point that the promise in cl 3.7 was not tied to the availability of “soft money”, and as much may be accepted. However, the fact remains that Dr Nguyen advanced no properly articulated case that there was a realistic prospect of his gaining employment after his falling out with Professor Morris, in circumstances where Professor Morris had controlled the funding for his salary for the previous decade. If he were to be employed, it is unclear what he would be doing and under whose supervision he would be working. The only thing that is certain is that he would not be working under Professor Morris.

70. [102]

    The primary judge’s reasons did not expressly address Dr Nguyen’s claim that the LHD’s breach of its obligation deprived him of an affiliation with a research lab which in turn rendered him unable to apply for government research grants – an argument which although not pleaded was advanced before his Honour in written submissions. But once again, Dr Nguyen has not advanced a case based on evidence that he would have obtained research grants, or that he lost a valuable chance of obtaining research grants by reason of a failure by the LHD to use its best endeavours to secure employment for him. In his submissions in this Court, Dr Nguyen relied only upon the report of Professor Wakefield, which was not in evidence.

71. [103]

    It follows that Dr Nguyen’s Notice of Appeal must be dismissed, none of his grounds of appeal having been upheld.

Notice of Contention and Notice of Cross-Appeal

1. [104]

   By their Notice of Contention, the respondents said that the primary judge’s orders should be upheld on the additional basis that cl 4.4 was not satisfied due to breaches by Dr Nguyen of cl 3.4. The respondents also proposed additional reasons why Dr Nguyen had failed to prove his claim for damages. By its Notice of Cross-Appeal, the LHD challenged the primary judge’s finding that it had breached cl 3.7 of the Deed. However, in light of the respondents’ confirmation that the Notice of Contention and Cross-Appeal were not pressed if Dr Nguyen’s challenge to the primary judge’s reasons on cll 4.1 and 3.7 were not upheld, neither falls to be addressed.

Conclusion and orders

1. [105]

   None of Dr Nguyen’s grounds of appeal should be upheld. The appeal must be dismissed. I propose the following orders:

2. [106]

   MCHUGH JA: I agree with Leeming JA.