McGrath and Honey in their capacity as liquidators of Pan Pharmaceuticals Ltd (In Liquidation) v Australian Naturalcare Products Pty Ltd [2006] FCA 1843

FEDERAL COURT OF AUSTRALIA

McGrath and Honey in their capacity as liquidators of Pan Pharmaceuticals Ltd (In Liquidation) v Australian Naturalcare Products Pty Ltd [2006] FCA 1843

ANTHONY GREGORY MCGRATH AND CHRISTOPHER JOHN HONEY IN THEIR CAPACITY AS JOINT LIQUIDATORS OF PAN PHARMACEUTICALS LIMITED ACN 091 032 914 v AUSTRALIAN NATURALCARE PRODUCTS PTY LIMITED ACN 003 795 499 NSD 2506 OF 2006

ALLSOP J

22 DECEMBER 2006

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 2506 OF 2006

BETWEEN: ANTHONY GREGORY MCGRATH AND CHRISTOPHER JOHN HONEY IN THEIR CAPACITY AS JOINT LIQUIDATORS OF PAN PHARMACEUTICALS LIMITED ACN 091 032 914

Applicants

AND: AUSTRALIAN NATURALCARE PRODUCTS PTY LIMITED ACN 003 795 499

Respondent

JUDGE: ALLSOP J

DATE OF ORDER: 22 DECEMBER 2006

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

(1) Time be extended up to and including 22 December 2006 for filing and serving of the notice of appeal from the orders of the Court made on 27 November 2006. (2). Leave be granted to file in Court the notice of appeal, noting the undertaking of the applicants to the Court to pay any relevant filing fee. (3) The applicants, Mr McGrath and Mr Honey, pay the costs of the respondent for the application for an extension of time. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 2506 OF 2006

BETWEEN: ANTHONY GREGORY MCGRATH AND CHRISTOPHER JOHN HONEY IN THEIR CAPACITY AS JOINT LIQUIDATORS OF PAN PHARMACEUTICALS LIMITED ACN 091 032 914

Applicants

AND: AUSTRALIAN NATURALCARE PRODUCTS PTY LIMITED ACN 003 795 499

Respondent

JUDGE: ALLSOP J

DATE: 22 DECEMBER 2006

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application for an extension of time in which to file and serve a notice of appeal from the orders made by a judge of the Court on 27 November 2006. There is no dispute between the parties that the relevant framework for consideration of the extension of time is Order 52 rule 15(2), which empowers the Court or a Judge for special reasons at any time to give leave to file and serve a notice of appeal outside the 21 days referred to in Order 52 rule 15(1). 2 Circumstances of what occurred in this case are set out in the affidavit of Ms Robinson sworn 21 December 2006. 3 The judge at first instance published reasons on 31 October 2006 in the matter between the respondent to this application as applicant and the applicants to this application as respondents. To avoid further confusion I will refer to the applicants to this application as the liquidators and the respondent to this application as Australian Naturalcare. Australian Naturalcare had appealed against a rejection of proof of debt by the liquidators in the liquidation of Pan Pharmaceuticals Limited. 4 Australian Naturalcare was a buyer of product from Pan Pharmaceuticals pursuant to various agreements and arrangements which are the subject of the controversy before the primary judge. The orders made by the primary judge on 31 October were that the proceedings stand over to enable counsel for the applicant to bring in draft orders to reflect the reasons that his Honour gave. Ms Robinson, in her affidavit, sets out the nature of the proceedings and what occurred after 31 October. 5 There were discussions and communications between the parties as to appropriate orders, further directions made, a further directions hearing was held and further correspondence took place. Finally, on 27 November 2006 the parties reached agreement as to the orders that they thought should be made and at 3.30 pm on 27 November 2006 the solicitor for Australian Naturalcare sent by email to the primary judge's associate a copy of those orders. 6 No response was received from the primary judge's chambers until 5 December 2006. On that day, the associate to the primary judge emailed to the parties copies of the orders made by the primary judge in chambers on 27 November 2006. It is accepted that time began to run for the purposes of filing and serving a notice of appeal from 27 November 2006. The rules provide for 21 days for that to be done. 7 The Supreme Court Rules have, for many years, had 28 days and this is not the first occasion where solicitors or litigants have made a mistake about the length of time in the Federal Court Rules. One would have thought that this should not occur. The evidence discloses that Ms Robinson had an understanding that it was 28 days. Her supervising partner, who is currently overseas, apparently had the same view. No explanation was given as to how that arose. I do not think that that is fatal to the application. 8 The fact is that the solicitors had an understanding which they could not have obtained from a prudent and careful familiarity with the Federal Court Rules. It is unnecessary to make a finding of fact about it, but it appears to have been based on a careless transposition of the Supreme Court position. If I could simply say that time and expense might be saved if equivalent appeal provisions in the various courts were identical. 9 The notice of appeal was sought to be filed two days out of time. The Registry rejected the filing of the document which is annexed to Ms Robinson's affidavit. 10 Promptly thereafter, the solicitors sought the attitude of the solicitors for Australian Naturalcare. The solicitors for Australian Naturalcare properly requested the grounds of the application which had been intimated, being an application of the character made before me today. Promptly thereafter, counsel for the liquidators approached me as the duty judge ex parte. I indicated that it was a matter which should be dealt with in the presence of Australian Naturalcare. I should add that there was no attempt made by counsel to have the matter dealt with by me in the absence of Australian Naturalcare; rather, as I understood at the time, counsel and her solicitors were anxious to bring the matter before the Court as promptly as possible given the circumstances of what had occurred. 11 On that day, the affidavit of Ms Robinson was filed in Court and the matter was stood over to today. The application was opposed. It was said that the only basis for the lateness of the filing was the error of the solicitors and that, in accordance with cases such as Re Woolcott and Davis (1984) 4 FCR 124, a decision of Muirhead J, the mere neglect of a solicitor alone would rarely amount to special circumstances in Order 52 rule 15(2). I was taken to various cases on Order 52 rule 15. I propose in a moment to deal with what I take to be the fundamental principles laid out by the Full Court comprising Lockhart, Sheppard and Burchett JJ in Jess v Scott (1986) 12 FCR 187. 12 It was said that the basis for the misunderstanding was not sufficiently clearly put, nor was there any evidence from the liquidators. I do not think either is fatal to the application. The baldness of the misunderstanding is sufficient to warrant, unfortunately, some criticism but the frankness of the explanation is satisfactory for me to understand what happened. As I said earlier, it should not have happened. People should understand the Rules of the Court. 13 Also, it is important to understand what the appeal right is. It is not a general right of appeal to file within a reasonable time. The right ceases at the relevant time and the Rules of Court providing for an end of the period are an important marker for parties to a controversy to understand when the trouble and strife of litigation is over. In many cases, even a tolerably short period may allow one party to come to the view that the litigation is at an end. To deny the reality of that end to that party who has taken that view may, in many cases, even with a short period, lead to significant personal prejudice. This kind of prejudice is of the kind discussed in Ketteman & Ors v Hansel Properties Ltd & Ors (1987) AC 189 and Commonwealth v Verwagen (1990) 170 CLR 394. No such prejudice was propounded here. The period of delay was two days caused by, it is necessary and unfortunate to say, the neglect or ignorance of the solicitors which should not have occurred. 14 It is now necessary, in that context, to deal with principles. As I said, counsel have helpfully taken me to the main authorities, there being many instances of the application of this rule. I begin by emphasising that special reasons must be understood, as the Full Court made clear in Jess v Scott, as a phrase used in the administration of justice and, as the Court of Appeal in New South Wales said in Outboard Marine Australia Pty Ltd v Byrnes [1974] 1 NSWLR 27, the rules should never be allowed to be used as an instrument of tyranny. 15 It goes without saying that the Rules of Court must prima facie be obeyed and it goes without saying that what we are dealing with here is a rule that sets the end point of a right to appeal. As the Full Court said in Jess v Scott, (in particular at pages 195 to 196) the test is elastic suitable for application across a range of situations from an oversight of a day to a neglect persisted in during a prolonged period. The notion of special reasons is something which requires the case to be distinguished from the usual course and whether the Court sees a ground which does justify a departure from the general rule. It is flexible, it is elastic and it is designed ultimately not to see justice done in the conduct of a litigation. 16 The notice of appeal, which was settled by senior counsel, is not said by counsel for Australian Naturalcare to be hopeless. It is not said not to be bona fide made. It is said that I should not be satisfied that there are good and substantial prospects. I do not propose to analyse the strength or weakness of the appeal at that level of specificity. It is not said that the claim is hopeless and, as I have said, the notice of appeal was settled by senior counsel. 17 Minds differ about the precise form of the best way of drafting notices of appeal. Counsel indicated that regard was had to the Full Court's decision in Sydneywide Distributers Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157 in the drafting of this notice of appeal. In all the circumstances, I am not prepared to deal with this application otherwise than on the basis that there is a bona fide notice of appeal with prospects of success that are not fanciful and not hopeless. The last comment is not made in any way based on the slightest criticism of the primary judge's reasons, but based on the structure of the notice of appeal and what has been said to me by both counsel. 18 I have had regard to the cases referred to by Mr Stoljar who appeared for Australian Naturalcare. I do not think, with respect, it is necessary to describe each case and the facts in each case. I think cognate cases have a utility to remind one of the seriousness of the issue and of the kind of weighing that should take place. No case can bind as an earlier exercise of discretion on cognate or even identical facts. Departure from earlier cases may reflect error of application of principle but not application of precedent. All of the cases are distinguishable, in my view, and should be viewed as separate exercises of the discretion. 19 It is important that the liquidators approached the Court as soon as possible and pressed for the matter to be heard as soon as possible. I may have, from what I said yesterday, been seen to indicate that the matter did not have any real urgency. In part I said that because of a view I had at the time from something counsel said to me, that she did not anticipate there to be any opposition. 20 There has, in fact, been opposition and in those circumstances, though the position could easily be held over with the position of the liquidators being held by their early application, it is important, I think, to deal with these applications as promptly as time permits so that both parties to the controversy understand where they are in relation to the appeal. In my view, and in all the circumstances, given the lack of any prejudice identified or addressed, the short period of time with which we are talking about, that is, two days, the frank and prompt confession of error by the solicitors, the existence of a bona fide and not hopeless notice of appeal and the view that I have that to deny forever the right of appeal would be, in my view, risking an injustice, I propose to extend time for the filing of the notice of appeal in terms which I will discuss with counsel in a moment. As to the question of costs, Senior Counsel for the liquidators indicated that the liquidators could not resist the paying of the costs of Australian Naturalcare of the application today. On that basis, I think an order for costs should be made. 21 As to the position between the liquidators and their solicitors the liquidators are experienced accountants and commercial men who have litigated often in the courts in the conduct of their affairs and I do not think I need to say anything that would assist them in understanding their position in relation to the solicitors. I think the facts speak for themselves as to where the liquidators' costs should lie. 22 For the above reasons, I therefore make the following orders: 1. Time be extended up to and including 22 December 2006 for the filing and serving of the notice of appeal from the order of the Court on 27 November 2006. 2. Leave be granted to file in Court the notice of appeal, noting the undertaking of the applicants to the Court to pay any relevant filing fee. 3. The applicants, Mr McGrath and Mr Honey, pay the costs of the respondent for the application for an extension of time. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.