McGrath and Honey v Australian Naturalcare Products Pty Limited

[2008] HCATrans 235

[2008] HCATrans 235

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S33 of 2008

B e t w e e n -

ANTHONY GREGORY McGRATH AND CHRISTOPHER JOHN HONEY IN THEIR CAPACITY AS JOINT LIQUIDATORS OF PAN PHARMACEUTICALS LIMITED (IN LIQUIDATION)

Applicants

and

AUSTRALIAN NATURALCARE PRODUCTS PTY LIMITED

Respondent

Application for special leave to appeal

KIRBY J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 JUNE 2008, AT 9.49 AM

Copyright in the High Court of Australia

MR A.J. SULLIVAN, QC:   May it please the Court, I appear with my learned friend, MS K.C. MORGAN, for the applicants.  (instructed by Blake Dawson)

MR J. STOLJAR:   May it please the Court, I appear with my learned friend, MS K.W. DAWSON, for the respondent.  (instructed by Australegal)

KIRBY J:   Yes, Mr Sullivan.

MR SULLIVAN: Your Honours, if special leave was granted in this appeal, the case would involve resolution of two core questions. First, whether Pan Pharmaceutical Ltd, who I can call “Pan”, made an implied representation, called below the “quality assurance representation ”, when it entered into a commercial agreement called a “manufacturing agreement” with the respondent on 3 April 2002. Secondly, if such an implied representation then came into existence, were there reasonable grounds for the making of it for the purposes of section 51A of the Trade Practices Act. 

Now, as your Honours will appreciate, the primary judge and the majority of the Full Court found that there had been such an implied representation and that there were no reasonable grounds.  The powerful, in our respectful submission, dissenting judgment in the Full Court, Justice Emmett, found that even if there had been such an implied representation, a matter he did not decide, it had not been shown there were not reasonable grounds for the making of the representation. 

We would respectfully submit that the resolution of those two core issues will involve a determination by this Court of several questions of general importance. First, assuming there was such an implied representation and if the applicants are able to persuade the Court that the majority of the Full Court erred in finding factually that there was no reasonable basis for making the representation, then the question of general importance which will need to be agitated is the proper interpretation, scope and effect of section 51A of the Trade Practices Act in at least two respects. First, as identified by Justice Allsop at page 114, point 50 of the application book, paragraph 164, does section 51A(2):

place the burden of proof upon the representor to prove, on the balance of probabilities, that there were reasonable grounds for making the representation?  Does it merely require that the representor adduce some evidence “to the contrary” as a means of nullifying the statutory deeming provision?

Now, as your Honour Justice Kiefel is probably more familiar with from your previous existence in the Federal Court, there is wide divergence in the approach taken, until this case, by the Federal Court as to which of those two particular approaches is the correct approach for section 51A. Justice Allsop in a penetrating part of his judgment, with great respect, between pages 114 and 126 of the application books, sets out comprehensively the legislative history and the history in the courts of this debate and summarises the two balances.

KIRBY J:   Yes, we are very aware of all this and we know that there is an issue here, but you have two large icebergs which float in your path.  The first is that of Justice Allsop in his statement that he would take the view most favourable to your client.  The second is the one presented by Justice Stone that she would look at this issue in a case where the matter has been fully argued before the court, which she says has not happened in this case.  Now, why are they not good reasons why this is not an appropriate time for this Court to look at the question?

MR SULLIVAN:   So far as the first iceberg, I would seek to melt that this way, your Honour, is that although Justice Allsop ‑ ‑ ‑

KIRBY J:   It is a very big one.  You better go around it rather than to try and melt it.  Climate change has ‑ ‑ ‑

MR SULLIVAN:   I do not want to be the Titanic, anyway, your Honour.  Your Honour, the Justice Allsop point is this; although he did take the view what he said was most favourable to us, or stated that, we respectfully submit that in fact he did not.  When you actually analyse ‑ ‑ ‑

KIRBY J:   You say he did not do what he said he did?

MR SULLIVAN:   Your Honour, we do say that, with respect.

KIRBY J:   That is an unusual thing for a court ‑ ‑ ‑

MR SULLIVAN:   I will take your Honour to the relevant passage in one moment.  Secondly, we say, in any event, in respect of that, that when one looks at the finding which was made ‑ the factual findings were made on that most favourable version – even if your Honours take the view which was expressed by your Honour the presiding judge and by the Chief Justice in Dederer and contrary to the view just tentatively expressed by your Honour Justice Heydon and by Justice Callinan in Dederer, in our respectful submission, when one analyses the finding, there was clear error in respect of the factual finding of the majority.  That error, in our respectful submission, is amply demonstrated in the judgment of Justice Emmett in dissent, a very powerful dissent in three paragraphs.  He says, in our respectful submission, exactly why the error exists.  So that is the first way we would overcome and I will take your Honours to those passages ‑ ‑ ‑

KIRBY J:   How long did this trial take at first instance?

MR SULLIVAN:   It had several tranches, your Honour, because of adjournments but it was probably two or three weeks, I would have thought, in total.

KIRBY J:   How many appeal books were there in the Court of Appeal? 

MR SULLIVAN:   Not many.

KIRBY J:   The Full Court?

MR SULLIVAN:   Not many.  In this case, your Honour, resolution of the factual issue would resolve looking at about half a dozen documents and there is not one bit of oral evidence your Honour needs to look at.  So far as a self‑contained factual matter, if ever the Dederer point is going to need to be tested in this Court, in our respectful submission, this is the vehicle.

KIRBY J:   It is so recent, Mr Sullivan, that the people who were partisan to the different views are still around.  You have to wait a little while, not very long.

MR SULLIVAN:   With great respect, as I read the judgment in Dederer, of the five Justices two expressed the view one way, that being your Honour and the Chief Justice, two expressed another way ‑ ‑ ‑

KIRBY J:   Yes.  The traditionalists, but we are going. 

MR SULLIVAN:    ‑ ‑ ‑and Justice Gummow did not feel it necessary to decide the point.  So we think that point, the Dederer point ‑ ‑ ‑

KIRBY J:   Theirs was the radical point of view.

MR SULLIVAN:   I beg your pardon, your Honour?

KIRBY J:   Theirs was the radical point of view.

MR SULLIVAN:   In our respectful submission, your Honour, that is the third point of general importance to arise here.  Answering your Honour’s second question, Justice Stone’s disinclination to decide the point, neither Justice Emmett nor Justice Allsop had any such difficulty.  Your Honours will have the benefit of that assistance.  The reason why the case was not fully argued is that we put below before the court one decision, being the decision of Justice Emmett, and said that represented the law and my learned friends did not demur from it.  We put the view, so there was no discussion. 

But, your Honours, this Court will not be prejudiced by not having adequate benefit to the reasoning of the Full Court given the extensive and thorough and, in our respectful submission, correct analysis of the section by Justice Allsop, agreed with by Justice Emmett.  So they are the way we would seek to go around the two icebergs which your Honour has indicated are floating in my path.

KIRBY J:   They are pretty obvious.  They are relied on by the respondent and they are pretty strong statements.

MR SULLIVAN:   Yes.  May I take your Honour ‑ ‑ ‑

HEYDON J:   Which are the three paragraphs in Justice Emmett’s judgment that you are ‑ ‑ ‑

MR SULLIVAN:   Paragraphs 48 to 50, your Honour, page 69 of the application book.  Did your Honour wish me to read those out?

HEYDON J:   No, I will just run through them.  I have read them, Mr Sullivan. 

MR SULLIVAN:   Yes.  Now, may I contrast that, your Honour, with Justice Allsop’s approach.  Your Honours will need to go to page 140 of the application book because Justice Allsop deals with this matter in a very abbreviated, with great respect, fashion.  His Honour states in paragraph 243 that he is going to look at:

the matter in a way most favourable to the Liquidators, that the evidence up to, but no further than, 30 April 2002 was “evidence to the contrary” –

Now, if I just pause there, your Honours will see, if your Honours go back to page 138, paragraph 238, a summary of what that evidence was.  Your Honours will see at lines 30 to 40 a statement by his Honour:

This body of evidence could be seen as tolerably clear “evidence to the contrary” of any lack of reasonable grounds for making the –

relevantly, the quality assurance representation on 3 April 2002. Then his Honour sets out at page 139 in paragraph 241 the contention which the liquidators advanced on this point before him and the matters which we emphasise. They are, of course, the matters which Justice Emmett adopted. But then his Honour goes to say this. The way his Honour says, “Well, I think ANP has discharged its onus even though the nullifying effect has come to an end” is to point to ‑ the deeming provision has come to an end in section 51A is – in 244 he says:

The seriousness of the problems recognised by the April 2003 audit, the source or provenance of a considerable number of the problems in 2002, the systemic nature of a number of the problems, the apparent serious nature of some of the behaviour of Pan employees . . . and the lack of any foundation to conclude that there was any sharp differentiation between 3 April 2002 and 1 May 2002 in such a systemically deficient manufacturing environment, lead me to conclude . . . there was no error in the finding.

KIRBY J:   Now, that reference to systemic conduct and conduct, that sounds like more than a few documents.

MR SULLIVAN:   It is not, your Honour.  It comes out of one document, which is the audit report of the TGA in April 2003.  So it is one document.

KIRBY J:   Is this is a document purporting to summarise ‑ ‑ ‑

MR SULLIVAN:   It is one document.  All this evidence came out of about three or four documents and there was no cross‑examination upon it and ‑ ‑ ‑

KIRBY J:   There is no contest that that does not properly represent statements of the facts and circumstances that preceded that document, because it is a sort of an epitome, is it not?

MR SULLIVAN:   It is an epitome.  There was no challenge to the fact that that was ‑ ‑ ‑

KIRBY J:   The trial was run on the foundation that that document was accurately stating the facts and circumstances that it contained?

MR SULLIVAN:   It was, your Honour, as were the previous order certificates which were put forward.

KIRBY J:   Yes.  You will see my concern, that a long trial with lots of transcript, it does not sound very comfortable for the High Court to get involved in that when you have not fully argued this point of law, so it is said, in the Full Court.

MR SULLIVAN:   I can give your Honour a personal assurance that the factual compass here is extremely narrow and not one bit of transcript of cross‑examination need to be relied upon.

HEYDON J:   This point of law about the construction of section 51A, is that raised by the grounds of appeal?

MR SULLIVAN:   Yes, your Honour.

HEYDON J:   Page 157?  I am just trying to get the structure.  Ground 2.1 is your first big point which you mentioned this morning and 2.2 seems to be linked to it.  Ground 2.3 is factual and 2.4 is factual.

MR SULLIVAN: Your Honour, it is not raised by us because we accept the construction of section 51A, which the majority accepted.

HEYDON J:   So you are going to get special leave because of the reasoning of Justice Allsop?

MR SULLIVAN:   If we establish the factual error of the type that we have indicated, then unless my friends seek to assert that 51A has a meaning different to that found by the majority, we must win the appeal.

KIRBY J:   So the case is not really then a case about the meaning of section 51A at all? It is a case about the application of a common meaning to the facts of this case. That does not sound very ‑ ‑ ‑

MR SULLIVAN: No, your Honour, with respect, not. There were two aspects of section 51A which his Honour visited. First was whether there was a reverse of the onus of proof as opposed to evidence to the contrary and, secondly, if his view was you only need to adduce evidence to the contrary, what was the scope and the content of the evidence which needed to be adduced? It was in respect to that second aspect at page 140 his Honour took a view most favourable to us and still denied us relief.

KIRBY J:   It does sound like an application, though, of a principle which is not in contest.

MR SULLIVAN:   With respect, it is in contest here, your Honour, because ‑ ‑ ‑

KIRBY J:   Things are sharpened when judges disagree about the principle.  The problem that at least you face at the moment with me is that the judges of the majority, or at least Justice Allsop did not appear to disagree with Justice Emmett’s statement of the principle.

MR SULLIVAN: The other way around, I think, your Honour. But the point I am making here, your Honour, is that in 243, if we persuade the Court in due course that the factual findings made were incorrect, it would mean that the decision has to be made as to what is the proper scope and content of the words “evidence to the contrary” and you cannot take the way that the majority did, which was to say, “Look at the matter in the way most favourable to the applicant”. The Court will need to determine, indeed, what is the true scope and content of section 51A, which has never been done before because there is no need to take the view most favourable to us because we will have discharged the burden of proving on that basis that there was no breach.

That question of fact, we say, also involves the Dederer point.  But the clear error, if I can seek to demonstrate why the error is clear, is that his Honour was making a finding here that as at 30 April 2002, on the evidence, he was satisfied that there was sufficient evidence to show that Pan was substantially in breach of its obligations under the Code so as to jeopardise its licence.  He does that for two reasons. 

First, your Honour will see in the reference to paragraph 244 to a date period between 3 April 2002 and 1 May 2002.  The date 1 May 2002 is not plucked out of the air.  It comes because of reliance by the court upon an admission we made in the pleadings, ironically, in respect of the tort claim that from 1 May 2002 Pan was in breach of the Code.  That is all that was said.  Pan was in breach of the Code.  As his Honour Justice Emmett said, we did not say to what extent they were in breach of the Code, but the quality assurance representation which was found by his Honour – your Honours will see this at page 101, line 40 of his Honour’s judgment – was that the representation was that:

at least impliedly, by the entry into the Manufacturing Agreement, was that Pan did and would substantially comply with the Code in a manner to entitle it to a licence to manufacture under the TG Act. 

The admission that we were in breach of the Code, in our respectful submission, could not go any further than to prove that fact.  Secondly, the other factual evidence is summarised at pages 136 to 137 of the application book.  This is the material his Honour appears to rely upon in paragraph 244, but, your Honours, only two of those incidences referred to there, which were revealed in the 2003 audit, predate 3 April 2002, that is, one of the incidences which is referred to in subparagraph (c) and one of the incidences in subparagraph (e).  How could those two isolated incidences, in our respectful submission, by themselves be such as to justify a finding on the balance of probabilities by ANP that as at 3 April 2002 there was such significant default as to put the licence in jeopardy?

HEYDON J:   But (b) is an allegation of fabrication or a finding of fabrication, fairly serious.

MR SULLIVAN:   Yes, but, your Honour, that is an allegation, as your Honour will see at page 136, line 30, in respect of products made in March 2003.  That is the year afterwards.

HEYDON J:   Yes.  I know you contest the application of any presumption of continuance, but ‑ ‑ ‑

MR SULLIVAN:   Yes, we do, your Honour, especially if there was no cross‑examination of Mr Selim, who gave evidence on this point, about such a matter.

HEYDON J:   Would he personally have known?  He is the chief executive officer.

MR SULLIVAN:   One does not know or not, your Honour, but one would expect the question to have been asked.

HEYDON J:   Just changing the subject rather, the written submissions of the respondent contend that only $70,000‑odd turns on the outcome of this application for special leave.  Is that correct?

MR SULLIVAN:   Your Honour, that is probably right, however, I am acting for a liquidator and there are many claims – the liquidator that there are many potential claimants who are similar, what are called sponsors to the present respondent, and therefore, as far as the liquidators are concerned, I am instructed that the matter may well have a relevance beyond the present case.

KIRBY J:   Do you say the sort of situation that has arisen in this case might happen in many other cases?

MR SULLIVAN:   Yes.  It is a manufacturing agreement, which is a pro forma document that is going to come into existence.  There are many other sponsors.  Pan was the biggest, I think, the largest manufacturer of these types of products in Australia.  There have been many foreshadowed claims, your Honour.

KIRBY J:   All right.  Is that it?

HEYDON J:   Has anyone sued you other than Australian Naturalcare Products Pty Ltd?

MR SULLIVAN:   Yes.  Lodged proofs of debt or sued, your Honour?

HEYDON J:   Sued.

MR SULLIVAN:   Yes.  I am instructed both, your Honour.

KIRBY J:   Very well, thank you.  Yes, Mr Stoljar.  Mr Sullivan seems to have carefully moved the Titanic a little bit around these two moving icebergs.  What do you say?  Are they still in place?

HEYDON J:   You say they are singing “Nearer My God to Thee”.

MR STOLJAR:   They are still in place.  I will come to that.  Can I deal first with this question of the $70,000, the amount of the claim?  My friend says there are other claims that may be ventilated in due course.  That is a matter that should be the subject of evidence on this application and absent ‑ ‑ ‑

KIRBY J:   Well, I take that point, but, on the other hand, we sit here looking at the whole administration of statutes, including the Trade Practices Act.  The point is one on which there is a disagreement evident in this case and in other cases.  It is therefore one which, of its nature, would appear to attract the interest of the High Court and of its nature, it is the sort of nature which would involve many liquidations, one would think.  The nature of this sort of dispute is not going to be unique to this case. 

MR STOLJAR:   With respect, it may be unique to this case in this sense, that part of the issues or the way the case was decided relate to the specific circumstances of this case.  If I could take your Honour, for example, to page 95 of the book, at about line 13 your Honour will see that Justice Allsop is dealing with the question, “Was the QAR made?”  Was the quality assurance representation made?  My friend, when he opened his submissions today, indicated that that was one of the two issues that would be in play if special leave were granted and this matter went to a Full Court.

KIEFEL J:   Is that essentially why you say it is not an appropriate vehicle, because it has to get past the factual threshold?

MR STOLJAR:   I certainly do say that, your Honour, but ‑ ‑ ‑

KIEFEL J: We might not get to the question about section 51A?

MR STOLJAR:   Yes, though I also say that the 51A issue drops away because this case was not resolved on the basis of 51A(2).  It was resolved on the basis of 51A(1), but I will come back to that.  If I could just deal with the first issue that Mr Sullivan raised, was the QAR made?  If your Honours come down to about line – it is a little hard to read on the page, but it is about line 45 – your Honour will see that Justice Allsop says:

the real issue was whether, in the whole context and in the light of all that had passed up to April 2002, the entry into the Manufacturing Agreement by Pan gave rise to a representation by Pan in the form of the QAR.

That issue was resolved favourably to my client.  It was found that the QAR was made and that issue has been collated on the notice of appeal, as your Honour Justice Heydon discussed with my friend.  However, that issue gives rise to factual matters.  Plainly, as Justice Allsop says, it is in the whole context in the light of all that had passed up till April 2002.

HEYDON J:   Your point is this.  To say that a contract that defines the rights between the parties also contains some other representation might or might not be a funny thing to conclude, but it is a quite different issue from deciding in the light of many other circumstances, apart from the entry into the agreement, whether there is a representation.

MR STOLJAR:   Yes.  That point, and also the point that this case will never give rise to factual inquiries broader than the one ventilated by my friend this morning if he presses his first point, because to determine this first issue would require an examination of all the context and all that had passed up by April 2002.

KIRBY J:   So you do not agree that the matter, if it came to this Court, could be resolved on the basis of the document, which we were shown, which is an epitome of past facts and circumstances.

MR STOLJAR:   No, your Honour, because inevitably this issue raises a great deal more factual issues than that, and more factual issues than that may arise, in any event, in the second issue, which I will come to.

KIRBY J:   How many appeal books were there in the Full Court?

MR STOLJAR:   I recollect about eight.  But for the same reason, the necessity to investigate the factual background lessens the impact of other claims that my friend adverts to when he addressed your Honours on the issue of the $70,000, because if this case turned, as we would say, in large part on the specific facts of the case, it is unclear to what extent it will establish some precedent that will guide or determine other claims that may be brought.

KIRBY J:   There were eight appeal books, but how many did you refer to in the course of argument, do you remember?

MR STOLJAR:   Your Honour, I do not recollect.

KIRBY J:   We get eight appeal books quite often and no one ever refers to them.

MR STOLJAR:   Yes.  Your Honour, I simply do not recollect offhand.  Could I come to 51A and your Honour’s icebergs, as your Honour Justice Kirby put it?  In approaching 51A one needs to, in my respectful submission, distinguish between two quite discrete issues.  The first arises under 51A(2) and that is the operation of the deeming provision.  The specific issue is whether a representation as to a future matter is deemed to be misleading and deceptive.  As my friend has discussed with your Honours this morning and as appears from the judgment of Justice Allsop below, that has been the subject of many differing opinions, but as was also discussed this morning, a majority of the court below assumed the case on the basis most favourable to my friend. 

On that favourable construction the representor can dislodge the effect of a deeming provision merely by adducing some evidence to the contrary, that the proposition that it had no reasonable grounds for making the representation.  Indeed, Justice Allsop made another assumption favourable to my friend and that he approached it on the basis that the representor could rely on only a part of its evidence in dislodging the effect of that deeming provision.  The consequence of that, your Honours, is that this case was not decided on the basis of a deeming provision.  It was not decided on the basis of some shifting of onus.

KIRBY J:   It may not have been, I am not sure about that, but the fact is that we have two very powerful arguments in the Full Court which appear to expose the issue and its of its nature the sort of issue which is around and is not going away.  Now, that rather answers the second of my icebergs, Justice Stone’s point that it had not been fully argued in the Full Court.  Whether it was fully argued or not, we have two very powerful opinions from respected judges who give their different points of view.  Why should not this Court resolve that matter if it is going to be arising many times in the Federal Court and other courts?

MR STOLJAR:   Because in this case, your Honour, there is not a contest, or not live one, as to the appropriate construction.  Both sides proceeded, in effect, on the basis of the construction contemplated by Justice Allsop, which is that once the representor ‑ ‑ ‑

KIRBY J:   I understand that and that is a powerful point in your favour, but, on the other hand, the reasons of Justice Allsop and Justice Emmett do expose the differences and refer to earlier decisions on the matter.  So the matter is exposed for decision‑making.  The argument that you do not get into a matter if it has not been dealt with sharply by the court below is often because you are not presented with the contentions in a way that crystallises the issue for decision by this Court.  That does not seem to be the case here.

MR STOLJAR: The answer is this, your Honour, that the terrain of the dispute, the subject matter of the forensic dispute between the parties, is not a 51A(2) point. It is 51A(1). When I started I said that there were two issues under section 51A, 51A(2) and then 51A(1). Section 51A(1) is a purely factual inquiry. The issue is whether the representor had no reasonable grounds for making the representation. All of my friend’s criticisms of Justice Allsop’s decision relate to that factual inquiry. They do not relate to 51A(2). This is not a question in which principle is being questioned or challenged. It is purely the application of that principle on the present facts.

HEYDON J:   In the Full Court did you argue to the contrary of Justice Allsop’s reasoning about 51A(2)?

MR STOLJAR:   No, your Honour.

HEYDON J:   Or did you support Justice Keane?  You did  not?

MR STOLJAR: In effect, the authority before the court regulating the operation of section 51A(2) was the decision of Justice Emmett to which my friend made reference, ACCC v Universal Sports Challenge and no party sought to contend for a different construction.

HEYDON J:   So there really was not any argument about 51A(2)?

MR STOLJAR:   No, your Honour, and that is as Justice Stone says.  We accept, your Honour, that I have the onus under 51A(1) of proving that the corporation had no reasonable grounds for making a representation.  We say we discharge the onus.  My friends challenge that and say that Justice Allsop did not do what he said he was would do, but, with great respect, he did, because what he did was determine as a matter of principle how 51A(2) would operate.  Having determined that 51A(2) fell away, there was then a factual inquiry under 51A(1) and we say that that factual inquiry proceeded in a conventional way with the court looking at all of the evidence and on all of that evidence determined, we say correctly, that the onus had been discharged. 

I was not proposing to go through all of the evidence, but if I could touch on it briefly.  If your Honours go to page 136 of the book, your Honours will see at about line 43 subparagraph (c) that deals with substitution of products and says, “five batches were manufactured in February and April 2002” in which improper substitution had occurred.  April 2002 was the very time at which the quality assurance representation was made.  Now, my friends in their written outline point to a similar incident having previously been raised about a batch manufactured in August 2000.  We say that does exonerate them from what is identified in subparagraph (c).  The fact that one does it once and gets away with it means that one can do it again on five occasions in later years. 

Then passing over some of the other evidence that Justice Allsop refers to, if your Honours come to page 137, at about line 16 your Honours will see subparagraph (e), “critically deficient controls” and Justice Allsop notes that there was evidence of deficient controls in March 2001 and again February and April 2002, and then in later months in 2002.  Then in subparagraph (f), looking at the last two lines:

inadequate investigations and remedial action following process or testing problems identified in the April 2002 audit –

Pausing there, our first proposition is that regardless of what inferences may or may not be drawn as part of the fact finding exercise from the admissions that my friend alluded to, those findings of themselves and without more established the proposition that Pan did not have as at early April 2002 reasonable grounds for making a quality assurance representation.  There were serious deficiencies in the conduct of its manufacturing processes at that time.  There were, however, further matters.  My friend took you to parts of Justice Allsop’s judgment where he recognised the seriousness of the problems, the systemic nature of the problems, the fact that it involved some senior employees of Pan and when one puts all that together, our proposition is that the deficiencies as at early April 2002 are made out. 

One then comes to a separate but related question about the admissions that my friend referred to.  They are in the application book, I will not take your Honours to them, but they establish more than a mere breach of the Code of itself and without more.  They establish that Pan did not comply with the Code in relation to the therapeutic goods manufactured and supplied by Pan to ANP during the period 1 May 2002 to 28 April 2003.  So that is in relation to, we would say, not part of the sum of the goods but all of the therapeutic goods supplied during that period.  There was a like admission in respect of the therapeutic goods manufactured and supplied by Pan to other customers during the whole of that period. 

There was also evidence that following the recall in April 2003, all product manufactured by Pan from 1 May 2002 was recalled.  So 1 May 2002 became a significant date.  Part of our case in which we say established the factual finding that was made under 51A(1) was that a natural inference arose from what had occurred by reason of the admissions

and the other evidence on 1 May 2002, that absent any evidence to the contrary, that situation existed as at early April 2002. 

Now, when Justice Allsop, and for that matter Justice Gyles, adverted to the lack of any foundation for concluding that a different state of affairs existed, in our submission, they were doing no more than adverting to the fact that a natural inference arose absent any evidence to the contrary and it was the absence of any evidence to the contrary that was being adverted to. 

My friend raised the issue of the cross‑examination of Mr Selim.  Mr Selim was not propounded as an expert in the specific conduct of Pan’s manufacturing processes as at early April 2002.  He is not the person described as the general manager by Justice Allsop in one of the paragraphs that I took your Honours to.  There was some limitations on the cross‑examination at trial in that some witnesses were not cross‑examined on matters in issue, and we would say this was a matter in issue.  In any event, that matter is only one matter that would be taken into account, we would submit, in the context of all of the factual findings. 

So, we say, ultimately that the first iceberg in particular sinks this application.  It is a question of the application of principle accepted by at least all three members of the Full Court in this matter to the specific facts and it raises no more than a challenge to the factual finding of the Full Court and, for that matter, the court below.  Those are my submissions.

KIRBY J:   Yes.  Thank you, Mr Stoljar.  Anything in reply, Mr Sullivan?

MR SULLIVAN:   Very briefly, your Honour.  Your Honour, so far as the factual iceberg in respect of the making of agreement point, we do not seek to dispute the factual context found by the Full Court and by the trial judge.  We say that in the factual context found, nevertheless, this Court would not find that there was an implied representation.  So we are not going to ask the Court to look at the facts and say you should assess a different factual context.  Therefore, the only factual dispute to arise in this course in respect of the breach of section 52 by reference to the so‑called reasonable precautions matter and then on that document I maintain my assurance that there only be half a dozen documents that need to be looked at.  The second point I wish to make is this ‑ ‑ ‑

KIRBY J:   There seems to be a little bit of a difference between you though on that.  You can give an assurance, but you cannot control the way the respondent presents its appeal.

MR SULLIVAN:   Of course not, your Honour, but one would imagine the respondent would support the factual context which justified a finding in its favour.

KIRBY J:   Maybe.  Maybe it would want to go further to answer any suggestions that you are advancing.  Once you get into facts, they tend to have a life of their own.

MR SULLIVAN:   In our respectful submission, it is a highly unlikely scenario that, with respect, the respondent would go back for its hat in the situation where the factual context was found in its favour and a finding made in its favour on the basis of that.  The second thing, your Honours, is my learned friend took your Honours to pages 136 to 137 to point out some matters.  Inadvertently I think he overlooked these matters. 

The reference in subparagraphs (c) and (e) on 136 to 137 to April 2002, the precise date of those batches being manufactured, as shown by the evidence below in the report, was 17 April 2002.  That is from pages 7 and 13 of the report.  So they post‑dated signing the agreement.  The April 2002 audit that is referred to was an audit on 30 April 2002 as a result of which the licence was renewed, the inference being that, in respect of any matters in breach up to that time, in our respectful submission, they were not sufficient to put the licence in jeopardy.  They are the only matters I wish to address in reply, your Honours.

KIRBY J:   The Court will adjourn briefly to consider the course it will take in this application.

AT 10.27 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.29 AM:

KIRBY J: According to the applicant, this application for special leave to appeal from orders of the Full Court of the Federal Court of Australia presents a question of critical importance concerning the meaning and application of section 51A(2) of the Trade Practices Act 1974 (Cth). In a suitable case such a question would warrant the grant of special leave because of arguable differences that have arisen in the approach to that question in the courts below. However, we are not convinced that this is a suitable instance for such consideration.

Justice Allsop in the Full Court expressly looked at the evidence and approached the matter in what he said was a way most favourable to the applicants. Justice Stone, who agreed with the factual findings of Justice Allsop, pointed out that the correct interpretation of section 51A(2) was not the subject of full argument in this appeal. In effect, the matter was disposed of in the Full Court within the language of section 51A(1). This makes the present case an unsuitable one to resolve the latent controversy about the application and meaning of section 51A(2) of the Act.

The applicant also faces what appear to be concurrent findings of fact against it.  Whatever is the precise approach to be adopted in this Court to such conclusions following the decision of the Court in Roads and Traffic Authority of NSW v Dederer (2007) 81 ALJR 1773, the fact of such concurrent findings would undoubtedly provide a significant hurdle for the applicant in disturbing the factual findings below.

In these circumstances, the result is that we are unconvinced that the application enjoys reasonable prospects of success and, accordingly, special leave is refused.  The applicant must pay the respondent’s costs.

AT 10.31 AM THE MATTER WAS CONCLUDED