Norco Co-operative Limited v Australian Co-operative Foods Limited

[1999] NSWCA 412

CITATION:	NORCO CO-OPERATIVE LIMITED v AUSTRALIAN CO-OPERATIVE FOODS LIMITED [1999] NSWCA 412
FILE NUMBER(S):	CA 40742/99
HEARING DATE(S):	8 November 1999
JUDGMENT DATE:	8 November 1999
PARTIES :	Norco Co-Operative Limited v Australian Co-Operative Foods Limited
JUDGMENT OF:	Stein JA at 1

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	EQ 4662/98
LOWER COURT JUDICIAL OFFICER:	Bryson J

COUNSEL:	J Garnsey QC (Claimant) J Ireland QC (Opponent)
SOLICITORS:	Allen Allen & Hemsley (Claimant) Addisons (Opponent)
CATCHWORDS:	NOTICE OF MOTION - application for extension of time to appeal - application that order of trial judge be stayed pending the determination of appeal or further order
ACTS CITED:	n/a
CASES CITED:	Gallo v Dawson [1990] 64 ALJR 458 Wykanak v Rockdale City Council (unreported, Court of Appeal, 3 June 1999)
DECISION:	Notice of Motion dismissed with costs

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
40742/99

STEIN JA

Monday, 8 November 1999

NORCO CO-OPERATIVE LIMITED v AUSTRALIAN CO-OPERATIVE FOODS LIMITED
JUDGMENT

1    STEIN JA: This is a hearing of an amended notice of motion brought by the claimant Norco Co-operative Limited against the opponent, Australian Co-operative Foods Limited, which is sometimes referred to as ‘Dairy Farmers’. 2    The claimant seeks two orders. The first is that the time for appealing against certain orders made by Bryson J on 31 March 1999 be extended. The second is that order number 1 made by Bryson J be stayed pending the determination of the appeal or further order. 3    Before proceeding to deal with the motion it is convenient to state the principles to be applied by the court in dealing with an application to extend time to appeal. They are conveniently to be found in Gallo v Dawson [1990] 64 ALJR 458 in the judgment given by McHugh J at 459. 4 I read a portion of his Honour's judgment from the left hand column of 459, starting at about point D. His Honour said:

The grant of an extension of time under this rule

and I interpolate, we are dealing with an equivalent rule -

is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the Court or Justice to do justice between the parties: see Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257 at 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice, upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension to time: see Avery v No. 2 Public Service Appeal Board [1973] 2 NZLR 86 and 92; Jess v Scott [1986] 12 FCR 187 at 194 - 195. When the application is for an extension of time in which to file an appeal, it is always necessary to consider the prospects of the applicant succeeding in the appeal.

5    At this point I mention that there is no argument that the claimant does not have an arguable appeal. So that matter may be put to one side. 6    McHugh J continued:

It is also necessary to bear in mind in such an application that, upon the expiry of the time for appealing, the respondent has 'a vested right to retain the judgment', unless the application is granted. Vilenius v Heinegar [1962] 36 ALJR 200 at 201. It follows that before the applicant can succeed in this application there must be material upon which I can be satisfied that to refuse the application would constitute an injustice.

7    I mention that the principles which I have just referred to in Gallo have recently been endorsed by the Court of Appeal in an application of Wykanak v Rockdale City Council (unreported, Court of Appeal, 3 June 1999).

8    To provide a short chronology of events, although incomplete, a number of matters relevant to the application may be noted.

9    On 25 March 1998 a Trademark sale agreement was entered into between New South Wales Milk Brands Pty Limited and the opponent. On 28 August 1998 there was a Trademark licence agreement made between the parties to this litigation. On 16 November 1998 the opponent commenced proceedings in the Supreme Court, which are the subject of this application. On 6 January 1999 the opponent's solicitors served on the claimant a document which gave notice of an intention to terminate the 1998 licence agreement.

10    The litigation before Bryson J was heard during February 1999 and his Honour reserved judgment, which he delivered on 31 March 1999.

11    The case principally, but not entirely, concerned issues of co-branding of milk products. No direct decision or order was made by his Honour in relation to the generic product called Lite White, although there was material in his Honour's judgment that referred to the issue of generic products. 12    The time for appeal expired on or about 28 April 1999. During the period from the judgment until then, certain matters took place between the parties which had a bearing, according to the claimant, on the claimant not initiating an appeal in that time against the decision of Bryson J. 13    There was a conversation between Mr McKenzie, the CEO of Norco and Mr Tooth, the CEO of the opponent on 13 April 1999, and a meeting on 23 April between Mr McKenzie and Mr Herd and Mr Aroney of Dairy Farmers. 14    There is some dispute as to what was said by Mr McKenzie to Mr Tooth and vice a versa on 13 April. There is also some dispute as to what was said at the meeting on 23 April. 15    Before me there has been some cross-examination of the varying accounts but it appears to be academic at this point of time to seek to find what exactly occurred in that conversation and the subsequent meeting.

16    If it were just the delay inherent in not appealing during that period, or rather I should say seeking to appeal shortly thereafter, we would not be here today. However, after the time for appeal expired, two things occurred fairly soon thereafter.

17    One was that on 3 May 1999 the orders made by Bryson J were served upon the company secretary of the claimant. The second matter that occurred was in my view of more importance. That was that on 5 May 1999 Dairy Farmers served on Norco a notice of termination of the 1998 licence agreement. 18    This was the licence agreement that dealt with generic products. It was therefore of great concern to Norco. Norco responded directly to the situation by launching proceedings in the Federal Court on 16 June 1999 to have the purported termination declared invalid and other relief. Those proceedings are still current and I am informed that on 14 December 1999 the Federal Court will hear an application by Dairy Farmers to stay part of those proceedings as they concern the product Lite White. 19    Besides launching the Federal Court proceedings after 5 May, what was not done was to seek to pursue an appeal against the decision of Bryson J by the filing of an application to extend the time to do so. Indeed, it was not until September that Norco positively decided to seek to appeal against Bryson J’s decision. I will come to some details in relation to those events in a moment. 20    It is clear that Mr McKenzie was well aware of the 28 day time limit on appeals. He says that he was so advised. He has given reasons for not instituting an appeal within time, and they relate to his side of the conversation and meeting in April 1999. 21    In his affidavit, sworn 20 September 1999, he has also indicated why he did not, after the service of a notice of termination of 5 May 1999, instruct his solicitors to seek leave to file a notice of appeal out of time against Bryson J's decision.

22    This is fairly important because it is the most material part of the delay which the court needs to examine with some care. In para 24 of his affidavit, Mr McKenzie sets out his reasons. He says that the reason for not at that point of time (that is after 5 May) seeking to pursue the appeal ‘was primarily as a result of commercial negotiations being conducted at the time between Norco and Dairy Farmers regarding the range of commercial possibilities’.

23    It follows that he did not believe in that context that it was in the commercial interests of Norco to seek to appeal the case out of time. He mentions that there were the proceedings on foot in the Federal Court concerning the purported termination of the 1998 agreement. This was an attempt to protect Norco's position, and Mr McKenzie believed that it was necessary to do this regardless of the existence of the commercial negotiations. I can well understand and appreciate this position. 24    I mentioned that Mr McKenzie said that the commercial negotiations then taking place between the parties was the primary reason why at that point of time (5 May or shortly thereafter) no action was taken to seek an extension of time to appeal. It is plain, and Mr McKenzie I think agrees, that the commercial negotiations were the main reason that actuated the decision not to seek an extension of time to appeal until the ‘incident’ that occurred early in September. So during the period from early May until the beginning of September no action was taken by the claimant except to proceed in the Federal Court.

25    The background to these events is certain commercial offers which were occurring. For example, on 31 August 1998 the Parmalat offer was made. There are documents annexed to the affidavit of Mr McKenzie which refer to this.

26    On 2 September 1999 an incident occurred which, to some extent, galvanised the claimant. On that date the directors of Norco were personally served with copies of Bryson J's orders while attending a Board meeting in Lismore. They took some advice from their solicitors, who wrote to the solicitors for the opponent on 3 September 1999. 27    Another thing also occurred on 3 September which Mr McKenzie explains in his affidavit. On that date he immediately instructed the cessation of distribution of all Lite White and Shape products.

28    As I have said, on 3 September the solicitors for the claimant wrote to the solicitors for the opponent about the service of the orders on the members of the board on the previous day. They sought to clarify the situation in relation to the distribution of Lite White. I will not read the letter onto the record, it is to be found as annexure L to the affidavit of Mr McKenzie.

29    A response was made by the solicitors for the opponent which I think, notwithstanding the submissions by both parties on its contents, was ambiguous. I do not say deliberately so, but it is difficult to appreciate precisely what it is saying. The parties have made competing submissions as to its meaning. 30    To complete the chronology of events, I mention that on 21 September 1999 an application was filed in the court to extend the time to appeal and a lengthy notice of appeal lodged. 31    During the hearing of this motion, discussion arose between the court and the bar table about the question of staying order 1 in the circumstances where it became apparent that the order, quite clearly, did not cover Shape products. I do not think that there was any argument at any point of time about this - but also whether or not the order extended to the generic product, Lite White. 32    It seems clear, from the material before me and confirmed quite categorically from the bar table by counsel for the opponent, that it does not. It appears that Norco, from the time of the judgment of Bryson J, had continued to distribute both of these products without any objection and with the payment of royalties up until 3 September when it ordered that distribution cease. 33    It was a decision that I assume was taken on advice, but in any event was voluntary. There was no order of Bryson J which required it to occur and no order in the Federal Court. 34    It seems to me that there is no reason why the claimant, if it sees fit, should not recommence the distribution of the generic product Lite White. Certainly there is no reason why it should not recommence the distribution of Shape products, which were never part of the order on any view. 35    However, be that as it may, all it means for the court is that I would be disinclined to stay order number 1 of Bryson J. 36    That situation, to some extent I think, cuts the ground from under the claimant's case for an extension of time. It is the submission of counsel on behalf of the claimant, Mr Garnsey QC, that the delays have been satisfactorily explained, and the inter-relationship of some of the issues before Bryson J and the overlapping with part of the proceedings in the Federal Court, are also relied on. 37    But what seems to be the nub of the application to extend time is a fear on the part of the claimant that the opponent will succeed in the Federal Court in obtaining an order that the proceedings before that court, insofar as they concern Lite White, will be stayed on the basis of an issue estoppel. It is against this fear that the claimant seeks to appeal Bryson J's decision. 38    I must say that my examination of the circumstances leads me to conclude that, to some extent, this application is misconceived. It is difficult to understand what it is that the claimant is seeking to appeal about, except to endeavour to have certain conclusions and findings reversed so as to be able to bolster its opposition to any stay application in the Federal Court. 39    When I examine the application for the check list, if I may use that rather crude expression, referred to by McHugh J in Gallo, I find the claimant's motion lacking in a number of respects. I do not accept that the delay, particularly in not seeking an extension of time to appeal after the service of the notice of termination of 5 May 1999 until early September, has been sufficiently explained on the basis of the commercial situation outlined in the claimant's case. 40    That, in my view, is an insufficient reason to explain in a satisfactory way the delay during that period of time. I appreciate that corporations need to be very much guided in their business dealings by what is in the best corporate interests of their companies. But having done so, they cannot necessarily expect that reason to be legitimately used as an explanation of a delay in proceedings in court.

41    Principally of course, what the claimant has to establish is that there is an injustice shown or demonstrated if it is unable to challenge Bryson J's judgment. Although Mr Garnsey submits that this is so, I have, as I indicated, a certain difficulty with the submission.

42    Much has been made of the letter from opponent's solicitor of 6 September 1999. I have already indicated that I feel that there are inherent ambiguities in the letter but what needs to be said quite clearly is that it was not necessarily that response which activated the cessation of distribution. That had already occurred on 3 September 1999. True it is, if the letter of 6 September 1999 had been expressed differently, it may have been that the distribution of the Lite White products and the Shape product would have recommenced, rather than the cessation being continued. 43    When it is all said and done I do not accept that the material before me satisfies the court that the claimant has established an injustice. Accordingly, I would not grant the extension of time sought in the notice of motion. 44    The notice of motion is therefore dismissed.

45    STEIN JA: Is there any argument about costs?

46    GARNSEY: In relation to your Honour's reasons, at the beginning of your reasons and I didn't seek to interrupt your Honour where you quoted from McHugh J in Gallo, your Honour said 'I interpose there is no argument' - that's how I heard your Honour - 'I interpose there is no argument that the claimant has an arguable appeal'.

47    My friend conceded that there was no question that the opponent does not have an arguable appeal. It was common ground that the appeal arguable--

48    STEIN JA: I intended to convey that, that's why I didn't return to it, I said that that matter be put to one side immediately. But you rely on that as going to costs, is that what you're saying.

49    GARNSEY: Partly, but the way your Honour put it might be held against me somewhere, sometime--

50    STEIN JA: Well no it won't be because it - I certainly didn't mean it to be ambiguous - it was conceded by Mr Ireland that the claimant had an arguable appeal. So that was never an issue.

51    GARNSEY: As to costs there are two matters, first my friend's concern as to the scope of the order and - I appreciate your Honour's said in your view it places ambiguous the letter of 6 September - did cut the ground from justifying the delay in terms as your Honour has noted.

52    The letter itself is an ambiguous and we would say a deliberately ambiguous response to a clear request which, if that request had been met, would not have lead to these proceedings.

53    STEIN JA: Would not have lead to these proceedings, you mean if--

54    GARNSEY: This application.

55    STEIN JA: So that confirms what I believed that this application really is more about the distribution of generic Lite White than Bryson J's decision.

56    GARNSEY: No your Honour. No, no, it's more about Norco not being in contempt of an order of this court.

57    STEIN JA: You say that but I'm not sure that I necessarily accept that.

58    GARNSEY: What letter of Allen Allen & Hemsley said, in the last paragraph--

59    STEIN JA: This is the one starting "As has been noted however"?

60    GARNSEY: Yes. What it seeks is an ambiguous answer and the answer which came back was to say ‘if you continue and you're wrong in the Federal court, no licence presently exists to distribute such products and you've acted from an erroneous legal view and that will not prevent a contempt of court having arisen’.

61    When your Honour says this is about the distribution of Lite White, it's not more about the distribution of Lite White than generic Lite White, than about the fear and the very proper fear of being held to be in contempt of an order of the court--

62    STEIN JA: I don't think there was ever any chance of that, knowing what I now know about the matter.

63    GARNSEY: Your Honour says that and we agree with that as the strongly predominant and very likely view. But the difficulty with the matter of contempt is, where someone asserting the possibility of it arising, is that if one is a responsible party especially a corporation of substantial long standing reputation, one takes that very seriously.

64    It would have been the easiest thing in the world for Adison's to have written back saying ‘yes sure go ahead, continue distributing Lite White, the Federal Court will determine whether you can or not, you'll have injunction and you might have to account for profits although you've been paying royalties, but there may be other relief’. That response could easily have been, and what they are trying to do is have their cake and eat it, and deliberately propound an unlikely and probably untenable but possible view of the order because literally it says that. There's no argument that it doesn't.

65    It is when it is understood subject to material in accordance with Bryson J's judgment that one can so no his Honour couldn't have meant that. But that is not a basis on which any one has ever acted when construing an order of the court, that's why the courts are so careful with framing the orders.

66    His Honour didn't hear argument on the form of the orders and deliver the reasons with the orders in them.

67    STEIN JA: Notwithstanding Mr Garnsey's submissions, I think that costs should follow the event of the motion, which has failed. 68    The notice of motion is therefore dismissed with costs.

oOo