Australian Naturalcare Products Pty Ltd v McGrath; in the matter of Pan Pharmaceuticals Limited

REASONS FOR JUDGMENT 1 The parties have isolated some issues which need to be determined in order that the matter can be brought to a conclusion following the delivery of reasons (Australian Naturalcare Products Pty Ltd v McGrath; in the matter of Pan Pharmaceuticals Limited (in liq) [2006] FCA 1403). The first thing to note is that there was an error in the reasons in relation to MSD costs etc which should have been deducted from revenue, not gross profit. The parties are agreed about that and the ultimate orders should reflect that correction. 2 The second matter for consideration is whether or not, in saying what I did at paragraph 104 of the judgment, I intended to include savings of wages costs together with the MSD costs in assessing an amount of 15 per cent, rather than 20 per cent as proposed by Mr McGuiness. I believe that is what I said and it is what I intended. I accepted the methodology of Mr McGuiness in general, but, as I explained, when I looked at his assessment of the various integers, including wages costs savings, the overall view I came to was that 15 per cent in total rather than 20 per cent in total was the correct figure. 3 The next issue for determination arises out of the necessity to allow for interest on an emerging or pro rata basis. In the course of doing that on monthly rests, it appeared that in three months more revenue was earned than what was called the 'benchmark' which represented spreading the actual loss over the period. The way the applicant's spreadsheet is composed means that the ultimate principal amount varies from the amount allowed in the judgment because of the effect of those months. There is no scope at this stage for any variation of the assessment I made of $4 million for that particular component, whatever the result may be in terms of interest, and the final figures should not reflect any variation of the principal sums that I have assessed and found in the judgment. It seems to me that, subject to checking the arithmetic, the respondent's latest spreadsheet probably reflects the principles that I have enunciated. 4 The fourth and more difficult question is what to do about costs. Counsel have referred to a number of aspects of the matter. What they have said is recorded on the transcript and I do not propose to reproduce all that they have said, I will simply indicate what influences me. 5 I said in my judgment that the normal rule is the costs follow the event. In my view, it remains the normal rule where there is more than one cause of action arising out of a set of facts. In this case, there is a considerable overlap between the factual matrix involved in the various causes of action and, although there may have been a different emphasis placed upon matters, if there had, for example, only been a trade practices count, it is difficult to split up the case in terms of causes of action. On the other hand, I do note that the trade practices count in its ultimate form was only put on relatively late in the proceeding, albeit before the commencement of the final hearing. There is no doubt that the final result is considerably less than the original claim and that the basis of success is a different basis from that originally put forward. There is no doubt that the liquidators were entitled to reject the proof of debt as submitted. 6 However, by the time the final hearing commenced, the parameters were certainly very much closer, both formally in the pleadings and informally based upon the without prejudice offers which form Exhibit A on this application. It is also put that a considerable part of both the preparation for and the hearing of the case and the submissions, was concerned with the question of damages and that is certainly correct. There were experts and lay witnesses on both sides and some of the more difficult issues to resolve related to damages. It is also true that, essentially, I accepted the expert for the respondents, rather than the expert for the applicant, although it is fair to say that there were aspects of damages which did not depend upon expert opinion. I have also been reminded that there was considerable emphasis on mitigation in the respondent's case, which I rejected. 7 Taking all things into account, I am not prepared to apply the normal rule inwhole. I think there are factors, which I have mentioned, which indicate this is an appropriate case for a discount to be made. In my opinion, the proper order is that 80 per cent of the costs of the applicant should be paid by the respondents. 8 Minutes of order should be submitted to dispose of the matter. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.