FEDERAL COURT OF AUSTRALIA

Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 7) [2011] FCA 715

THE COURT ORDERS THAT:

1.    Order 4 of the orders of 14 April 2011 is varied by substituting the figure of $5,026,200.63 for the figure of $5,031,541.85.

2.    Order 6 of the orders of 14 April 2011 is varied by substituting the figure of $397,723.69 for the figure of $287, 723.69.

3.    The Court approves the sum of $7,896.19 as forming part of “PAC’s Costs” for the purpose of clause 9.3 of the Settlement Distribution Scheme.

4.    The time for Group Members to deliver an Invitation Response in accordance with clause 3.4 of the Settlement Distribution Scheme is extended to 10am on 27 June 2011 and any Invitation Response not already delivered to the Administrator is to be delivered by delivering a completed Claim Invitation and Invitation Response by e-mail to athorpe@mtpartners.com.au or smtango@mtpartners.com.au or by facsimile to +61 2 9229 2200.

5.    A notice in accordance with the Notice annexed to these orders is to be sent by 5pm on 22 June 2011 to the e-mail address or facsimile number held by the Administrator for each of the following:

a.    Healthy Life Partners Pty Ltd;

b.    Power Foods International Pty Ltd;

c.    Nature Vet Pty Ltd;

d.    Health Minders Pty Ltd;

e.    Bluegum Pharmaceuticals Pty Ltd;

f.    Rener Health Products Pty Ltd;

g.    Gaily Pharmaceuticals Co Ltd;

h.    Brauer Natural Medicine Pty Ltd;

i.    PT Ayu Agung;

j.    Healthcore Co Ltd;

k.    I Think Naturally Pty Ltd;

l.    Medicine Man Labs Pty Ltd;

m.    Optimum Healthcare Pty Ltd;

n.    Queensland Biochemics Pty Ltd;

o.    Symbion Health Ltd.

6.    The Court approves the sum of $33,354.12 in respect of the costs of these applications as forming part of the “Administration Costs” for the purposes of clause 10.1.2 of the Settlement Distribution Scheme.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    On 25 March 2011 reasons for decision were given approving a settlement in this proceeding: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277. Orders were made on 14 April 2011 and entered on 11 May 2011.

2    Thereafter further matters emerged which have occasioned yet two further Notices of Motion. One Notice of Motion sought orders that:

(i)    there be a further payment of $7,896.19, being an amount forming part of what were previously referred to as “PAC’s Costs”; and

(ii)    there be an extension of time within which group members can return their Claim Invitation Responses.

The other Notice of Motion sought orders varying:

(i)    Order 4 as made on 14 April 2011, the variation being to reduce the amount previously ordered to be paid, the reduction being in the amount of $5,341.22; and

(ii)    Order 6 as made on 14 April 2011, the variation seeking an increase in the amount previously ordered to be paid, the increase being in the amount of $110,000.

3    It is concluded that the relief sought in each of the two Notices of Motion should be granted.

4    Given the desire of the Administrator of the Settlement Distribution Scheme (“the Scheme”) to make a distribution of the settlement monies prior to 30 June 2011 (if at all possible), it is desirable that reasons in support of granting such relief should be delivered promptly. Time (regrettably) has not permitted of a more leisurely consideration of the issues raised for resolution. As the result, however, is considered to be reasonably clear, little would be gained in delaying the provision of such reasons as can now be given.

A FURTHER $7,896.19 and An Extension of Time To File Responses

5    The first Notice of Motion is one in which the Administrator of the Scheme is in effect the applicant seeking relief.

6    When approving the settlement of the representative proceeding which had been commenced on 23 December 2008, and when making orders on 14 April 2011, one of the orders then made was the following:

3. Liberty is granted to the administrator of the Distribution Scheme to apply to the Court for orders in connection with the Distribution Scheme including any order, approval or guidance of the kind contemplated by the Distribution Scheme.

7    In addition to the liberty reserved by that order, in seeking the first order the Administrator places specific reliance upon clause 9.3 of the Scheme which provides as follows:

9.3     The Administrator shall seek the approval of the Court to payment from the Fund of PAC’s Costs and the Representatives’ Expense Claims, and subject to that approval, shall pay PAC’s Costs and the Representatives’ Expense Claims from the Fund, in such amounts as may be approved, within 7 days of the Court granting any approval.

8    It is considered appropriate that this additional amount of $7,896.19 (inclusive of GST) should be paid. This sum relates to an invoice issued by the liquidator of Pan Pharmaceuticals Ltd after the orders made on 14 April 2011, albeit an invoice relating to work carried out prior to the approval of the settlement.

9    In respect to the second order sought by the Administrator, namely an order extending time within which a claim could be made, reference is made at the outset to clauses 3.3 and 3.4 of the Scheme which provided as follows:

3.3    The Administrator shall send a Claim Invitation to each Group Member as soon as practicable after the Settlement Approval Date.

1.4    Each Group Member who wishes to do so must respond in writing to the Claim Invitation by delivering an Invitation Response to the Administrator, by the stipulated date which shall be not earlier than 30 days after delivery of the Claim Invitation, in accordance with Clause 14 below. A Group Member who does not submit an Invitation Response within the time stipulated by the Claims Invitation (and in this respect, time is of the essence), shall not be entitled to make any Claim.

10    Although the Scheme did not itself confer any power upon an Administrator to extend time, clause 15 conferred such power upon the Court. That clause provided as follows:

15.    Time

15.1    The time for doing any act or thing under the Settlement Distribution Scheme may be extended by order of the Court.

It is this clause which is now invoked to extend the time otherwise prescribed by clause 3.4.

11    A number of group members failed to make a claim within the time prescribed by clause 3.4. This number was originally said to be eighteen – but a further group member was identified this morning. Of these nineteen, four have since made claims. The date upon which the claims were made, the extensions of time sought and the amount of those claims may be summarised as follows:

Reasons why the claims were not made within time varied from an unawareness of the need to take any further step in order to make a claim to the requirement to make a claim being simply overlooked. Although the explanations may not have been otherwise persuasive, the Administrator does not oppose the extensions sought. A comparison between the time taken between the commencement of the present proceeding and the date of final orders and the comparative shortness of the extensions of time sought also support an extension being granted.

12    In seeking the extensions of time to permit these four claims to be accepted, the Administrator did not propose that any further notice should be extended to the outstanding fifteen group members. Reliance was placed upon the attempts to contact these outstanding group members and their failure to respond. Some, indeed, were understood to have expressed a commitment not to make a claim. That proposal, however, is rejected. The time that has been taken in resolving the present proceeding and the nature of the explanations by the four group members that have been accepted and which are presently in issue is such that it would be unfair to allow an extension of time for some but not others. To unduly delay distribution of the settlement monies, however, would also be unfair to those group members who did submit claims within the time originally contemplated. But, on balance, it is considered that the remaining group members should be promptly notified of the extension now to be granted and the manner in which any future application for an extension of time may need to be resolved.

13    In the circumstances of the present application, it is concluded that:

(i)    the time otherwise prescribed by Clause 3.4 of the Scheme should be extended to 10.00 am on Monday 27 June 2011;

and that:

(ii)    the Administrator should notify by 5.00 pm today those group members who have not to date made a claim that the time within which they may do so has been extended up to 10.00 am on Monday 27 June 2011 and as to the manner in which any future application for an extension of time may need to be resolved. Such notice should be provided in the manner and form set forth in orders to be now made.

Order 35 and The Common Law

14    The second of the Notices of Motion sought a variation to Orders 4 and 6.

15    In seeking those variations Pharm-a-Care did not seek to place any reliance upon any provision of either the Scheme or upon any liberty to apply to the Court that had been expressly reserved.

16    The variation to Orders 4 and 6 thus requires a consideration as to the source of the power of the Court to vary those orders as made on 14 April 2011 and later entered and whether any discretion to do so should be exercised in favour of the orders now sought.

17    At common law the rule is “that once a judgment of the Court has been passed and entered, the Court thereafter lacks power to make an order which alters or sets aside that judgment. The only remedy in such a case for a dissatisfied litigant is, where available, an appeal”: Caboolture Park Shopping Centre Pty Ltd (In liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 234 per Lee, Hill and Cooper JJ. See also: Bailey v Marinoff (1971) 125 CLR 529 at 530 per Barwick CJ.

18    There were, however, limited circumstances in which the common law recognised an ability to alter or vary orders once entered: Owston Nominees No 2 Pty Ltd v Branir Pty Ltd [2003] FCA 629, 129 FCR 558. These circumstances, and the question as to whether the common law continues to operate in addition to Order 35 r 7, were there addressed by Allsop J (as His Honour then was) as follows:

[27] Thus, the common law appears to recognise, relevantly, at least four relevant possible bases for the exercise of power to deal with entered orders (i) ambiguity, invoking the need for construction, (ii) where the order does not reflect what the court decided, (iii) where something is to be added not dealt with by the court, which circumstance is probably limited to “ancillary” or “consequential” matters, and (iv) a supplemental order, the need for which arises from circumstances occurring after the order was made. (I leave aside the slip rule, fraud and self executing orders.) In respect, especially, of (i) to (iii) above, it is necessary to look at the surrounding circumstances. These include the reasons, the pleadings and, if necessary, the evidence and how the case was conducted: …

[28] The parties did not address the question as to the extent to which O35 r 7 excluded the common law or the extent to which it could be seen as exhaustive of the Court's power to act in circumstances of this kind. I do not need to address these matters to resolve the present debate.

Most recently, in Dib Group Pty Ltd v Coolabah Tree Aust-Wide Pty Ltd [2011] FCAFC 57 at [77] Gray, Lander and Katzmann JJ observed that the “[c]ircumstances in which a court will vary or set aside an order that has been entered are identified in O 35 r 7(2), but those paragraphs should not be understood to be the only circumstances in which the court would exercise the power”.

19    Of potential present relevance is the power at common law to vary an order once entered where the variation sought is to make a “supplemental order, the need for which arises from circumstances occurring after the order was made”. Such a “supplemental order” may, for example, include a supplementary order for costs in addition to those previously made: e.g., Caboolture; NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8; Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498 at [11] to [14] per Collier J. In Caboolture orders had been made and entered, including an order in favour of the successful respondent for the payment by the applicant of its costs. A supplemental order was sought and made that the applicant’s solicitors pay those costs. In applying this approach and the approach of Byrne J in Akedian Co Ltd v Royal Insurance Australia Ltd [1999] 1 VR 80, Chernov J in UTSA Pty Ltd v Ultra Tune Australia Pty Ltd [1998] VSC 13, [1999] 1 VR 204 concluded:

[9] … I prefer the views of Byrne J. and those of the Full Court of the Federal Court in Caboolture Park Shopping Centre Pty. Ltd. v White Industries (Qld) Pty. Ltd. (1993) 45 F.C.R. 224, that orders sought in a situation such as the present are truly supplemental and do not affect the legal impact of the earlier judgment. In my opinion, the consideration by the court of an application for costs against a non-party, even after it has given judgment on the issue of costs inter partes in the proceeding, would amount to the exercise of a new discretion and not a re-agitation of issues previously considered. In other words, it would not involve re-consideration of matters that had been decided on an earlier occasion. Whether the court proceeds to exercise that jurisdiction, however, is a separate question.

But a “supplemental order” may not “vary or revoke” an order as entered: SZCZF v Minister for Immigration and Citizenship [2009] FCA 208 at [26] to [27], 107 ALD 138 at 144. Appr’vd: MZXSV v Minister for Immigration and Citizenship [2009] FCA 1025 at [12] per Ryan J.

20    Irrespective of any continuing operation of the common law, in this Court an applicant seeking the variation of orders previously made should first turn to Order 35 r 7. This rule, in any event, “largely reflect[s] the common law position”: Caboolture (1993) 45 FCR 224 at 234.

21    Order 35 r 7 provides as follows:

Setting aside

(1)    The Court may vary or set aside a judgment or order before it has been entered.

(2)    The Court may vary or set aside a judgment or order after the order has been entered where:

(a)    the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order;

(b)    the order was obtained by fraud;

(c)    the order is interlocutory;

(d)    the order is an injunction or for the appointment of a receiver;

(e)    the order does not reflect the intention of the Court; or

(f)    the party in whose favour the order was made consents.

(3)    A clerical mistake in a judgment or order, or an error arising in a judgment order from an accidental slip or omission, may at any time be corrected by the Court.

(4)    Subrule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order.

22    When varying an order pursuant to Order 35 r 7(2)(f), Merkel J in Australian Securities and Investments Commission v Yandal Gold [2003] FCA 77 observed:

[22] The construction that I would place upon O 35 r 7(2)(f) gives effect to the purpose of the rule as it would ensure that the Court’s discretion to vary orders by consent is able to be exercised in order to rectify the unintended operation of certain orders in a manner that is consistent with the inherent jurisdiction of the Court to set aside a judgment by consent of the parties, provided that the setting aside of the judgment would cause no particular injury to a third party. In that regard, in Permanent Trustee Co. (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 28 FLR 195 at 201 Brennan J observed:

“The better view appears to be that the court has jurisdiction to set aside a regular judgment if the parties to the judgment consent to the court doing so. But it further appears that the court should decline to make the order if a third party would suffer particular injury by the making of the order.”

It is not considered that Merkel J was confining the operation of r 7(2)(f) to those circumstances where there had been an “unintended operation of certain orders.” Other cases in which the rule has been invoked have not so confined the rule: e.g., BHP Steel (AIS) Pty Ltd v Construction, Forestry, Mining and Energy Union [2001] FCA 336 at [18] per Kiefel J.

23    Essential elements to r 7(2)(f) include the identification of the “party” in whose “favour” an order has been entered and whether that party “consents”. If those requirements are satisfied, the discretion conferred by r 7(2) may thereafter be exercised and one factor relevant to the exercise of the discretion is any “prejudice” that may be suffered if the variation is made.

24    Order 35 r 7(3) directs attention to whether there has been a “clerical mistake … or an error arising in a judgment order from an accidental slip or omission”. If those conditions precedent are established, the Court “may” correct the mistake or error. The power is commonly referred to as the “slip rule”.

25    The operation of the “slip rule” and the myriad of factual situations in which it has been invoked have been usefully summarised by Lockhart J in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385. Lockhart J (with whom Black CJ agreed) there said:

The slip rule applies where the proposed amendment is one upon which no real difference of opinion can exist. It does not apply where the amendment is a matter of controversy; nor does it extend to mistakes that are the consequence of a deliberate decision …

The slip rule may be invoked irrespective of whether the order has been drawn up, passed and entered …

It is well settled that the application of the slip rule is not confined to giving effect to the intention of the judge at the time when the court’s order was made, or judgment given. It extends to the intention which the court would have had, but for the failure that caused the accidental slip or omission … The rule also extends to permit the correction of an order or decree where the omission results from the inadvertence of a party’s legal representative …

The circumstances in which the slip rule has been applied are numerous and varied. Examples of the application of the rule include amendments, to allow a proper order for costs …; to increase the amount of an award of damages …; to permit a proper calculation of interest: …; to permit a claim for interest to be added to the amount of the judgment: ...; to order repayment of moneys previously paid by the defendant where the subsequent appeal was upheld: …; to alter a wrong date or figure in the orders, where the parties and the court both used the same wrong date or figure, but the correct figure had been available at the relevant time: …; and, to limit the time of an injunction’s application: …: (1995) 61 FCR at 390 to 391.

Two of the authorities cited by Lockhart J were L Shaddock & Associates Proprietary Limited v Council of the City of Parramatta (No 2) (1982) 151 CLR 590 and Gould v Vaggelas (1985) 157 CLR 215. In Shaddock an application was successfully made under the “slip rule” for an order that interest be paid. In accepting that the Court had power to make such an order, Mason ACJ, Wilson and Deane JJ referred to the form of the former High Court Rules and concluded:

It follows from the foregoing that, but for the inadvertence of counsel for the applicants, this Court would have made provision, in the substituted judgment of Waddell J., for interest on the damages in respect of the relevant period. We turn to a consideration of the question whether it is competent for the Court to make good the omission on the present application.

Order 29, r. 11 is in the traditional form of a slip rule. It reflects the inherent jurisdiction of a court "at any time to correct an error in a decree or order arising from a slip or accidental omission" … In terms, the rule provides, inter alia, that "an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court or a Justice on motion or summons". The rule extends to authorize an omission resulting from the inadvertence of a party's legal representative ….This is so, regardless of whether the order has been drawn up, passed and entered ….. : (1982) 151 CLR 590 at 594-595.

Subsequently, in Gould v Vaggelas Gibbs CJ, Wilson, Brennan and Dawson JJ observed:

The jurisdiction of the Court to entertain the motion is not challenged by the respondents. Recent decisions of this Court provide illustrations of the injustice that may be caused to litigants by the inadvertence of counsel and the willingness of the Court in appropriate circumstances to grant a remedy … Nevertheless, the jurisdiction is one to be exercised sparingly, lest it encourage carelessness by a party's legal representatives and expose to risk the public interest in finality of litigation: (1985) 157 CLR 215 at 274-275.

See also: Re J W Challand Pty Limited (1945) 62 WN (NSW) 166 at 167 per Nicholas CJ in Eq. The power to make a correction extends to circumstances where there has been a “pure slip”: Chessum and Sons v Gordon [1901] 1 QB 694. An order for costs had there been made but a claim for a particular sum in the amount of £160 11s 8d had been overlooked. An order varying the previous order was made. A like variation was made in Craigmyle v Inchcape [1942] Ch 394. Morton J there reviewed the English authorities and made reference to the comparable English rule. His Lordship continued as follows:

Thus, I have had cited to me cases where the omissions arose by a slip on the part of counsel, on the part of a solicitor, and on the part of a party to the action. Having regard to those authorities, I am satisfied that I can make the order asked for under the provisions of O. xxvɪɪɪ., r. ɪɪ. It is true that when the case was before me, I made the order which I intended to make in regard to the costs for which I was asked to make provision, but there was an accidental omission on the part of counsel, and I did not make the order which I would have made if that accidental omission had not occurred. I am glad to find it possible to give this construction to the rule, as I think it is a rule of great convenience, and in the present case real hardship would have resulted if I had not felt able to make the order asked for on this motion.

26    The power to correct the record of the Court, however, “does not permit reconsideration, let alone alteration, of the substance of the result that was reached and recorded”: Burrell v R [2008] HCA 34 at [21] per Gummow ACJ, Hayne, Heydon, Crennan and Kiefel JJ. Appl’d: SZMLB v Minister for Immigration and Citizenship (No 2) [2008] FCA 1962 at [2] per Rares J.

27    “The Rule applies where the variation is one upon which no real difference of opinion can exist. It does not apply where the amendment is a matter of controversy”: Denmeade v Stingray Boats [2004] FCA 1503 at [18] per Spender J. Thus, in Australian Competition and Consumer Commission v Esanda Finance Corporation Ltd [2004] FCA 685 an application by Esanda to vary a costs order that it pay the costs of an earlier application to amend its pleading was unsuccessful. The basis of the application was an agreement between Esanda and the Commission. But consent to the amendment was only given if Esanda raised no objection to the amended pleading proposed by the Commission and there had been objection. In rejecting reliance upon Order 35 r 7(3), Lee J concluded:

[9] In any event I am not persuaded that the circumstances of this case warrant the exercise of the Court’s power under the so called “slip rule”, whether that power is an implied power or a power conferred expressly, (eg: O 35 r 7(3) of the Rules of the Federal Court), to correct an error or mistake occasioned by an accidental slip or omission, including inadvertence of a party’s legal representative. (See: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300). Although commonly it will be the case that a party granted leave to amend a pleading will be ordered to pay the costs of another party thereby thrown away, the decision to make such an order will be governed by the circumstances of the particular case. The “slip rule” becomes available for exercise where there is no real difference of opinion that a further order is required to correct or rectify a patent error in existing orders. (See: Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 per Lockhart J at 390–391). The failure of the Court to make an order on 17 December 2002 in the terms now sought by Esanda was not a “clerical error” or “mistake” in the orders pronounced by the Court on that day. It is not obvious that only one order, namely, the order now sought, could have been made if an order for costs had been sought at the relevant time. The ACCC opposes Esanda’s application and there is a clear difference of opinion between the parties on that issue. Furthermore, it will be inappropriate to make an order under the rule where an event has intervened that would make it inexpedient or inequitable to do so, or where application for the order has been delayed. (See: L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] (1982) 151 CLR 590 per Mason ACJ, Wilson, Deane JJ at 597). The circumstances of this case fall within that qualification.

In circumstances where there has been no clerical error and no error from an accidental slip or omission, and where a judgment gives effect to the intention of the Court, it is not appropriate to invoke Order 35 r 7(3): e.g., Brookfield v Davey Products Pty Ltd [2002] FCA 889. But where an order has not previously been made due to “oversight”, for example where no order has been made on appeal as to costs at first instance, an order may be made pursuant to Order 35 r 7(3) to give effect to “the intention of the Court”: Goliath Portland Cement Co Ltd v Chief Executive Officer of Customs [2000] FCA 1329 per Lee, Cooper and Kiefel JJ.

28    Where the line is to be drawn between a “clerical error” or “an accidental slip or omission” so as to give effect to the intention of the Court, on the one hand, and a correction of an order which seeks to do more than give effect to the intention of the Court, may in some cases be difficult to discern.

29    But the “slip rule” – either at common law or pursuant to Order 35 r 7(3) - does not permit a variation or corrections of “error[s] in reasoning”: Austal Ships Sales Pty Ltd v Aktiebolag [2009] FCAFC 179, 263 ALR 384. Claims had there been made for breach of a patent. The primary Judge found that an Austal design infringed claims 1 – 7 and 9 of the patent; the Full Court found that the design infringed claim 7 but not 1. An application for special leave was unsuccessful: [2009] FCAFC 179 at [18], 263 ALR 384 at 389. A Motion was then filed seeking a variation of the orders of the Full Court – it being claimed that if the design did not infringe claim 1, claim 7 was invalid because it claimed a second invention contrary to s 40(4) of the Patents Act 1990 (Cth). That submission had not been advanced at first instance, on appeal or in the High Court. By the time of the hearing of the Motion, one member of the Full Court (Heerey J) had retired (Federal Court of Australia Act 1976 (Cth), s 14(3)). The parties consented to the remaining members, Finn and Dowsett JJ, hearing and determining the Motion. In dismissing the Motion, their Honours observed:

[23] It would go well beyond the accepted ambit of operation of O 35 r 7(3) for the court to revisit its own decision in order to consider that question. …

Their Honours then addressed a submission as to the need for finality in litigation and continued:

[25] We do not accept that O 35 r 7(3) permits this court to re-visit any and every decision simply because one party alleges error in the reasoning process leading to the ultimate resolution of the substantive questions in issue. The sub-rule requires a clerical mistake or an error arising in a judgment or order from an accidental slip or omission. Whilst either limb of O 35 r 7(3) offers a sufficient basis for correcting the inadvertent failure to reflect in the order the fact that the Full Court had found no infringement of claim 1, neither limb offers a basis for revisiting the correctness of the reasons underlying that, or any other, part of the orders. An error in reasoning cannot amount to a clerical mistake. Nor is an error in reasoning an error arising in a judgment or order. The court may be in error in its reasoning, but a judgment or order which reflects the consequences of that error is, itself, free from error, although appealable. We do not understand these propositions to have ever been doubted, although it may be, that from time to time, the operation of the rule has been stretched to accommodate a hard case.

[26] In our view, the application is misconceived. It must be dismissed.

Clearly, the lateness of the procedural stage at which invalidity in respect to claim 7 was raised was of relevance. Equally, however, their Honours were also of the view that an “error in … reasoning” was not a “clerical error”; and an error in a “judgment or order which reflects the consequences of that error is, itself, free from error, although appealable”. However far the “operation of the rule [may be] stretched to accommodate a hard case”, the ambit of the rule remains constrained by the terms of Order 35 r 7(3) itself.

30    When considering circumstances primarily relevant to the exercise of the discretion, Wilcox and Allsop JJ in Hanave Pty Ltd v LFOT Pty Ltd [2004] FCAFC 180, 136 FCR 566 observed:

[4] The nature and extent of the desired variation of the judgment, the delay in bringing the variation forward, the explanation going to the existence of the accidental slip or omission and for the delay are fundamental considerations. We prefer not to express a view on whether what occurred here, to the extent that the evidence discloses it, was an “accidental slip or omission”. Even assuming it to be such, it was born of an apparent ignorance of the basis for any claim for pre-judgment interest for months after the case was over and the orders entered. Litigation is a costly and stressful undertaking. Whilst procedure should never be an end in itself, the necessity to follow and apply the rules of Court and the prevailing statutes dealing with the conduct of litigation promotes a degree of regularity and certainty necessary for the fair and predictable conduct of litigation. Once litigation is over people should generally consider themselves free from further agitation of an already quelled controversy. This is the policy of finality of litigation. Exceptions to the policy such as in O 35 r 7(3) are designed to permit justice and fairness in the particular case, in appropriate circumstances. Here, in our view, the circumstances of the delay, the ignorance of the persons involved and the absence of any real inadvertence (as opposed to ignorance) stretch significantly the notion of “accidental slip or omission”. Even assuming the facts reveal such (which we doubt, but do not decide), they point inexorably in our view to the inappropriateness of exercising the discretion to apply O 35 r 7(3).

No reference was made by Counsel in the present proceeding to any authority which considered whether the discretion conferred by Order 35 r 7(3) should be exercised adversely to a party seeking a variation of an order that had been entered by reason of the act of omission being attributable to conduct that could be properly characterised as negligent.

The Variation of Orders 4 and 6

31    Orders 4 and 6 as made on 14 April 2011 provided as follows:

Approval of costs and expense claims

4.    Pursuant to section 33V(2) and 33ZF of the Act, the sum of $5,031,541.85 (inclusive of GST) is approved as the amount of “PAC’S Costs” for the purposes of the Distribution Scheme and that amount be distributed in accordance with clauses 9.3 and 9.4 of the Distribution Scheme.

…

6.    Pursuant to section 33V(2) of 33ZF of the Act, the sum of $287,723.69 (inclusive of GST) (Project Costs) is approved as an amount forming part of the “IMF Payments” payable to IMF (Australia) Ltd for the purposes of the Distribution Scheme and that that amount be distributed as part of the “IMF Payments” in accordance with clauses 11.1 and 11.2 of the Distribution Scheme.

32    In seeking a variation of these orders, Counsel on behalf of Pharm-a-Care placed primary reliance upon Order 35 r 7(3) – although rr 7(2)(f) and 7(4) were also invoked.

33    The variation which is now sought to Order 4 is to reduce the amount otherwise approved from $5,031,541.85 to $5,026,200.63. This sum refers to the amount payable to Pharm-a-Care being what was previously referred to as “PAC’s Costs”. This reduction in the amount in the sum of $5,341.22 is attributable to a series of errors, namely:

34    In the present proceeding, Order 4 was an order made in “favour” of Pharm-a-Care. It, not surprisingly, “consents” to a variation in Order 4 which reduces the amount otherwise payable to it. It could be accepted without question that Counsel (for example) would not seek to recover twice in respect to the same fees – notwithstanding an order of the Court which embraced such a “double counting”. The variation to Order 4 plainly falls within Order 35 r 7(2)(f). It is appropriate that the discretion conferred by that rule should be exercised in favour of varying the order previously made.

35    Order 6, however, attracts potentially different considerations.

36    The variation sought in respect to Order 6 is to increase the payment of what were previously referred to as “Project Costs” from $287,723.69 to $397,723.69. These costs formed part of the payments to IMF (Australia) Ltd (“IMF”). The written Outline of Submissions filed in support of the variation submitted that this “additional amount of $110,000.00 was missed in the final calculations, although it was included in the material tendered at the approval hearing”.

37    The error or mistake had its origin in an affidavit of Mr Thorpe sworn on 28 February 2011. That affidavit sought to divide the “project costs” that were sought to be recovered under five different categories, namely:

(a)    legal and other costs and expenses incurred by the Lawyers prior to 29 August 2008 up to an amount of $110,000 (inclusive of GST) for the purpose of investigating the merits and viability of the Class Action;

(b)    legal and other costs and expenses incurred by the Lawyers from 30 August 2008 up to the commencement of Proceedings for the purpose of the Proceedings and determining the common issues of fact and law;

(c)    on and from the commencement of Proceedings;

i)    the reasonable legal costs and disbursements of the Lawyers incurred prior to the conclusion of the IMF Agreement for the sole purpose of prosecuting and resolving the Proceedings;

ii)    the costs involved in the provision by IMF of any security for costs; and

iii)    any Adverse Costs Order paid by IMF;

(d)    all of IMF’s out of pocket costs and expenses paid or incurred in relation to the Project (including the costs and expenses associated with the Project Investigation and Project Management and in relation to any consultants engaged by IMF in relation to the Project) (other than those already referred to in this definition); and

(e)    any GST payable on any Supply made by any entity as a result of the above costs or expense being incurred;

and which are not Applicant’s Individual Costs.

That affidavit thereafter went on to separately address “items” (a) and (d) and (e). A “Supplementary Costs Affidavit” sworn by Mr Thorpe on 3 March 2011 thereafter stated:

Expenses and GST incurred by IMF – Project costs items (d) and (e)

I refer to paragraph 10 of the Costs affidavit. I have become aware of an error in the amounts set out in that paragraph as the expenses incurred by IMF in relation to the representative proceeding (IMF Project Costs component). At Tab 6 of Exhibit ABT2 of the Costs affidavit is a schedule which sets out the IMF Project Costs component in the amount of $302,253.69. Accordingly, on account of IMF having received the amount of $14,530 as reimbursement for costs incurred in relation to a subpoena issued to IMF, the total amount of expenses outstanding to IMF is $287,723.69.

When drafting the orders which were ultimately made on 14 April 2011, the draftsman picked up this sum of $287,723.69 and “overlooked” the fact that it related to “items (d) and (e)” and did not include “item (a)” – previously foreshadowed as being a sum “up to an amount of $110,000”.

38    With respect to the pre-requisites set forth in r 7(2)(f) which must be satisfied before any question as to the exercise of the discretion arises, the operation of r 7(2)(f) in litigation involving contested issues between opponents advancing separate and discrete private issues may readily be understood. A party who has been successful in obtaining an order for the payment of monies or been successful in obtaining a favourable costs order may “consent” (for example) to the amount of the monies ordered to be paid being reduced. Such is the position now adopted by Pharm-a-Care in respect to Order 4.

39    But r 7(2)(f) does not always sit comfortably with applications to vary orders made in representative proceedings commenced under Part IVA of the Federal Court of Australia Act. In such proceedings there may be some difficulty in characterising a particular “order” as an order being made in “favour” of a particular party. Order 6 was in reality an order made in “favour” of IMF.

40    But it sits ill with the intended operation of r 7(2)(f), for example, if Pharm-a-Care in its own right “consents” to IMF being paid a greater sum than that previously ordered. Presumably IMF would also consent to being paid more. And, as far as the Commonwealth Respondents are concerned, it matters little to them how the overall sum of monies that are to be paid are distributed between group members. The liability of the Respondents is not increased and no greater sum of monies has to be paid by them in the event that the variation of the order now sought is made. Order 6 may properly be characterised as an order made in “favour” of Pharm-a-Care and the remaining group members, namely an order which confines the amount that may be paid to IMF thus making more monies otherwise available for distribution. On this approach, each of the group members is the person in whose “favour” Order 6 has been made.

41    There is no evidence in the present proceeding that group members (other than Pharm-a-Care) consent to the increased payment or have ever been advised of the present application to vary Order 6. But it is said on their behalf that Pharm-a-Care is the representative of the group members and that it consents to the variation of the order both on its own behalf and on behalf of each of the other group members. That may well be sufficient to bring the present application within Order 35 r 7(2)(f). In some circumstances it may be necessary to consider providing further notice to group members of a variation sought in respect to an order that affects their interests.

42    Such further reliance as was sought to be placed upon r 7(4) may be raised to be rejected. That rule confers an express power to make a “supplementary order” and has its counterpart in the common law.

43    The variation of Order 6 which is now sought, however, is not an order which “supplements” an order previously made; the order which is sought is an order in effect vacating the order previously made and seeking a different order in lieu – or at least a variation of an order previously made. Previously Pharm-a-Care was successful in securing a favourable exercise of discretion as to the amounts of monies to be paid. It may now be seeking again a favourable exercise of discretion – but the amount now in issue in respect to “Project Costs” is significantly greater. Whether or not that greater amount would have been previously ordered does not deny the reality that Pharm-a-Care is now seeking a fresh exercise of discretion.

44    It should further be noted that if attention were to be confined to the intention of the Court when making Order 6, difficulties would readily emerge. When making Order 6, the intention of the Court was to approve the payment of the amount specified in Order 6. There may have been a mistake on the part of Pharm-a-Care as to the quantification of that amount but no approval was sought for the payment of “Project Costs” in an amount to be calculated or which so happened to be $287,723.69. The approval which was sought, and to which detailed consideration was given during the course of the hearing, was for the payment of “Project Costs” in that amount.

45    Sensing potential difficulty with bringing the application within Order 35 r 7(2)(f) and/or r 7(4), Counsel for Pharm-a-Care placed primary reliance upon Order 35 r 7(3).

46    On Pharm-a-Care’s behalf, it is readily accepted that an error or mistake has taken place. The affidavit evidence that was previously before the Court was misunderstood by both the instructing solicitors and Counsel. The sum of $110,000 was expressly referred to in that evidence – but was simply overlooked when the process of drafting Order 6 was undertaken.

47    Although the making of such an error is surprising, especially given the quantum of the amount overlooked and the apparent clarity expressed in the affidavit when referring to different “categories” of costs, it may be accepted that a mistake was nevertheless made. A mistake on the part of legal representatives of that nature is capable of falling within Order 35 r 7(3).

48    When the present Notice of Motion first came before the Court yesterday, reservation was expressed as to the manner in which the amount “up to … $110,000” was quantified. On the basis of the evidence then available, the claim had some of the hallmarks of an “ambit claim”. An adjournment to this morning was granted to allow greater detail to be provided as to how this amount was in fact quantified. As it transpired, the sum of $110,000 was comprised of three invoices dated on the following dates and for the following amounts:

MTP Costs prior to 29 August 2008 – Project Costs Item (a)

That Table was before the Court yesterday – but not the supporting details to the invoices referred to. Those details were made available this morning.

49    In the circumstances of the present case, it is concluded that the mistake which was made in respect to this $110,000 falls within Order 35 r 7(3). It is further concluded that the discretion conferred by that rule should now be exercised to make the correction sought and without the necessity for any further notification to group members because:

    the amount claimed was previously foreshadowed in the affidavit evidence that was before the Court during the approval hearing and does not relate to an entirely new claim;

    the amount claimed is in respect to “legal and other costs” incurred prior to 29 August 2008. Although the amount claimed is considered to be relatively high, and some of the individual amounts claimed lack any great specificity, it is considered that in total the amount is nevertheless appropriate, especially given the legal and factual complexities that had to be addressed prior to commencing proceedings;

    had the mistake or error not have occurred, it is most likely that an order would previously have been made including the amount of $110,000;

    the Administrator considers the amount to be fair and reasonable;

    there has been no prior notification to group members of the quantum of likely costs to be incurred in respect to “Project Costs” specifically – so that no question arises as to correcting any previous notice that may have been given; and

    there has been no delay in bringing the present application.

Conclusions

50    Approval should now be given to the further payment sought by the Administrator in the sum of $7,896.19 and the time within which group members may make a claim should be extended.

51    The Court has power to vary Order 4 pursuant to Order 35 r 7(2)(f) and should exercise its discretion to vary the order in the manner sought.

52    The Court also has power to vary Order 6 pursuant to either Order 35 r 7(2)(f) or r 7(3) and should exercise its discretion to vary the order in the manner sought.

53    Pharm-a-Care seeks its costs in respect to the costs incurred in respect to its two Notices of Motion. A schedule of costs has been provided which quantifies the total costs (including Counsel fees and disbursements) as $33,354.12. It is appropriate that an order for costs in that amount should be made.

ORDERS

54    The Orders of the Court are:

1.    Order 4 of the orders of 14 April 2011 is varied by substituting the figure of $5,026,200.63 for the figure of $5,031,541.85.

2.    Order 6 of the orders of 14 April 2011 is varied by substituting the figure of $397,723.69 for the figure of $287, 723.69.

3.    The Court approves the sum of $7,896.19 as forming part of “PAC’s Costs” for the purpose of clause 9.3 of the Settlement Distribution Scheme.

4.    The time for Group Members to deliver an Invitation Response in accordance with clause 3.4 of the Settlement Distribution Scheme is extended to 10am on 27 June 2011 and any Invitation Response not already delivered to the Administrator is to be delivered by delivering a completed Claim Invitation and Invitation Response by e-mail to athorpe@mtpartners.com.au or smtango@mtpartners.com.au or by facsimile to +61 2 9229 2200.

5.    A notice in accordance with the Notice annexed to these orders is to be sent by 5pm on 22 June 2011 to the e-mail address or facsimile number held by the Administrator for each of the following:

a.    Healthy Life Partners Pty Ltd;

b.    Power Foods International Pty Ltd;

c.    Nature Vet Pty Ltd;

d.    Health Minders Pty Ltd;

e.    Bluegum Pharmaceuticals Pty Ltd;

f.    Rener Health Products Pty Ltd;

g.    Gaily Pharmaceuticals Co Ltd;

h.    Brauer Natural Medicine Pty Ltd;

i.    PT Ayu Agung;

j.    Healthcore Co Ltd;

k.    I Think Naturally Pty Ltd;

l.    Medicine Man Labs Pty Ltd;

m.    Optimum Healthcare Pty Ltd;

n.    Queensland Biochemics Pty Ltd;

o.    Symbion Health Ltd.

6.    The Court approves the sum of $33,354.12 in respect of the costs of these applications as forming part of the “Administration Costs” for the purposes of clause 10.1.2 of the Settlement Distribution Scheme.

Associate:

Dated:    24 June 2011