Bank of Western Australia v Salmon [2009] NSWSC 224 | Case summary

JUDGMENT [No 1] - Application for leave to withdraw admissions. 1 KIRBY J: This is an application by the defendant to withdraw certain admissions made in his sworn Amended Defence. 2 Action was commenced in this court by the Bank of Western Australia against Mr Owen Salmon ("The Defendant"). The hearing of that action began yesterday, 25 March 2009. Mr Dowdy of counsel appears for the Bank. Mr Salmon appears for himself. 3 The bank sues on a Guarantee executed on 30 March 2006 in respect of monies which were advanced to a company, TCBS SPV Tomaree Pty Limited ("Tomaree"), in 2006. 4 At the end of yesterday's hearing, Mr Salmon foreshadowed an application to further amend an Amended Statement of Defence. An order was made that he should provide counsel, by email, not later that 7.00 am this morning, with an outline of the proposed amendments, so that the issue could be dealt with when the hearing resumed. Mr Salmon did not do so. He said that he lives alone, has three children who are young. Two of the children had recently undergone circumcision operations. There had been complications and he simply was not able to prepare the document required. I will come back to that issue. 5 Before I do so, let me describe the history of these proceedings. Mr Salmon was the sole Director and ultimately the controlling shareholder of Tomaree. He is a mature man, clearly intelligent with a number of university degrees. He operated a business as a management consultant. He describes himself on a website page as an experienced businessman. Some time before 2006, he determined that he would develop certain land at Nelson Bay. The land is in Tomaree Street, hence the name of the company. He hoped to build 29 tourist and residential units for sale. Through brokers, he borrowed money from the Bank of Western Australia. The money was secured by means of a Mortgage over the Nelson Bay land, as well as a floating charge on the development as it progressed. There was also a personal Guarantee executed by Mr Salmon. The documentation of the loan and guarantee is extensive and has been tendered in evidence, primarily in Exhibit A. 6 I should perhaps identify some of these documents. There was a Facility Agreement in relation to the advance to the company of $3,105,000 requiring the repayment of that money not later than 3 April 2008. The money was advanced on 3 April 2006, when settlement took place. There was, as mentioned, a floating charge also executed prior to settlement on 3 April 2006, as well as a personal guarantee by the defendant himself. In addition there was a later agreement for the provision of supplementary funds ($300,000), an Extension Agreement dated 3 July 2006. It had to be repaid not later than 30 September 2006. 7 Mr Salmon was shown the Guarantee document in the course of his evidence. He acknowledged that his signature appeared on it. It was witnessed by his solicitor, Mr Jeremy Lucas, whose signature likewise appeared on the last page of this document. There is, in addition, a Statutory Declaration signed by Mr Salmon, again in the presence of Mr Lucas, whereby he vouched for the fact that he had received (from Mr Lucas) advice in relation to his obligations under the Guarantee. In the course of evidence yesterday the originals of these documents, or at least some of them, were tendered. 8 Now the Guarantee document and, indeed the Facility Agreement, are each in a bound volume. They are computer generated documents with a spiral binding. Contrary to the usual practice and to good practice, they were not signed or initialled on each page. However, the total documentation of this transaction was voluminous. The documents were signed only on the last page in each case by Mr Salmon, witnessed by Mr Lucas. 9 The Facility Agreement bears a computer imprint: "30 March 2006 11.50am". There is a handwritten addition on the first page of the date "3 February 2006". Given the date upon which it was executed and the computer annotation, that date is clearly a mistake. There was no evidence as to whose handwriting it was or how it got there. 10 In the application made to amend the pleading and to withdraw admissions, Mr Salmon has seized upon two features of the Facility Agreement. The first is the handwritten date and its incompatibility with the date of execution and the date which appears on the bottom of each page; and secondly, the fact that documents were not signed on each page, but only the last page. 11 Mr Salmon claimed to have signed each page. He gave evidence at the end of yesterday that the document which he signed had handwritten additions, interlineations, which incorporated certain assurances which had been given in relation to the Guarantee. I will come back to that issue. 12 The Statement of Claim was issued by the bank on 6 July 2007. It claimed the total of the two amounts advanced, namely, $3,670,602.92 together with interest. Mr Salmon did not contest that these sums were advanced to the company and that the company had failed to repay them. 13 Mr Salmon, at a time when he was acting for himself, prepared a document which he entitled "Reply". On the copy I have, taken from the court file, that description has been crossed out and the word "Defence" substituted. It was indeed a defence, a sworn defence to The Statement of Claim. 14 The Defence itself was affirmed on 22 November 2007 by Mr Salmon. That defence included the following paragraphs: "1. The entire statement of claim by the plaintiff is not legal or true as there are no signatures by deponent or witness. 4. The defendant was not a guarantor of the facility advanced in February 2006. 5. The plaintiff has not provided a signed copy of the facility that it refers to in its pleadings despite repeated requests. 6. The plaintiff continues to produce a document that was not signed by the defendant except for one page." 15 The remaining paragraphs in the Defence make various allegations against the finance broker, against a bank officer, who was accused of extortion and against the receivers appointed in respect of his company. It is an angry document which certainly does not conform with the rules, although, as I have said, Mr Salmon, who is not a lawyer, was at this point acting for himself. 16 Mr Salmon did, however, thereafter retain lawyers (Bransgroves Lawyers) and unquestionably gave them instructions. They prepared an Amended Defence which he affirmed on 8 April 2008 and filed on 13 May 2008. It was filed after a hearing before the Registrar of this Court, where a number of orders were made, the first of which was that leave was given to file an Amended Defence. Other orders were made in respect of discovery requiring each party to identify categories of documents and exchange lists of documents and thereafter undertake inspection. 17 I am told by Mr Dowdy of counsel that Mr Salmon responded to these orders by saying that he had no documents at all. The bank discovered its documents, having gone through the procedure of identifying categories and thereafter providing the documents and making them available for inspection if required. 18 In the course of evidence yesterday Mr Salmon was asked, in cross-examination, where his copy of the Facility Agreement was, that is the document with the handwritten additions which he had described. He said he did not know. He had a number of packing cases. Effectively, he was now living out of a suitcase. He had not got around to unpacking these packing cases. He agreed that the document may turn up. So far it had not. 19 Now, going to the Amended Defence, it significantly narrowed the issues. Mr Salmon, in his sworn defence, agreed to the following paragraphs in the Statement of Claim, subject to a qualification which I will come to. I will to some extent paraphrase the various paragraphs of the statement of claim: "1. That the plaintiff, that is the bank, was a company duly incorporated, and that Tomaree was a customer of the bank, and that Mr Salmon was a director of Tomaree. 2. That in February 2006 the plaintiff extended a commercial advance facility to TCBS, that being the abbreviation for the company Tomaree. 3. There was an admission, importantly, that the terms and conditions of the commercial advance are set out in a document entitled 'Facility Agreement' dated 3 February 2006 as varied by way of deed of variation dated 3 July 2006. 4. That in July 2006 the bank extended a short term contingency funding advance to Tomaree." 20 The qualification which is added in the sworn Amended Defence was in these terms in relation to the documents mentioned in paragraphs 2, 3 and 4: "4. The defendant admits paragraphs 2, 3 and 4 of the statement of claim, however says that there was a collateral agreement and representations giving rise to estoppel which define the entirety of the rights between the defendant and the plaintiff as described below." 21 Nothing was said to suggest that the terms of the Facility Agreement were incomplete, that it had been altered, that its terms had in some way been changed. Specifically nothing was said that changes were made to the Facility Agreement to safeguard the position of Mr Salmon as guarantor. 22 One then comes to the Guarantee. The first reference to the Guarantee in the Statement of Claim was in paragraph 1(d): "1. At all material times: (d) the defendant was a guarantor of the facility made available to (Tomaree)." 23 The Amended Defence answered that paragraph in these terms: "3. In response to paragraph 1(d) of the statement of claim the defendant says the purported guarantee was either void abinitio or discharged by operation of law for the reasons described below." 24 The elaboration referred to in that paragraph did indeed occur below in the Amended Defence in the following paragraphs: "10. The defendant denies paragraph 16 of the statement of claim and says the purported guarantee was either void abinitio or discharged by operation of law for the reasons described below. 11. The plaintiff is estopped from suing the defendant under the purported guarantee until the property at 12 and 16 Tomaree Street, Nelson Bay, has been sold. Particulars Immediately prior to the facility advance the Defendant discussed the loan advance with Brendan Ross, an officer of the Plaintiff. In the conversation the defendant indicated that he was unsure of the ability (of) TCBS to complete the development if required funds from another company were not forthcoming. He was however sure that the security property at 12 & 16 Tomaree Street, Nelson Bay would answer for the debt. Accordingly he indicated he would be unwilling to guarantee the loan unless it was on the basis the property would be sold prior to the guarantee being sued on. Brendan Ross assured him that it was the policy of the Defendant to always realise securities first before calling on personal guarantees and that it would do so in this instance. 12. The variation of the facility subsumed the terms of the original facility and by operation of the principle in Coady v J Lewis & Sons Ltd [1951] 3 DLR 845 the guarantee was discharged." 25 I should interpolate that paragraph 16 of the Statement of Claim was simply a reference to the amount claimed, namely $3,670,602.92 together with interest. Paragraph 11 of the Amended Defence was a reference to a collateral contract. The particulars create the impression, to my mind, that the assurance said to have been given by Mr Ross, according to Mr Salmon, caused him immediately thereafter to sign the Guarantee, safe in that assurance. That is rather different from the account he gave today in evidence. 26 Still dealing with the Guarantee, the Statement of Claim went on to plead the Guarantee itself. It said this: "12. In order to secure the obligations of TCBS under the facility agreement, the defendant entered into a written guarantee and indemnity whereby the defendant guaranteed all amounts payable by TCBS under the facility agreement including money owing under the commercial advance and short term advance." 27 The Amended Statement of Defence simply ignored that paragraph. It passed over it completely. Mr Dowdy of counsel, on behalf of the bank, says with some vigour that under the rules, pt 14 r 26 of the Uniform Civil Procedure Rules 2005, the Guarantee may be taken to have been admitted through the failure to traverse. 28 So that is what the Amended Defence said about the Bank's Guarantee. Let me go back to the Statement of Claim and refer to other matters which the Amended Defence admitted. 29 The Amended Defence by paragraph 6 admitted the following paragraphs of the Statement of Claim, relating to the short term contingency advance: "6. It was a term of the commercial advance and short term advance that (Tomaree) had to make monthly interest payments in arrears. 7. It was a term of the short term advance that (Tomaree) had to repay the principal advance on 30 September 2006. 8. It was a term of the commercial advance and short term advance that the plaintiff could make the entire balance of both facilities due and payable following default by (Tomaree) under the terms of the facility agreement. 9. (Tomaree) has defaulted under the terms and conditions of the commercial advance and short term advance." 30 The Amended Defence by paragraph 7 also admitted, with a qualification which I will come to, paragraphs 10 and 11 of the Statement of Claim. Those paragraphs were as follows: "10. By way of notice of demand dated 20 February 2007 to (Tomaree), the plaintiff made demand for the outstanding balance of the commercial advance and short term advance as at 16 February 2007 in the sum of $3,670,602.92. 11. (Tomaree) has refused, neglected or failed to comply with the demand." 31 The qualification which the Amended Defence added was that Mr Salmon asserted that he had never been served and that service of the notice was a pre-condition to the proceedings. 32 The Statement of Claim then, in paragraph 13, asserted that it was a term of the agreement that Mr Salmon as guarantor must on demand pay any amount which his company had not paid. That is, in circumstances where the company was in default, the Guarantee operated. Indeed, it operated, according to counsel, without notice, unless by its terms it required notice. Here its terms did not require notice, except to the last known address and that notice was in fact given. 33 The Amended Defence in answer to this paragraph repeated the assertions made earlier, namely, the Guarantee was void abinitio or discharged by operation of law. 34 The Statement of Claim continued in paragraphs 14 and 15 as follows: "14. By way of notice dated 3 July 2007, the plaintiff demanded payment from the defendant in the sum of $3,670,602.92, being the amount outstanding under the loan agreement that (Tomaree) had failed to pay. 15. The defendant has failed to comply with the guarantee demand." 35 Paragraph 16, as mentioned, then claimed the amount of $3.67 million plus interest. 36 The Amended Defence in answering these paragraphs, as I say, relied upon the assertions in relation to the Guarantee as set out above. 37 Mr Dowdy in these circumstances says that when he came to court on behalf of the plaintiff there really were only two issues on the pleading; first, whether the bank made a demand under the Guarantee and indemnity, and secondly, whether the bank had sued prematurely, in breach of a representation that the bank would first sell the Nelson Bay property before calling on the Guarantee, as alleged in the collateral agreement which Mr Salmon has pleaded. Mr Dowdy says, as to the first matter, that indeed his client did send a demand to the last known address. The second issue, he acknowledged, was a live issue and he was here to meet it. 38 There is, perhaps, a third issue which I should mention. Paragraph 13 of the Amended Defence is in these terms: "13. The Guarantee was unjust for the purposes of the Contracts Review: Particulars Immediately prior to the facility advance the Defendant discussed the loan advance with Brendan Ross, an officer of the Plaintiff. In the conversation the defendant indicated that he was unsure of the ability (Tomaree) to complete the development if required funds from another company were not forthcoming. He was however sure that the security property at 12 & 16 Tomaree Street, Nelson Bay would answer for the debt. Accordingly he indicated he would be unwilling to guarantee the loan unless it was on the basis the property would be sold prior to the guarantee being sued on. Brendan Ross assured him that it was the policy of the Defendant to always realise securities first before calling on personal guarantees and that it would do so in this instance." 39 When the hearing resumed this morning Mr Dowdy complained that he had not received the draft amendments that Mr Salmon had been obliged to provide by email. He therefore asked that the case proceed. 40 He took me in submissions to the authorities dealing with the circumstances in which the court will give leave to withdraw an admission. The authorities are helpfully collected by White J in a case of SLE Worldwide v WGB & Ors [2005] NSWSC 816. It is convenient to quote from the headnote in that case which is in these terms: " ... Held that admissions made formally and deliberately by party legally advised should prima facie not be permitted to be withdrawn unless party seeking to withdraw them can point to an error when admissions were made or a relevant change of circumstance." 41 Later in the judgment, White J set out at some length the passages from a number of authorities. They included Sangora Holdings Pty Ltd v Dunstan (Supreme Court of Western Australia, Full Court, 13 April 1999, unreported; BC9901667) where Steytler J (with whom Scott J agreed) said the following: (at 7) "[54] It is a serious matter to make an admission in a pleading. From that point onwards the admitted fact or facts cease to be in issue and the action proceeds upon that assumption. It may often be the case that, absent the admission, the action would have proceeded upon a different basis. It has consequently been said on a number of occasions that, as a matter of principle, a party who has made an admission in a pleading should not be entitled to withdraw that admission without good cause (see, for example, Divcon (Australia) Pty Ltd v Devine Shipping Pty Ltd [1996] 2 VR 79 at 80). The withdrawal of an admission will often even less readily be allowed if it has stood for a long time (see Davey v Harrow Corporation [1958] 1 QB 60 at 69) or when the withdrawal will cause significant prejudice to the other party (see Hamilton v Australian Telecommunications Commission [1989] 2 Qd R 18 at 20 and Permanent Building Society v Wheeler , unreported; FCt SCt of WA; Library No 940115; 22 February 1994 and see, generally, Seaman: Civil Procedure Western Australia para 20.14.2)." 42 White J also made reference to the judgment of Santow J in Drabsch v Switzerland General Insurance Co Ltd (16 October 1996, unreported; BC9604909) where his Honour said this: (at 7-8) "1. Where a party under no apparent disability makes a clear and distinct admission which is accepted by its opponent and acted upon, for reasons of policy and the due conduct of the business of the court, an application to withdraw the admission, especially at appeal, should not be freely granted; Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 per Rogers CJ Comm D, followed in IOL Petroleum Ltd v O'Neill per Young J (Young J, 17 November 1995, unreported) and Apex Pallett Hire Pty Ltd v Brambles Holdings Ltd (full Supreme Court of Victoria, 8 April 1988, unreported), and in that respect not following H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694 at 703. 2. The question is one for the reviewing judge to consider in the context of each particular appeal, with the general guideline being that the person seeking on a review to withdraw a concession made should provide some good reason why the judge should disturb what was previously common ground or conceded ; IOL Petroleum Ltd v O'Neill (supra), in the context of withdrawing a concession made before the Registrar. 3. Where a court is satisfied that admissions have been made after consideration and advice such as from the parties' expert and after a full opportunity to consider its case and whether the admissions should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn; Coopers Brewery Ltd v Panfida Foods Ltd (supra) at 745 and 748. Thus a court will not lend its approval to the withdrawal of admissions where, by analogy with the making of amendments, this is actuated by purely tactical reasons; compare Devae Prufcoat Pty Ltd v Altex Industrial Paints Ltd (Cole J, 15 March 1989, unreported). 4. It will usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts. Leave may also be appropriate where circumstances show that the admission was made inadvertently or without due consideration of material matters. Irrespective of whether the admission has or has not been formally made, leave may be refused if the other party has changed its position in reliance upon the admission; H Clark (Doncaster) Ltd v Wilkinson (supra), in that respect not doubted. 5. Following Cohen v McWilliam & Anor (1995) 38 NSWLR 476, a court is not obliged to give decisive weight to court efficiency, such that a party who wishes to defend its claim is entitled to a hearing on the merits, with cost orders being available as a means of compensating the other party for any costs thereby unnecessarily incurred or not fairly visited on the other party." 43 White J observed that this remained a correct statement of the relevant principles after Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146. (Jeans v Commonwealth Bank of Australia [2003] FCAFC 309; (2003) 204 ALR 327 at 330-331; Silver v Dome Resources NL [2005] NSWSC 265 at [8]-[9]). His Honour continued: "56. ... In Jeans v Commonwealth Bank of Australia , the Full Court of the Federal Court said that there was no principle that admissions might or might not be withdrawn, but that the court had a broad discretion to weigh up all matters, with the overall question being to ensure there was a fair trial. (At 330 [18]). Nonetheless, I approach the task of assessing what fairness to the parties requires, guided by the principles expounded by Santow J in Drabsch . It is legitimate and it may be necessary to consider whether the party making the admission did so deliberately, or whether he did so in error, whether the significance of the admission has changed since it was made, for example by reason of other amendments, ( Silver v Dome Resources NL at [12]), or whether new evidence has come to light. In this case there is no suggestion that the admission was made in error. There has been no change to the pleadings which has altered the significance of the admissions. It is not suggested that new evidence has come to light which justifies their withdrawal. Where a party, who is legally advised and does not suffer any disability, deliberately and without mistake, admits liability in whole or in part, and there are no relevant changes of circumstance, prima facie, justice or fairness to both parties does not require that it be allowed to change its mind. That is why admissions made with deliberateness and formality are not ordinarily permitted to be withdrawn." 44 His Honour later referred to a Queensland case Rigato Farms Pty Ltd v Ridolfi [2000] QCA 292; [2001] 2 Qd R 455, where De Jersey CJ said this: "Fulfilling procedural requirements will often contribute significantly to securing an ultimate result which may be considered just. Allowing the appellant to withdraw these deemed admissions would substantially erode the beneficial worth of a very important procedural mechanism directed, through expediting cases and reducing costs, to promoting the interests of justice." 45 McPherson JA, in the same case, emphasised that, in permitting an admission to be withdrawn, the Court should be satisfied that there was a genuine dispute, and that would ordinarily require an explanation of how the admission came about. White J quoted the following passage from that judgment: "Before permitting the admission to be withdrawn, the first step to be determined here was whether there was a genuine dispute about the defendant's liability in this action. ... it is not enough for that purpose simply to assert that a dispute exists: ... Some proper basis must be laid for that assertion, which would ordinarily include an explanation of how the earlier admission came to be made and why it should now be permitted to be withdrawn. That is not shown by a (sic) saying simply that there has been a change of solicitors, or that it is possible to see that, before the admission was made, the issue of liability was an open question. Here the defendant has not condescended to swear to the circumstances in which the admission came to be made, or to show that it occurred by inadvertence, mistake or in some other way that might now justify its withdrawal." 46 I was also taken to the decision of the Federal Court in Re Rocco Celestino v Antonio Celestino [1990] FCA 299 and especially paragraphs 12 to 14; and Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 (Rogers CJ Comm D). 47 Counsel, having made submissions in relation to withdrawal of the admission, Mr Salmon then gave sworn evidence in which he provided his explanation for having acknowledged the Facility Agreement and its terms and conditions when he swore the Amended Defence. In effect, he said he admitted these paragraphs through inadvertence (T 93). It was a mistake. He in fact had told his solicitors that he disputed the Facility Agreement. Mr Dowdy said, understandably, that he was not in a position to cross-examine. He did not have the Bransgroves file, and obviously this matter had come to his notice for the first time moments before. Mr Salmon then retired from the witness box. 48 Nonetheless it seems to me clear, on the authorities, that leave to withdraw the admissions should not be given. 49 First, there is no question that giving leave would significantly prolong this trial. It would occasion expense to the plaintiff by reason of the need for an adjournment. That is one consideration, although by no means the main consideration and certainly not determinative. Ultimately this Court is concerned to do justice to both parties, and justice sometimes requires amendment, it may require leave to be given to withdraw admissions, and it can entail expense. I therefore move to other matters. 50 Secondly, the position as advanced by Mr Salmon lacks any credibility in my view. I do not accept there was a mistake when the admissions were made. He asserts that the matters which he now wishes to ventilate were foreshadowed in his original Defence. I disagree. There were general allegations in his original Defence, but nothing of the sort that is now advanced. There was not one word about the Facility Agreement being amended in order to incorporate the terms of the collateral agreement or any agreement as he now alleges. Certainly he did say that he only signed the last page, but that is a long way from saying that the Facility Agreement was in a different form to that alleged and a different form to the form which he agreed in his sworn Amended Defence had been provided. 51 Thirdly, Mr Dowdy says, with some justification, that the position advanced by Mr Salmon is completely incredible and unintelligible. He was invited at the end of yesterday to describe the nature of the obligation that he thought that he was undertaking when he signed the Guarantee, which he agrees he did sign. He mentioned differences between the company and himself, but he was not able to advance any intelligible statement of what he believed he was undertaking to do when he signed the personal Guarantee (T 53-55; 73-75) (cf Ex 2 (1.3.09) para [8]). 52 Upon my enquiry as to whether he was suggesting that the amendments to the Facility Agreement were to reflect what he alleges in the collateral contract as set out in paragraph 11 of the Amended Defence, Mr Salmon asserted, as I remember his evidence, that that was the position in relation to the additional advance for $300,000 on 3 July 2006, but not the facility agreement. The Facility Agreement, he understood, had some other effect which he endeavoured to describe in terms which, as I say, were to me incomprehensible; and I say that with respect to him, because he is plainly an intelligent man. His inability to articulate precisely what obligation he thought he was undertaking goes to the very heart of what he now seeks to raise as a defence and to his assertion of mistake. It will be remembered that he swore a Statutory Declaration, witnessed by his solicitor, that he had received advice in relation to his obligations under the Guarantee at the time he signed that document. 53 Mr Dowdy submitted that the manoeuvring of Mr Salmon, as he would describe it, is all about delay; that he simply wants to put this matter off for another day, and that is contrary to the just, quick and cheap disposal of this action; he is a person who acknowledges that his companies were advanced $3.405 million; interest was obviously payable; the obligations have never been satisfied; a call has been made upon the Guarantee, and he now seeks to avoid it through raising something never previously raised. I broadly accept that submission, although there was a hint of it in his most recent affidavit (Ex 2), affirmed on 1 March 2009 (para [8]). 54 For these reasons, I refuse leave to withdraw the admissions and the amendment which has been foreshadowed. The matter should proceed in respect of the remaining issues.

Bank of Western Australia v Salmon

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