Supreme Court of WA|2006-03-31|Before: Mr P

Essex Securities Pty Ltd v Lunt & Anor [2006] WASC 58 (31 March 2006)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ESSEX SECURITIES PTY LTD -v- LUNT & ANOR [2006] WASC 58

Practice and procedure - Application to amend defence to withdraw admission - Relevant principles - Turns on own facts

Celestino v Celestino, unreported; FCt FCA; No ACT G7 of 1990; 16 August 1990

Gale v Super Drugstores PLC [1996] EWCA Civ 1300; [1996] 1 WLR 1089

Hutton v Meston [2004] WASCA 178

Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516

Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309; (2003) 204 ALR 327

Sangora Holdings Pty Ltd v Dunstan, unreported; FCt SCt of WA; Library No 990172; 13 April 1999

SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816

State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146

Clough & Rogers v Frog (1974) 48 ALJR 481

Cropper v Smith (1884) 26 Ch D 700

Watkin v Bank of Western Australia Ltd, unreported; SCt of WA; Library No 980642; 4 November 1998

1 MASTER NEWNES: This is an application by the defendants for leave to amend their defence. It is opposed by the plaintiff on the ground that the amendment involves the withdrawal of an admission which has stood on the record for more than four years and the withdrawal of that admission would cause irreparable prejudice to the plaintiff.

2 The action was commenced by the plaintiff by a generally indorsed writ filed on 8 May 2001. The statement of claim was not filed until 9 August 2001.

3 In the statement of claim the plaintiff alleges that, on or about 30 June 1990, it was orally agreed between Mr Peter Briggs on behalf of the plaintiff and the first-named defendant ("Mr Lunt") on behalf of the defendants, that the plaintiff would advance certain moneys to the defendants or to one or other of them. It is pleaded in par 4 of the statement of claim that it was a term of the agreement that the defendants would repay the money upon demand and that by a number of advances, the amount of each of which is particularised, made on various specified dates from 30 June 1990 to various dates which it is said are not known but are after October 1996, the plaintiff advanced the total sum of $426,800.97 to the defendants. It is alleged in par 5 of the statement of claim that by letter dated 19 March 2001 the plaintiff made written demand for repayment of the money but the defendants have failed to repay it or any part of it.

4 A defence was filed on 31 August 2001. In the defence the defendants deny the agreement and then, in relation to the allegations in par 4 of the statement of claim, the defendants plead as follows:

"4. The Defendants deny paragraph four of the Statement of Claim.

The Defendants acknowledge the payments pleaded and say:

a. At all relevant times the first named Defendant was the Managing Director of WRS Pacific Pty Ltd.

b. Peter Briggs was at all relevant times was [sic] a common law director in WRS Pacific Pty Ltd and exercised control over the same through the shareholding in WRS Pacific Pty Ltd held by Essex Properties Pty Ltd a company controlled by Briggs.

c. Briggs in order to fund the business activities of WRS Pacific Pty Ltd provided funds to the first named Defendant for specific purposes relevant to and to fund the activities of WRS Pacific Pty Ltd.

d. All advances pleaded by the Plaintiff were for the above purpose and were so documented by way of invoice/statement in support of payments made.

e. Such payments were recorded in the annual accounts of WRS Pacific Pty Ltd and audited as expenditure of that company."

5 The defendants go on to admit that the plaintiff has made demand for repayment of the advances alleged, but deny that they are liable to repay the moneys for the reasons set out in par 4 of the defence.

6 Following service of the statement of claim, the action proceeded at a relatively leisurely pace. An order was made on 31 January 2002 for discovery to be given. The defendants filed an affidavit and list of documents on 10 April 2002. On 25 July 2002 the defendants obtained an order that unless the plaintiff gave discovery of documents on or before 15 August 2002, the claim be struck out. The plaintiff gave discovery on 15 August 2002. Apart from correspondence between the solicitors for the parties, the only documents discovered by the plaintiff were "Bundle cheque butts of cheques paid to defendants by plaintiff". An application for summary judgment was made by the defendants on 14 April 2003 and subsequently a large number of affidavits were filed by both sides in relation to that application. The application was ultimately dismissed on 27 May 2004. On 13 December 2004, the defendants filed an application for particular discovery and leave to request further and better particulars of the statement of claim. The defendants subsequently gave notice of an intention to file an amended application for leave to request further and better particulars. Despite various directions having been given, that application has made little substantive progress.

7 At a case evaluation conference on 17 October 2005, Registrar Rimmer directed that any application to amend the defence be filed and served by 31 October 2005. The current application was filed on 26 October 2005. A minute of the proposed amendment was filed on 4 November 2005. The proposed amendment is to par 4 of the defence and is as follows:

"4. The Defendants deny paragraph 4 of the statement of claim and say that:

(a) save for the sums totalling $30,000.00 being salary and/or consultancy fees payable to the First Defendant no funds were advanced to them personally;

(b) no funds were requested by them by way of loan as pleaded or at all;

(c) certain funds were made available to the First Defendant for the purpose of financing the operations of WRS Pacific Pty Ltd and were utilised for such purpose and says further that such funds cannot be particularised until the Plaintiff provides discovery and inspection of supporting documentation."

8 In an affidavit in support of this application, Mr Lunt says that at the time the defence was prepared he did not have the accounts of WRS Pacific Pty Ltd and had not seen any accounts of the plaintiff since 1994. Mr Lunt says that, in on about 20 March 2003, as a result of proceedings in the District Court between the second-named defendant and the plaintiff, he first saw the accounts of WRS Pacific Pty Ltd for the years ended 30 June 1995 to 30 June 2002. Mr Lunt says:

"Having reviewed such accounts in respect to the advances pleaded in paragraph 4 of the statement of claim I say that

a. The payments totalling $31,800 between 13 December 1993 and 1 March 1994 comprised salary payments to me payable in respect to my consultancy agreement with WRS Pacific Pty Ltd save for $1800 which was made available to me for the purposes as referred to in paragraph b below;

b. as the balance of the sums claimed in these proceedings I believe were in fact advances for the use and benefit of WRS Pacific Pty Ltd that these advances appear to be in my understanding as a former managing director of WRS Pacific Pty Ltd referred to in the balance sheets of WRS Pacific Pty Ltd as advances;

c. I cannot recollect having received all of the funds pleaded;

d. I can state however that none of the funds pleaded were made available for the personal benefit of the defendants and that none of the claims pleaded were loans to the defendants."

9 Mr Lunt says that despite request the defendants' solicitor has been unable to inspect all of the plaintiff's documents relevant to the particulars of the statement of claim. Mr Lunt concludes:

"In these circumstances it is sought to amend our Defence to take into account our position which I now believe to be the case, namely, our uncertainty as above referred to."

10 I should say that the "accounts" of WRS Pacific Pty Ltd referred to by Mr Lunt are annexed to his affidavit and consist of the annual financial statements of the company; that is, the balance sheet and profit and loss statement for each of the years referred to.

11 On this application there was a dispute on the evidence as to when Mr Lunt saw the relevant accounts of WRS Pacific Pty Ltd. The plaintiff contends it was rather earlier than March 2003. In that respect, I note that Mr Lunt says he was the managing director of WRS Pacific Pty Ltd at the time it is alleged the payments were made. In the existing defence the defendants plead that "[a]ll advances pleaded by the Plaintiff were for the [purposes of WRS Pacific Pty Ltd] and were so documented by way of invoice/statement in support of payments made" and that the "payments were recorded in the annual accounts of WRS Pacific Pty Ltd and audited as expenditure of that company". Those pleas suggest that Mr Lunt saw the accounts and the relevant entries at about the time those entries were made.

12 In any event, I do not think it is necessary for the purposes of this application to canvass that issue. It is sufficient that, at the latest, Mr Lunt saw the accounts on or about 30 March 2003.

13 It was submitted on behalf of the plaintiff that the effect of the amendment was to withdraw the existing admission in the defence that the payments set out in the statement of claim had in fact been made. The defence, as it is proposed to be amended, would put the plaintiff to proof, not only of the purpose for which each of the payments was made, but also that each payment was in fact made at all.

14 Counsel for the plaintiff argued that no grounds had been established which would warrant the withdrawal of the admission, which had stood on the record for more than four years and which had previously been affirmed on oath by Mr Lunt. In relation to the latter, counsel for the plaintiff referred to an affidavit of Mr Lunt sworn in support of an application for summary judgment made by the defendants in April 2003. In that affidavit, which was sworn on 10 July 2003, Mr Lunt says that he swears the affidavit on behalf of both the defendants and, at par 4, says that he has read the defence and that it is "true and correct in all respects". Despite that, no reason had been given for the application now to withdraw the admission that the payments were made.

15 Counsel for the defendants did not concede that the effect of the amendment was to withdraw an admission, arguing that the whole of par 4 of the statement of claim had always been denied in the first sentence in par 4 of the defence. He submitted that, in any event, leave should be granted even if it involved the withdrawal of an admission. He argued that the affidavit of Mr Lunt in support of the application sufficiently deposed to the fact that a mistake had been made when the fact of the payments was admitted. The plaintiff had not established that it would suffer any real prejudice by the amendment and it was necessary in the interests of a determination of the true issues between the parties that the amendment be allowed.

16 It is clear that at an interlocutory stage an amendment of a pleading which has the effect of withdrawing an admission may be allowed. There is no principle that an admission may or may not be withdrawn and the Court has a broad discretion to permit or refuse such an amendment, with the ultimate objective being the attainment of justice: Hutton v Meston [2004] WASCA 178; Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309; (2003) 204 ALR 327 at 334.

17 In Hutton v Meston (supra), McLure J (as her Honour then was), with whom Murray and Templeman JJ agreed, considered the approach to be taken to an application to amend a pleading where the amendment involves the withdrawal of an admission. Her Honour declined to follow the decision of the Full Court of the Federal Court in Celestino v Celestino, unreported; FCt FCA; No ACT G7 of 1990; 16 August 1990, in which it was held that in order to grant leave the Court must be satisfied that:

(a) an error or mistake by or on behalf of the party seeking the amendment has been demonstrated;

(b) a sensible explanation for the making of the admission has been provided, based on evidence of a solid and substantial character; and

(c) no injustice will be occasioned to the other party which cannot be met by an appropriate order for costs.

18 McLure J also declined to follow the decision of the English Court of Appeal in Gale v Super Drugstores PLC [1996] EWCA Civ 1300; [1996] 1 WLR 1089, where both members of the majority concluded that it was not normally necessary for a party to justify or explain the withdrawal of the admission. Waite LJ concluded that the discretion to permit the withdrawal of an admission is a general one in which all the circumstances have to be taken into account and a balance struck between the prejudice suffered by each side if the admission is allowed to be withdrawn. Millett LJ said that the court should ordinarily allow an admission to be withdrawn if the application is made in good faith, raises a triable issue with a reasonable prospect of success, and will not prejudice the plaintiff in a manner which cannot be adequately compensated. Both required that the relevant prejudice be established specifically and affirmatively.

19 In Hutton v Meston (supra), McLure J considered that as the nature and effect of an admission can vary widely it may be unhelpful to formulate a general rule as to when an admission may be withdrawn. Her Honour was not persuaded that the general rules applied by the majority in Gale represented the law in Australia. Her Honour also considered that the rules formulated in Celestino v Celestino (supra) constituted an improper fetter on the discretion to permit or refuse an amendment without regard to the ultimate object of the exercise of the amendment power, which, as the High Court reiterated in State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146, is the attainment of justice.

20 McLure J observed [at 23] that on an application to amend a pleading to withdraw an admission the scope of, and weight to be given to, relevant considerations in the exercise of the discretion is determined by the governing principle of the attainment of justice.

21 In Sangora Holdings Pty Ltd v Dunstan, unreported; FCt SCt of WA; Library No 990172; 13 April 1999, Steytler J (as his Honour then was), with whom Scott J agreed, said:

"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. ... The withdrawal of an admission will often even less readily be allowed if it has stood for a long time ... or when the withdrawal will cause significant prejudice to the other side."

22 Accordingly, where a party, who is legally advised and does not suffer any disability, deliberately and without mistake makes an admission, and there is no relevant change of circumstances, prima facie justice and fairness require that the party not be allowed simply to change its mind: SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 at [56].

23 Although it is inappropriate to attempt to formulate general rules as to the approach to be taken, or to attempt to state exhaustively the matters to be considered on an application of this nature, in my view it will generally be relevant to consider the circumstances in which the admission was made, the reason that it is sought to be withdrawn, the significance of the admission, the time for which it has stood on the record and any prejudice that is likely to be suffered by the other side that cannot appropriately be compensated by an order for costs. In respect of the last, it must be recognised that in some cases the adverse effects consequent upon such an amendment (including effects created by delay) on the public and private interests involved in the litigation will not be adequately compensated by a costs order. Even simply delay may create adverse consequences that cannot be cured by a costs order: Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 at [29].

24 It is against that background that I turn to a consideration of the defendant's application in this case.

25 Although it was not conceded by the defendants' counsel, in my view the effect of the proposed amendment, in its terms, is clearly to withdraw the admission in the defence that the payments were in fact made, so that if the amendment were allowed the plaintiff would be put to proof, not only that the payments were made to the defendants personally - rather than, as pleaded by the defendants, to Mr Lunt in his capacity as managing director, and for the purposes, of WRS Pacific Pty Ltd - but also that the payments were made at all. The plea that the defendants "acknowledge the payments pleaded" cannot reasonably be understood in any way other than as an admission of the fact of the payments.

26 There is no evidence of the circumstances in which the defendants came to make that admission and there is no satisfactory explanation of the reason that they now seek to withdraw it. Mr Lunt does not explain how seeing the financial statements of WRS Pacific Pty Ltd for the relevant periods cast new light on the matter or caused him to believe that the admission was in error or should not have been made. Nor does he explain why, if upon seeing those financial statements he came to that view, he nevertheless affirmed the correctness of the defence in his affidavit of 10 July 2003, some four months after he saw them, or why the defendants took no steps to amend their defence until late in 2005.

27 In fact, it is notable that Mr Lunt does not go so far as to say that the admission was made by mistake or by inadvertence, or that there has been any relevant change of circumstances or that anything has since come to light which changes the defendants' position with respect to the admission. There is also no evidence that the admission is contrary to the facts.

28 In his affidavit in support of this application, sworn on 26 October 2005, Mr Lunt simply says that he believes the sums claimed in this action were advances for the use and benefit of WRS Pacific Pty Ltd, but he cannot recall having received all of the funds pleaded. I should observe that in the affidavit Mr Lunt does not appear to speak of his state of knowledge in 2001, when the admission was made, but rather as at the time the affidavit was sworn in October 2005. In any event, the fact that Mr Lunt does not recall having received all of the amounts pleaded is not, of course, necessarily inconsistent with an admission on the pleadings that the payments claimed were actually made, coupled with a denial that they were made for the purpose alleged by the plaintiff. A party may, for various reasons, choose not to put their opponent to proof of a fact even where the admitting party does not have a clear recollection or proof of that fact.

29 At the time this application was made the admission in the defence had stood on the record for some four years and for more than two years after Mr Lunt says he saw the financial statements of WRS Pacific Pty Ltd. In the meantime, the parties have given discovery and inspection of the discovered documents has apparently been carried out. An application for summary judgment has also been made by the defendants without reference to any error in the making of the admission. Indeed, as I have said, at that time Mr Lunt affirmed the correctness of the current defence and the summary judgment application was based simply on the contention that no money had been advanced to the defendants personally. I should also note that the defendants have at all times been represented by solicitors.

30 In the circumstances, it is difficult to resist the conclusion that the admission is now sought to be withdrawn by the defendants for tactical reasons, rather than because of any bona fide error on their part or the part of their legal advisers in originally making the admission, or for other good cause.

31 The plaintiff says that it would now suffer irreparable prejudice if it were put to proof of the fact of the payments as many of the relevant financial records have since been destroyed. In an affidavit sworn on 22 February 2006, the plaintiff's solicitor, Mr Paonni, says that he is instructed that the plaintiff has no records of the payments in question apart from the documents that have been discovered. Mr Paonni says that on 22 February 2005 [sic, 2006] he made enquiries of the banks where the relevant accounts of the plaintiff were held and was informed by each bank that the records they held went back only seven years, that is, to February 1999, the earlier records of the bank having been destroyed.

32 I do not consider that evidence particularly compelling. It would appear from that evidence that when the defence was filed in August 2001 (up to which time the plaintiff did not know whether or not the fact of the payments would be admitted), the plaintiff had not taken the trouble to gather into its possession all of the necessary documents and, indeed, that a number of the documents necessary to enable the plaintiff to prove part of its case were already lost. That is, by August 2001 bank records would only have been obtainable by the plaintiff back to August 1994. An amount in excess of $100,000 is claimed by the plaintiff in this action in respect of payments prior to August 1994. It is also not immediately obvious that the bank and other records which the plaintiff says are now no longer procurable would not also have been relevant to the matters that have at all times been in issue on the pleadings. There is, moreover, no evidence as to when any relevant records of the plaintiff were destroyed.

33 The proposed amendment is obviously a significant one. If leave to make the amendment is refused the defendants will not be able to contend that the payments pleaded by the plaintiff were not made at all or to put the plaintiffs to proof that those payments were made. The fact that the payments were made will be taken as admitted and the only substantive issue will be whether the payments were made to Mr Lunt for the defendants' personal use or whether they were made to him as the managing director of WRS Pacific Pty Ltd and used for the purposes of that company.

34 On the other hand, it is a serious matter to make an admission in a pleading and to allow an action to proceed for a long period of time on the basis of that admission. In this case there has been no satisfactory explanation by the defendants as to why the admission, which has stood on the record for more than four years, is now sought to be withdrawn. There is no evidence of any significant change in circumstances since the admission was first made, or at the very least since it was affirmed on oath in July 2003, and there is no evidence that the admission is contrary to the fact. Indeed, it is not easy to discern the reason that the admission is now sought to be withdrawn, other than a tactical one.

35 I do not consider that the question of whether or not the plaintiff would suffer identifiable prejudice, or any prejudice, by reason of the amendment is a significant factor in the circumstances of this case. That said, I do not think that the question of prejudice necessarily depend upon specific or quantifiable prejudice being established. The case has since August 2001 proceeded on the basis that the fact of the payments was not in issue. The effect of the amendment would be to put the plaintiff to proof of that for the first time. Whether or not the plaintiff can point to specific prejudice it would thereby suffer, a litigant will almost inevitably suffer prejudice, albeit perhaps of a somewhat nebulous kind, if substantial additional issues are brought into an action which has already been underway for some years and which has hitherto proceeded on the basis that those matters are not in issue. Whether such prejudice can appropriately be compensated by a costs order may well be a moot point.

36 In the circumstances, I consider that the interests of justice require that leave to amend the defence, so far as the amendment would withdraw the admission that the payments pleaded were made at all, be refused.

37 I will hear the parties on the form of orders and on costs.

Essex Securities Pty Ltd v Lunt & Anor [2006] WASC 58

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Judgment (71 paragraphs)

Essex Securities Pty Ltd v Lunt & Anor [2006] WASC 58 (31 March 2006)

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Cases Cited (4)