Gregorich v Khouri & Ors [2020] VSC 5

2 In defences filed on 28 June 2019 and 15 July 2019 the first, second, third and fourth defendants admitted[2] allegations that the Davey Street Agreement was made between Gregorich as lender, the third defendant (Dean) as the then Trustee of the Khouri Family Trust (the Trust) as borrower, and the fourth defendant (Prime) as "investment manager".[3] Prime was placed into liquidation on 10 July 2019. The remaining defendants now wish to contend that Prime, and not the Trust, was the borrower and that it is Prime who is liable to the plaintiff under the Agreement. In order to do so they must have leave to withdraw the admissions previously made.

3 The defendants also admitted[4] allegations that in November 2015 the first defendant (Jacques), on behalf of the Trust and Prime, signed a document (described in the claim as "the First Proposal") that partly recorded the Agreement.[5] They now wish to contend, by withdrawing their admissions, that a different version of the document (described as the "Second Proposal") was in fact executed in November 2015. The First Proposal makes reference to the Trust as borrower whereas the Second Proposal does not.

4 For the reasons that follow, leave to withdraw the admissions at sub-paragraphs 32(l) and (m) of the defendants' defences is refused. The justice of the case does not favour a grant of leave. In short, the proposed amendments represents a substantive change of case in the face of directly contradictory evidence sworn earlier in or in connection with this proceeding by Jacques who is the principal player in the events the subject of the claim. The circumstances call for an explanation. The explanation advanced is neither cogent nor persuasive. The defendants have not discharged the burden of showing that the plaintiff will not be prejudiced by the amendments.

5 Pursuant to rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 the Court may at any stage order that any party have leave to amend any document in the proceeding, for the purpose of determining the real question in controversy between the parties, correcting any defect or error in the proceeding or avoiding multiplicity of proceedings.[6]

6 Whether an amendment should be permitted is matter of discretion, to be exercised according to an assessment of where justice lies. While it is neither possible nor desirable to delimit the factors that the Court may take into account in exercising the discretion,[7] some considerations that should inform the exercise of the discretion have been considered in the authorities.

7 An amendment will not be permitted where it would cause irremediable prejudice to the other party. On an application to amend the applicant bears the burden of persuasion that the amendment will not cause such prejudice, while the party opposing the amendment bears an evidential onus of adducing evidence on the question of prejudice. The question is whether the possibility of prejudice or injustice to the opposing party has been excluded. If it has not, the application must be refused. It must also be refused if the Court concludes that it cannot decide whether it is just to allow the amendment.[8]

8 The loss of an opportunity to take a step in the proceeding in response to a denial may constitute relevant prejudice.[9] An order for indemnity costs may not always undo the prejudice a party suffers by a late amendment.[10] Case management considerations may inform the justice of the grant or refusal of an application to amend.[11]

9 A court will usually require an explanation for the change in position.[12] In McKenzie v Commonwealth[13] and in Jeanes v Commonwealth[14] Gillard J said that it is not the law that a defendant is not permitted to withdraw an admission unless it was shown to have been made inadvertently or through error, and that the absence of a reasonable or adequate explanation will not determine the outcome of an application in the face of compelling reasons of justice.[15] As Gillard J observed, the criteria for the exercise of the discretion conferred by Rule 36.01(1) are those articulated in the Rule itself.[16] Accordingly, there is no separate rule that the reasons for and explanation of a change of position will of themselves dictate the outcome of an application to withdraw an admission.

10 Nevertheless, an explanation is ordinarily called for in recognition of the fact that the making of an admission is regarded as a serious step for a party to take - its effect being to remove the admitted fact from the arena of controversy between the parties.[17] Thus it has been said that a party will not be permitted to withdraw an admission in a pleading "without good cause".[18]

11 That is a more particular emanation of the principle that generally speaking, where a discretion is sought to be exercised in favour of one party and to the disadvantage of the other, an explanation will be required. An explanation is required in order to permit the court to see that the application is brought in good faith and to weigh the circumstances against the effects of an amendment and the objectives of the relevant rule.[19] In Aon Risk Services[20] French CJ said that one consideration in the exercise of an interlocutory discretion is the potential loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification.[21]

12 It has been often said in the context of applications to withdraw admissions, that the explanation proffered should be based on evidence of a "solid and substantial character".[22] However, what is adequate will depend upon the circumstances of the particular case.

13 Finally, it is now understood (at least since the High Court's decision in Aon) that parties must be given a fair trial and a sufficient opportunity to identify the issues they seek to agitate, but according justice in an application to amend is not to be equated with a requirement to afford a party an unlimited opportunity to amend its case.[23]

The defendants' application - grounds for withdrawal

14 The defendants contend that they should be permitted to withdraw their admissions because:

(a) They have provided an adequate explanation of the circumstances relevant to the admission and its proposed withdrawal;

(b) The plaintiff will not be prejudiced by the amendments; and

(c) The proposed amendment is consistent with certain parts of the existing pleading and will resolve existing inconsistencies in the defences.

15 It is necessary to traverse the procedural history of this matter, the relevant feature of which is that the identity of the borrower of funds from Gregorich (the subject of the proposed amendments) was addressed explicitly in evidence given by Jacques in the course of two applications brought in connection with this proceeding.

16 The plaintiff's claim is that he understood that he had invested his funds in a residential property development at Davey Street, Frankston, in which the defendants or some of them had substantial interests. Described generally, his claim is that the defendants, who acted as his financial advisers, induced him to pay the funds to them for the purpose of investing in the Davey Street development (to their benefit) and did so by making various misrepresentations, acting unconscionably and in breach of duties owed to him.

17 Two of the properties comprised in the Davey Street development were owned by Airio Pty Ltd, which was the trustee of the Airio Investment Trust. The Trust was one of two unit holders in the Airio Investment Trust. Gregorich wished to trace his funds into those properties and lodged caveats against their titles. In November 2018 Airio brought proceedings to have the caveats removed (the caveat proceeding). Richards J ordered the removal of the caveats on 19 November 2018.[24]

18 This proceeding was issued by a generally indorsed writ on 15 November 2018. On or about the same day Gregorich issued an application in this proceeding for freezing orders against Jacques' assets (the freezing order application). On 22 November and 5 December 2018 undertakings were given for the preservation of assets, including by Jacques in his capacity as trustee of the Trust. The final form of the undertakings was recorded in orders made by Kennedy J on 30 January 2019. The orders were agreed following, among other things, an application by Jacques and a related party to vary the undertakings initially given by them. Thereafter, a statement of claim was filed in April 2019 and defences in June and July 2019.

19 Jacques swore affidavits in the caveat proceeding and in this proceeding on the freezing order application, relevantly, on 18 November 2019 and 30 November 2018.

20 In his affidavit of 18 November 2018 (sworn in support of the caveat removal application) Jacques, in his capacity as trustee of the Trust and as the then sole director of Prime, said in substance that:

(a) On 13 November 2015 Gregorich entered an agreement to advance a loan of $1,327,000 to the Trust.

(b) The loan was recorded in the financial accounts of the Trust. The accounts for the year ended 30 June 2017 were annexed to the affidavit. The balance sheet records a non-current liability of $1,327,000 to Gregorich, described as a "Loan Payable". It also records loans made to Airio and other entities. The profit and loss statement records expenditures including interest paid on loans.

(c) Prime provided various letters to Gregorich about the loan (exhibited, each signed by Jacques with the notation, "Prime Financial Services Australia"), including a letter of 18 January 2017 that relevantly stated,

For audit purposes, we wish to clarify our method of earning returns for your investment with Prima FSA. Upon receipt of your investment, we have directed the funds into our residential development project located at 10-12 Davey Street Frankston. ... The development company which owns and operates the project is Airio Pty Ltd - which is partly directed and operated by our office.

That letter was described in the affidavit as disclosing certain of the methods by which the Trust earned the monetary returns "due and liable by the [Khouri] Family Trust to [Gregorich as trustee for his superannuation fund], under the November 2015 loan agreement". Jacques explained that the Davey Street development was partly operated by the Trust as a unit holder of Airio and that the Trust funded some of the costs of the development. The letter was said to have been provided to Gregorich (who made the investment on behalf of his self-managed superannuation fund) for the purposes of compliance with superannuation audit requirements.

Jacques went on to say that the Trust also earned profit by partly funding other development projects, and had invested the moneys loaned to it pursuant to the November 2015 loan agreement into various property developments.

(d) The Trust had been making interest payments to Gregorich, in the amounts and on the dates specified.

(e) The November 2015 loan agreement was in the form of a document exhibited to the affidavit (exhibit JQ-1). That document was later described in the claim as the First Proposal (as noted above).

(f) The Trust had, in September 2017, entered into a contract of sale to purchase another property at 374 Nepean Highway, Frankston. The Trust required the full distribution of the profits it anticipated receiving on the Davey Street development in order to complete that purchase. If, by reason of Gregorich's caveats, the settlement of the sale of the Davey Street properties owned by Airio was prevented, or if any portion of the net settlement proceedings due to the Trust were withheld, two consequences would flow. The Trust would have difficulty in making further interest payments to Gregorich due under the November 2015 agreement and in meeting its financial obligations in relation to other development projects.

21 In ordering the removal of the caveats, Richards J found that Gregorich's claimed interests in the properties were insufficiently demonstrated to justify the maintenance of the caveats. Her Honour also found, on the question of the balance of convenience, that among several other factors, one relevant factor was that the Trust was relying on its share of the proceeds of the settlement of the Davey Street development to settle on its own purchase of other land at Frankston and if the caveats remained in place that purchase would not be able proceed, thereby affecting the third party vendor of that property.[25]

22 In his 30 November 2018 affidavit sworn in opposition to the freezing order application Jacques said, relevantly and in substance, that:

(a) The Trust is in the business of investing in property development projects;

(b) He told Gregorich that he would arrange for the loan of Gregorich's funds through the Trust (which was a unit holder in the Airio investment trust) for the development of the Davey Street properties which were owned by Airio. It was then agreed that Gregorich would lend moneys to the Trust, which agreement was recorded in a document exhibited to the affidavit (exhibit JK-06, in the same form as exhibit JQ-1 to the 18 November affidavit, which is the document later described in the claim as the First Proposal);

(c) The November 2015 loan to the Trust was extended by agreement;

(d) The method by which the Trust earned returns was set out in the letter of 18 January 2017 (discussed above);

(e) The sale of the Davey Street properties was due to settle on 12 December 2015 and the Trust was expected to receive from that settlement the sum of $1.9m in repayment of loans and profit share; and

(f) The Trust holds units in certain additional unit trusts (that is, in addition to the Airio investment trust). He had nominated the corporate trustee of one of those trusts as the purchaser of 374 Nepean Highway Frankston. The Trust would loan fees for borrowings for this property from fund received on settlement of the Davey Street properties.

23 The purport of Jacques' evidence was, then, that the Trust borrowed the funds from Gregorich. That loan was as reflected in the financial accounts of the Trust. As a unit holder in Airio, the Trust invested the funds (at least in part) in the Davey Street development by lending them to Airio and in return expected to earn a profit and to be repaid by Airio. That position was a basis on which Jacques (for the Trust and, in turn for Airio) sought successfully to have the caveats on the Davey Street properties removed. It was also a basis on which Jacques, for the Trust and for himself, sought to resist a freezing order over Trust assets.

24 Prime is referenced in passing in that evidence. Correspondence about the loan transaction was written by or on behalf of Prime and signed by Jacques for Prime. As noted above, the letter of 18 January 2017, which said that Gregorich's investment was "with Prime FSA" but was otherwise opaque as to the entities involved (referring to the Davey Street development as "ours" and stating that Airio was partly directed and operated by "our office"), was explicitly explained by Jacques as addressing the manner in which the Trust earned returns.

25 The relevant paragraphs of the statement of claim[26] have evidently been drawn to reflect the position as described in the Jacques' evidence. The admissions the subject of this application are consistent with Jacques' evidence.

The defendants' explanation of their change of position

26 The defendants do not now seek merely to put the plaintiff to proof of his case as to the identity of the borrower to whom he advanced funds. They wish to advance a case that is substantially different from and inconsistent with that made to date.

27 Particularly because of the evidence given by Jacques, and because Jacques relied upon that evidence in seeking to persuade the court to make orders in his favour (and in favour of related parties) in the freezing order application and in the caveat proceeding, it was incumbent on the defendants to explain their change of position in a way that grappled with the substance of and reasons for the proposed change.

28 The defendants relied upon the affidavit of Emma Khouri (Emma) (the second defendant and wife of Jacques) sworn 6 December 2019, in which grounds for the amendment were advanced. The affidavit addressed these factors:

(a) as to paragraph 32 of the defences (by which the admissions were made) -

(i) the 30 November 2018 affidavit of Jacques;

(ii) statements said by Emma (on information and belief), to have been made by Jacques and Dean to the effect that Prime and not the Trust, was the borrower; and

(iii) an explanation for the differences between the First and Second Proposal documents;

(b) changes of solicitors and the defendants being rushed in their consideration of the defence; and

(c) the personal circumstances of Emma and Jacques.

29 Emma's evidence in substance advances this case: the Second Proposal, and not the First, was executed by Jacques and Gregorich. As it happens, the Second proposal makes no explicit reference to the Trust, whereas the First does. The existence of the two documents is explained by the fact that she created the First Proposal after the event, by altering the document in order to "clarify where the moneys were being invested" in response to a query from Gregorich's accountants. The First Proposal purports on its face to have been signed by Jacques and Gregorich, but Emma now says it was in fact fabricated by her. Jacques' affidavit of 30 November 2018 (sworn on the freezing order application) annexed the First Proposal rather than the Second Proposal because Emma mistakenly provided it to the defendants' solicitors. Jacques has told her that he did not carefully read his affidavit before swearing it. He did not tell the solicitors at the time that the Trust was the borrower. Jacques and Dean have each told her that Prime, and not the Trust, was the borrower.

30 On examination, the evidence of Emma does not provide an adequate explanation of the circumstances relevant to the defendants' proposed change of position.

31 Fundamentally, the evidence on this application does not engage other than superficially and incompletely with the clear, explicit and substantive evidence given by Jacques in his 18 and 30 November 2018 affidavits concerning the Trust as borrower of the Gregorich funds. The substance of Jacques' evidence is set out above. It did not address the role of the Trust in passing. It cannot be sensibly re-cast by substituting references to Prime for references to the Trust.

32 The statement that Jacques "did not carefully read" his 30 November 2018 affidavit or exhibit JK-06 (the document in the form of the First Proposal) before swearing it does not afford a coherent or credible account of how Jacques came to give that evidence. It does not engage with the substance of the evidence or even attempt to do so. Nor does it explain the evidence that Jacques might have given had he read the affidavit carefully, or identify which parts of it are incorrect. By way of example and significantly, it does not seek to explain why, in the face of the new position asserted, the loan from Gregorich is recorded in the financial accounts of the Trust. There is no claim that those accounts were erroneous or that they were fabricated or altered.

33 The evidence that Jacques did not carefully read his affidavit is hearsay. Further, and in any case, the statement itself is devoid of any meaningful content. It is of so little probative value that it does not assist the defendants.

34 Emma's evidence (including the statements attributed to Jacques about his previous evidence) does not address the 18 November 2018 affidavit at all. Even if the evidence regarding the 30 November affidavit were accepted, the 18 November affidavit would stand un-addressed. This fact was explicitly addressed in submissions by the plaintiff and in discussion between the court and the defendants' counsel in oral argument. It was submitted that I should not conclude that no explanation was available in respect of that evidence, despite none being put before me. No application was made by the defendants to adduce further evidence, or to adjourn their application in order to do so.

35 The defendants' material did not advance any substantive or coherent explanation as to how the admissions in their defences came to be made.

36 Jacques has been represented in this proceeding by Altus Lawyers, HDL Legal & Consulting, Slater & Gordon and Parker Lawyers & Consultants in succession. Emma and Dean have been represented by each of those firms save for Altus. Defences for each of the defendants were prepared and filed for HDL Legal & Consulting and signed by two members of counsel. Further and better particulars of the defences were prepared and filed by Slater & Gordon.

37 Emma states that Dean and Jacques had told her that Prime was the borrower and that they did not tell HDL Legal or their counsel "to the contrary". She says further that Jacques told her that he did not tell Altus lawyers (who prepared his 30 November 2018 affidavit) that the Trust was the borrower. The evidence does not extend to what was in fact said to the lawyers, or as to the basis on which the affidavits were prepared.

38 The evidence as to Jacques' communications with the lawyers is hearsay. Even leaving that fact to one side, the evidence, scant as it is, is not credible without more, having regard to the substance of the 30 November affidavit and the 18 November affidavit.

39 Emma says that she altered the Second Proposal to create the First Proposal.

40 The documents themselves contain several differences but with one exception the differences appear immaterial - that is, the documents appear to covey the same meaning in substance. The relevant difference is that the Second Proposal does not contain any express statement identifying the borrower but does say that upon completion of the development, 'principle [sic] investment plus profit to be paid by Prime FSA, total payout figure $2 million'. The First Proposal contains the statement, 'Borrower is the Khouri Family Trust ABN 93 850 738 566 - liable entity for loan repayment'. It also states, 'upon completion of development project at 10-12 Davey Street, principle [sic] investment plus profit to be paid by the Khouri Family Trust, total payout figure $2 million'.

41 It is implicit in the defendants' application (although it was not said expressly) that the source of the admissions the defendants wish to withdraw was the "altered" First Proposal document that was mistakenly provided to the defendants' lawyers. The tenor of the application is that now that the problem has been identified (a fabricated document) the defendants' positions should be adjusted accordingly.

42 As discussed earlier, that contention does not grapple with Jacques' evidence on the subject. Several further observations may be made about the defendants' position in relation to the altered document.

43 First, the statement of claim itself identified the two versions of the Proposal from the outset. The Second Proposal is not a new document adduced on this application. It was put into evidence by Gregorich on the freezing order application.[27] Emma says that she did not inform Dean or Jacques that she had altered the document. Even assuming that is so, no explanation is given as to why Emma made the admissions in her defence or why she has only now revealed these facts.

44 Second, the altered document was, on Emma's account, "edited" to identify the Trust as the borrower. Emma does not say in her affidavit that the added parts of the document were false. She says, rather, that she made the alterations to provide clarity about "where the moneys were being invested" in response to the query by Gregorich's accountant. She says that at the time she understood that the funds had been made available to the Trust for use in the Davey Street development. No further detail is provided. That the "alterations" to the First Proposal were mistaken is implied only by reference to what Emma says she has now been told by Jacques and Dean (the unelaborated statement that Prime was the borrower evidently made for the purposes of this application).

45 Third, the terms of the Second Proposal (if that be the version of the document that was executed) do not necessarily dictate the result that Prime must have been the borrower. The document (which is headed, "investment proposal") states that the loaned funds and profit would be "paid by Prime FSA" (Prime Financial Services Australia). In determining the identity of the borrower that document would have to be considered in the context of other facts and documents, including the financial accounts of the Trust. I do not form any concluded view about the proper construction of that document on this application. I note, however, that an available view (whether or not it is ultimately correct) is that Prime executed the document in its role as an investment manager - that is, in a facilitation role.[28] The relevant point for present purposes is that the circumstances in which leave to amend is sought are not adequately explained by the defendants' fastening onto the Second Proposal.

46 In other circumstances, more confined evidence as to a change of position may have sufficed. Here, for the reasons explained earlier, the change of position is not one that may be described as a correction of a slip or a mistake.

47 Emma says in general terms that it was hard for the defendants to prepare their defences because they had had several changes of solicitors. She says that a meeting with counsel to settle the defences felt rushed, that she felt under immense pressure and that she did not feel that the defendants were able to convey their position fully in the time available. That meeting was preceded by a two to three hour meeting between counsel, Emma, Jacques and Dean, for the purposes of taking instructions and preparing the defences. She says they contained errors because of inadequate time was allowed to prepare the defences.

48 No attempt was made to link the pressure of time with the issue in question (the role of the Trust). Emma does not say what it is that she or the other defendants would have explained to counsel had more time been allowed. As the defendants' counsel conceded, the explanation proffered by Emma deals in a very general way with the rushed circumstances in which the documents were put together, and that is as far as it can be taken.

49 It can be reasonably inferred that the defendants' representatives had available to them Jacques' affidavits when preparing the defences. As discussed, the substance of those affidavits has not been accounted for on this application despite the attempt to characterise references to the Trust as borrower as an error.

50 I do not accept that the defendants' change of position is explained by the pressure of time or by errors made by their legal representatives.

51 Emma deposes to the personal circumstance of herself and Jacques. The substance of the evidence is that during December 2018, and around about that time both she and Jacques were unwell. Emma underwent an emergency caesarean section in December 2018 and for the previous month required very regular monitoring of her pregnancy by the hospital. Since the birth of her son she has been juggling the demands of business, family and this litigation.

52 Jacques suffers from debilitating anxiety and depression for which he is regularly managed. He was hospitalised for a week in late July to early August 2019 to deal with a bad reaction to medication and, separately, underwent neurosurgery on his back in April 2019.

53 Emma says that due to his anxiety and depression Jacques has been largely unable to work or deal with solicitors. In her affidavit on this application she makes reference, on this issue, to an affidavit sworn by Jacques on 11 October 2019. In the 11 October 2019 affidavit (sworn in opposition to an application to strike out the defendants' defences) Jacques describes the mental health issues that he has suffered from over the last decade, a deterioration in his mental state in early August 2019 which resulted in an admission to hospital for a week and a half, and a further incident on 19 August 2019. That evidence was supported by a letter from his psychiatrist. Jacques said, however, that while he continues to suffer from depression his condition had recently improved, sufficient to enable him to be involved, on a limited basis, in providing instructions to his solicitors about the issues in the proceeding.

54 For the purposes of this application I readily accept that each of Emma and Jacques have suffered from health issues that have made it difficult for them to manage this litigation and that at times during 2018 and 2019 Jacques has been incapacitated. I also accept that those challenges were compounded by the ordinary difficulties of having to manage young children and competing responsibilities.

55 Whilst I accept those circumstances and the fact that litigation can place a heavy burden on parties, the circumstances themselves do not in this case, explain or support the defendants' change of position.

56 Dean did not give evidence on this application. There was no evidence addressed to his circumstances nor any suggestion that there was any reason why he could not have given evidence. It is evident from the reference to him in Emma's affidavit that he is presently engaging with the litigation, although he has elected to do so through Emma and not directly. Dean was at relevant times the trustee of the Trust. The defendants admit the allegation that he was present with Jacques and Gregorich at the meeting on 13 November 2015 when the Davey Street Agreement was struck and the Proposal was signed. He ought to have been in a position to give relevant evidence on this application, even if Jacques was not so placed.

57 Whilst the evidence addresses Jacques' health, it does not specifically deal with the fact that he has not given evidence on this application. It does not advance the position as described by Jacques in his 11 October 2019 affidavit. The defendants' counsel accepted that there was no evidence on this application going to Jacques' inability to give evidence. Like Dean, Jacques is evidently engaging with this litigation but on this application through Emma and not directly.

58 In summary, I do not consider that Emma's evidence is sufficiently cogent or satisfactory for the purposes of this application, even though she was not cross-examined.

59 I consider that the plaintiff has discharged the evidentiary burden of adducing evidence on the question of prejudice and that the defendants have not discharged the burden of persuading me that the plaintiff will not suffer irremediable prejudice.

60 As noted earlier, within days of this Court ordering the removal of caveats intended by Gregorich to provide security for his claim to the return of his investment, Gregorich commenced this proceeding and issued the freezing order application against Jacques. His solicitor deposes that Gregorich made that application on the basis of the evidence filed by Jacques in the caveat proceeding. That he did so may also be inferred from the content of the 18 November 2018 affidavit.

61 As the plaintiff put it, the evidence was that the trustee owed a valuable asset, and the trustee gave undertakings as to preservation of the value of that asset. Jacques, as trustee of the Trust, gave undertakings that he would not enter into any new arrangements that would diminish the value of the Trust's assets below $1,437,000 and that he would, as trustee, pay interest to Gregorich on the borrowed funds until further order.

62 Gregorich contended that had those undertakings not been proffered in those circumstances - where evidence was put on about the identity of the borrower - it would have been open to him to seek orders against different assets or entities. He would have looked beyond the Trust to endeavour to secure his potential entitlement to a judgment, potentially against Prime or against Dean or Emma. He did not do so in the face of a firm case that there was one borrower. He obtained what appeared to have been valuable security and allowed time to pass without seeking alternative security, on the basis that the Trust was the relevant entity. Prime was placed into liquidation in July 2019, some months after the freezing order application.

63 Given the steps that Gregorich did take in seeking security, I consider that there is a sufficient likelihood that he would have taken steps to seek to obtain security against one or more of the other defendants had he not been led to believe that the Trust was the borrower of his moneys. That is sufficient in these circumstances to raise an evidentiary case of prejudice, notwithstanding that the likely course that an alternative application would have taken has not been established.

64 Although the defendants did not make their admissions in pleadings until June and July 2019, the admissions embodied the position that Jacques had explicitly and consistently taken from the outset. The absence of a formal pleading before June 2019 does not alter the position in relation to prejudice.

65 The defendants accepted in oral argument that there was an opportunity for Gregorich to make some investigations and potentially to take some action, although they submitted without elaboration that I should infer that there was little for the plaintiff to gain. The defendants have not discharged the burden of showing that the plaintiff would not be prejudiced by the amendment. The prejudice is of a kind that cannot be remedied by the grant of an adjournment or an award of costs.

66 Separately, the plaintiff submitted that he might have conducted his defence of the caveat removal application differently, had the defendants' present position in relation to the borrower been then adopted. That contention does not materially assist the plaintiff. Caveats were lodged against properties owned by Airio. It was not apparent from the plaintiff's submissions how the defence of the application would have sensibly taken a different course had Prime been identified as the borrower of Gregorich's moneys.

67 The plaintiff also contended that were the amendments allowed he would suffer procedural prejudice. In the face of a defence that Prime was the borrower, he would seek to plead and prove that the defendants were estopped from resiling from their previous position. The steps required in order to do so would entail prejudice.

68 The plaintiff says that he would be entitled to pursue the best evidence available to him on the estoppel question. He would, to that end, intend to subpoena the records of the defendants' several sets of solicitors with a view to obtaining records of the defendants' instructions regarding the identity of the borrower, asserting a consequential waiver of privilege arising from the defendants' contentions on this application that the admissions were mistakenly made. He says that those steps could very likely not be taken in time to allow the trial to proceed on 17 February 2020. At the last directions hearing held before this application was issued, the defendants accepted that the trial should proceed as far as possible without delay.

69 I accept that the plaintiff would seek to plead and prove an estoppel by way of reply, in the event that the defendants were permitted to withdraw their admissions. However, there is a fair degree of speculation entailed in the proposition that the plaintiff would, on further reflection and considered advice, decide that it was necessary or desirable to support that claim by pursuing documents held by the defendants' solicitors, given the other material available to the plaintiff, on which he relied on this application.

70 The defendants contend that the proposed denials are consistent with existing parts of the defences. It is said that by reason of the existing denials Gregorich ought to have been on notice of the case the defendants now wish to make.

71 By sub-paragraphs 32(h), (i) and (j) it is alleged in substance that at a meeting on 13 November 2015 Jacques presented Gregorich with a pre-drafted document in the form of the First Proposal and told Gregorich that if he wanted to invest $1,327,000 as proposed he should sign it. Gregorich and Jacques signed the First Proposal. Jacques then presented a second document (in the form of the Second Proposal) and asked Gregorich to sign it. (For context, I note that Gregorich alleges at sub-paragraph 32(k) that he signed the second document believing it to be a copy of the first.)

(a) denied the allegations in sub-paragraphs (h), (i) and (j); and

(b) admitted (or said further) that Jacques gave Gregorich a written proposal which they both signed, that Jacques asked Gregorich to signed a second copy of the proposal. That proposal is not described in the defence.

73 The substance of this aspect of the defences then, is that it is admitted that an unidentified written proposal was signed by both parties but it is denied that Jacques presented Gregorich with the First Proposal.

74 The notice point lacks merit. The existing pleading admits that a document was signed but does not identify it, notwithstanding that both versions of the Proposal are described in paragraph 32 of the claim. That admission cannot reasonably be considered to have put the plaintiff on notice of the case the defendants now wish to advance. Moreover, the contention cannot be sustained in the face of the admission in sub-paragraph 32(m). The defendants' counsel properly conceded that point was a difficult one for his clients.

75 It is also said that the admissions the subject of this application are inconsistent with denials made at sub-paragraphs 32(h), (i) and (j) and paragraph 30 of the defences, and that withdrawal of the admissions will facilitate the proper conduct of the trial by removing those inconsistencies.

76 It is true that there is an inconsistency between the defendants' admissions in sub-paragraphs 32(l) and (m) and their denials at sub-paragraphs (h), (i) and (j), in that the execution of the First Proposal is both admitted and denied. As noted earlier, the denials at sub-paragraphs 32(h), (i) and (j) do not go so far as to set up a clear positive case. They make no factual allegation as to which document the defendants say was executed.

77 All other things being equal, it is desirable that inconsistencies in pleadings be resolved. Nevertheless, the resolution of the inconsistency in this case should not be determinative of the application.

78 The defendants seek to resolve the inconsistency by making their case consistent with the denials contained in sub-paragraphs 32(h), (i) and (j), rather than seeking consistency with the admissions at sub-paragraphs 32(l) and (m).

79 The defendants' application focused on which version of the Proposal recording the Davey Street Agreement was executed, but the substance of the change that the defendants wish to effect is to contend that Prime, and not the Trust, was the entity that borrowed Gregorich's funds, and is the principal party to whom Gregorich must look for his money. As the defendants' submissions made plain at the outset, "[the] amendments are directed at one matter: to deny that the trustee of the Khouri Family Trust was the borrower of funds from the plaintiff in November 2015, and to assert that it was, instead Prime, the fourth defendant".[29] The defendants wish to make that case positively by adding words to that effect to sub-paragraph 32(l) of their defences.

80 For the reasons discussed above, it does not follow as a matter of necessity that if the parties executed the Second Proposal and not the First, that Prime (and not the Trust) must have been the borrower. The issues (which document was executed and which entity borrowed the funds) may be related but the resolution of the first does not necessarily entail resolution of the second.

81 While sub-paragraphs 32(l) and (m) make reference to the First Proposal, their evident purpose is to identify the parties to the Davey Street agreement, which is said to have been only partly reduced to writing (in the First Proposal). The defendants contend in effect that by amending their pleadings in order to resolve an inconsistency in their pleaded case as to which document was executed, they should be permitted to change their defences as to the identity of the borrower. For the reasons discussed elsewhere, the justice of the case does not favour that outcome. That is so, notwithstanding that unamended, the defences contain an inconsistency.

82 On the question of inconsistency the plaintiff submitted that the defendants' admission in sub-paragraph 64(e), that Dean as the trustee of the Trust received the rights of the Trust under the Davey Street Agreement, was consistent with the admissions in sub-paragraphs 32(l) and (m), and that a change of case would result in a new different inconsistency with sub-paragraph 64(e). That may be so, although the pleading does not specify the rights of the Trust received under the Agreement.

83 The defendants also contend that the admissions at sub-paragraphs 32(l) and (m) are inconsistent with their admission at paragraph 30 that Gregorich provided a cheque for $850,000 made out to "Prime Financial Services Investment" which Prime deposited. That sum was part of the $1,327,000 invested by Gregorich. Payment of those moneys into a bank account maintained by Prime does not have the necessary consequence that Prime must have been the entity who borrowed Gregorich's funds and which owed any relevant obligations to Gregorich pursuant to the Davey Street Agreement. The defendants did not adduce any evidence about the banking arrangements between Prime and any other relevant entity including the Trust.

84 The justice of the case does not favour the withdrawal of the defendants' admissions made by sub-paragraphs 32(l) and (m) of the defences and the application is dismissed.

[1] In his capacity as trustee of the Arcadia Engineering Super Plan. Separately, the plaintiff invested $110,000 with one or other of the defendants. Relief is sought in respect of that investment but it is not in issue on this application.

[2] Sub-paragraphs 32(l) of the defences dated 28 June 2019 and 15 July 2019.

[3] Sub-paragraph 32(l) of the Statement of Claim dated 11 April 2019.

[4] Sub-paragraph 32(m) of the defences dated 28 June 2019 and 15 July 2019.

[5] Sub-paragraph 32(l) of the Statement of Claim dated 11 April 2019.

[6] Rule 25.02(5) provides that rule 25.04(b) (which permits a defendant to withdraw a defence or any part of it at any time) does not enable a party to withdraw an admission operating for the benefit of another party without the consent of that party or leave of the court.

[7] Burkett v Bendigo and Adelaide Bank (No 3) [2019] VSC 45 (Burkett), [14] and the authorities there cited.

[8] Amcor Packaging (Australia) Pty Ltd & Ors v Australian Corrugated Box Co Pty Ltd & Ors [2013] VSCA 223, [65], [66].

[9] Burk v Commonwealth of Australia (No 3) [2004] VSC 210, [70] and the authorities there cited.

[10] Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon), [99]-[100].

[11] Aon, [94]-[98]; Burkett, [15].

[12] McKenzie v Commonwealth of Australia [2001] VSC 361 (McKenzie), [45].

[14] Jeanes v Commonwealth of Australia [2005] VSC 488 (Jeanes).

[15] McKenzie, [44]-[45]; Jeanes, [19].

[17] Collie v Merlaw Nominees Pty Ltd (in liq) & Anor [2001] VSC 39 (Collie), [94]-[95] and the authorities there cited.

[19] Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon), [103].

[22] Celestino v Celestino [1990] FCA 299, [12]; Ridolfi v Rigato [2001] 1 Qd R 455; Permanent Trustee Co Ltd v Gulf Import and Export Co [2006] VSC 110, [10].

[24] Ex tempore judgment delivered 19 November 2019 in Airio v Gregorich & Anor S ECI 2018 02237 (caveat ruling).

[27] Affidavit of Gregorich 3 December 2018.

[28] That role would arguably be consistent with the admission at paragraph [5(a)] of the defence that Prime was a provider of financial, accounting and investment advice and guidance, and with the statement at paragraph [12(c)] of the defence that Prime provided services to Gregorich including by way of liaison with him about his assets and taxes.

[29] Defendants' written submissions at [3].