Citation Number : [2003] WADC 51

Practice and procedure - Admission of liability by respondent - Application to amend defence to withdraw admission - Principles applicable to amendment application - 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

Matland Holdings Pty Ltd v NTZ Pty Ltd [2002] FCA 1590

McKenzie v Commonwealth of Australia [2001] VSC 361

NT Power Corporation Pty Ltd v Power and Water Authority [1999] FCA 1184

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

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

Baker v Shire of Albany (1994) 14 WAR 46

BP Australia Pty Ltd v Nyran Pty Ltd [2003] FCA 834

Clarke v Yorke (1882) 31 WR 62

Cropper v Smith [1884] 26 Ch D 700

Hamilton v Australian Telecommunications Commission [1989] 2 Qd R 18

Hollis v Burton [1892] 3 Ch 226

Ketteman v Hansel Properties Ltd [1987] AC 189

Lowther v Heaver [1889] 41 Ch D 248

Matheson v Commissioner of Main Roads [2001] WASCA 402; (2001) 25 WAR 269

Murran Investments v Aromatic Beauty Products [2000] FCA 1732; (2002) 191 ALR 579

1 MURRAY J: I have had the advantage of reading in draft the reasons of McLure J. I agree with them. They express adequately for me the reasons why I joined in the orders made on the hearing of the appeal.

2 TEMPLEMAN J: I have had the advantage of reading in draft the reasons to be published by McLure J. It was for the reasons given by her Honour that I joined in the decision to dismiss the appeal. There is nothing I wish to add.

3 MCLURE J: The appellant (defendant) appeals from the decision of Nisbet DCJ allowing an appeal from the decision of the Deputy Registrar of the District Court giving the appellant leave to amend his defence. The effect of the learned Judge's decision was to prevent the appellant from withdrawing an admission of liability for negligence made in a personal injury action. This Court dismissed the appeal at the conclusion of the hearing. These are my reasons for doing so.

4 The respondent (plaintiff) claims that on 7 May 1999 in the course of her employment as a teacher with the Education Department of Western Australia she was a passenger on a double-decker bus driven by the appellant (defendant). Three classes of students and at least three teachers from Craigie Senior High School were on the bus at the relevant time. The respondent says that when she was at the top of the staircase the bus jolted severely and she lost her balance and fell down the staircase ("the accident").

5 The appellant is insured by the Insurance Commission of Western Australia ("Commission"). By October 1999 the Commission had in its possession statements about the accident from the respondent, another teacher on the bus, Peter Crayden, a student, Daniel Court and the appellant. The respondent and Mr Crayden said in their statements that the bus lurched after starting off from a stationary position. Mr Court said the bus lurched as it came to a stop. The appellant said in his statement that to his knowledge the trip was uneventful and nothing untoward had occurred and the bus in question had been sold. For school excursions, the appellant's employer required that schools provide teachers to control students with at least one teacher on each of the upper and lower decks of the bus.

6 By letter dated 8 November 1999 the Commission advised the respondent's solicitors that the driver's negligence would not be denied

subject to the claim being settled or proceedings commenced prior to the expiration of the limitation period.

7 The appellant commenced proceedings on 28 November 2001. She filed a statement of claim on 6 February 2002 in which she pleaded that the accident was solely caused by the negligence of the appellant. The appellant expressly admitted the plea in his defence filed on 5 March 2002.

8 Thereafter the action was entered for hearing and was listed for a pre-trial conference which was held on 14 June 2002. On 19 June 2002 the appellant filed an application for leave to amend his defence. In his proposed amended defence, the appellant denied that he was negligent and pleaded in the alternative that if he was negligent, the respondent was guilty of contributory negligence. A contributory negligence plea is also inconsistent with the admission made by the appellant that the accident was caused solely by his negligence.

9 The facts are set out in affidavits sworn by solicitors representing the appellant. A solicitor deposes to what she was told by the Commission's claims officer who appeared to have made the decision to admit liability. The officer, Mr Edwardes, told the solicitor that the admission was made in circumstances in which there was evidence that the bus jerked causing the plaintiff to fall and that bus drivers have in previous cases been found liable in circumstances where passengers had been thrown forward in their seats as a result of the negligent actions of drivers although he had no experience in matters involving double-decker buses.

10 After the Commission's decision not to deny liability for negligence referred to in its letter of 8 November 1999, another solicitor representing the Commission, Mr Brooksby, formally advised the Commission in December 1999 that liability should be contested. I infer he informed the Commission that the appellant had an arguable defence. The legal advice was not accepted and the Commission confirmed to Mr Brooksby its decision to accept liability. The Commission maintained and acted on that decision until the pre-trial conference in June 2002. Mr Brooksby said that at that stage following discussions with "a senior officer" at the Commission it was agreed the Commission should now put the question of negligence in issue. There was no express explanation as to why the change of heart occurred.

11 Further, Mr Brooksby was informed by the appellant on 14 June 2002 that the bus he was driving at the time was semi-automatic with a fluid flywheel and that it was impossible to make the bus jerk "to any significant extent" other than what would normally occur as a vehicle converts from a stationary position to a position of one of motion. Mr Brooksby swore that the information was confirmed by a mechanic employed by the former owner of the bus. The respondent adduced in evidence a letter from an engineer to the effect that older style Mercedes buses had a semi-automatic transmission that was notoriously jerky but that he would have to test the particular bus involved in the accident before he could comment further.

12 It was not in dispute that, based on the information known to the Commission before November 1999, the appellant had an arguable defence. Further, the Commission was aware from December 1999 if not before that the appellant had an arguable defence to the action.

13 There was also evidence from the appellant that as at June 2002 some of the teachers and students on the bus at the time of the accident were still at Craigie Senior High School.

14 On 29 August 2002 the Deputy Registrar ordered that the appellant have leave to amend his defence in accordance with the proposed amended defence. The Judge ruled that the Deputy Registrar had erred in granting leave to amend and set aside the order.

15 In this Court the appellant contended that the Judge made an error of law by applying the wrong test and had thereby improperly fettered his discretion. The test applied by the Judge was that from "Pleadings: Principles and Practice" Jacob and Goldrein (at 200) in the following terms:

"Where an amendment seeks to withdraw an admission, the court will enquire into the circumstances in which the admission was made. It will grant such leave only:

(a) where the admission was made inadvertently; or

(b) where new facts have come to light justifying its withdrawal."

16 In applying the test to the facts the Judge rephrased it in terms that a court will not permit an admission to be withdrawn unless it can be shown that it was made without a full appreciation of the facts and circumstances upon which it was based and that as the admission was made with full knowledge of all the surrounding circumstances, it may not be withdrawn simply because the appellant's counsel has persuaded his client that the admission, made against his advice, was wrongly made.

17 Under O 21 r 5(1) of the Rules of the Supreme Court (which applies by virtue of a District Court Practice Direction) the court has an unfettered power at any stage of proceedings to grant leave to amend a pleading "on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct".

18 There is a divergence of approach in the authorities on the specific issue of the exercise of the discretion to permit an amendment involving the withdrawal of an admission. The Full Court of the Federal Court considered this question in Celestino v Celestino, unreported; FCt FCA; No ACT G7 of 1990; 16 August 1990. In that case a defendant sought to withdraw an admission of liability of negligence some five years after the admission was made and six days into the trial. The application to amend was refused and upheld on appeal. The court held that in order to grant leave it was necessary to 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.

Celestino has been followed by single Judges of the Federal Court in Matland Holdings Pty Ltd v NTZ Pty Ltd [2002] FCA 1590 at [45] - [47] and NT Power Corporation Pty Ltd v Power and Water Authority [1999] FCA 1184. However, it was not followed by Gillard J in McKenzie v Commonwealth of Australia [2001] VSC 361. He said (at [46]) that it was an error to fetter the exercise of the discretion by requiring proof of inadvertence or mistake or error and (or) a reasonable explanation to withdraw an admission.

19 The appellant relied on an English authority which reflects a different policy approach. In Gale v Super Drugstores PLC [1996] EWCA Civ 1300; [1996] 1 WLR 1089 the respondent (plaintiff) applied to strike out a defence denying liability for negligence and pleading contributory negligence on the ground that the appellant (defendants) had by their insurer admitted liability in correspondence prior to the commencement of proceedings. The defence was struck out at first instance. The Court of Appeal by a majority (Waite and Millett LJJ) allowed the appeal. In that case, the plaintiff suffered personal injuries in October 1990, liability for negligence was admitted by letter in November 1991 and the defence denying liability was filed in September 1993. The defendant's explanation for its change of position was that it had made an admission of liability at a very early stage and after they engaged the services of solicitors at a late stage the solicitors advised the defendant it had a defence. It was not regarded as significant that the admission was made in a letter rather than in a pleading. The same principles applied. Indeed, Millett LJ was of the opinion that the same principles apply whether or not an amendment to the pleading involved the withdrawal of an admission. Both members of the majority concluded that it was not normally necessary for a party to justify or explain the withdrawal of the admission. According to Waite LJ, 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.

20 The High Court in Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 has stated the principles that govern the exercise of an unfettered power to permit (or refuse) the amendment of pleadings. The overriding principle is the attainment of justice. Although the Federal Court Rules under consideration in that case did not contain specific case management rules equivalent to our O 1 r 4A and r 4B, nothing turns on that difference in this case. I note as an aside that many practitioners in this jurisdiction (wrongly in my view) regard this case as protecting them from the consequences of their inattention to the pleadings until shortly before or at trial. However, that is not so in this case. The client did not act on the solicitor's advice.

21 In my respectful opinion, the statement of the rule relied on by the Judge below and that formulated by the Full Federal Court in Celestino is not the correct approach to the determination of the application. Both constitute 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 is the attainment of justice: Queensland v JL Holdings Pty Ltd at 154 per Dawson, Gaudron and McHugh JJ and 167 per Kirby J.

22 As the nature and effect of an admission can vary widely it may be unhelpful to formulate a general rule. In any event, I am not persuaded that the general rules formulated and applied by the majority in Gale represent the law in Australia.

23 I propose to confine my remarks to the circumstances in this case. In doing so I am mindful that 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.

24 As already noted, the appellant filed affidavit evidence explaining its reasons for making and now wishing to withdraw the admission of liability. Such an explanation was required in this case having regard to the nature and importance of the admission, the time for which it has stood and the very significant delay and cost consequences of allowing the amendment.

25 What that affidavit evidence disclosed was that the appellant by his insurer the Commission, a professional and highly experienced litigant in the area of personal injury, made a considered commercial judgment to admit liability for negligence. That is, after conducting investigations it made a decision to admit liability, a decision in which it persisted notwithstanding it received legal advice in December 1999 that it should deny liability. It persisted with its admission notwithstanding legal advice that it had an arguable defence on liability. The question is what injustice or prejudice does the appellant suffer if he is now prevented from changing his position to plead an arguable defence to liability. The answer is no relevant prejudice. Contrast that with the position of the respondent. There is no evidence of specific prejudice such as the proven inability to trace witnesses as required in Gale. However, it is a serious matter to make an admission in a pleading, particularly an admission of liability, because from that point onwards the admitted facts cease to be in issue in the action and the parties proceed on that assumption: Sangora Holdings Pty Ltd v Dunstan, unreported; FCt SCt of WA; Library No 990172; 13 April 1999. In the period between November 1999 and June 2002 when the appellant foreshadowed his intention to make this application it can be inferred that the memories of witnesses would have faded and lines of inquiry may have become cold, consequences identified by the Full Court in Celestino at [14]. In other circumstances these matters, and other relevant considerations such as delay, cost and case management principles, may not outweigh relevant prejudice to the applicant to amend. They do in this case.

26 In my assessment the balance of justice in this case clearly favoured the respondent. Although the Judge applied the wrong test he came to the correct conclusion. For that reason I joined in the dismissal of the appeal.

• Background
• The Making and Withdrawal of the Admission
• The Decisions Below
• Legal Principles