"… the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases … I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party … as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it correct, if it can be done without injustice, as anything else in the case is a matter of right."
45 That statement of principle was approved by the High Court in Clough & Rogers v Frog (1974) 48 ALJR 481, and in JRL Holdings at 154. It is therefore necessary, as their Honours point out in Celestino at 8-10, to be satisfied
· that an error or mistake by or on behalf of the party seeking the amendment has been demonstrated,
· that a sensible explanation for the making of the admission has been provided, based on evidence of a solid and substantial character, and
· that no injustice will be occasioned to the other party by the withdrawal of the admission, other than hardship by delay or cost which can be accommodated by an appropriate order for costs.
46 I propose to apply those general principles in considering the content of par 23 of the fourth amended statement of claim.
47 Deegan has sworn two affidavits asserting that the admission was made in error and seeking to explain how the admission came to be made in error. Her evidence discloses that Mr Deegan controlled the administration of the business of Murran and its records until his sudden death on 17 January 1999. Soon after, when she gave instructions to commence these proceedings (they were commenced on 17 June 1999), she believed that the problems complained of arose only after 1 July 1997. She was in error, but it was an error which was made by reference to the gross sales revenue in the financial years ended 30 June 1996 and 30 June 1997. She was then unaware of the net trading profit after operating expenses for those periods. The records concerning the gross monthly sales revenue of the franchise business indicated that the gross sales revenue did not commence to drop materially until after 1 July 1997, and (by inference) that reliance on that information led to the allegation of fact which appeared in par 16 of the first statement of claim. It was only after January 2000 that a full investigation of those records was undertaken. That investigation then "revealed" that the breaches of the representations and of the warranties in fact commenced soon after 14 November 1995, but that the impact of those breaches was not materially reflected in gross sales revenue until after 1 July 1997. During that period of some nineteen months between December 1995 and June 1997 inclusive, Deegan claims that Murran traded "to a large degree from its stock reserves". On 21 March 2000, as a result of that investigation, particulars of the breaches of representations and warranties covering that earlier period were provided to the respondents' solicitors. They subsequently found their way into the third amended statement of claim and are repeated with greater particularity (in the fourth amended statement of claim.
48 Deegan also deposes to her subsequent investigations revealing
· significant failures by Aromatic in complying with stock orders, and
· discontinuance of product lines
· failure to achieve, or to approximate, the anticipated net profit per annum of $100,000
in breach of the representations or of the warranties in the period prior to 1 July 1997.
49 Section 51A of the Act deems representations concerning future matters to be false unless the respondents establish that they had reasonable grounds for making them at the time they were made. The fact that the applicants initially pleaded that, for the period October 1995 to June 1997, the respondents "honoured" the representations is a matter upon which the respondent would have been able to rely establishing the existence of reasonable grounds for the making of the representations.
50 The applicants have not contended that the alteration in the pleading does not constitute the withdrawal of admissions as claimed by the respondents. They have sought to prove the circumstances in which the admissions came to be made, and have sought to prove the matters which, they now contend, show that in fact the admissions was incorrect and that the falsity of the representations can be demonstrated much earlier than 1 July 1997. The respondents submit that that explanation is not sufficient to explain why the admission was made in the first place so as to enable it to be withdrawn, nor that there is any real merit in having it withdrawn because the applicants' case on that material cannot succeed. They also contend, by way of alternative, that the leave to withdraw the admission should be restricted to the issue to which the affidavit relates, namely levels of stock only.
51 In my judgment, the applicants have established that the factual allegations in par 16 of the original statement of claim were made on the instructions of Deegan, and on the basis of a misunderstanding by her as to the performance of the franchise business of Murran to 30 June 1997. That misunderstanding is explained by her limited role in the financial and administrative affairs of Murran until the sudden death of her husband, and given the timing of this proceeding after his death also serves to explain why the factual allegations were made in the first place. There is, moreover, no particular injustice to the respondents by allowing the applicants to withdraw that admission. They have not deposed to any such injustice. They have submitted that the withdrawal of the factual allegation will mean that, for the operation of s 51A of the Act, they will no longer be able to rely upon it to establish that reasonable grounds existed for the making of such of the representations as concern future matters. That is clearly so. But the respondents are not prevented from adducing evidence to prove the truth of the relevant representations, or that there was a reasonable foundation for the making of those representations. In that regard, the withdrawal of the "admission" simply means that the respondents no longer have available a piece of evidence which would assist in that proof. It is a piece of evidence which, on Deegan's affidavit, was erroneously provided.
52 Indeed, the respondents will still have the benefit of the applicants having to make the running on that topic because the applicants will need to prove the making of the representations and that the representations were untrue. The fact that the claims of the applicants also include claims for damages for deceit and misrepresentation shows that the applicants will carry the onus of proof, and will have to adduce their evidence on those issues, as part of their case. And ultimately, in relation to claims under the Act, if it is not proved that there was no reasonable basis for the making of representations about the future, there can be no injustice in the respondents not being entitled to rely upon that factual allegation which will have been found to have been erroneous. Of course any delay and cost which the respondents may suffer may be met by an appropriate order for costs, and the costs of the issue at trial also may be met by such an order if one is appropriate.
53 I am satisfied that the applicants now genuinely seek to withdraw the factual allegation and to plead their case as specified in the fourth amended statement of claim. I therefore propose, to the extent necessary, to grant them leave to withdraw the factual allegation.
54 That leave is subject to my consideration of the third substantive ground of objection to the fourth amended statement of claim. It is also, of course, on the basis that I am making no judgment about the reliability of the applicant's claims either as expressed in the fourth amended statement of claim or in the affidavits of Deegan.