Patten v Motor Traders' Association of New South Wales

Relevant rules and legislation

1. Section 64 of the Civil Procedure Act 2005 (NSW) provides: 64 Amendment of documents generally (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made. (4) If there has been a mistake in the name of a party, this section applies to the person intended to be made a party as if he or she were a party. (5) This section does not apply to the amendment of a judgment, order or certificate.
2. In respect of withdrawal of admissions the guiding rule is Uniform Civil Procedure Rules 2005 (NSW) r 12.6 which provides as follows: 12.6 Withdrawal of matter in defence or subsequent pleading (1) A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time. (2) Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court. (3) A withdrawal under this rule is to be made by filing a notice of withdrawal stating the extent of the withdrawal. (4) If the withdrawal is by consent, the notice under subrule (3) must be accompanied by a notice from each party whose consent is required by subrule (2) to the effect that the party consents to the admission or other matter being withdrawn in accordance with the notice of withdrawal.
3. I am also required to consider in the exercise of my discretion ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW). Those provisions state as follows: 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3): (a) any solicitor or barrister representing the party in the proceedings, (b) any person with a relevant interest in the proceedings commenced by the party. (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. (6) For the purposes of this section, a person has a relevant interest in civil proceedings if the person: (a) provides financial assistance or other assistance to any party to the proceedings, and (b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings. 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and (ii)any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.
4. The principles associated with the exercise of the Court's discretion to allow a party to amend its pleading have been authoritatively stated in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 ("Aon"). Aon dealt with amendment that potentially led to delays that could be described as unnecessary and was associated with inefficiencies in the use of court time identified as a "publicly funded resource". It involved issues of vacation or adjournment of set trial dates and discussed the need for those matters to be taken into account (per French CJ at [5]). See also [23] "…the adversarial system has been qualified by changing practices in the courts directed to the reduction of costs and delay in the realisation that the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources."
5. The judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ takes up similar concerns: [98] Speed and efficiency, in the sense of minimum of delay and expense, are seen as essential to adjust resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimize costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs… and [111] An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
6. The Court has a broad discretion to weigh up all relevant matters to decide whether to grant leave to withdraw an admission. The overarching requirement is to ensure that there is a fair trial: SLE Worldwide v WGB [2005] NSWSC 816 at [16] and [56]. As set out in the often quoted passage from Drabsch v Switzerland General Insurance Co Ltd (Supreme Court (NSW), Santow J, 16 October 1996, unrep). 1. The question is one for the reviewing judge to consider in the context of each particular matter, with the general guideline being that the person seeking on a review to withdraw a concession made should provide some good reason why the judge should disturb what was previously common ground or conceded. 2. It will usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts. 3. Leave may also be appropriate where circumstances show that the admission was made inadvertently or without due consideration of material matters. 4. Irrespective of whether the admission has or has not been formally made, leave may be refused if the other party has changed its position in reliance upon the admission.
7. Another often quoted summary of the relevant factors to consider is that of Debelle J in Centrestate Exports Pty Ltd v Amarantos Shipping Co Ltd [2005] SASC 158 at [32] which refers to the overriding consideration being the interests of justice, examining the circumstances in which the admission was made, whether the admission was made deliberately or inadvertently, the reason given for the application to withdraw, the detriment or prejudice which might be caused to the other party and the stage that the proceedings have reached.

Defendant's evidence and submissions

1. Tim McDonald, the Solicitor with current conduct of the proceeding swore and served an affidavit on 16 February 2018. He stated that when he prepared the original Defence he saw the proceedings as: "Concerned primarily with the interpretation of the employment contract that applied to the Plaintiff's employment as CEO of the Defendant and whether the termination payments made to the Plaintiff at the conclusion of his employment reflected his entitlements under that employment contract".
2. Instructions were taken from the CEO Mr Yallouridis and a member of the Executive Board. It was not considered appropriate or necessary at that time to take instructions from employees who were in lower positions. It was only when the Defendant was served with the Plaintiff's evidence and a Notice to Produce that it became apparent that there was a need to interview Mr O'Neill. Mr O'Neill had been employed as the Financial Controller during the Plaintiff's years as CEO. Mr O'Neill had historical knowledge of matters relevant to the Plaintiff's employment and decisions made by him regarding wage increases.
3. Mr O'Neill swore his affidavit of evidence on 1 February 2018 and it was served upon the Plaintiffs' solicitors on that date. The part of Mr O'Neill's affidavit leading to the need for amendment was extracted in Mr McDonald's affidavit: "CPI increases": 11. I refer to paragraphs 5 and 6 of the Plaintiff's Affidavit. As CFO, it was and remains my responsibility to apply salary increases if instructed to do so by the CEO of MTA. I have not, and would not, apply any changes to staff salaries, including CPI based increases, without the express written instructions of the CEO… 12. Prior to the Plaintiff commencing his term as CEO, employee salaries were increased annually by reference to the CPI or a percentage close to the CPI. 13. Whilst the Plaintiff was CEO, staff salaries largely remained unchanged, and there were no general salary increases implemented (including no CPI based increases). During the period that the Plaintiff was CEO, I had a conversation with him to the following effect: Me: What are we doing about salary increases this year? Plaintiff: There is a wage freeze on. We will not be increasing wages for now. Although I cannot now recall the context in which that conversation occurred, I have a clear recollection of the plaintiff using the phrase wage freeze when informing me that there were to be no salary increases. During his engagement as CEO, there were a number of instances where the Plaintiff gave an instruction not to replace staff who left the MTA. I understand that this was done for the same reason as the wage freeze, namely to improve the MTA's cash flow.
4. Mr McDonald stated that further investigations were carried out which included interviewing other members of the Executive Board and further affidavits were prepared by those persons. He stated that he "simply was not aware" of the issue regarding the wage freeze and the Plaintiff's activities in relation to it, nor the precise job titles of positions held by the Plaintiff at various times, until he spoke to Mr O'Neill.
5. He had not been instructed regarding those matters by Mr Yallouridis, the person who verified the Defence filed in August 2017. Mr Yallouridis was the CEO in August 2017, but did not work for the Defendant prior to the Plaintiff's cessation of employment.
6. Mr McDonald was cross-examined by Counsel for the Plaintiff. He was challenged as to the adequacy of his explanation. In relation to the admissions made in the August 2017 Defence to paragraph 4 of the Statement of Claim, Mr McDonald stated that it "didn't immediately occur to me those matters were going to be significant issue in the proceedings in relation to what periods he (the Plaintiff) held various positions". In relation to the wage freeze/CPI issue he replied that "whilst there was not really an issue about CPI increases in the sense that the contract mentioned CPI increases, what came to light when interviewing Mr O'Neill as part of the process of answering the Notice to Produce was that there had been a wage freeze instituted by the Plaintiff, which explained why CPI increases had not been paid".
7. As to why Mr O'Neill had not been interviewed prior to January 2018, Mr McDonald explained that he did not see that it was appropriate to go to more junior staff in proceedings about a CEO given the sensitivity associated with the matter, and that as Mr O'Neill was the accountant, he did not seem to be an obvious person to speak to in relation to CEO contract issues.
8. In cross-examination, Mr McDonald frankly stated that in retrospect, of course he would have preferred to have spoken to the people who it now seems could have shed more light, but in terms of his state of knowledge at the time, and his instructions at the time of preparation of the initial Defence, he thought it was entirely appropriate to speak to the current CEO to take instructions about the contract.

The Plaintiff's Submissions

1. The Registrar ordered the Plaintiff to set out in writing his reasons for opposing the amendments. A letter dated 13 February 2018 from the Plaintiff's solicitors to the solicitors for the Defendant set these out. The primary submission was that the proposed amendments amounted to an attempt to withdraw admissions without any explanation citing Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1390 at [4] per Finn J.
2. The second basis comprised a series of complaints about minor slippages in the timetable which are of little consequence.
3. The third was that the pleadings closed in August 2017 and the evidence and Notice to Produce were prepared by the Plaintiff on the basis of the issues disclosed in the pleadings. There is an assertion that "none of the proposed amendments arise from any of the material filed by the Plaintiff" however it is evident from Mr McDonald's affidavit and his evidence that this is not the case and I have no reason to doubt that specific matters in the Plaintiff's affidavit and Notice to Produce led to those further instructions being taken.
4. The fourth complaint seems to relate to a difference of opinion as to whether some of the amendments did or did not amount to withdrawals of admissions.
5. Counsel's written submissions filed on behalf of Plaintiff expanded on the matters raised in the letter. A criticism is made of the evidentiary issue raised by Mr O'Neill's affidavit regarding the wage/CPI freeze describing it as "a novel concept of an ambiguous hearsay and unilateral contractual variation to not only the Plaintiff's written employment contract, but to all its employees' contracts".
6. There is a complaint about the lack of explanation by Mr Yallouridis, asserting that there is an obligation upon the Defendant to have Mr Yallouridis explain on oath the basis upon which he made the admissions in the Defence: Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 in [132] and [154]-[156]. It was argued that there is a distinction between the knowledge of the client and the knowledge of the solicitor and accordingly an affidavit from Mr Yallouridis explaining what he did or did not know in August 2017 was necessary.
7. A further matter raised was that there was "a seeking to settle the dispute" relying upon the admissions. The parties informed me that there had been a previous failed mediation.
8. It was argued that the proposed amendment to paragraph 13 is "likely to cause delay and confusion" and "does not make sense".

Decision

1. In exercising the Court's s 64 discretion, it is essential to consider the context of the current proceedings and the time at which the application is made.
2. Apart from very minor timetable slippage, the proceedings have moved at a reasonable pace to the exchange of affidavit evidence and service of Notices within a period of eight months since commencement. It is not unexpected that this process may, on occasion, flush out new relevant evidentiary matters that need to be dealt with by amendment of pleadings and other affidavits.
3. Sometimes amendment requires consideration of withdrawal of admissions. The overarching consideration however is to ensure that the real questions raised by the litigation can be determined, fairly without multiplicity of proceedings or too much delay.
4. Rule 12.6 provides that any admission or any other matter that operates for the benefit of another party may be withdrawn by consent. If consent is refused, the leave of the court is required.
5. In the context of the affidavit of Mr O'Neill being provided to the Plaintiff's solicitors on 1 February 2018, and in the absence of an invitation to more fully set out the explanation, the not-negotiable position taken by the Plaintiff with respect to the proposed amendments is, in my view, unreasonable.
6. Whilst the Plaintiff may insist that the recollections of Mr O'Neill are mistaken or not borne out by other evidence, or are weak from an evidentiary point of view, I do not accept the submission that the proposed amendment to paragraph 13 is vague or that it is unable to be understood or does not make sense. It can be dealt with by the usual processes of the Court including, at this stage, evidence in reply from the Plaintiff, formal or informal discovery or production of records covering the relatively recent and short period of 2013 to 2016.
7. I find that the explanation provided by Mr McDonald adequately covers how this situation arose. I found him to be frank in his evidence. It is not unreasonable that more junior staff at the Defendant were not consulted for the preparation of the Defence, the focus of which was a former CEO's contract. I do not see anything to be added by an Affidavit of Mr Yallouridis who is a successor to the plaintiff as CEO. There is no reason to expect that he would have any information or knowledge of any conversation between Mr O'Neill and the Plaintiff that took place at a time when Mr Yallouridis did not work for the organisation. I accept the explanation provided by Mr McDonald in full.
8. I do not find that there has been any unacceptable delay. The evidentiary development occurred in the normal process of preparation and exchange of affidavit evidence. Whilst ideally the material would have been incorporated into the initial Defence, it still would have had to have been met by affidavit evidence of the Plaintiff, discovery and/or subpoenas and relevant legal arguments at trial.
9. There is no evidence of the Plaintiff irretrievably changing his position, although there may be an argument that the mediation held prior to the proposed Amended Defence was wasted.
10. I reject the submission by Counsel for the Plaintiff that the matters raised by Mr O'Neill are "novel and ambiguous". Whilst what is described by Mr O'Neill does seem to be a unilateral contractual variation and perhaps even a surprising one, and one that appears to fly in the face of the provisions of the Plaintiff's own contract, what is to be made of the status of Mr O'Neill's evidence and the Plaintiff's evidence in response is a matter for the trial Judge.
11. I do not see the proposed amendments to the Defence entailing any undue expense or delay. As correctly submitted by Counsel for the Defendant, the assertions made in the proposed Amended Defence would have to be dealt with by affidavit evidence, whether raised in the initial Defence or now in the proposed Amended Defence.
12. Having weighed up the considerations set out in the Civil Procedure Act 2005 (NSW), the principles set out in Aon, and having assessed the status of the proceedings and the timing of the application, leave should be granted to withdraw the admissions made in the August 2017 Defence entailed in the proposed Amended Defence. Prejudice, if any, can be addressed by costs orders.

Orders

1. I make orders as follows: 1. The Defendant has leave to file an Amended Defence in the form of the proposed Amended Defence served on 5 February 2018, excluding the amendment to paragraph 8. 2. The Defendant has leave to withdraw admissions made in the Defence filed in these proceedings to the extent set out in the proposed Amended Defence served on 5 February 2018, excluding those in paragraph 8.

Costs

1. Counsel for the parties advised me that there will be a contested application for special costs orders and that evidence and written submissions will be required. I provide the following timetable: 1. Both parties are to file and serve any evidence upon which they rely on the question of costs on or before 4.00 pm Monday 9 April 2018, a copy to be provided to my Associate by email. 2. The parties are to file and serve written submissions in support of any costs orders sought on or before 4.00 pm Monday 9 April 2018, a copy to be provided to my Associate by email. 3. Both parties are to file and serve any evidence or submissions in reply on or before 4.00 pm Wednesday 11 April 2018, a copy to be provided to my Associate by email.

Amendments 09 May 2018 - Fixed faulty paragraph numbering. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 May 2018