Celestino v Celestino (Spender, Miles and VonDoussa JJ, Federal Court of Australia, 16 August 1990, unreported)

Cropper v Smith (1884) 26 Ch D 700

Clough & Rogers v Frog (1974) 48 ALJR 4481

Drabsch v Switzerland General Insurance Co. Limited (Santow J, Supreme Court of NSW, 16 October 1996, unreported)

Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541

Ell v The Hunter District Water Supply and Sewerage Board (1927) 27 SR (NSW) 437

Paragraph 1 of the defence filed on 7 November 2001 be struck out.

1. 1. In this action for damages arising out of a motor vehicle collision, the plaintiff applies for an order that the opening paragraph of the defence be struck out. The application requires a consideration of the circumstances in which the Court will permit a party to withdraw an admission.

2. The plaintiff alleges in the statement accompanying the originating application that on 21 April 2000, he was riding a motor cycle along Pabral Road below Mount Coree, five kilometres north of the Arboretum, Brindabella. The originating application was filed on 20 June 2001; an appearance was entered on 2 November in that year.

3. By then there had already been considerable correspondence between the plaintiff's solicitors and the defendant's authorised insurer, NRMA Insurance Limited. At the insurer's request, the plaintiff completed an accident notification form which provided details of the accident and the plaintiff's injuries. The plaintiff's solicitors provided the insurer with a copy of the police report in November 2000. This indicated that police did not attend the accident scene, and were unable to determine who was responsible for the collision, each driver stating that the other was at fault. It appears that the plaintiff's motor cycle and the defendant's Toyota Rav 4 were travelling in opposite directions prior to the impact.

4. On 30 November 2000, the insurer wrote a letter to the plaintiff's solicitors which included the following passage:

The enquiries into the circumstances of the accident are now complete and we admit our insured has breached their duty of care to your client.

However, the enquiries also indicate Mr Reinicke has contributed to the accident/injuries. This has been assessed at 50%. If you have any additional information that may assist us in reviewing our decision, please telephone me to discuss your client's claim. However, we reserve our rights to amend the percentage for contributory negligence if new information becomes available.

5. On 11 December 2000 the solicitors replied, inquiring as to the basis upon which the plaintiff was said to have contributed to the accident. On 20 December 2000, the insurer replied by letter including the following:

I advise we apply contributory negligence of 50% to your client's claim based on the information we received from our investigations into the accident circumstances. It appears your client has failed to ride in an appropriate manner for the conditions of the road in which they were travelling. The information also indicates your client was riding his motor cycle in the centre of the roadway, instead of keeping to the left hand side.

I advise we maintain contributory negligence of 50%, however if you had any additional information that may assist us in reviewing our position, please telephone me to discuss your client's claim.

The letter attached a copy of a statement by Mark Edward Heidmann, apparently prepared by an investigator instructed by the insurer. Mr Heidmann was a friend of the plaintiff and had been riding with him in the Brindabellas on the day of the accident.

6. Further correspondence ensued, directed to the provision of particulars of the plaintiff's injuries and the components of his claim. On 7 March 2001, the plaintiff's solicitors wrote to the insurer requesting copies of witness statements and particulars of the allegation of contributory negligence. The insurer replied on 18 March 2001 in the following terms:

I advise that we are not prepared to release copies of our statements, or provide you with particulars of contributory negligence.

7. On 7 November 2001, within a week of entry of appearance, the solicitors for the defendant filed, but neglected to serve, a defence, the first paragraph of which read:

The defendant denies paragraphs 1 and 2 and the allegations of negligence contained therein.

8. The interlocutory stages of the action proceeded with the plaintiff in ignorance of the fact that a defence had been filed. During the next twelve months, the matter came before the Court on a number of occasions in relation to applications for orders for the supply of particulars. In October 2002, the solicitors for the defendant prepared and signed a certificate of readiness, which they sent to the solicitors for the plaintiff, asking that it be executed and returned. They certified that the suit was ready for trial, that all pleadings had been completed and delivered, and that the only issue to be determined at trial was quantum.

9. On 8 November 2002, the solicitors for the defendant wrote to the solicitors for the plaintiff as follows:

Please find enclosed a copy of the defence filed in the Supreme Court on 7 November 2002. We have not been issued with a sealed copy.

In fact, the defence was filed on 7 November 2001. The letter stated that it had been filed a year later than was the fact. No explanation has been offered either for the delay in service or for the error in the covering letter. The letter was received by the plaintiff's solicitors on 11 November 2002. They saw that the defence was inconsistent with the admission which had been made almost two years earlier. They sought clarification by letter. They were told in a letter from the defendant's solicitors received on 3 January 2003, that the defendant intended to rely on the defence as filed. On 6 January, the plaintiff's solicitors wrote to the defendant's solicitors informing them that the plaintiff would be relying on the admission. The defendant's solicitors replied on 23 January 2003, repeating that they would be relying on the defence filed, acknowledging that this involved a withdrawal of the admission but expressing the view that the plaintiff had suffered no prejudice, because the admission had made it clear that the defendant would be alleging contributory negligence and submitting that the plaintiff's damages should be reduced by 50% on that account.

10. The plaintiff did not make application immediately to have paragraph 1 of the defence struck out. At the same time, the defendant made no application to withdraw the admission. It does not seem to me that the delay between the correspondence of January 2003 and the making of the application in December 2003 is a factor of relevance in either direction, except that the period to be taken into account in considering any prejudice to the plaintiff is the period from the admission until January 2003 rather than any later time.

11. It is with this background that the plaintiff applies for an order that paragraph 1 of the defence be struck out. An analysis is required of precisely what assertions are denied by that paragraph and also of precisely what was admitted in the earlier correspondence. Paragraphs 1 and 2 of the statement accompanying the originating application were in the following terms:

1. Time, date, place and circumstances of the use of the motor vehicle (including, where possible, registration details of all vehicles involved):

(1) On 21 April 2000, at approximately 1.30pm the plaintiff was riding a Kawasaki motor cycle registered number (ACT) 50824 along Pabral Road below Mount Coree, 5 kilometres north of Arboretum, Brindabella, ACT.

(2) At about the same time the defendant was driving a Toyota motor vehicle on the same road but towards the Blundall Flat.

(3) At a point near to Blundell Flat, the Toyota and the Kawasaki collided head on.

2. Precise particulars of the defendant's negligence:

(2) Failing to keep her motor vehicle under any or any proper control

(3) Driving her motor vehicle at a speed which was excessive in the circumstances.

(4) Failing to sound any warning of the approach of her motor vehicle.

(5) Failing to apply the brakes on her motor vehicle in time to avoid the collision or at all.

(6) Failing to steer or control her said motor vehicle so as to avoid the collision.

(7) Failing to drive with sufficient care on a dirt roadway.

(8) Failing to keep her vehicle on the correct side of the roadway.

(9) Failing to keep her vehicle well over to the left of the road so as to leave room for persons travelling in the opposite direction to pass safely.

12. Paragraph 1 of the defence goes far beyond a denial of negligence. The denial extends to every allegation of fact made by the plaintiff in the paragraphs set out. Nothing is admitted, not even the occurrence of the collision. The defendant denies that she was the driver of the Toyota motor vehicle referred to. The effect of the denial is to put the plaintiff to proof of every ingredient of his cause of action.

13. This is in sharp contrast with the admission originally made. The insurer specifically admitted that its insured (not identified by name in the letter making the admission, but clearly identified by reference to the course of correspondence as the defendant) had breached her duty of care to the plaintiff. This amounted to an admission that there was a collision between the plaintiff's motor cycle and the defendant's motor vehicle, and that the defendant was driving the vehicle at the time of the collision, as well as an admission that the defendant was negligent and that her negligence was causative of the collision.

14. The Federal Court of Australia had occasion to consider the question of withdrawal of an admission of liability by a defendant in respect of a motor vehicle accident in Celestino v Celestino (Spender, Miles and Von Doussa JJ, 16 August 1990, unreported), an appeal from a single judge of this court. Counsel had applied for leave to withdraw an admission of liability on the sixth day of the trial, during cross-examination of the plaintiff. Liability had been admitted some five years before trial by the solicitors for the defendant, instructed by the insurer. The letter containing the admission of liability had been sent by the solicitors following delivery of interrogatories for the examination of the defendant, which in consequence had not been answered.

15. The Court quoted a basic statement of principle, set out by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710:

... 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 corrected, if it can be done without injustice, as anything else in the case is a matter of right.

Their Honours noted the approval of this passage by the High Court of Australia in Clough & Rogers v Frog (1974) 48 ALJR 4481, althought, as their Honours went on to say, the statement of principle assumes that an error or mistake has been demonstrated.

16. Where a party seeks to withdraw an admission, a further matter arises for consideration. In the absence of clear evidence to the contrary, a court is entitled to assume that counsel who makes an admission in the course of the conduct of the trial has satisfied himself or herself that the admission was, on the client's version of the facts, a proper admission to make: Langdale v Danby (1982) 1 WLR 1123 per Lord Bridge of Harwich at 1134. Their Honours in Celestino expressed the opinion that a court, and other parties to litigation, are similarly entitled to make that assumption about admissions made by solicitors on their clients' behalf in the course of litigation whether in pleadings or in correspondence, and that where leave is sought to withdraw an admission, a court will require an explanation for the making of the admission, which must be a sensible one based on evidence of a solid and substantial character (at para 12). On the facts in Celestino, the trial judge had correctly refused leave to withdraw the admission on the ground that no sufficient explanation had been given about the circumstances which led to it being made, or the later decision to seek to withdraw it (para 13).

17. Their Honours noted a further ground on which the application should have been refused: even where sufficient explanation for the erroneous or mistaken making of an admission is provided, the admission may only be withdrawn where no injustice will be occasioned to the other party. If the other party has relied on the admission in good faith to his or her detriment, the Court will not permit the admission to be withdrawn. In the case in question, the plaintiff's solicitors, relying on the admission, had not insisted on answers to interrogatories, or taken any steps to marshal evidence to prove the plaintiff's case on liability. The Court was entitled to assume that the plaintiff would suffer prejudice in the proof of his case if after an extended period an admission of liability were permitted to be withdrawn. It could be expected that memories of witnesses and the parties would have faded, and lines of enquiry would have become cold. Although prejudice in particular respects might not be apparent on the information before the Court, the probability of prejudice due to delay, although unidentified, could be assumed.

18. The principles governing the exercise of the discretion whether or not to approve the withdrawal of an admission were set out by Santow J in Drabsch v Switzerland General Insurance Co. Limited (Supreme Court of NSW, 16 October 1996, unreported). His Honour was dealing with a commercial dispute in the Equity Division of the court, on appeal from a Master, and the principles stated will not necessarily translate to an action for damages for personal injury. They may be summarised, relevantly for the present application, as follows:

(a) Where a party makes a clear and distinct admission which is accepted by the opponent and acted upon, an application to withdraw the admission should not be freely granted.

(b) The question is to be considered in the context of each individual matter, but the general guideline is that the party seeking to withdraw should provide some good reason why the court should disturb what was previously conceded.

(c) Where the court is satisfied that an admission has been made after consideration and advice such as from an expert and after a full opportunity to consider its case and whether the admission should be made, admissions made with deliberateness and formality would ordinarily not be permitted to be withdrawn. The court will not approve the withdrawal of an admission where the application to withdraw is actuated by purely tactical reasons.

(d) It will be usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts. Leave may also be appropriate where the admission was made inadvertently or without due consideration of material matters. Leave may be refused if the other party has changed its position in reliance on the admission.

19. In the present case, the admission was not made by solicitor or counsel, but by the defendant's insurer, through a claims officer employed in its compulsory third party claims department. It is common knowledge in the Territory that NRMA Insurance Limited is the sole authorised insurer under the Road Transport (General) Act 1999, so that all motor vehicles registered in the Territory are required to be covered by a third party policy issued by that company. It is common knowledge within the legal profession that the company manages claims under those policies through an experienced staff of claims officers, and that the company generally does not instruct solicitors prior to the institution of proceedings, regularly settling claims involving large sums of money and complex issues as to liability and quantum of damages, direct with solicitors representing claimants. These are matters of which I may take notice without proof by evidence in the normal way: Evidence Act 1995, section 144. An admission made by letter over the hand of a claims officer is in a very different category to an admission which might be made by an unrepresented lay litigant. It is clear from the correspondence that the admission was made after consideration of the police report and the obtaining of witness statements by investigators. The admission was stated to be made following the completion of the company's enquiries into the circumstances of the accident, and was carefully worded as an admission of breach of duty of care by the defendant to the plaintiff, rather than an admission of liability generally. I take this to reflect the insurer's awareness that damage is a necessary ingredient of the tort of negligence, and that an admission of liability would involve the admission of at least some damage.

20. The admission was made by letter of 30 November, 2000, received by the plaintiff's solicitors on 4 December 2000. This was some six months before the commencement of proceedings. The insurer at no time informed the plaintiff's solicitors that any application would be made to withdraw the admission, or that it should be taken to be withdrawn or otherwise ineffective. The admission was a clear and distinct one which was accepted by the plaintiff. I am satisfied that it was made by the insurer after due deliberation by an experienced claims officer aware of the matters which ought to be taken into account in arriving at such a decision, and after a full opportunity to consider the insurer's case and whether the admission should be made. The admission was made with deliberateness and formality. It was not made inadvertently or without due consideration of any material matters. The admission has not been shown to be contrary to the actual facts, and no evidence has been given as to any factual or tactical matters which would now justify the withdrawal of the admission.

21. Although there is no evidence of actual prejudice to the plaintiff arising from reliance on the admission, I am mindful of the considerations expressed at paragragh 14 in Celestino, referred to above. McHugh J spoke in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 of the deterioration in the quality of justice arising from delay. His Honour said at 551:

Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. ... it must often happen that important, perhaps decisive, evidence has disappeared without anybody now "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose. A verdict may appear well based on the evidence given in the proceedings, but, if the tribunal effect had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay ... the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.

His Honour's observations related to an application to extend a limitation period, but are equally relevant to an application of the present kind. The longer the delay, the greater will be the prejudice which the Court will infer. In the present case, the absence of evidence of actual prejudice to the plaintiff, should paragraph 1 of the defence be allowed to stand, is far from conclusive.

22. A further relevant factor is that the admission was made by an insurer to which legal advice is readily available. I take judicial notice of the fact that NRMA Insurance Limited has a panel of firms of solicitors in Canberra, whom the company regularly instructs in actions of this kind. The plaintiff was, to the insurer's knowledge, represented by solicitors. The insurer must be taken to have decided that the obtaining of legal advice prior to making the admission was unnecessary.

23. It is also relevant that paragraph 1 of the defence goes far beyond a withdrawal of the admission of negligence. If allowed to stand, the paragraph would permit the defendant to sit mute and require the plaintiff to prove that the defendant was the driver of the vehicle in question, and even that there was a collision between the plaintiff's motor cycle and the defendant's vehicle on the road in question. It is conceivable that this might place the plaintiff in a position of real disadvantage: the collision is said to have taken place on a narrow unsealed road in the Brindabella ranges; police did not attend the scene, and it appears that the investigating police officer spoke to the defendant only by telephone.

24. Counsel for the defendant placed reliance upon a decision of a the Supreme Court of NSW, Ell v The Hunter District Water Supply and Sewerage Board (1927) 27 SR (NSW) 437 per PW Street CJ, Gordon and Ferguson JJ, in which their Honours permitted a defendant to withdraw an admission which was probably at odds with the actual facts and which would have precluded the defendant from relying on the Highway rule. Their Honours said that there was no distinction in principle between an application to withdraw admissions of fact and an application to make any other amendment; and that leave should generally be given to amend in the absence of bad faith or prejudice unable to be put right by a costs order. The reason for the withdrawal of the admission was clear to the court, and not to permit it would have resulted in the action going to trial on a factual basis at odds with the reality. The present application is readily distinguishable on its facts.

25. I am satisfied that the plaintiff is exposed to the likelihood of prejudice if paragraph 1 of the defence is allowed to stand, and that the admission was made in circumstances where no good reason has been shown for it to be permitted to be withdrawn. The defendant should not be permitted to maintain her denial of the facts alleged in paragraph 1 of the statement accompanying the originating application, or her denial of negligence. Paragraph 1 of the defence should be struck out.

26. The notice of motion by which this application was brought also sought an order that the defendant swear and file an affidavit as to documents within seven days, and an order for costs. On the day the application was argued, 13 February, having been informed of difficulties experienced by the solicitors for the defendant in having her swear an affidavit of discovery, and being informed that the documents discovered were entirely, or almost entirely, documents in the possession and control of the insurer rather than the defendant personally, I directed that the affidavit of discovery could be made either by the defendant or by an appropriate employee of the insurer. I was asked by both parties to reserve the question of the costs of that aspect of the application.

27. It now appears that the plaintiff has been successful in relation to both substantive orders sought, and in those circumstances I am provisionally minded to order that the costs of the application, including those reserved costs, be paid by the defendant.

However, I shall give the parties an opportunity to make further submissions before I make any formal order as to costs.

I certify that the preceding 27 (twenty-seven) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master Harper.

Solicitors for the plaintiff Gary Robb & Associates