Schmierer v Keong [2005] NSWSC 1081 | Case summary

4432/03 TREVOR JOHN SCHMIERER AND ADRIAN STEWART DUNCAN AS JOINT AND SEVERAL LIQUIDATORS OF PETER JOHNSON HORSE TRANSPORT PTY LIMITED (IN LIQUIDATION) & ANOR v CLIFFORD HAROLD KEONG JUDGMENT 1 HIS HONOUR: In this matter, which is for trial before me commencing 14 November 2005, there is a motion that deals with two interlocutory aspects; one relates to the expert evidence to be given in the case; the other relates to a proposed amendment to the defence. 2 The first thing to be considered is as follows. The orders which the defendant seeks today are sought in an amended notice of motion, which was brought forward only yesterday and which proceeds on a different basis relating to the expert reports from the original notice of motion, which was filed on 6 October 2005. The amended motion is supported by two affidavits, which were served only at 4.20 pm yesterday and which raise quite new material. The fact that they were served so late without any explanation for the lateness, or as to the time at which the new matter that they deal with came to the defendant's solicitor's attention, is most unsatisfactory. If more time were available to deal with the matter, I should probably stand the motion over to permit the plaintiff more time to deal with it. However, I have made it quite plain and I make it quite plain that, if I come to the view in determining the matter that the plaintiff should be given further opportunity to deal with the material now brought forward, that time will be given. 3 The background of the matter is as follows. The relevant issue in the proceedings, which are brought under s 588G of the Corporations Act 2001 (Cth) ("the CA"), is whether or not the defendant was a director of the company, of which the plaintiff is liquidator, at the time certain transactions were entered into. There is no issue between the parties that the company was insolvent at that time, but it is fiercely contested that the defendant was a director. Part of what is sought to be led to establish that he was a director, is the signature by him of a number of documents as director, or which would be expected to be signed only by a director. He denies signing these documents. 4 The experts involved are handwriting examiners. On the plaintiffs' side, the relevant examiners live in Canberra and Sydney respectively. On the defendant's side, the examiner lives in Brisbane. On 15 October 2004, the defendant's examiner issued a report in which, essentially, he expressed the opinion that the relevant signatures are forgeries; they were not written by the same person as undisputed signatures of the defendant. In a joint report dated 7 December 2004, the plaintiffs' examiners wrote a report, which essentially expressed the opposite view, ie, that the relevant signatures were written by the defendant. 5 The experts were, not surprisingly, ordered to confer and produce a Joint Experts' Report as to any agreed matters. A short report was prepared, which was signed by the three examiners on the 14th, 16th and 17th March 2005 respectively. The content of the conference they held is not, of course, in evidence before me but, on the material brought forward, it is common ground that there was some form of telephone conference, in which all three of them participated at the same time. The estimates that have been given of the length of that conference vary from a few minutes to 20 minutes. 6 Although the Joint Experts' Report is short, it is radical in nature. What it states is that the "conclusions expressed in the joint report of [the plaintiffs' examiners] are ... those that we collectively agree are appropriate and upon which the Court and parties should rely". By joining in that report, the defendant's examiner in terms, resiled from his own earlier and opposite opinion. The problem posed to the defendant by the filing of that report is that it is provided by r 31.25(7) of the Uniform Civil Procedure Rules 2005 ("the UCPR") that if -

This would leave the expert evidence unanimous in the plaintiffs' favour. 7 By his original notice of motion, the defendant sought leave to lead further expert evidence. It is plain from his solicitor's affidavit filed at that time that the course then anticipated was that the report of a further expert would be obtained. However, in the late affidavit material, the defendant's examiner deposes that he did not and does not hold the view expressed in the Joint Experts' Report and that he adheres to his report of October 2004. The terms of the amended notice of motion now brought forward seek leave for the defendant to adduce expert evidence from the defendant's examiner in the form of his October 2004 report. 8 The reason assigned by the defendant's examiner for his agreeing to and signing the Joint Experts' Report are personal difficulty and a medical condition of his. He deposes that he is a Vietnam veteran, who suffers from post traumatic stress disorder and that this was what led him to sign the Joint Experts' Report when he did not agree with it. 9 This statement receives substantial medical corroboration in an affidavit of Dr Jocelyn Ewing of Brisbane, a highly qualified clinical psychologist, who has treated the defendant's examiner since July 2002. He was under regular treatment by her in late 2004 and early 2005, because his condition was worsened by particular stresses in his life at that time, which Dr Ewing sets out. She confirms that he suffers from chronic severe post traumatic stress disorder, with associated depression and generalised anxiety disorder, as a result of his Vietnam service. Although he generally manages his disorders relatively well, he has a permanently reduced tolerance of stress and his symptoms tend to flare when he is under increased stress, as he was over the turn of 2004/2005. She states: "He is then less able to think clearly, tends to rush and panic under pressure and his attention to detail and capacity for logical thought are reduced. He is often able to identify and correct his errors in thinking, with support and assistance, but this may not occur until the concurrent stresses have reduced and he has been able to settle." 10 This provides, perhaps, an understandable basis for the defendant's examiner's expressing, then retracting, then reverting to, a professional opinion concerning the matter in hand. Even if there were not some explanation tendered for that course of conduct, one would still face the situation where the defendant had suddenly had removed from him the body of expert evidence, which he proposed to lead on an important and central issue in this trial, by the sudden retraction in the Joint Experts' Report of the defendant's examiner's opinion. 11 It seems to me that these are unusual circumstances and ones in which the discretion of the Court should be exercised in favour of permitting the deprived party to replace the lost expert evidence. I am well aware that solemn admissions are not allowed to be retracted as of course: see Coopers Brewery Limited v Panfida Foods Limited (1992) 26 NSWLR 738; Drabsch v Switzerland General Insurance Co Ltd NSWSC Santow J 16 October 1996 unreported; Jeans v Commonwealth Bank of Australia (2003) 204 ALR 327; Silver v Dome Resources NL [2005] NSWSC 265, which consider the question of the withdrawal of admissions in pleadings. However, the circumstances here are quite unusual and the injustice in not allowing the defendant to replace the suddenly withdrawn evidence, if other evidence be available, seems to me to be manifest. In this case, the defendant's desire now is to replace it with the earlier evidence, which the defendant's examiner had provided. It does not seem to me to be suggested that the plaintiffs are prejudiced by the resurrection of the defendant's examiner's earlier report (other than by loss of the obvious advantage to them in having a lay down misere as to the state of expert opinion on the handwriting). They have been aware since October last year of the defendant's examiner's report and, indeed, their own expert report was subsequent to, and written in the light of, the defendant's examiner's report. In those circumstances, there is no prejudice which ought preclude my granting the application. 12 The result in regard to that part of the application will be that I grant leave to file in Court the amended notice of motion and I shall make an order as sought in prayer 1. 13 Turning to the other aspect of the matter, the question of amendment of the defence, the first amendment sought is an amplification of par 14 of the defence, which is a denial, if the defendant is found to be a director of the company, of participation by him at the relevant time in the management of the company. Paragraph 14 has always been there, but is now to be amplified by the addition of a particular (v), to the effect that the defendant was incapacitated by being in hospital, or confined to a wheelchair, during particular periods. Whilst that particular is new, the evidence to that effect was substantially put on a year ago. 14 The greater objection has been to the addition of par 15 of the defence, which asks for the defendant, if found to be a director, to be excused from liability, pursuant to s 1318 of the CA. This, the plaintiffs allege, is a pleading of inconsistent matter, which ought not be allowed, since the defendant must be admitted, or established, to be a director before he can undertake to discharge the onus which he bears, in order to establish an entitlement to excuse under s 1318. This is said to be either contrary to UCPR r 14.18 or embarrassing or vexatious. I do not accept this submission. This does not seem to me to be a pleading of inconsistent matter of the sort which ought not be allowed. It appears to me simply to be part of a pattern, which is permissible, where the defendant denies holding the position of director, but seeks, alternatively, to have the benefit of the excuse provided for by s 1318, if the Court, in fact, finds him to be a director. 15 It may well be that the material raised by par 15 and, perhaps, by par 14 as well, ought not be determined in the initial trial, which ought be limited to the issue of whether or not the defendant was a director. But a decision on that matter can be made in due course and it is not necessary to the determination of the amendment application. The decision on that application is that the defendant is granted leave to file an amended defence in the form propounded. 16 On the question of the costs of the application, Mr Stevenson, of Senior Counsel for the defendant, draws attention to the fact that consent to amend the defence was sought and refused and that both parties had to be in Court, in any event, today to deal with that matter, so that the argument concerning the expert evidence was substantially encompassed by the same set of costs as the other matter. He says that, in these circumstances, the costs of this motion should either be costs in the proceedings, or that there be no order as to costs of the motion. 17 However, both of these matters are matters of indulgence sought by the defendant and sought very late in the day. In all the circumstances, I do not regard it as unreasonable of the plaintiffs to have opposed the applications, even the application for amendment of the defence. The problem about the expert evidence is certainly not the defendant's personal fault. However, equally certainly, it is not the plaintiffs'. In all the circumstances, the order that I propose is that the defendant be ordered to pay the plaintiffs' costs of the motion.

Schmierer v Keong

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Judgment (14 paragraphs)

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