These proceedings were commenced by Statement of Claim filed on 18 December 2018. The plaintiffs, Umberto Sergi and Cleopine Pty Ltd, primarily sought relief under s 66G of the Conveyancing Act 1919 (NSW), either for sale or partition, in respect of ten properties located in various parts of New South Wales. Each property is alleged to be held by either one of the plaintiffs in co-ownership with one or more of the ten defendants.
The proceedings are contested by the first to third and eighth to tenth defendants. Those defendants, who share common legal representation, will for convenience be referred to as the "active defendants". On 1 April 2019, the active defendants filed a Defence and a Cross-Claim against the plaintiffs. By the Defence, the active defendants took issue with some of the allegations contained in the Statement of Claim, including in relation to an alleged impasse reached between the parties, and in paragraph 13 raised certain matters in relation to the three properties in Edensor Park for which the plaintiffs were seeking orders for partition. Paragraph 13(d) contained a statement to the effect that the active defendants otherwise relied upon the Cross-Claim.
By the Cross-Claim, the active defendants sought orders for specific performance of an agreement in relation to the Edensor Park properties, and other relief including in respect of alleged breaches by Umberto Sergi of obligations under a partnership with the first two defendants, Rosario Sergi and Georgio ("George") Sergi. Umberto, Rosario and George Sergi are brothers.
The partnership was pleaded in paragraphs 8 to 13 of the Cross-Claim. It was expressly pleaded in paragraph 9 that the partnership was a partnership at will.
On 2 April 2019, the plaintiffs filed a Notice of Motion seeking summary judgment. I note that leave for the filing of the motion was sought before the Defence and the Cross-Claim had been filed. In any event, the motion was returnable on 12 April 2019, and on that occasion directions were made to have the motion ready for hearing in the Real Property List on 17 May 2019.
In the meantime, the matter was re-listed on 10 May 2019 because the plaintiffs were concerned that the active defendants might move for default judgment on their Cross-Claim due to the failure of the plaintiffs to file a Defence to the Cross-Claim. There was also an unsuccessful application made at short notice by the active defendants on 16 May 2019 for an interlocutory injunction. The Notice of Motion filed in Court on that occasion also sought leave to file an Amended Defence.
At that stage, the proposed Amended Defence contained new paragraphs 13(d) - (g) which contained allegations of the existence of other partnerships in relation to some of the properties (in Leeton, Lithgow and Ermington) and made reference to certain notices of dissolution of partnership recently given by Umberto Sergi, the efficacy of which was disputed.
In light of the issues raised or sought to be raised by the active defendants, the Court was not prepared to hear the plaintiffs' summary judgment application on 17 May 2019. It was apparent that the alleged existence of partnerships, the assets of which may include the properties the subject of the plaintiffs' claim, raised matters which could stand in the way of summary judgment. It was further apparent that the pleadings needed to be put in order so as to properly identify the issues in relation to any relevant partnerships. In circumstances where the evidence suggested that the plaintiffs themselves acknowledged that a number of partnerships (at least four) had existed, the Court suggested that the plaintiffs may wish to file amended pleadings that would raise such matters. The plaintiffs indicated that they did not want to follow that course. Accordingly, a direction was made for the active defendants to serve a proposed Amended Defence and a proposed Amended Cross-Claim by 29 May 2019. The matter was adjourned to 31 May 2019.
The plaintiffs objected to the proposed amended pleadings served by the active defendants. One of the objections was that the proposed amendments entailed the withdrawal of admissions, and that leave to do so would be required.
On 31 May 2019 leave was granted to the active defendants to file an Amended Notice of Motion seeking leave for the filing of the amended pleadings and, if so advised, leave to withdraw admissions. The active defendants filed an Amended Notice of Motion on 7 June 2019. By that motion, leave was sought to file a further revised version of the proposed Amended Defence, and an amended Cross-Claim. Leave was also sought, to the extent that such was necessary, to withdraw the assertion of a partnership at will contained in paragraph 9 of the Cross-Claim, and withdraw from paragraph 13(d) of the Defence the reference to reliance upon the Cross-Claim. The Amended Notice of Motion was listed on 14 June 2019.
Relevantly for present purposes, the proposed Amended Defence:
1. admits the registered proprietorship of the various properties as alleged by the plaintiffs, but says that the properties are held pursuant to certain partnerships or trusts or "other arrangements" (see paragraph 4);
2. alleges that two of the properties (685 Smithfield Road and 707 Smithfield Road Edensor Park) are, together with a property at 697 Smithfield Road Edensor Park, held subject to an agreement whereby the properties would be held together until a development approval was obtained in respect of them whereupon they would be sold (paragraphs 5, 13(g) and 13(i));
3. alleges that two of the properties (Pine Avenue Leeton and Main Street Lithgow) are held subject to a partnership formed in about 1984 between the first plaintiff and the first, second and fourth to seventh defendants, a term of which was that the partnership would continue for the lifetime of the partners (i.e. until the death of all of them), and that the notice of dissolution of the partnership given by the first plaintiff on 8 May 2019 was ineffective (see paragraph 13(d));
4. alleges that the property in Bartlett Street Ermington is held subject to a partnership formed in about 1982 between the first plaintiff and the first to third defendants, a term of which was that the partnership would continue for the lifetime of the partners (i.e. until the death of all of them), and that the notice of dissolution of the partnership given by the first plaintiff on 8 May 2019 was ineffective (see paragraph 13(e));
5. alleges that the remaining properties (including the Burrawan Street Port Macquarie property of which the second plaintiff is a registered proprietor) are held subject to a partnership formed in about 1971 between the first plaintiff and the first and second defendants, a term of which was that the partnership would continue for the lifetime of the partners (i.e. until the death of all of them), and that the notice of dissolution of the partnership given by the first plaintiff on 8 April 2019 was ineffective (see paragraph 13(f));
6. alleges that an agreement was made in about 2003 between the first plaintiff and the first and second defendants in respect of the Burrawan Street Port Macquarie property (see paragraph 13(h));
7. alleges further or in the alternative that the properties alleged to be held by the partnerships pleaded in paragraphs 13(d), (e) and (f) are held upon certain express trusts (or alternatively a common intention constructive trust) which trusts are subsisting, but subject to the agreements in respect of the Edensor Park and Burrawan Street Port Macquarie properties (see paragraphs 14 to 17 and 23); and
8. contends that, in the premises, the plaintiffs are not entitled to relief under Conveyancing Act s 66G in respect of any of the properties (see paragraphs 18 to 22).
The proposed Amended Cross-Claim primarily claims relief in respect of the agreement concerning the Edensor Park properties (including relief in the nature of specific performance), declaratory relief as to the existence of the trusts, compensation for breach of fiduciary duty in respect of the Short Street Port Macquarie properties (which are said to be held in the partnership formed in about 1971), and enforcement of an alleged agreement whereby the first plaintiff promised to repay a loan of about $225,000 out of his share of the proceeds of the sale of the Edensor Park properties.
The proposed Amended Cross-Claim includes allegations concerning the partnership said to have been entered into between the first plaintiff and the first and second defendants in about 1971. In this regard, paragraph 9 is proposed to be altered to delete the reference to a partnership at will, and instead plead that the partnership would continue for the lifetime of the partners. Additional details of the terms of the alleged partnership are contained in an amended paragraph 10. The trusts are dealt with in new paragraphs 14 to 17 and 23 in a manner cognate with the provisions of the proposed Amended Defence. (Paragraphs 18 to 22 are identical to the same numbered paragraphs in the proposed Amended Defence. They do not seem appropriate for the Cross-Claim). The remaining paragraphs, which deal with the Edensor Park properties, the Short Street Port Macquarie properties, and the alleged agreement to repay a loan, are not altered in any substantial way.
The focus of the debate between the parties was upon the proposed deletion of the allegation contained in paragraph 9 of the Cross-Claim of a partnership at will (and its incorporation by reference into the Defence by paragraph 13(d) thereof). The plaintiffs complained that this amounted to a withdrawal of an admission, or other matter that operates to their benefit, within the meaning of Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 12.6(2). Accordingly, it was submitted that the leave of the Court is required, in addition to the general requirement for leave to amend under s 64(1)(b) of the Civil Procedure Act 2005 (NSW). The plaintiffs submitted that in accordance with the established principles governing applications for leave to withdraw admissions, the active defendants have failed to make out an appropriate case for a grant of leave.
In short, the plaintiffs contend that no adequate explanation has been given for the change in course, the evidence given in support of the new allegations is not satisfactory, and the circumstances suggest that the change in course is a tactical device designed to defeat the plaintiffs' s 66G claims and indeed to avoid summary judgment on those claims.
UCPR r 12.6 relevantly provides:
(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.
It is necessary to consider whether the proposed amendments involve the withdrawal of any admission, or any other matter that operates for the benefit of another party, within the meaning of r 12.6(2). At the conclusion of the hearing on 14 June 2019, the Court directed that the parties provide further written submissions directed to that question. Those submissions were received on 28 June 2019.
The active defendants submitted that the assertion of a partnership at will, contained in the Cross-Claim, is not an admission. They submitted that neither was it a matter that operates relevantly for the benefit of the plaintiffs, as it does not operate for the benefit of the plaintiffs within the proceedings. In this respect, a contrast was drawn with an admission of liability in proceedings. It was put that the only benefit that could arise from the assertion of a partnership at will would be through acting on the basis of it outside the proceedings themselves.
The plaintiffs submitted that the pleading of the partnership at will amounted to an admission as to the nature of the partnership. It was foreshadowed that the first plaintiff intends to agree in his Defence to Cross-Claim that the partnership was a partnership at will, and there would then be no issue in the litigation about it. The plaintiffs submitted that in any event the pleading of the partnership at will was a matter for the benefit of the plaintiffs (or at least the first plaintiff). It was submitted that it was not necessary for the benefit to be a benefit in the litigation, but even if it was, the requirement was satisfied because relief was more likely to be available to the plaintiffs on that basis than if there was a partnership for the lifetime of the partners. It was further submitted that if an assertion in a pleading is acted upon by the opposing party, or the other party takes the benefit of the assertion, the assertion is a matter that operates for the benefit of another party within the meaning of UCPR r 12.6(2).
It was submitted that the first plaintiff acted upon the assertion of the existence of the partnership at will by giving notices of dissolution of partnerships on 8 April 2019 and 8 May 2019. It should be pointed out, however, that the assertion of the existence of a partnership at will contained in the Cross-Claim is confined to a partnership between the three brothers entered into in about 1971. Only the notice of dissolution given by the first plaintiff on 8 April 2019 could relate to that partnership. The notice was in the following terms:
UMBERTO SERGI hereby gives Notice pursuant to Section 32 of the Partnership Act 1892 (NSW) that any partnership between myself, Rosario Sergi aka Ross Sergi and George Sergi is hereby determined, NOTWITHSTANDING that any such partnership was determined on or before 30 June 2017.
I note that there is evidence before the Court, and the terms of the notice of dissolution suggest, that the first plaintiff has in the past acknowledged the existence of a partnership with the first and second defendants.
An initial question arises as to whether UCPR r 12.6(2) applies only to "a defence or subsequent pleading" as referred to in UCPR r 12.6(1). The plaintiffs referred the Court to Khouri v National Australia Bank Ltd [2007] NSWSC 987 where Gzell J at [1]-[2] rejected a submission that r 12.6(2) was confined to defences or subsequent pleadings. I confess to having some doubt as to the construction given to the rule by his Honour. UCPR r 12.6(2), when read in its context alongside r 12.6(1) and as part of Division 2 of Part 12 of the UCPR, does not seem to be concerned with plaintiffs or cross-claimants who are pursuing claims in proceedings. However, I will nonetheless proceed on the assumption that UCPR r 12.6(2) can apply to pleadings other than "a defence or subsequent pleading" and can therefore apply to a statement of cross-claim, which is generally treated by the rules as equivalent to a statement of claim (see UCPR r 9.1(3)).
Even so, it is my opinion that the pleading in paragraph 9 of the Cross-Claim that the partnership was a partnership at will is not an admission within the meaning of r 12.6(2). In the context of pleadings, an admission by a party can arise in response to an allegation made by an opposite party (see UCPR r 14.26). That is not the case where a party makes an assertion that is contained within a statement of claim or a statement of cross-claim.
Outside of pleadings, a party may make formal admissions in various ways in accordance with the rules of Court (see, for example, UCPR rr 17.2 - 17.5). These kinds of admissions can be withdrawn with the leave of the Court, or else operate subject to the Court ordering otherwise (see UCPR r 17.5(2)). The assertion made in paragraph 9 of the Cross-Claim of the existence of the partnership at will is not an admission of that character either.
It is also my opinion that the pleading in paragraph 9 of the Cross-Claim is not a matter which operates for the benefit of another party within the meaning of UCPR 12.6(2). The assertions made about the existence of the partnership, as contained in paragraphs 8 to 13 of the Cross-Claim, form part of an affirmative claim advanced within the proceedings. The proceedings had hitherto contained no issue about the existence of any partnership. The making of the assertion of a partnership at will did not itself render it more likely that the plaintiffs would obtain the relief they sought. Viewed objectively, the assertion ought not be considered to be a matter that operates for the benefit of the plaintiffs (or the first plaintiff).
It is not sufficient to overcome that conclusion that the plaintiffs might have been content to resist the Cross-Claim on the basis that the alleged partnership at will existed. Unless and until the plaintiffs make an admission to that effect, the assertion of the alleged partnership remains a matter capable of being in issue on the Cross-Claim.
Neither is it sufficient that the first plaintiff may have acted on the basis of the assertion of the partnership at will by giving a notice of dissolution. It can be accepted that the first plaintiff regarded it as to his benefit to give the notice on 8 April 2019. However, I do not think it follows that the assertion of the partnership at will is a matter that relevantly operates for the benefit of another party. In my view, the question whether a matter operates for the benefit of another party within the meaning of UCPR 12.6(2) must be determined objectively by viewing the matter in its context as part of the pleadings. That is to say, whether a matter in a pleading should be regarded as one that operates for the benefit of another party must be objectively apparent from the pleadings themselves. Examples would include a statement that liability is admitted for breach of a contract or breach of a duty, a statement that an available defence under a limitation provision or a Statute of Frauds provision will not be relied upon, or (assuming the rule applies to statements of claim and statements of cross-claim) a statement that a credit or allowance would be given in the calculation of a claim or an amount alleged to be due.
Here, it is not objectively apparent that the allegation in the Cross-Claim concerning the existence of a partnership at will is a matter that operates for the benefit of the plaintiffs (or the first plaintiff). The matter can be seen to form part of a claim to be asserted by the active defendants, and in the context of that claim as formulated is not in the nature of a concession.
For the above reasons, the pleading in paragraph 9 of the Cross-Claim (to which no Defence has been filed) does not fall within UCPR r 12.6(2) as an admission or other matter that operates for the benefit of another party. Accordingly, the leave of the Court is not required under the rule to withdraw the matter contained within paragraph 9 of the Cross-Claim. The same conclusion follows in respect of paragraph 13(d) of the Defence insofar as it can be read as incorporating the terms of the Cross-Claim.
Had I reached a different conclusion, and thus had to consider whether leave to withdraw should be granted, I would have declined to give leave. The applicable principles are well established. They have been summarised in numerous cases in this Court including SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 at [55]-[56] per White J (as his Honour then was), In the matter of Dymocks Book Arcade Pty Ltd [2013] NSWSC 298 at [8]-[13] per Brereton J (as his Honour then was), and more recently Fabrizio v Wickham Hill Investment Pty Ltd [2018] NSWSC 612 at [68]-[69] per Robb J. I would not have been satisfied that adequate explanations had been proffered as to how the apparently deliberate assertion of a partnership at will had been made and as to why it would now be appropriate to allow a different case to be advanced (see Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455 at [27] per McPherson JA).
The principal evidence in that regard consisted of the statement contained in paragraph 6 of the second defendant's affidavit of 6 June 2019, which is to the effect that he did not understand that the term "partnership at will" meant that the partnership could end at any time. The second defendant was but one of two deponents who verified the Cross-Claim. No evidence was given by the solicitors for the Cross-Claimants. Whilst some evidence was adduced in relation to the partnerships now sought to be alleged, this evidence was general in nature or expressed in a conclusionary form, and did not go much further than indicate that arguable grounds existed for the allegations now sought to be made. In short, in circumstances where the change in course might be regarded as a mere tactical device, the evidence would not have satisfied the Court that it would be in the interests of justice to withdraw an admission or other matter that operates for the benefit of another party.
However, in the absence of any requirement for leave pursuant to UCPR r 12.6(2), I am prepared to grant leave to the active defendants pursuant to s 64(1)(b) of the Civil Procedure Act to file the proposed Amended Defence and the proposed Amended Cross-Claim (save in respect of paragraphs 18 to 22). In my opinion, it accords with the dictates of justice referred to in s 58 of that Act, and is consistent with the overriding purpose referred to in s 56 of that Act, to allow the proposed amendments. Whilst criticism was made of the sufficiency of the evidence given in support of the new allegations of partnership and trust, I am satisfied that the new claims are not untenable. The claims are advanced at a relatively early stage in the proceedings, and in circumstances where it seems clear that the properties the subject of the proceedings may be affected by numerous partnerships. The terms of those partnerships, and whether they still exist, will likely be central issues in the dispute between the parties. The plaintiffs have expressed an unwillingness to amend their own pleadings to raise such matters. The grant of leave can readily be seen as necessary to aid the proper identification and determination of the real issues in the proceedings. The plaintiffs do not point to any irremediable prejudice they would suffer if the amendments are permitted.
The Court will therefore make orders as sought in paragraphs 4(a) and (b) of the Amended Notice of Motion filed on 7 June 2019, save in respect of paragraphs 18 to 22 of the proposed Amended Cross-Claim. The Court will further make orders to the effect that the active defendants pay any of the plaintiffs' costs thrown away by reason of the amendments. As the application for leave to amend was contested by the plaintiffs, unsuccessfully, the Court will further order that the plaintiffs pay the active defendants' costs of the amendment application.
In light of the above conclusions it would seem appropriate that the plaintiffs' Notice of Motion for summary judgment be dismissed. However, as the submissions of the parties did not specifically deal with that question, the Court will not make such an order at this stage.
There remains one final matter. That concerns the costs of the directions hearing on 10 May 2019. As noted earlier, the matter was re-listed on that day at the behest of the plaintiffs, who were concerned that the active defendants might move for default judgment on their Cross-Claim. The plaintiffs seek costs in respect of the 10 May 2019 appearance on the grounds that the active defendants had on 18 April 2019 threatened to apply for default judgment and by 10 May 2019 had not resiled from that position despite being requested to do so. The plaintiffs had asked the active defendants to agree that a Defence to the Cross-Claim would not need to be filed until after the determination of the plaintiffs' summary judgment application. The active defendants resist the order for costs, primarily on the grounds that, in accordance with the Real Property List Practice Note, they would need leave to file any Notice of Motion for default judgment, and that any such motion would be placed in the Friday list. The plaintiffs responded to that by noting that under UCPR r 16.3(1A), a motion for default judgment is not always required to be served upon the party in default.
In my opinion, the appropriate order for costs in the exercise of the Court's discretion is that each party pay their own costs in relation to the directions hearing on 10 May 2019. It was perhaps unnecessary for the plaintiffs to re-list the matter as it was most unlikely, in circumstances where the plaintiffs had filed a motion for summary judgment, that any motion for default judgment on the Cross-Claim would not have been required to be served. However, had the active defendants given an assurance that they would hold off on seeking default judgment or, if they were to seek default judgment, they would not seek to proceed ex parte, any need to re-list the matter would have disappeared. Both sides can be seen to share some responsibility for the re-listing on 10 May 2019. The re-listing could have been avoided if the parties had adopted a more co-operative attitude towards each other.
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Decision last updated: 11 July 2019