Stafford & anor v Kekatos & anor

Susan Stafford (first plaintiff) PARTIES : Rhonda Dawn Stafford (second plaintiff) Voula Kekatos (first defendant) George Kekatos (second defendant)

Mr P Hallen SC w Mr E T Finnane (plaintiffs) COUNSEL : Mr M H Southwick (first defendant) Mr C Stomo (second defendant)

Uther Webster & Evans (plaintiffs) SOLICITORS : Kells The Lawyers (first defendant) Proctor & Associates (second defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GENERAL LIST

4871/06 Susan Stafford & Anor v Voula Kekatos & Anor JUDGMENT (ex tempore; re application to withdraw admission by First and Second Defendants) 1 HIS HONOUR: Each defendant applies for leave to withdraw admissions contained in their defences to the Amended Statement of Claim and to amend their respective defences by substituting, for the current admission of the allegation in Amended Statement of Claim paragraph 44A - which alleges: Further, the First Defendant, on or about 29 August 2004 executed the Undertaking and Authority and on or about that date provided it to the Plaintiffs by their agent Wayne Stafford. a nonadmission of that allegation. 2 The relevant background so far as the proceedings and the pleadings are concerned is summarised in my judgment on the application for summary dismissal [see Stafford v Kekatos [2008] NSWSC 810].

3 Paragraph 44A of the Amended Statement of Claim refers to an undertaking and authority which bears the date 29 August 2004, was admittedly executed by the first defendant Mrs Voula Kekatos, and is in the following terms: I Voula Kekatos hereby undertake and acknowledge that I will enter into the Agreement for Sale of Land to acquire Lots 1-5 Hume Highway Paddys River with the Receiver on behalf of the Penrose Quarry Trust signed this day by all the parties and shall apply all monies held by the parties pursuant to the Deed of Charge over Global to each respective party in accordance with the amounts stated in the accounts prepared by Peter Hawketts for 30 September 2003.

4 In the plaintiffs' original statement of claim, paragraph 41 was as follows: On 29 August 2004, pursuant to the Proposed Assignment Arrangement, the First Defendant undertook and acknowledged, that she would enter in to the Agreement for Sale of the Penrose Land in her capacity as trustee of the Penrose Trust. Particulars

Document dated 29 August 2004 executed by the first defendant.

5 Referring as it does to an undertaking and acknowledgment of Mrs Kekatos, which picks up the words of the undertaking and authority to which I have referred, it is quite plain that that paragraph referred to the subject undertaking and authority. In her original defence, Mrs Kekatos, in paragraph 19, pleaded as follows: Denies paragraphs 40 to 44 inclusive and says: (a) There was no Proposed Assignment Arrangement as alleged. (b) There was no Assignment as alleged. (c) There was no Assignment Representation as alleged. (d) She is not aware and cannot admit there was any taxation advantage as alleged. (e) The plaintiffs represented to the second defendant that they were unable or unwilling to further contribute to the costs of the Receivership, including the costs of the Heggies litigation (being Supreme Court Proceedings No. 3054 of 2004). (f) The plaintiffs and the first defendant entered into a Deed by which the plaintiffs assigned to the first defendant all their interest in the charge. All references to the Penrose Trust were removed from the Deed prior to delivery. (g) The first defendant does not know and cannot admit the matters particularised in paragraph 44.

6 The second defendant Mr George Kekatos' defence was similar, though not identical. In paragraph 18 of his original defence, he pleaded as follows: Denies paragraphs 40 to 44 inclusive and says: (a) There was no Proposed Assignment Arrangement as alleged. (b) There was no Assignment as alleged. (c) There was no Assignment Representation as alleged. (d) He is not aware and cannot admit there was any taxation advantage as alleged. (e) The plaintiffs represented that they were unable or unwilling to further contribute to the costs of the Receivership, including the costs of the Heggies litigation (being Supreme Court Proceedings No. 3054 of 2004). (f) The plaintiffs and the first defendant entered into a Deed by which the plaintiffs assigned to the first defendant their interest in the charge. All references to the Penrose Trust were removed from the Deed prior to delivery.

7 It will be observed that, while there was a general denial of paragraphs 40 to 44, there were super-added admissions to parts of them, and there was no distinct denial of execution of the undertaking and authority, nor any positive suggestion that it was not executed on the date which it bore - matters which, in accordance with the rule that pleadings should distinctly raise issues which might otherwise take parties by surprise, might have been expected to be pleaded if it were intended to advance such a case.

8 In the Amended Statement of Claim, which was filed on 19 June 2008, paragraph 41 was as follows: On 29 August 2004, pursuant to the Variation or in the alternative the Novation, the First Defendant: a. executed, as assignee, a deed for the assignment by the Plaintiffs to the First Defendant of all their right title and interest in the Charge ("the Assignment"); and b. at or about the same time, signed a document headed "Undertaking and Authority" ("the Undertaking and Authority") pursuant to which she: i. acknowledged and undertook that she would purchase the Penrose Land as trustee of the Penrose Trust; and ii. acknowledged and undertook that she would apply all monies held pursuant to the Charge to each respective party in accordance with the amounts stated in the accounts prepared by Peter Hawketts for 30 September 2003. Particulars (a) Deed of Assignment dated 29 August 2004 and subsequently lodged with the Australian Securities and Investments Commission ("the Deed of Assignment") (b) Undertaking and Authority dated 29 August 2004 executed by the First Defendant.

9 Mrs Kekatos filed a defence to the Amended Statement of Claim on 26 August 2008. Paragraph 20 was as follows: In answer to paragraph 41: (a) admits signing a Deed for the assignment by the Plaintiffs to the First Defendant of all their right title and interest in the charge. (b) says that the Plaintiffs interlineated into the signed document references to "the Penrose Quarry Unit Trust". (c) that the reference to the Penrose Quarry Unit Trust were removed. (d) otherwise denies the matters alleged in that paragraph. (e) says there is no sufficient memorandum or note in writing and the alleged agreement is unenforceable by reason of s54A (or s23C) Conveyancing Act.

10 I have already referred to paragraph 44A of the Amended Statement of Claim. Paragraph 23 of Mrs Kekatos' defence was as follows: 23. Admits paragraph 44A.

11 Mr Kekatos' defence to the Amended Statement of Claim was filed on the first day of the trial, 8 September 2008. Paragraph 2 was as follows: 2. Admits paragraphs 1 to 3 inclusive ... 39, 44A, 57 ...

12 Paragraph 19 was as follows: In answer to paragraph 41: (a) admits signing a Deed for the assignment by the Plaintiffs to the First Defendant of all their right title and interest in the charge. (b) says that the Plaintiffs interlineated into the signed document references to "the Penrose Quarry Unit Trust". (c) that the reference to the Penrose Quarry Unit Trust were removed. (d) otherwise denies the matters alleged in that paragraph. (e) says there is no sufficient memorandum or note in writing and the alleged agreement is unenforceable by reason of s54A (or s23C) Conveyancing Act.

13 In the course of opening the plaintiffs' case, Mr Hallen SC drew attention to those admissions. Not long thereafter it was foreshadowed by Mr Southwick (for Mrs Kekatos), and Mr Stomo (for Mr Kekatos), that those admissions had been made in error and an application would be made for leave to withdraw them. Today, that application has been formalised by a notice of motion filed on behalf of Mrs Kekatos. Although Mr Kekatos has not filed any such motion, he has by counsel indicated that he seeks similar leave, and as I have foreshadowed, to substitute for the admission of paragraph 44A not a denial but a nonadmission.

14 I have recently considered the relevant principles on such an application in Hill End Gold Ltd v First Tiffany Resource Corp [2008] NSWSC 866. As in that case, the observations of Young CJ in Eq in Sirius Shipping Corporation v The Ship Sunrise [2006] NSWSC 164 and For the Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 108 are instructive, and emphasise that the question is one of the attainment of justice rather than trying to apply an artificial approach according to any fixed set of rules. His Honour emphasised that the Court is after the truth, and that in principle an erroneous submission should be able to be withdrawn unless outweighed by other factors, the chief of which is prejudice to the other party. His Honour added that there must be some evidence as to how the admission was made, and there must be some material to show that it was erroneous.

15 In Hill End Gold, I identified the essential questions for the court as being: First, was the admission wrongly made? That is, was the admission erroneous? Secondly, was the admission made inadvertently and is there an adequate explanation for it? That is, in essence, was the process which led to the admission one which resulted from mistake, confusion or inadvertence rather than a deliberate course of conduct? And thirdly, where does the balance of prejudice lie? Those considerations I think sufficiently inform the approach to be taken on the present application.

16 Before I turn to the first of those considerations, I should record that while it may not be decisive of the case, I appreciate that in this case the issue addressed by the admission is a very important one, which may have substantial repercussions for the case as a whole. For that reason, notwithstanding that the matter is in mid-trial, I think the issue and the arguments deserve the fuller reasons I am in the course of giving, rather than the more peremptory approach that might often be taken in such a situation. That is also because I am acutely conscious that it is undesirable that the case be decided on a false issue, which might be the case if the defendants were held to an admission wrongly made.

17 I turn then to the first question: was the relevant admission wrongly made? In this respect I observe that, in For the Good Times, Young CJ in Eq referred to an erroneous admission (not an admission that might merely be arguably erroneous) (at [3]). Similarly, in SLE World Wide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816, White J emphasised (at [57]) that admissions deliberately and formally made should not be permitted to be withdrawn unless sufficient cause is shown why they should be and, in particular, that it was insufficient that it was reasonably arguable that the admission be wrong for that purpose.

18 It is useful to start with the uncontroversial or less controversial matters which can be drawn from the document and its context. The starting point is the document on its face. First, it bears the signature of Mrs Kekatos, and so much is no longer in dispute. Secondly, it bears the date 29 August 2004, and it is not self-evident that that date has been retrospectively inserted in the document. Thirdly, it was plainly transmitted as part of a six page facsimile transmission by Mr Wayne Stafford to Mr Cvitanovic at, it would seem, 8.54am on 14 September 2004, under cover of a letter which said that it covered the three page Deed of Assignment, the one page undertaking and the fifth schedule of the Penrose Quarry Trust Deed.

19 Next, in its terms it refers to "the Agreement for Sale of Land ... on behalf of the Penrose Quarry Trust signed this day". Mr Southwick submits that this casts doubt on its contemporaneity, because the only occasions on which any agreement for sale of land was executed were in December 2003, or early 2005. However, the words "I will enter in to the Agreement for Sale of Land" suggest that the document was executed in anticipation of, and not after, the execution of any relevant agreement for sale of land. I think the preferable construction of the document is that the words "Signed this day" refer to the agreement for sale rather than to any trust deed, and that it contemplated such an agreement being signed, rather than necessarily referring to one that had already been executed "this day".

20 Mr Southwick also pointed to the circumstance that the document included an undertaking to apply moneys held by the parties under the deed of charge to each party in accordance with the amounts stated in Hawketts' accounts of 30 September 2003, and submitted that this was inconsistent with the provisions of the Deed of Assignment. I accept that there is an inconsistency in that respect. However, it seems to me that, were the only material before the Court the documentary material in the context to which I have referred, that inconsistency could not possibly prevail over the other matters so as to detract from the prima facie date of the document.

21 Is there anything else in the evidence which would detract from its prima facie date? Mr Stafford's evidence is to the effect that he received the undertaking - he does not say explicitly from whom - in or about August or September 2004, and that he sent it to Mr Cvitanovic by facsimile under cover of his letter of 10 September 2004 - which, as I have said, was sent on 14 September. Mr Cvitanovic, although initially saying that he received it on 10 September, ultimately came to the position that he received it, as the facsimile document suggests, on 14 September 2004, and subsequently had a conversation with Mr Kekatos, although that conversation did not refer specifically to the authority but only to the Deed of Assignment.

22 Mr Kekatos, in his affidavit, said: 151. I believe the document dated 29 August 2004 apparently signed by my wife Voula Kekatos was originally created in late 2003 in connection with the proposed Penrose Quarry Trust. …

23 That part of his affidavit was objected to and rejected but Mr Kekatos was given leave to supplement with oral evidence. In his evidence-in-chief, he had said that he thought the document related to Mr Hawketts' calculations about the charge holders some time at the end of 2003 when he came up with these figures. He said that the signature looked like his ex-wife's signature, and that he was unaware whether or not it was executed on 29 August 2004. He did say that he had not sent the document to Mr Cvitanovic but had only sent the Deed of Assignment. Subsequently he said that, doing the best he could, he believed that he had sent only the Deed of Assignment to Mr Cvitanovic, and appeared to concede that it was more probable than not that the undertaking and authority was sent to Mr Stafford, at least initially, by himself, "Though I can't say 'yes' or 'no'". When asked whether he could offer any other reasonable explanation for how the document came in to the possession of Mr Stafford, he said, "No, I can't. All I can suggest is that I gave it to him some time prior to that time because I don't think I prepared the document. I don't know".

24 Mr Hawketts said that he had not previously seen the undertaking and authority. 25 Mrs Kekatos has offered no evidence at all on this subject. As the signatory, the absence of evidence from her is significant. 26 To my mind it is unlikely in the extreme that this document was brought in to existence by Mr Hawketts or in connection with what he was doing. There is nothing in the function that he was performing that would have called for the production of any such document; moreover he seems to have had a fairly clear concept of a distinction between accounting work and legal work, and this was certainly not the former. 27 As Mr Hallen submitted, it would be quite remarkable if this document bore the date 29 August 2004 - the date on which the Deed of Assignment was apparently executed - unless it had itself been prepared and executed at or about that time - unless there had been some subsequent insertion of the date on it to give it the appearance of having corresponded with that time, but no one appears seriously to make that suggestion, or to claim to have sufficient instructions to do so. The evidence of Mr Kekatos is uncertain on the topic, and does not provide grounds for the conclusion that the date had been retrospectively inserted. 28 Strikingly, and importantly, there is no evidence on this topic from the person whose signature admittedly appears on the document and who is also the person who verified the defence in the first place, Mrs Kekatos. Mr Kekatos, as I have said, while he does not believe that he forwarded the document to Mr Stafford or Mr Cvitanovic, was unable categorically to deny that he did so. 29 Mr Southwick, when asked to enunciate what Mrs Kekatos' case was in respect of the document, said that it was a document unrelated to the assignment of the charge in September 2004, created on a date unknown to the parties but not on 29 August. That necessarily involves an implied assertion that the date was inserted by someone at some other time. I agree with Mr Southwick's submission that that does not necessarily imply a fraudulent or improper purpose, but very significantly it would invite forensic documentary examination, to ascertain whether the date had been inserted contemporaneously consistent with the prima facie appearance or not. 30 Taking all those matters together, I am afraid I am unpersuaded that it has been shown that the admission is even arguably, let alone plainly, wrong; accordingly I am unsatisfied that the admission was erroneously made. 31 I turn to the second question: whether it was made inadvertently. As I have already mentioned, the original defences of both defendants did not explicitly traverse the allegation that the document had been executed on 29 August 2004, although I accept that the allegation might have been covered by the general denial. 32 Mr Quintiliani, the solicitor for Mrs Kekatos, has offered an explanation which suggests that the defence to the Amended Statement of Claim was prepared in haste and under some pressure of time, and did not faithfully reflect what was discussed and contemplated in the conference which preceded its preparation. In that sense, as Mr Hallen fairly accepted for the plaintiffs, there may have been inadvertence. Moreover, the suggestion of inadvertence in that sense is supported by the circumstance that Mr Kekatos had in his affidavit, at paragraph 151, given the version to which I have already referred. 33 I must say that I would have thought that for Mrs Kekatos to make out a case of inadvertence at least some inquiry of her, who verified the defence, would have been required; yet there was no explanation forthcoming from that source. After all it is Mrs Kekatos who has sworn an affidavit deposing on oath that she believes the allegations of fact contained in the defence are true, that the allegations of fact denied in the defence are untrue, and that she does not know whether the allegations of fact not admitted in the defence are true. In the absence of such evidence, I do not think I can be persuaded that the admission was made inadvertently by Mrs Kekatos in the relevant sense, although based on what is in his affidavit I would accept that Mr Kekatos, who appears simply to have hastily copied much of the defence of Mrs Kekatos, did inadvertently, in effect, transcribe her admission into his own defence. 34 So far as prejudice is concerned, I was at first inclined to the view that the plaintiffs would suffer no irremediable prejudice by the withdrawal of the admissions. However, on closer examination, it becomes clear that the crucial question is the date of execution. If the document was, as it prima facie suggests, executed on 29 August, there is a very important contemporaneity with the Deed of Assignment prepared and executed at about the same time. If it was in fact executed at some quite different time, the significance of the document would be very much diminished, if not destroyed. That means that the time at which the date 29 August 2004 was inserted on the document is critical. That is a matter which, had the plaintiffs known it was in issue, could have been addressed by interrogatories of Mrs Kekatos - who, it is but recently known, is now not to give evidence, though she had previously served an affidavit - or by forensic document examination. Neither of those courses would now be reasonably available to the plaintiffs. In those circumstances, I think there will be significant forensic disadvantage to the plaintiffs if withdrawal of the admission were permitted. 35 In Hill End Gold, I said that cases should be decided on the real issues, so far as justice permits that to be achieved (at [63]). Consistent with what the Chief Judge had said in the cases to which I have referred, it is not necessarily so that, just because one of the three issues to which I have referred is answered adversely to a party, an application for leave to withdraw an admission must fail; ordinarily, a balancing exercise would be required to decide whether justice requires that the applicant be permitted to withdraw the admission. But, so far as I can tell on the evidence at this stage, I do not think that there is a real triable issue about the date of execution of the undertaking and authority. Ultimately, there is no evidence that denies that it was executed on 29 August 2004. 36 Even being of that view, still if there were no prejudice, and if I were satisfied that Mrs Kekatos' submissions were inadvertent, I might have come to a different ultimate conclusion; but when the combination of prejudice to the plaintiffs, failure to demonstrate inadvertence on the part of Mrs Kekatos, and failure to show that there is an arguable case, let alone explain that the admission was wrong in fact, the conclusion must be that the admission should stand, and the application for leave to withdraw be dismissed. 37 I order that the Notice of Motion filed today be dismissed with costs. **********

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