FEDERAL COURT OF AUSTRALIA Carna Group Pty Ltd v The Griffin Coal Mining Company (No 5) [2020] FCA 970 File number: WAD 354 of 2018 Judge: MCKERRACHER J Date of judgment: 9 July 2020 Catchwords: PRACTICE AND PROCEDURE – pleadings – amendment – applications for leave to withdraw admissions – whether the admissions concern a question of law or fact – whether it is in the interests of justice to allow the amendments Held: applications granted Legislation: Federal Court Rules 2011 (Cth) r 26.11(2) Cases cited: Ansell Healthcare Products LLC v Reckitt Benckiser (Australia) Pty Ltd (No 2) [2016] FCA 765 Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1390 Awap Sgt 26 Investment Ltd v CN 2000 Holdings Ltd [2020] WASCA 74 Carna Group Pty Ltd v Griffin Coal Mining Company (No 3) [2020] FCA 576 Coliban Heights Pty Ltd v Citisolar Vic Pty Ltd [2018] VSCA 191 Damberg v Damberg [2001] NSWCA 87 Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 Federal Commissioner of Taxation v Travelex Ltd [2020] FCAFC 10 J Kitchen & Sons Pty Ltd v Stewart's Cash & Carry Stores (1942) 66 CLR 116 Juno Pharmaceuticals Pty Ltd v Millennium Pharmaceuticals, Inc [2019] FCA 526 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 Optical 88 Ltd v Optical 88 Pty Ltd [2010] FCA 310 Shine v Williams [2007] WASCA 194 Trevilyan v Donaldson [1997] SASC 6502 Date of hearing: 18 June 2020 and determined on the papers Date of last submissions: 30 June 2020 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: Ms R Young Solicitor for the Applicant: Clayton Utz Counsel for the First Respondent: Ms K McNally Solicitor for the First Respondent: McNally & Co Counsel for the Second Respondent: Mr A Mizen Solicitor for the Second Respondent: Mizen + Mizen Counsel for the Third Respondent: Mr S Penrose Solicitor for the Third Respondent: Tottle Partners ORDERS WAD 354 of 2018 BETWEEN: CARNA GROUP PTY LTD ACN 063 629 630 (IN LIQUIDATION) Applicant AND: THE GRIFFIN COAL MINING COMPANY PTY LTD ACN 008 667 285 First Respondent RAJ KUMAR ROY Second Respondent JAMES RIORDAN Third Respondent AND BETWEEN: THE GRIFFIN COAL MINING COMPANY PTY LTD ACN 008 667 285 Cross-claimant AND: CARNA GROUP PTY LTD ACN 063 629 630 (IN LIQUIDATION) First Cross-Respondent HARRY CARNA Second Cross-Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 9 JULY 2020 THE COURT ORDERS THAT: 1. Leave is granted to each of the respondents to withdraw the admissions made in their defences as described in the interlocutory applications that were filed by the first respondent on 24 June 2020, the second respondent on 24 June 2020 and the third respondent on 23 June 2020. 2. The respondents pay the applicant's costs thrown away by reason of further amendment to the defences. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MCKERRACHER J: 1 The respondents apply to withdraw admissions contained in their defences as to the termination of a contract. The application is opposed. To avoid unnecessary repetition, these reasons should be understood in the light of earlier interlocutory reasons. In particular, my reasons in Carna Group Pty Ltd v Griffin Coal Mining Company (No 3) [2020] FCA 576 set out the relevant factual background (at [4]-[29]) and these reasons adopt the same defined terms. 2 Although the relevant pleas vary in their wording across each of the respondents' defences, the admissions sought to be withdrawn are, in substance, that: (a) on or about 23 February 2014, Carna terminated the Contract, or alternatively the Contract came to an end; and (b) on or about 14 March 2014, Carna and Griffin entered into the Substituted Contract; 3 All respondents contend the matter concerns a question of law and argue that such admissions would not bind the Court in any event: see Shine v Williams [2007] WASCA 194 per Buss JA and Murray AJA (at [26]). 4 Griffin says that the admissions are of legal conclusions that were made when Griffin was represented by another legal practitioner. More importantly it says that if leave is not granted to withdraw the admissions, Griffin will be required to proceed to trial based on a legal position which is contrary to the certificate signed by its legal practitioner, as to which it relies upon Damberg v Damberg [2001] NSWCA 87 per Heydon JA (at [160]) (Spigelman CJ and Sheller JA agreeing) where it was said: In short, the courts are averse to pronouncing judgments on hypotheses which are not correct. To do so is tantamount to giving advisory opinions and to encouraging collusive litigation. On the other hand, the courts will act on admissions of or agreements about matters of fact where there is no reason to doubt their correctness. But they are reluctant to do so where there is reason to question the correctness of the facts admitted or agreed. A similar caution appears to apply in relation to an assumption or agreement that foreign law is the same as the lex fori. 5 Griffin also refers to Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317, although that decision concerned the withdrawal of an admission on appeal. 6 The second respondent, Mr Roy, says that he was not a party to the Contract and any 'admission' by him in relation to it is not material. Nor is he legally qualified or otherwise qualified to opine on the correct legal conclusion or make admissions about it. It remains the case that Carna carries the burden of satisfying the Court that the contractual position was as it alleges. An admission by Mr Roy does not establish that matter, and the withdrawal effects no change as to the extent of the matters Carna must establish as part of its case. 7 All respondents emphasise that the relevant pleas were prepared prior to discovery. Since 3 December 2018, there have been approximately 50,000 documents discovered and produced by subpoena. The withdrawal of the admissions by Mr Roy is said to arise from further consideration of the correct legal characterisation of the matter in light of the matters evident on discovery. 8 It is emphasised by Mr Roy that the amendments do not raise any new factual issues and there is no prejudice to Carna in any relevant sense. Witness statements have not yet been exchanged and documents have not yet been put into a trial bundle. The trial is some nine months away. 9 Carna opposes the grant of leave. It says the respondents' applications seek to change the complexion of the case, add to the matters which need to be pleaded, and expand the scope of discovery and evidence to be led. There is no adequate explanation for the timing of the applications, and insufficient evidence has been tendered in support. The time for moving to trial on the case raised, and fought, has, it says, well and truly been reached. 10 Carna says that r 26.11(2) of the Federal Court Rules 2011 (Cth) (FCR) obliges the respondents to seek leave to withdraw any admission or other plea 'that benefits' Carna. That applies to the withdrawal of the 'admission or plea' by which the respondents admitted that the Contract was terminated on or around 23 February 2014, and the Substituted Contract was formed on or about 14 March 2014. It is irrelevant therefore whether the withdrawn pleas were admissions as to law or fact. They are admissions or pleas which benefited Carna. In any event, it is contended that whether Carna terminated the Contract is a matter of mixed fact and law, and not merely a legal conclusion: see, for example, Coliban Heights Pty Ltd v Citisolar Vic Pty Ltd [2018] VSCA 191 per Tate, Kyrou and McLeish JJA (at [46]), citing J Kitchen & Sons Pty Ltd v Stewart's Cash & Carry Stores (1942) 66 CLR 116 per Latham CJ and McTiernan J (at 126-127). 11 Carna accepts that in deciding whether to grant leave to withdraw, the Court has a broad discretion. The overriding consideration will be what is in the interests of justice, considering the circumstances of the particular case at hand. In particular, the Court may consider: (a) the circumstances in which the admission came to be made; (b) the reasons given for the application to withdraw the admission; (c) the time for which the admission has stood on the Court record, and any unexplained delay in applying to withdraw the admission; (d) the strength of any evidence or case advanced that the admission is incorrect; (e) the competing prejudice suffered by the parties; and (f) modern case management objectives. see, for example, Juno Pharmaceuticals Pty Ltd v Millennium Pharmaceuticals, Inc [2019] FCA 526 per Besanko J (at [38] and the cases cited therein); Ansell Healthcare Products LLC v Reckitt Benckiser (Australia) Pty Ltd (No 2) [2016] FCA 765 per Rares J (at [49]-[54] and the cases cited therein). 12 Where a party makes an admission which is accepted by its opponent and acted upon, that party should not be permitted to withdraw the admission without good cause: Optical 88 Ltd v Optical 88 Pty Ltd [2010] FCA 310 per Yates J (at [31]), citing with approval Australian Competition and Consumer Commission v Construction, Forestry Mining and Energy Union [2007] FCA 1390 per Finn J (at [4]). 13 Carna argues that the interests of justice are best served by this case continuing to proceed on the long standing premise that the Contract was terminated and the Substituted Contract formed. 14 Carna points to the fact that the admissions that the respondents seek to withdraw have stood on the record for 18 months. In those 18 months, the respondents have brought multiple interlocutory applications predicated on the Contract being terminated on or about 23 February 2014, and the Substituted Contract forming on 14 March 2014. These include, the third respondent, Mr Riordan's, and Griffin's applications dated 28 and 29 November 2019 (respectively) seeking summary judgment in respect of the Cash Support Representation, in which Mr Riordan accepted, in his affidavit sworn in support of the application, that Carna commenced work pursuant to the Substituted Contract on or around 24 March 2014. Additionally, since 30 October 2018, Griffin has pursued a cross-claim against Carna predicated on breaches of the Substituted Contract. 15 Carna complains that the respondents' explanation for the withdrawals is that they have reconsidered their position in light of the 'voluminous' discovery. But their change of mind is 'apparently derived' from four documents, all of which are key documents. Carna says that these documents have been well known to the respondents since 2014 and three were put again to Mr Riordan in 2016 (and two of them were discovered in this proceeding in early 2019). The documents are as follows: Document Date Description Document ID Production and Disclosure Information 30.01.2014 Invoice 3581 (Mobilisation Fee Invoice) CAR.001.010.9763 Sent to Mr Riordan and Griffin on 31 January 2014 (see JFS-4). Produced as part of Carna's discovery on 1 March 2019. 23.02.2014 Carna termination letter (2014/0011) GD1.001.002.1674 GRF.002.001.2622 (Multiple IDs) Provided to Griffin on or around 23 February 2014. See JFS-7 for Mr Roy's acknowledgment of receipt. MFI60, put to Mr Riordan on 13 April 2016 in examinations in COR 220 of 2015 (see JFS-9 at 137). 23.02.2014 Carna's second letter to Griffin dated 23 February 2014 (2014/0012) CAR.001.035.8523 GRF.002.001.2624 (Multiple IDs) Sent to Griffin on 24 February 2014 (JFS-5). See, also, JFS-7 for Mr Roy's acknowledgement of receipt. MFI61, put to Mr Riordan on 13 April 2016 in COR 220 of 2015 (see JFS-9 at 143-151) Produced as part of Carna's discovery on 28 March 2019. 14.03.2014 Carna letter to Griffin purporting to withdraw termination (2014/0014) CAR.001.035.8553 Sent to all respondents on 14 March 2014 (see JFS-8). MFI64, put to Mr Riordan on 13 April 2016 in examinations in COR 220 of 2015 (JFS-9 157-158). 16 Carna says that there are no new materials which justify the respondents' proposed withdrawals at this late stage of the proceeding. It also notes that Mr Riordan and Griffin also say there is complexity in the discovered documents. This is said to be because Carna issued the invoice identified in the table above dated 30 January 2014 and Griffin paid it on 31 January 2014, when Carna's case is that the Contract had been terminated by the time of that invoice and payment. Carna says that it has never asserted that the Contract was terminated by 30 January 2014. Rather, Carna's case is, and always has been, that the initial Contract was terminated by Carna's letter of termination to Griffin dated 23 February 2014. Carna says it is unclear why any complexity has arisen for Mr Riordan and Griffin based on the issue of invoice 3581. 17 Carna contends that by sending Griffin the termination letter dated 23 February 2014 (on 24 February 2014), Carna formally communicated its election to terminate the Contract to Griffin. The respondents have not put any evidence on by which Griffin disputes Carna's termination, or in which Griffin asserted that the Contract remained on foot. Upon Griffin's receipt of the letter, the Contract came to an end. The opening line of Carna's second letter to Griffin dated 23 February 2014 confirms Carna's termination of the Contract. At para 10, the letter further states that 'before entry into any new contract, it would be essential to agree the terms of the relevant schedules to the contract'. 18 Carna further argues that as to its own letter dated 14 March 2014, though it purports to 'withdraw' Carna's termination letter dated 23 February 2014, at law the Contract did not re-enliven retrospectively with effect from 23 February 2014: A termination is final and irrevocable. Anything afterwards is a new agreement: Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 per Rich, Dixon, Evatt JJ (at 733); cited with approval in Trevilyan v Donaldson [1997] SASC 6502 per Olsson J. Carna asserts that the respondents have presented no meaningful evidence in support of their proposed new case. 19 As to prejudice, Carna says it will suffer prejudice if the amendments are allowed for the reasons that follow. 20 First, Carna is a company in liquidation. Though funded in this litigation, it must (like all parties) judiciously use its funds. Carna has prepared its case for the last 18 months on the premise that the Contract was terminated, and has defended multiple interlocutory applications and Griffin's cross-claim predicated on that basis in that time. 21 Secondly, Carna will sustain additional costs in preparing its pleadings if the amendments are allowed. For example, Carna may plead that the respondents are estopped from denying the Contract was terminated and the Substituted Contract was formed. 22 Thirdly, Carna will sustain additional costs in discovery. Carna may seek further and better discovery from Griffin for documents on the issue as to why the schedules to the Contract had not been agreed by the parties as at the date of termination. 23 One of the categories of documents previously discovered by Griffin included all correspondence from 1 September 2013 to December 2014 relating to the entry into, and variation of, the Contract and Substituted Contract, and the negotiation, agreement or variations of the Schedules, Mine Plan, Production Requirements and Production Schedules. Another of Griffin's categories of discovery was all documents from March 2014 to December 2014 recording the condition of Griffin's plant and equipment. 24 In light of the proposed amendments, to assist in explaining matters relating to termination in February 2014, Carna may seek further and better discovery from Griffin as to the condition of Griffin's plant and equipment from late 2013 to February 2014, including communications it had (including with third parties) about the quality of the plant and equipment, maintenance records and any documents identifying the reasons for the disrepair from late 2013 to February 2014. The work involved in obtaining the further discovery from Griffin, and reviewing the documents produced, is anticipated to take a further two to four weeks (subject to Griffin producing the required documents within that time frame). 25 Fourthly, Carna will sustain additional costs in the preparation of evidence, as: (a) if termination is a disputed issue, Carna may need to consider leading evidence to justify the termination in February 2014. The respondents may lead evidence as to what they now contend was Carna's non-performance of the Contract in early 2014. This may broaden the scope of lay and documentary evidence. None of that evidence could be finalised until Griffin has provided the further and better discovery identified above; (b) fresh work would be required to specifically interrogate the respondents' existing discovery on matters relating to termination in February 2014, including documents identifying the difficulties that arose in the agreement of the schedules to the Contract prior to Carna's termination of the Contract in February 2014. It is anticipated that this work would take a further one to two weeks; and (c) Carna has briefed its expert witness on the basis that the Contract was terminated, and a Substituted Contract formed. The expert is well-advanced in preparing his report on this basis. Work to revise the expert brief would take a further one to two weeks. The expert has been proceeding on an instruction that the Substituted Contract was formed, and has already spent considerable time on the brief. 26 In contrast, Carna says that the respondents have not identified any prejudice they will suffer if the applications are refused, likely because no relevant prejudice will be suffered by the respondents. It says the proposed case from the respondents appears to be weak at law, or in fact (or both). Moreover, even if the amendments were allowed, the respondents would still need to meet Carna's primary case that the Cash Support Representation and Re-affirmed Warranty induced Carna to enter into the Substituted Contract. This is the case that the respondents have been preparing to meet, and will need to meet regardless of whether leave is granted to amend. 27 Finally, Carna says that the need to ensure efficient use of parties' and the Court's resources supports the refusal of the respondents' applications. It is no small matter to withdraw a fundamental and agreed aspect of Carna's claim and Griffin's cross-claim. The interests of justice are best served by not allowing amendments which are not well supported by the evidence, in circumstances in which Carna will suffer substantial prejudice. CONSIDERATION The admission 28 Although the question of termination may be a mixed question of fact and law, it is primarily the admission of a legal conclusion, not a material fact that the respondents seek to withdraw. As such, the admission would not bind the Court: Federal Commissioner of Taxation v Travelex Ltd [2020] FCAFC 10 per Derrington J (at [88]) (Kenny J agreeing (at [1]) and Steward J agreeing (at [158])); Awap Sgt 26 Investment Ltd v CN 2000 Holdings Ltd [2020] WASCA 74 per Buss P, Mitchell JA, Hill J (at [181]-[189]). 29 It is unclear what role the voluminous discovery has played in the proposed withdrawal but it is clear that the withdrawal of the admission arises from further consideration of what is thought to be the correct legal characterisation of the conduct of Carna and Griffin. 30 It does seem, at least provisionally, to be the case, as it often is in commerce, that the proposed withdrawal of the admission is set against a factual background which does not readily lend itself to conventional textbook contractual analysis. 31 Although Griffin purported to terminate the Contract by letter dated 23 February 2014 in circumstances where the conditions precedent to performance of the Contract had not been satisfied, Carna and Griffin thereafter continued to negotiate regarding the schedules to the Contract, leading to Carna by letter dated 14 March 2014 'formally withdraw[ing]' the purported termination and confirming that the conditions precedent of the Contract had been satisfied on 13 March 2014. 32 The summary of relevant matters to be considered in relation to the withdrawal of admissions are accurately set out by Carna (and adopted at [11] above) and have been conveniently identified in Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1390 (at [4]) and Juno (at [38]). The overriding consideration is the interests of justice. 33 With a little reluctance I do accept the respondents' contention that in this case the amendment is of a legal conclusion arising from muddled background facts and is arguably, or at least not unarguably, consistent with a reasonable assessment of those facts, and that it is sought to be made some nine months before the trial and well before any witness statements are to be exchanged. As such, even if the amendment is capable of giving rise to any detriment or prejudice to Carna, that prejudice should be addressed by an order for cost thrown away by reason of the amendment. Those may be considerable. CONCLUSION 34 The interests of justice in proceeding upon what the respondents contend is the proper construction to be placed on the facts and circumstances is better satisfied than refusing leave to amend so as to proceed upon a premise which is not adopted by way of defence. In any event, the respondents will still have to meet the case for Carna based on the representations. Carna will still rely on that part of its case, which it describes as its primary case. That description also accords with my understanding to date. The application will be granted. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 9 July 2020