New South Wales Supreme Court CITATION : Silver v Dome Resources NL [2005] NSWSC 265 HEARING DATE(S) : 3 and 10 March 2005 JUDGMENT DATE : 10 March 2005 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Leave to withdraw admission in defence refused CATCHWORDS : PROCEDURE [99] - Supreme Court procedure - Practice under Supreme Court Rules - Admissions - Withdrawal - Absence of absolute right to withdraw - Discretionary considerations. Trade Practices Act 1974 (Cth) s 52 LEGISLATION CITED : Corporations Act 2001 (Cth) ss 200B and 200G Celestino v Celestino FCAFC unreported 16 August 1990 Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 Demasi v Linfox Transport (Aust) Pty Ltd NSWSC unreported 14 June 1995, McLelland CJ in Eq Drabsch v Switzerland General Insurance Co Ltd NSWSC unreported 16 October 1996, Santow J CASES CITED : Hutton v Meston [2004] WASCA 178 Jeans v Commonwealth Bank of Australia Ltd (2003) 204 ALR 327 McKenzie v Commonwealth [2001] VSC 361 The State of Queensland v J L Holdings Pty Limited (1997) 189 CLR 146 Michael Bernard Silver (P1 & XD1) Fair Choice Limited (P2 & XD2) PARTIES : Dome Resources NL (D1 & XC1) Durban Roodepoort Deep Limited (D2 x XC2) FILE NUMBER(S) : SC 2586/01 J E Thomson & M J Watts (Ps & XDs) COUNSEL : T G R Parker (Ds & XCs) Bull, Son & Schmidt (Ps & XDs) SOLICITORS : Allens Arthur Robinson (Ds & XCs) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 10 MARCH 2005 2586/01 MICHAEL BERNARD SILVER & ANOR v DOME RESOURCES NL & ORS JUDGMENT 1 HIS HONOUR: These are applications to amend further the statement of claim and the defence. The questions that have been contested on the hearing of the application are whether the defendants may further amend their defence to withdraw an admission and as to whether the plaintiffs may further amend their statement of claim to include claims under s 52 of the Trade Practices Act 1974 (Cth) in respect of two representations additional to the two representations already relied on. 2 In their original statement of claim, filed on 11 May 2001, the plaintiffs allege in par 20: "If the First Defendant made a payment to the Second Plaintiff pursuant to the terms of the Amended Retirement Deed, the First Plaintiff, who was at all relevant times a beneficially entitled shareholder of the Second Plaintiff, would have received a substantial benefit." In their defence filed 21 June 2001, the defendants did not deny, but traversed by non admission, par 20 of the statement of claim. In their amended defence filed 20 May 2002 the defendants admitted par 20 of the statement of claim. This formal amendment occurred shortly after evidence was filed on behalf of the plaintiff (for instance, after Mr Silver's affidavit was sworn on 5 April 2002). However, it was reasonably clear, while this evidence was being formulated, that the admission of par 20 was going to be made. 3 There is a long history in these proceedings of pleading amendments and interlocutory contests. The proceedings were originally fixed for trial on 4 to 6 February 2003. That fixture was vacated by Barrett J on 20 December 2002 in the following circumstances, as set out by his Honour in his judgment delivered on that day: "I am persuaded that the defendants should be allowed to withdraw the relevant admissions since on what I have seen there are valid questions to be ventilated about the authority of the signatories to the retirement variation deed and the corporate actions supposedly authorising the deed to be made. I accept that this may cause prejudice to the plaintiffs by way of a need for further inquiry and possibly discovery. I also accept that the point could have been raised at an earlier stage by the defendants. This is one of those cases where the needs of orderly progress of proceedings towards trial and so far as possible the maintenance of scheduled hearing dates have to be balanced against the interests of justice and as I see the interests of justice there is a need for the authority issue having been raised at least in a cogent way to be introduced into the proceedings. I therefore propose to allow the amendments sought by the defendants." I should add that the question of authority mentioned by Barrett J remains central to and will be an important issue in the longer trial now fixed before me for 4 to 15 April 2005. 4 The defendants in late January 2005 indicated for the first time a desire to withdraw their admission of par 20 of the statement of claim. The original decision to admit par 20 was made in consultation with the defendants' then counsel. In the statement tendered in support of the application to withdraw the admission, the reasons for making the admission were stated as follows: "5 At the time that the Admission was made no evidence had been produced to the Defendants or AAR to substantiate the allegations made in paragraph 20 of the Statement of Claim. The decision to make the Admission was made because it was believed that making the admission would assist the Defendants' Cross Claim and in particular would assist in the contentions that (a) the First Plaintiff's knowledge should be attributed to the Second Plaintiff, and (b) the First Plaintiff personally benefited from the execution of the Retirement Variation Deed and from Mostert and Stratton's breaches of duty. 6 As a result of reconsideration by the present Counsel it is now desired to withdraw the Admission. At the same time amendments will be made to the Cross Claim to remove allegations from the Cross Claim consistent with the Admission. The decision to withdraw the admission of paragraph 20 of the Statement of Claim is based on a judgment by the present Counsel, with which Mr Martino, having considered the matter, agrees, that the Defendants' interests are best served by withdrawing the admission and making those amendments to the Cross Claim." Subsequently, affidavits of Mr Davis and Mr Martino were filed and read, but they do not substantially differ from the summary in the statement tendered. 5 The terms of par 20 of the statement of claim are not crystal clear to the uninstructed mind. However, it is plain that the factual matters sought to be contested are whether the first plaintiff is a beneficially entitled shareholder of the second plaintiff and whether he would have received a "substantial benefit", that being a term in an accounting standard that feeds into the provisions of ss 200B and 200G of the Corporations Act 2001 (Cth). Matters under those sections are in play in other parts of the pleadings. 6 The question of whether the first plaintiff was a beneficial shareholder depends on an oral arrangement between him and a Mr Yu. The plaintiffs have relied on affidavit evidence of their solicitor, Mr Marucci, that Mr Yu is difficult to find, having disappeared into China. Creditably, Mr Marucci has bent every effort to find him and has located him in a rest home somewhere between Beijing and Tienjin, where he can contact him by email. Mr Yu is ill and there are serious doubts about his ability to travel and as to the availability of video link facilities to take his cross examination. Even the process of obtaining his evidence would be difficult and disruptive at this late stage. The importance of an independent witness to corroborate the first plaintiff's account of the oral arrangement is obvious. 7 The defendants draw attention to the fact that no affidavit by Mr Yu was put on at an earlier time, when he was available. Mr Marucci frankly concedes that he did not consider this as a possibility, when evidence was filed in early 2002. However, it lies ill in the mouth of defendants who have changed their own mind at the eleventh hour to complain that the plaintiffs have changed their mind about the necessity of Mr Yu's evidence. 8 The principles concerning the withdrawal of admissions have been discussed in a number of recent cases. They were considered at length by Rogers CJ Comm D in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738. Much of what was said in that case is not germane to the present case, but his Honour enunciated the central principle that leave may be granted for an admission to be withdrawn if justice so requires (at 746). The relevant principles were formulated more amply by Santow J (as his Honour then was) in Drabsch v Switzerland General Insurance Co Ltd NSWSC unreported 16 October 1996 and his Honour's formulation was adopted in the Full Court of the Federal Court of Australia in Jeans v Commonwealth Bank of Australia Ltd (2003) 204 ALR 327 at [17] and [18] as follows: "[17] As his Honour noted, it was common ground that the relevant principles to be applied on the motion for leave were those dealing with an application to withdrawn [sic] an admission. His Honour summarised these principles. There was no suggestion on the appeal that his Honour applied the wrong principles or summarised them inaccurately. His Honour correctly rejected the approach taken in England in H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694; [1965] 1 All ER 934 where it was suggested that, except in cases which gave rise to an estoppel, an admission might be withdrawn, at least if the other party was not prejudiced otherwise than in a way that might be cured by a costs order. Rather his Honour accepted the view advanced by Rogers CJ in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 that a party should not be permitted easily to withdraw an admission as otherwise the making of an admission might become meaningless. Nevertheless there was a countervailing policy, his Honour accepted, that a party not be discouraged from making admissions out of fear that once given they might not be withdrawn. [18] The true position was, his Honour said, that there was no principle that admissions might or might not be withdrawn. Rather the court had a broad discretion to weigh up all matters with the overall question being to ensure that there was a fair trial. His Honour accepted the principles stated by Santow J of the Supreme Court of New South Wales in Drabsch v Switzerland General Insurance Co Ltd (unreported, 16 October 1996, BC9604909) as follows (at 7 – 8): 1 Where a party under no apparent disability makes a clear and distinct admission which is accepted by its opponent and acted upon, for reasons of policy and the due conduct of the business of the court, an application to withdraw the admission, especially at appeal, should not be freely granted … 2 The question is one for the reviewing judge to consider in the context of each particular appeal, with the general guidelines being that the person seeking on a review to withdraw a concession made should provide some good reason why the judge should disturb what was previously common ground or conceded … 3 Where a court is satisfied that admissions have been made after consideration and advice such as from the parties' expert and after full opportunity to consider its case and whether the admission should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn … 4 It will 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 circumstances show that the admission was made inadvertently or without due consideration of material matters. Irrespective of whether the admission has or has not been formally made, leave may be refused if the other party has changed its position in reliance upon the admission … 5 Following Cohen v McWilliam (1995) 38 NSWLR 476, a court is not obliged to give decisive weight to court efficiency, such that a party who wishes to defend its claim is entitled to a hearing on the merits, with costs orders being available as a means of compensating the other party for any costs thereby unnecessarily incurred or not fairly visited on the other party." Their Honours went on to consider the relationship of those principles to the decision of the High Court in The State of Queensland v J L Holdings Pty Limited (1997) 189 CLR 146. 9 In reality, in my view, there is no conflict between the statements of principle in the withdrawal of admissions cases that I have cited and in J L Holdings, since the governing consideration in each instance is the requirement of justice or of ensuring there is a fair trial. There had been an earlier formulation of the principles as to the withdrawal of admissions by the Full Court of the Federal Court of Australia in Celestino v Celestino FCAFC unreported 16 August 1990. But this statement of principle predated J L Holdings and has been held unsound by Gillard J in McKenzie v Commonwealth [2001] VSC 361 at [46] and by the Full Court of Western Australia in Hutton v Meston [2004] WASCA 178 at [18]. This disavowal was in part because of a conflict between the earlier case and J L Holdings. In any event, I take Santow J's statement in Drabsch, approved by the Full Court of the Federal Court in Jeans, as representing a correct statement of the applicable principles. 10 Among the propositions that flow from the statements of Santow J and of the Federal Court, are that withdrawals will not be allowed as a matter of course; and that, as the applicant for withdrawal is seeking an indulgence, it is for that applicant to establish that there is a case for withdrawal. Mr T G R Parker, of counsel for the defendants, put it to me that the withdrawal would be allowed unless it was futile and that it was for the opponent to establish the futility, which the plaintiffs had not done. On the contrary, it is my view that, if the matter is to turn on onus, the onus is on the applicant to establish that there is utility in the withdrawal. Thus, in Australia & New Zealand Banking Group Ltd v Bechely-Crundall NSWSC unreported 11 June 1996, Sperling J said that relief would be granted by way of leave to withdraw an admission "provided that the matter is seriously in question in the proceedings". That is, the utility of the withdrawal of the admission must be established, not its futility. 11 Were it not for one factor, which I shall advert to below, I am firmly of the view that the withdrawal should not be allowed. The defendants, who have been as frank as the plaintiffs in the presentation of their case on the application, clearly state that the admission was made on the advice of counsel after consideration of material factors and at least in part to gain a tactical advantage in the presentation of their cross claim. They do not establish that refusal of the application will lead to the conduct of the case on a factual basis that is different from reality. They simply say that new counsel now deems it advantageous to the defendants to deny par 20 of the statement of claim. Furthermore, I find that the plaintiffs would be prejudiced by withdrawal of the admission at this stage and that that prejudice could not be cured simply by a costs order. As things stand, they would wish to have Mr Yu's evidence, if the issue were contested. Their preparation for a trial a month off would be disrupted by the effort to get that evidence and it is far from certain whether it could be obtained in time in acceptable form. His evidence appears to me to be very material on the issue sought to be raised. Save for what follows, in my view, refusal of the application to withdraw would be in accordance with the requirements of justice. 12 The only countervailing consideration is that the plaintiffs seek to rely on new causes of action which were not in play when the admission was made. It is clear that par 20 is material to those new causes of action. In Demasi v Linfox Transport (Aust) Pty Ltd NSWSC unreported 14 June 1995, McLelland CJ in Eq would not have permitted admissions made in a defence to be withdrawn except that the statement of claim was amended "in a way which may arguably cause the admitted fact to have an added or different significance in relation to a claim first brought forward by the amendment to the statement of claim." There the allegation sought to be put in issue (whether a lease expired on 29 or 30 September) had a totally different significance in respect of the added, as opposed to the existing, claim. Here the significance of the admitted fact is of the same nature in relation to the proposed new claims as to the old, but that does not alter the fact that the plaintiffs seek to rely on new claims that were not propounded at the time the admission was made. I do not propose to hold an inquiry into whether the defendants' decision would have been the same had the new claims already been in play at that time. Like McLelland CJ in Eq in Demasi, I do not think that defendants should be held to their admission in respect of claims not under consideration at the time it was made. If they are not held to the admission in relation to some claims, they should not be held to it at all. 13 I propose to follow the course followed by his Honour in Demasi, namely, to put the plaintiffs to an election as to whether or not they wish to persist in their amendment application, so far as it relates to the new causes of action. If they do, since no other prejudice is suggested to flow from that amendment, I shall allow that amendment, but also allow the withdrawal of the admission. If they do not persist with that amendment, I intend to refuse the defendants' application to withdraw the admission. 14 In fact, this election was debated during submissions on the motion and the plaintiffs indicated to the Court that, if I put them to that election, they would retract their application to amend by adding the additional representations. 15 The result is that the plaintiffs will be granted leave to file a further amended statement of claim in the form propounded omitting the amended paragraphs between 53A and 56A and also omitting prayer 11A. The defendants' application for leave to withdraw the admission will be refused. 16 This decision will result in some, but not all, of the originally sought amendments being allowed, both to the statement of claim and to the defence. The parties should bring forward for formal leave to be granted to their filing in court further versions of the amended pleadings which are in accordance with this ruling. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.