New South Wales Supreme Court CITATION : Australian Pharmaceutical Industries v Egan [2010] NSWSC 203 HEARING DATE(S) : 26/2/10 JURISDICTION : Equity Division Commercial List JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 26 February 2010 DECISION : Leave to withdraw admission not granted CATCHWORDS : PROCEDURE - admissions - application for leave by defendant to withdraw admission made in cross-examination - whether admission made inadvertently or without consideration of material matters - where relevant material had been put before defendant and defendant was questioned fairly about it - whether admission reflected true state of affairs. CATEGORY : Procedural and other rulings CASES CITED : Hill End Gold Ltd v First Tiffany Resources Corp [2008] NSWSC 866 Stafford v Kekatos (No 2) [2008] NSWSC 1044 PARTIES : Australian Pharmaceutical Industries Limited (Plaintiff) Elizabeth Anne Egan (Defendant) FILE NUMBER(S) : SC 2009/298774 COUNSEL : M Condon (Plaintiff) S O'Brien (Defendant) SOLICITORS : Holman Webb Lawyers (Plaintiff) McDonald Johnson Lawyers (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McDOUGALL J 26 February 2010 50167/09 AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED v EGAN JUDGMENT 1 HIS HONOUR: Two notices of motion were referred to me today for hearing in these proceedings. In point of time, the first notice of motion was the plaintiff's, filed on 2 December 2009, in which it sought among other things, orders that the commercial response be struck out and judgment. 2 That notice of motion has been amended by an amended notice of motion filed in Court today in which the plaintiff seeks leave to file an amended list statement (that leave has been given) and, among other things, judgment for the amount as claimed on a summary basis. 3 The other notice of motion is the defendant's notice of motion in which she seeks leave to withdraw an admission made by her in cross-examination on 14 December 2009. 4 The admission identified in the defendant's notice of motion is "that the plaintiff has given the defendant credit for an amount of $935,000 as shown in" a certain document. That was put to the defendant in cross-examination on an earlier occasion. I was informed that the two notices of motion would take between them two hours of hearing time: an accurate assessment but for a matter to which I shall refer in due course. 5 Accordingly, that estimate being at what I might call the outer end of time available on a Friday (and just below the limit by reference to which special fixtures should be set) I proceeded with the hearing of the two motions. Logically, the defendant's notice of motion was the first dealt with. 6 The admission in question was made in cross-examination on 14 December 2009, in the course of the hearing the unamended notice of motion of the plaintiff. It is desirable to know a little of the background to these proceedings. 7 The plaintiff supplies, among other things, pharmaceutical goods to its customers who are pharmacists carrying on business throughout New South Wales and, no doubt, elsewhere. The defendant has at all material times carried on a pharmacy known as the Derby Street Day Night Chemist and has at all material times been a customer of the plaintiff. 8 The plaintiff's case is that there is a balance owing today, on the defendant's account for goods sold and delivered, in excess of $3.5 million. 9 The defendant contested the amount due, and asserted amongst other things that the plaintiff's records did not give credit for at least one significant payment. She referred to a payment of $935,000 made on about 29 January 2004. That money was received as part of the proceeds of a loan transaction made between the defendant and her bank. 10 I have a strong impression that the defendant's record-keeping skills are not of a high order. That may be wrong or it may be right; it is not intended to be a criticism but it means, I think, that the defendant was genuine when she said that she could not understand the state of accounts between her and the plaintiff. 11 It has to be said that her understanding has not necessarily been assisted by the way in which the plaintiff has presented at least some statements of the account, but that is by way of background only. 12 It is important to know that in March 2008 the plaintiff and the defendant entered into a deed with the somewhat unusual title of "Security Interest". By recital B to that deed, the parties acknowledged that the defendant owed the plaintiff a trading account debt as at 5 March 2008 of $3,226,487.59. By recital C, the parties acknowledged that the plaintiff was prepared to defer payment of part of that sum, $1,856,884.80, on conditions including that it receive certain specified securities. By cl 2.3 of that deed, it was stated that the defendant had entered into the agreement in consideration of the plaintiff not making demand for the amount of $1,856,884.80 and transferring that to a deferred payment account. 13 The evidence of Mr Angus Clemie is that from time to time, when customers of the plaintiff got into difficulties, deferred payment arrangements are made, the effect of which is to put off payment of part of the amount owing so as to enable them to keep trading and, it is hoped, pay out the full amount owing to the plaintiff. 14 In substance, the agreement of March 2008 was intended to effect such an arrangement between the plaintiff and the defendant, but with the plaintiff's position being secured. 15 As I have said, the plaintiff's original notice of motion came on for hearing before me on 14 December 2009 (a Monday). It had been returnable the preceding Friday (11 December 2009) and had been given a special fixture. 16 The plaintiff had evidence of the kind that is usually found in applications for summary judgment, in anticipation of the defendant's response being struck out (which had to happen because it was woefully inadequate). The defendant put on evidence by which she sought to show that the plaintiff's accounts did not accurately reflect the balance between her and it. Her evidence made no reference to the deed nor to the admission effected by recital B (or the facts the subject of that recital). 17 The plaintiff's evidence included an affidavit of its solicitor, Mr Stephen David Rogers. He dealt, among other things, with the defendant's proposition that an amount of $935,000 which was paid had not been credited to her account. He annexed to his affidavit a statement for an account number 80225 which showed that a cash amount of $935,000 had been paid and credited on 29 January 2004, reducing the balance outstanding on the account accordingly. That affidavit, or at least the annexure, was given to the defendant on 11 December 2009. The defendant was cross-examined on, among other things, that statement of account. Before the cross-examination turned to the statement, it established that the defendant had had the benefit of accounting advice since at least 2005, in particular of an accountant, Mr Duncan, who had been asked to investigate the plaintiff's claims and who was said to have produced some sort of reconciliation. Against that background, the defendant was shown the statement to which I have referred (annexure A to Mr Rogers' affidavit of 11 December 2009). 18 The defendant's attention was drawn to the credit for $935,000. She acknowledged that she had seen the document (for the first time) the preceding Friday. She was then asked, by reference to the document, whether she disputed that the amount in question had been credited to the account. She answered: "Well seeing this it looks like it has, yes." 19 She was asked whether she disputed the amount that had been credited to her account, to which she answered "No". She then gave the following evidence at T4.30-35: Q. That amount is in dispute, having now seen this document do you now accept that there is no dispute about that $935,000 figure? A. Yes. Q. You are agreeing with that proposition? A. Yes. 20 That is the admission that the defendant seeks, by her notice of motion, to which I have referred, to withdraw. 21 The factual basis on which the defendant seeks to withdraw the admission is set out in a number of affidavits that she has sworn. In one, sworn 15 January 2010, the defendant said that, having conferred with her accountant, Mr Duncan, on 16 December 2009, she "realised for the first time that the statement was not...of her account with the plaintiff." She referred to an affidavit of Mr Duncan (which was not read on the application before me today) which, if one looks at, makes a number of observations about the form and content of the statement. The defendant then said: "I say that the sum of $935,000 was not in fact credited to my account with the plaintiff on 29 January 2004". 22 The plaintiff replied to this with some further evidence, including an affidavit of Mr Clemie which exhibited, among other things, some sort of reconciliation prepared by him showing transfers between the defendant's trading account and her deferred payment account. That document shows in substance that from time to time the value of invoices were transferred from what is called the "debtors" account to what is called the "deferment" account. 23 The latter account is account number 80225, the number appearing on the statement in respect of which the admission now sought to be withdrawn was made. Mr Clemie's reconciliation shows further that from time, payments apparently made into the debtors account were transferred to the deferment account. 24 At the end of the document, and out of chronological sequence, a payment of $935,000 is noted as having been made on 29 January 2004: under the column heading "TFR from debtors account". 25 The corresponding credit (or reduction in debit balance) shows in the next column, under the column heading "deferment account". 26 Although the document is far from easy to follow, it is reasonably apparent, when it is analysed, that it shows payments being credited from time to time to the deferred payment account, and the value of invoices from time to time transferred into that account. 27 It seems to me, particularly given that Mr Clemie was not cross-examined on the application for leave to withdraw the admission, that I should treat the reconciliation as demonstrating what in any event is apparent from the statement on which the defendant was cross-examined: namely, that the amount of $935,000 was credited in reduction of her indebtedness to the plaintiff on 29 January 2004. 28 Of course, the payment was credited not to the trading account but to the deferred payment account. Of course, the particular deferred payment account predates the deed of March 2008 to which I have referred. However, Mr Clemie's evidence is that from time to time such accounts were opened, and that this was so in the case of the plaintiff and the defendant prior to 29 January 2004. 29 When one considers whether a party who has made on admission should be given leave to withdraw it, one of the matters to which one looks is whether the admission was made inadvertently or without consideration of material matters. Another matter to which one looks is whether the payment was, or at least can fairly be argued to have been, erroneous. 30 The principles were reviewed by Brereton J in Hill End Gold Ltd v First Tiffany Resources Corp [2008] NSWSC 866 at [31]-[35] and again in Stafford v Kekatos (No 2) [2008] NSWSC 1044 at [14] and [15]. It is from his Honour's analysis that I have taken the propositions to which I referred a moment ago. 31 In this case, the admission was made deliberately, in the sense that the relevant material was put before the defendant and she was questioned fairly about it. The defendant had had the opportunity of considering the material over the weekend, although I accept, as she says, that she had not taken advice on the particular document before she was cross-examined on it. Nonetheless, this is not a case of someone having been trapped into saying something, or having been ambushed by a document withheld until the very moment that the fatal question was put. 32 More importantly, it seems to me, there is very little that can be said in support of the proposition that the admission was erroneously made. On the contrary, I think, the document is likely to record the probabilities, objectively ascertained. There is an abundance of material to show that the admission reflected the true state of affairs. 33 Settlement of the defendant's loan to which I have referred occurred (according to a letter from her solicitor) on 28 January 2004. The solicitor reported that the amount in question had been paid to the plaintiff. The plaintiff's statement on which the defendant was cross-examined shows the credit of the amount on 29 January 2004. That is confirmed by Mr Clemie's reconciliation. 34 In those circumstances, it seems to me, the effect of the payment can be taken to have been proved regardless of the plaintiff's admission. 35 In those circumstances, I think there is insufficient basis for questioning the accuracy of the admission so as to require the Court to go to the discretionary considerations that would need to be examined, to see if they would support the grant of leave. 36 In short, it seems to me, there is no basis upon which a party who has made an admission correctly (in the sense that what was admitted was factually correct) should be given leave to withdraw it. 37 For those reasons, I order that the defendant's notice of motion filed on 18 December 2009 be dismissed. I will hear the parties on costs in a moment. 38 I referred some time ago to the estimate of two hours that was given for the hearing of both motions. On that estimate, I said that once I had finished the hearing of the notice of motion with which I have just dealt, I would proceed with the hearing of the plaintiff's amended notice of motion, and that I would give one set of reasons covering both. 39 Attention was then turned to the evidence in support of the plaintiff's notice of motion and Mr Condon of counsel, who appeared for the plaintiff, commenced to put his client's case. Mr O'Brien of counsel, for the defendant, reminded both Mr Condon and the Court that in fact he wished to cross-examine Mr Clemie on his affidavit. Mr O'Brien said that his cross-examination would take of the order of half an hour. Mr Condon very fairly accepted that, in either giving or agreeing with the estimate of two hours, he had overlooked Mr O'Brien's requirement to cross-examine Mr Clemie and the likely estimate of duration. 40 It became apparent the only way that I could deal with the plaintiff's notice of motion today would be to take Mr Clemie's cross-examination, perhaps to have brief oral submissions, and give the parties leave to put in detailed submissions in writing. There is a substantial body of evidentiary material, and without being disrespectful to anyone, I have to say that it is not always easy to follow. Indeed, it took longer than I expected to deal with the notice of motion for leave to withdraw the admission simply because of the way in which the material had accumulated over the course of a significant number of affidavits. 41 In those circumstances, I held the view (which reflection has done nothing to shake) that to proceed on the basis of written submissions - even the excellent written submissions that I know counsel presently before the Court would produce - would be a recipe for disaster, or at the very least confusion. It was, and remains, my view that it was necessary for the Court to have the assistance of counsel in oral submissions in order to find its way through the material and to understand what parts of the material (which I should note includes not just eight or ten affidavits in total, but six documentary exhibits) contain the evidence for and against the plaintiff's position. 42 To put it another way: had I known that the overall hearing would take two and a half hours (or had the List Judge known that) the matters would have been given a special fixture in the usual way. 43 Had I been able to find time next week to continue the matter, that might have been a possible alternative; but as I said, I am listed to hear a two to four week case of considerable complexity involving, among other things overseas witnesses. 44 In addition, the resources of the Commercial List are somewhat stretched because a Judge who sits in this list is experiencing a case running very significantly over time. 45 In those circumstances, it was not practical to start the hearing today and continuing it on a mutually convenient date preferably early next week. 46 For those reasons, I indicated that I would formally vacate the hearing before me of the plaintiffs' amended notice of motion filed in Court today and I do so. 47 I reserve the costs of that notice of motion of today. I give the parties leave to approach the List Judge for a fixture for the hearing of that notice of motion. 48 HIS HONOUR: I direct the defendant to file a response to the amended Commercial List statement by 5 pm on 5 March 2010. I stand the proceedings over for directions to 12 March 2010. Any application in respect of the defendant's response is to be filed and served no later than 10 March 2010, returnable for directions on 12 March and I abridge the time for service accordingly. To ensure there is no doubt about it, I stand over the hearing before me or another Judge but on the basis that I am not part heard. ********** 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. 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