ACN 007 528 207 P/L (in Liq) v Bird Cameron (Reg) & Ors No. Scciv-99-1392

ACN 007 528 207 PTY LTD (IN LIQUIDATION)
v
BIRD CAMERON (REG), BPM PTY LTD CAN 008 787 219 & ORS
[2003] SASC 429
Master’s Appeal

DUGGAN J. This is an appeal against the decision of a master who dismissed an application by the appellant (the second defendant) to withdraw an admission made in a defence filed in the action.
The plaintiff company has commenced proceedings against a firm of accountants (the first defendant) who advised the company in relation to the sale of shares in that company. The plaintiff has claimed that the first defendant was negligent in its advice. Other related causes of action against the first defendant in relation to the transaction have been pleaded.
It would seem that the accountancy practice was conducted by different entities from time to time. It is apparent from the statement of claim that there was some uncertainty in the mind of the plaintiff as to the history of the practice. Paragraph 1.9 of the Statement of Claim pleads in part:
“1.9(a)(i) The first defendant together with its predecessor firms Eric Merchant & Associates, CP Bird and other firms to be particularised upon discovery in the within action was at all material times a firm of chartered accountants which at least from 1 July 1986 traded under the partnership name within the meaning of that term in Order 42 Rule 2(1) of the Federal Court Rules, Bird Cameron.
(ii)In the alternative the said firm traded under the name Bird Cameron from 1 July 1986 until 15 December 1989. There after it traded under the name Bird Cameron Partners. The said firm from 1 January 1989 or 1 July 1989 or 15 December 1989 licensed the second defendant to operate its accountancy practice, save for the audit and insolvency work. The said firm at all times, continued to own the professional client files of the practice, including the files in relation to Warlan and the transaction pleaded in paragraph 2 below.
1.9(b)Further or in the alternative to paragraph 1.9(a) the second defendant, from 1 January 1989, or in the alternative 1 July 1989 or in the alternative 15 December 1989, carried on a chartered accountants practice under the name Bird Cameron, which practice was the successor of the chartered accountants practice referred to in paragraph 1.9(a) herein. The fourth defendant took over the obligations of the second defendant (including liabilities) and hence is liable to the plaintiff for the conduct of the second defendant as pleaded herein. The plaintiff refers to and repeats paragraph 1(y) of the defence of the first and second defendants.”
The second defendant, along with the other defendants, filed a joint defence in answer to the fourth further amended statement of claim. In so far as it is relevant to the present issue the defence states:
“1     The defendants:
(a)       admit paragraphs 1.1 to 1.8 inclusive;
(b.1)deny paragraph 1.9(a)(i) except for the admissions in the succeeding paragraphs of this defence and they admit that Bird Cameron has been a registered business name;
(b.2)     The defendants deny paragraph 1.9(a)(ii) and say that:
(i)the plaintiff has failed to identity to whom the term ‘said firm’ relates;
(ii)if the term ‘said firm’ relates to the first defendant and its predecessor firms then:
(a)    the said firm ceased trading under the name Bird Cameron after 1 January 1989;
(b)    thereafter the said firm only provided insolvency and audit services and carried on business under the name Bird Cameron Partners;
(c)    the said firm licensed BPM to operate its accountancy practice, save for the audit and insolvency services, from 1 January 1989;
(iii)BPM operated the accountancy practice from 1 January 1989 to 30 November 1995 inclusive trading under the business name Bird Cameron;
(iv)The defendants admit, to the best of their knowledge, that the said firm retained ownership of all professional client files created both prior to and during the period of the licence agreement.” (emphasis added)
On 1 July 2003 the second defendant filed a further amended defence. The defence purported to withdraw the admission in para 1(b.2)(iv) of the earlier defence. No application had been made to withdraw the admission. The plaintiff responded by bringing an application to strike out the amendments set out in the further amended defence. At the hearing of the application before the master, counsel for the second defendant made an oral application to withdraw the admission. After hearing argument, the master refused the application and the present appeal is against that refusal.
SCR 54.04 provides that no party may amend or withdraw an admission except by leave of the court. Before commenting on the principles relevant to the exercise of that discretion, it is appropriate to refer to the assertion made by the second defendant that the admission is of no value.
Counsel for the second defendant has argued that the admission is nonsensical when compared with other matters pleaded in para 1.9 of the defence. According to the argument, the defence denied the existence of the firm alleged in para 1.9(a)(i) of the statement of claim and then purported to make an admission concerning ownership of files by the firm.
In my view, the defence is not to be read in this way. I have observed that it appears from the statement of claim that the plaintiff was in some doubt as to the history of the various entities involved. It is also clear from the defence that the defendants denied the assertions made by the plaintiff in the statement of claim in this regard. Nevertheless, that denial was qualified by the use of the words “except for the admissions made in the succeeding paragraphs of this defence”. The denial was then followed by a series of assertions as to the entities involved in the accountancy practice from time to time.
In para 1(b.2) of the defence, the defendants state that if the term “said firm” relates to the first defendant and its predecessor firms, then the firm practised through the entities referred to in para 1(b.2)(ii) and (iii). These assertions were followed by the admission that the said firm retained ownership of all professional client files prior to and during the period of the licence agreement.
In these circumstances, it cannot be said that there is inconsistency within the pleading. The admission as to ownership of the files is not based on a version of events put forward by the plaintiff and denied by the defendant. Rather it is predicated on the defendants’ own version of the history of the practice. This admission has the potential to be of considerable importance in the litigation.
Then it was argued that subsequent amendments to para 1.9 of the statement of claim which were made before the filing of the further amended defence significantly changed the allegations concerning the entities. The principal amendment to para 1.9 consisted of an allegation that, during certain periods, the practice operated through the agency of the second defendant. Details were given of the names of partners of the practice at different times. However, the original allegations to which the defendants responded in their defence remain as part of paragraph 1.9 in the statement of claim. The amendments to the statement of claim do not undermine the relevance of the admissions made by the defendants in their defence.
It was also argued that the admission made by the defendants was of no value because it was prefaced by the words “to the best of their knowledge”. Admissions in pleadings are frequently made on the basis of information provided to a party. In the case of corporations, this will always be the case in the sense that the information is provided by officers of the company. In my view, the reference to the admission being made to the best of the defendants’ knowledge does not, of itself, detract from the efficacy of the admission.
Then it is argued that the admission is of little or no weight because the concept of ownership is a question of mixed law and fact. Reliance was placed on Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43. However, this case was concerned with informal admissions. Such admissions were distinguished from admissions on the pleadings in Dovuro Pty Ltd v Wilkins 77 ALJR 1706. Gummow J said [69]:
“Admissions on the pleadings are one thing. Modern rules of court commonly provide that a party may, by its pleading, raise any point of law. That which is so raised may be admitted.”
SCR 13.02(2)(a) is such a rule.
Factors which might be relevant to the exercise of the discretion given by SCR 54.04 in particular cases are the stage which the proceedings have reached; detriment which might be caused to the other party; and the reason given for the application to withdraw.
In the present case, it is of particular significance that no reason was given as to why the admission was made. The wording of the defence suggests that a deliberate admission was made after consideration of the trading history of the accountancy practice by persons involved in it. There is no evidence of error or mistake on the part of those making the admission.
The principal basis put forward in support of the application, namely that the admission is inconsistent with other aspects of the pleading, has no merit.
The admission has been relied upon by the plaintiff in a further action against Bird Cameron Partners. That action is based on the same grounds as the present action. The admission is relied upon in that action as a new material fact relevant to an application for an extension of time to commence the action. If granted an extension of time, the plaintiff will apply for consolidation of the two actions. I think it is arguable that the plaintiff may suffer prejudice if the second defendant is permitted to withdraw the admission.
However that may be, the failure by the second defendant to provide any explanation for the making of the admission is a strong reason for rejecting the application to withdraw it.
The appeal will be dismissed.

[2003] SASC 429

24 December 2003