ACN 007 528 207 Pty Ltd (in Liq) v Bird Cameron (Reg) and Ors (No 10) No. Scciv-99-1392

[2004] SASC 110

ACN 007 528 207 PTY LTD (IN LIQUIDATION) V BIRD CAMERON (REG) AND ORS (NO 10)
[2004] SASC 110

1. JUDGE BURLEY.             By application filed on 4 March 2004, two of the defendants, Mr Heggie and Mr Swinney, have applied for an order “that they be granted leave by this Court to withdraw the admissions made in paragraph 1(b.2) (iv) of the Amended Defence filed on behalf of the then defendants on 15 March 2001”.

2. A similar application had been made by the defendant, BPM Pty Ltd. That application was heard by me and at the completion of the argument I announced my decision and gave brief ex tempore reasons for the decision. I refused leave to the defendant, BPM Pty Ltd, to withdraw the relevant admissions. The defendant appealed against my decision. The appeal was heard by Duggan J, who dismissed the appeal and published reasons on 24 December 2003, Judgment Number [2003] SASC 429.

3. Paragraph 1(b.2)(iv) of the amended defence is as follows:

   “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.”

4. That subparagraph was in partial response to paragraph 1.9(a)(ii) of the statement of claim, which is as follows:

   “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 [BPM Pty Ltd] 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.” [my italics]

5. The pleadings in this matter are complex, but it is sufficient for present purposes to give a general summary of the effect of the statement of claim.  The plaintiff sues a firm of chartered accountants in respect of advice received from the accountants regarding two transactions involving the sale of shares in the company.  The plaintiff alleges breaches of statutory provisions, a breach of duty of care, breach of the firm’s retainer, breach of fiduciary duty, aiding and abetting a breach of the statutory duties of the directors of the plaintiff and damages for misrepresentation.  Nearly fifty individuals have been served with these proceedings as a result of the naming of the first defendant as “Bird Cameron (Reg)”.  They have all filed appearances or notices of address for service.  The applicants, Mr Heggie and Mr Swinney, come within this category.  Forty-four of the individuals so served have, in their joint defence, denied the assertions in paragraph 1.9(a)(ii) of the statement of claim.

6. The application is supported by the affidavits of Mr Heggie (Document 141) and Mr Swinney (Document 138).  They each say that the defence which contained the relevant admission was filed without reference to them.  That does not mean that the admission was made without authority.  In cases where an insurer has the conduct of a defence, it is conceivable that a defence may be filed without the defendant’s (insured’s) specific authority but nevertheless it binds the defendant.  There is no evidence one way or the other relating to the question of whether or not the defence containing the admission was filed with authority.  They each now say that the allegations in paragraph 1.9(a)(ii) are incorrect.  In their affidavits they set out the chronology and formation of the various accountancy practices under various names and the fact that the accountancy business was, for some of the relevant period, conducted pursuant to licence agreements.   Having recounted that history, each of them said, at paragraph 22 of their respective affidavits:

   “Ownership of the client files remained, at all times, with the clients.”

7. Other affidavits of Mr Heggie and Mr Swinney were referred to during the course of argument.  Neither of them, in any of the various affidavits filed by them, explained how it came to be that the defence, and in particular the relevant admission, was filed without reference to them.  Neither of them has provided any information as to how it came to be that the admission was contained in the defence.  Moreover, neither has stated that such information is not available to them.

8. I have had the benefit of both written and oral submissions from the respective counsel for the parties.  Mr Brohier appeared for the plaintiff and Mr Strawbridge appeared with Mr Keane for the applicants/defendants.

9. SCR 54.04 provides that an admission contained within a pleading may not be withdrawn except by leave of the Court.  The cases involving this rule are set out at paragraph 54.04.5 of Civil Procedure.  The parties are usually allowed to withdraw admissions provided that the approving parties have not already acted on it to their detriment. 

10. In one of the decisions referred to, Burke v Coro and Another (1985) 122 LSJS 159, the trial judge and the Full Court on appeal preferred evidence adduced at trial which differed from a deemed admission which arose because a defendant omitted to plead to a factual allegation contained in the statement of claim. The willingness of the Court to do so has a bearing upon this application.

11. Putting aside for one moment the question of prejudice to the plaintiff, it seems to me that where an admission is made in a defence without the authority of the defendant, the defendant should be permitted to withdraw that admission so as to provide the defendant with the opportunity of calling evidence which contradicts the assertion made in the statement of claim which is initially admitted in the defence.  In arriving at this conclusion, I have taken into account that the pleadings define the issues in dispute between the parties and that normally, where an admission is made by a defendant, the defendant would not be permitted at trial to adduce evidence to contradict that admission.  This could lead to injustice if the defendant was not otherwise permitted to withdraw the admission.

12. In my view, an essential feature of this process of reasoning is that the defendant, in support of the application to withdraw the admission, must put before the Court the contrary evidence available to the defendant which the defendant wishes to adduce at the trial, but is precluded from doing so by virtue of the admission in the defence.

13. To put it another way, a defendant should not be permitted to withdraw an admission, even in circumstances where the admission was made by mistake or without reference to the defendant, in circumstances where the defendant is unable to adduce evidence which contradicts the allegation made in a statement of claim.  I do not thereby suggest that such evidence has to be conclusive;  it will be sufficient if the evidence sought to be adduced by the defendant raises a doubt about the accuracy of the allegation made in the statement of claim.  To borrow from the cases relating to interlocutory injunctions, the evidence sought to be adduced by the defendant should raise a triable issue.

14. Another essential element is that the applicant establish that the admission was made without authority.  There is no such evidence in this case.

15. In my view, the absence of contrary evidence and evidence of lack of authority is fatal to the application.

16. For these reasons, the application for leave to withdraw the admission will be dismissed.

17. I will hear the parties as to costs.