J N Taylor Holdings Limited (in Liquidation) and J N Taylor Finance Pty Ltd (in Liquidation) v Alan Bond, Peter Alexander Mitchell, Antony Gordon Oates and American Home Assurance Company No. SCGRG 90/2704 Judgment..

[1994] SASC 4923

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA DEBELLE J

CWDS
Courts - practice and procedure - pleadings - Defence - application to strike out paragraphs in amended defence withdrawing previous admissions - admissions withdrawn after amended statement of claim filed and delivered - amended statement of claim filed after leave to add further parties and make amendments - substantial amendments to pleadings - whether leave required to withdraw admissions - dispensation for Rules - leave not required in this case - withdrawal of admissions not likely to cause prejudice or embarrassment to plaintiffs - no abuse of process - application dismissed. Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738, applied.

HRNG ADELAIDE, 6, 20 December 1994 #DATE 20:12:1994

Counsel for plaintiff
J N Taylor Holdings Limited:        Mr M Hoffman

Solicitors for plaintiff:         Fisher Jeffries

Counsel for defendant
American Home Assurance Company:    Mr Connell

Solicitors for defendant
American Home Assurance Company:    Thomsons

ORDER
Orders made.

JUDGE1 DEBELLE J The plaintiff has applied by summons dated 5 December 1994 seeking a number of orders in relation to the defence which the fourth defendant has filed to the plaintiff's fifth amended statement of claim. The plaintiff first seeks orders that a number of paragraphs in the amended defence be set aside or, in the alternative, struck out. Those paragraphs are identified in paragraph 1 of the application. The plaintiff next seeks orders that seven listed paragraphs in the defence be struck out and, thirdly, the plaintiff seeks a more explicit defence in relation to other paragraphs, which are identified in para.4 of this application.

2. I have already dealt in a summary way with the application for particulars and some of those applications have been withdrawn. The requirement to supply particulars has been conceded in other cases, and in a third category of cases I have refused the plaintiff's requests. The transcript of the argument on the application for particulars sufficiently deals with that topic.

3. I turn to deal with the application made to set aside or alternatively to strike out paragraphs in the amended defence. It is necessary to go back into the history of the somewhat tortuous pleadings in the action and to examine other issues which are relevant for the consideration of this application.

4. This action began as a claim by a group of preference shareholders for the appointment of a provisional liquidator and included claims for damages against the three first named defendants, all of whom were formerly directors of what are now the plaintiff companies. A provisional liquidator was appointed. At a later time, on 2 May 1991, an order was made substituting the liquidators of the two plaintiff companies as plaintiffs. For some time thereafter the preference shareholders took no further part in the conduct of this action. The fourth defendant was joined in 1992 and on 19 January 1993 the plaintiff filed and served what is called the fourth amended more explicit statement of claim. That was served on all defendants including the fourth defendant. The fourth defendant was ordered to file and serve its defence on or before 30 June 1993. Between 15 February 1993 and 12 May 1993 the plaintiffs provided discovery and inspection to the fourth defendant of the documents which had been discovered in these proceedings. On 12 April 1993 the plaintiff served on the first defendant a report of an expert Mr Brian Morris, who was the author of schedules F and G to the fourth amended statement of claim. On 30 June 1993 the fourth defendant filed its defence. By an application dated 12 November 1993 the fourth defendant sought orders that summary judgment be entered in its favour dismissing the plaintiffs' claims against it. In support of that application, the fourth defendant filed an affidavit which advanced argument based upon admissions which had been made by the fourth defendant in its defence.

5. I will not go into all the details of the events which occurred thereafter. Suffice it to say that, upon the application for summary judgment being made, the plaintiff sought to amend first, the terms of its statement of claim and, secondly, to add new parties. On any view those amendments were occasioned at least in part, if not in a substantial part, by the application by the fourth defendant for summary judgment. One of the applications to amend dealt with a plea concerning payment of premiums to the fourth defendant. In para.85 of the fourth amended statement of claim the plaintiffs had pleaded that a company called Dallhold paid a premium to the fourth defendant. In its defence, the fourth defendant referred to section 237 of the Companies Code, legislation which applies to the issues in this action, and pleaded that by virtue of the operation of section 237 the payment of the premium by Dallhold rendered the policy void. As might be imagined, the plaintiffs were quick to investigate the matter and have consequently amended their pleading quite substantially in relation to payment of the premium.

6. There are other respects in which the plaintiffs have amended the statement of claim. I shall not go into them all. One class of amendments has been occasioned by the addition of the preference shareholders as plaintiffs. An application was made on 23 March 1994 by the existing plaintiffs, that is to say, the liquidators of the two plaintiff companies, to add the preference shareholders. On 20 April 1994 an application was made by a number of preference shareholders to be added as plaintiffs. After quite a number of amendments to the statement of claim and a good deal of argument, these applications were allowed on 8 July 1994.

7. There is another class of amendment. The fourth amended statement of claim pleaded on a number of occasions that each of the three defendant directors had knowingly participated in certain conduct. In broad terms those allegations have now been withdrawn so that the fifth amended statement of claim proceeds on the footing that the first three defendants ought to have known of certain things or have delegated, thereby abdicating, their responsibility as directors. It is true that in part those allegations of delegation are also to be found in the fourth amended statement of claim. I wish to point out, in broad terms, the nature of some of these amendments.

8. There is a fourth class of amendment. Instead of making the same allegation in general against each of the three defendant directors, the statement of claim has been broken down to make separate allegations of breaches of the Companies Code or of other duties, specifically against each director. It nevertheless remains true to say that in broad terms the allegation in the fourth amended statement of claim remain. On 7 September 1994 I gave a series of directions as to the future course of pleadings in this matter, including leave to the plaintiff to file an amended statement of claim and leave to the defendant to file the amended defence. In its defence to the fourth statement of claim, the fourth defendant made a number of admissions. It has in its defence to the fifth amended statement of claim withdrawn almost all of those admissions. The plaintiffs assert that the fourth defendant is not entitled to do so without leave and it is on that footing that they apply for the named paragraphs to be set aside.

9. As a general rule, leave to a plaintiff to amend its statement of claim with consequential leave to the defendant to amend its defence, would not entitle the defendant to withdraw admissions made in its initial defence. The defendant would be entitled to do so only if the paragraphs amended by the plaintiff justified that course. In all other respects the defendant could only withdraw the admissions by leave of the court.

10. This is far from the usual case. Indeed, it borders on being an extraordinary case. However, it is certainly not a case which falls under the heading of the general rule. As I have said, the plaintiff has made a number of amendments of a not insubstantial nature to its fourth amended statement of claim. Fresh parties have also been added on the application, at least in part, of the liquidators of the two plaintiff companies. It would be wrong to say that the substratum of the action has changed. As I have said, in broad terms, the allegations made, are the same both as against the three defendant directors and against the insurer. But there are nevertheless some important and material differences. Those differences coupled with the addition of new parties and coupled with the fact that the amendments to the statement of claim are reasonably substantial, justifies, in my view, the defendant treating this as a fresh statement of claim.

11. It might be noted as a matter of fact that the fourth amended statement of claim contained 108 paragraphs leading to the prayers for relief. The fifth amended statement of claim contains 152 paragraphs leading to the prayers for relief. Some of those additional paragraphs deal with fresh allegations against the defendant insurer, others deal with fresh allegations against the defendant directors and a number of them have been occasioned by the addition of new parties.

12. The joining of additional plaintiffs is a factor to which I think a degree of weight must be attached. The fourth defendant was prepared to make certain admissions in the light of the then parties to the action. Those parties have now changed, and it is proper, I think, to proceed on the footing that this is, in effect, a new statement of claim.

13. I do not mean in the remarks I have so far made, to indicate that I am seeking to do anything other than to determine the question whether the nature of the changes has any consequence other than that the fifth amended statement of claim should be treated as tantamount to a new one particularly given the joinder of additional parties.

14. Mr Hoffman, who appeared for the plaintiffs, submitted that the additions had been made by the fourth defendant for tactical reasons and it is for tactical reasons that the defendant now seeks to withdraw from it. In the course of argument, Mr Connell, who appeared for the fourth defendant, almost conceded that the admissions had been made initially for tactical reasons. I put it to him that on its face, the admissions had been made for tactical purposes and the fourth defendant now sought to resile from them. He responded 'I wouldn't seek to argue with that.' It is fair to say that tactical considerations are not the sole preserve of the fourth defendant. The narrative that I have already given of the events leading to these amendments indicates that, when faced with an application for summary judgment, the plaintiffs were prompt, first, to make substantial amendments to the statement of claim insofar as it affected the allegations against the fourth defendant and then later to add further parties. True it is that the plaintiff had leave to make the amendments. But the fact nevertheless remains, they withdrew pleas which were adverse to their interest and substituted others.

15. I turn to the question whether the plaintiff is entitled to have the pleas in the amended statement of claim which are listed in the application struck out on the ground that they have a tendency to cause prejudice, embarrassment or delay, or are vexatious or otherwise an abuse of process to the court.

16. The application fails also on this ground. The withdrawal of the admissions will not be likely to cause either prejudice or embarrassment to the plaintiffs of a kind sufficient to refuse the withdrawal of the admissions. I immediately acknowledge that there will be a degree of prejudice in that the plaintiffs will now not be able to rely on the admissions that have been made. That is not the end of the matter.

17. Mr Hoffman acknowledged, in the course of his submissions, that, if there was any prejudice to the plaintiffs, it would exist only at the trial of the action. He did, in passing, refer to the fact that there might be some prejudice in dealing with notices to admit which had been administered by the plaintiffs to the defendants but I think any issues arising out of the notices to admit can be easily dealt with, as has already been suggested in the course of argument on other matters today, by a preliminary hearing to determine the documents which are to be admitted in this action.

18. So then we are left with prejudice at the trial. In large part, the admissions which have been withdrawn, are in relation to matters which the plaintiff would have to prove in any event, that is to say, the admissions relating to paragraphs in the statement of claim which the second and third defendants have put in issue. It is impossible to speak of the position of the first defendant as he is yet to file his defence to the fifth amended statement of claim. Under this heading fall paras.29.6; 30.1; 31; 32; 33A to 33F insofar as they relate to the second and third defendants. It is impossible to say what the position would be in relation to paras.33A and 33B, as they are allegations that are against the first defendant, but it would be unlikely that he would admit that which the second and third defendants either deny or do not admit. Also falling under this heading are paras.35, 36, 37, 38A to F (with the same qualification in respect of paras.38A and B as was made to 33A and 33B), 46, 47, 48, 49, 50, 51, 52, 53, 56, 57, 58, 72A to F (with the same qualification as is made to paras.33A and 33B), 75AA to 75AF (again with the same qualification), 76, 77 and 78. As I say, in all of those matters, the defendant directors have either denied the allegations or pleaded they do not know what it is alleged against them and, therefore, cannot admit it.

19. That leaves, I think, only para.28 and paras.39-45. In relation to those paragraphs, the second and third defendants, at least, admit the allegation in so far as those allegations are based on documents where they admit the allegations to the extent that the allegation is proved by the documents.

20. All of the documents upon which the plaintiffs rely to prove these allegations are business records. There could be little dispute about that. For example, one document is minutes of a meeting. Para.28 refers to a meeting on 7 September 1988. I foresee little difficulty in the plaintiffs being able to prove the minutes of that meeting.

21. Paras.39-45 deal with what the statement of claim calls loan arrangements by various facility documents. Those matters, as I have said, are in large part admitted by the second and third defendants. Here again, the plaintiff's case, to a large part, turns on the documents which identifies it in its pleadings. Again, I foresee little difficulty in proving those documents. It cannot, therefore, be said that the withdrawal of the admissions causes any prejudice or embarrassment of the kind which should justify an order striking out the paragraphs.

22. I should add, for completeness, that the plaintiff does not press its claim in relation to para.3 of the defence.

23. I turn to the question whether the withdrawal of the admissions is likely to cause delay. There is a manifest public interest in the efficient administration of justice. That is perhaps most vividly illustrated by the rules which the Court has made in respect of case flow management. The relevant interests are not limited to those of the parties to the action. They include persons in other actions who seek to have their cause litigated with all reasonable expedition. Parties cannot expect to be able to make admissions and withdraw them with impunity. In considering whether they should be bound by them, the Court will not, I think, limit the factors to which regard should be had to the question whether the other party has acted to its detriment.

24. All of these matters are summarised by what Rogers CJ noted in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 at 750 when his Honour observed that there were two competing policies which he identified in these terms:
    'One, that an admission should not be permitted easily to be
    withdrawn so as to make the procedure meaningless and on the
    other that parties should not be discouraged from making
    admissions out of fear that once given they cannot be
    withdrawn.'

25. Earlier in his reasons, his Honour had also referred to the public interest in the efficient administration of justice. In addition, the court should always be alive to determine only questions which are genuinely in dispute.

26. This case, at least so far as the issues between the plaintiffs and the fourth defendant are concerned, is far from ready for trial. Plainly, the parties are, at this stage, preoccupied with the terms of the statement of claim and defence as between the plaintiff and the fourth defendant. Once it is possible to resolve the issues between the parties on these two documents, it will then be necessary for the plaintiffs to file their reply. The fourth defendant has announced in open court that it intends to apply for summary judgment or, at least, for a determination of a number of preliminary questions before the trial of the first to third defendants. With this knowledge, the plaintiffs have foreshadowed that they intend to raise a number of matters in their reply and the plaintiffs properly acknowledge that it will, in all likelihood, be appropriate for the fourth defendant to file a document in the form of a rejoinder to the reply. In other words, the plaintiff and fourth defendant are, at least, a long way yet from determining the issues between them. In that respect, the withdrawal of the admissions is not likely to cause any undue delay to the prosecution of the action. In any event, it is relevant again, under this heading, to note that the plaintiffs will have to prove the matters, in any event, that is to say, prove the allegations denied by the first three defendant directors.

27. Nor do I think that the withdrawal of the admissions constitutes, in all the circumstances, an abuse of process in the court. In this respect I refer to all that I have said so far in the reasons. Much of what Mr Hoffman has said would have been very relevant in ordinary cases between a plaintiff and one defendant. But, as I seek to emphasise, this is no ordinary case.

28. There remains, the plaintiff's application in para.3. I do not think it appropriate to do other than to add a little to what was said in the course of argument on this matter. The thrust of the complaint of the plaintiffs is limited to words at the foot of each of the paragraphs listed in para.3 of this application. The fourth defendant has agreed that it is appropriate to amend the latter part of the relevant paragraphs to limit the evidence to which it refers to evidence which emerges for the first time in the course of the trial, that is to say, evidence which is not in one respect or another already in the possession of the fourth defendant.

29. For these reasons, the application made in paras.1 and 2 of the application dated 5 December, is dismissed. As I have indicated, the parties have agreed to attend to the matters dealt with in paras.3 and 4 in the way mentioned in the transcript.

30. Although Rule 54.04 requires that leave is required to withdraw admissions made in pleadings, it is apparent from these reasons that this is not an ordinary action or the usual case. It is highly desirable that the action not be delayed by further argument on pleading points. In so far as is necessary, I therefore dispense with the requirements of Rule 54.04.

31. (The Judge then refused an application by the plaintiff for leave to appeal and then made the following orders.)
    (1) that the fourth defendant file and deliver the
    foreshadowed amendments by way of a more explicit defence

    and other incidental matters on or before 20 January 1995;
    (2) that the plaintiffs file and deliver such reply as they
    may be advised by no later than 10 February 1995;
    (3) that the fourth defendant file and deliver such
    rejoinder as it may be advised by no later than 24 February
    1995.
    (4) Costs in the cause.
    (5) That the fourth defendant shall by notice in writing to
    the plaintiff's solicitors advise whether it seeks to have a
    preliminary determination of certain issues, the manner in
    which it seeks to have them determined and the issues it
    seeks to have determined, such notice to be given on or
    before 24 February 1995.