FEDERAL COURT OF AUSTRALIA

Lo Pilato (Liquidator) v Barclays Workshop Pty Ltd (In Liq); In the Matter of Barclays Workshop Pty Ltd (In Liq) [2013] FCA 729

IN THE MATTER OF BARCLAYS WORKSHOP PTY LTD (ACN 105 332 090 (IN LIQUIDATION)

THE COURT ORDERS THAT:

1.    Leave be granted to the defendant to file in Court and to read the affidavit of Anthony Charles Griffiths sworn on 22 July 2013.

2.    By 5 August 2013, the defendant file an affidavit sworn or affirmed by its Managing Director that specifies:

(a)    Whether any of the goods identified in paragraph 9 of the Statement of Claim filed herein ever came into the possession, custody or control of the defendant and, if so, precisely which of those goods came into the possession, custody or control of the defendant and when in the case of each item that occurred.

(b)    Insofar as any goods came into the possession, custody or control of the defendant, whether any of those goods subsequently left the possession, custody or control of the defendant and, if so, when in the case of each item that occurred and the circumstances in which that occurred.

(c)    Insofar as goods came into the possession, custody or control of the defendant which remain in the possession, custody or control of the defendant, which of those goods are still in the possession, custody or control of the defendant and what is the location of them.

(d)    Insofar as the defendant asserts that payment was made for any of the goods specified in paragraph 9 of the Statement of Claim, when was payment made, by whom, to whom and by what means.

3.    Pursuant to r 22.06 of the Federal Court Rules 2011, the defendant have leave to withdraw the admissions made by it as a result of its failure to dispute the Notice to Admit served upon it on 28 February 2013 (the Notice to Admit).

4.    The time by which the defendant is to file any Notice of Dispute in respect of the Notice to Admit be extended up to and including 29 July 2013.

5.    The plaintiffs file and serve their Reply (if any) by 6 August 2013.

6.    By 6 August 2013, the plaintiffs file and serve all evidence upon which they intend to rely at the final hearing.

7.    The costs of and incidental to the Interlocutory Application filed by the defendant on 20 May 2013 be the plaintiffs’ costs in the proceeding.

8.    The proceeding stand over to 9.15 am on 7 August 2013 before the A.C.T. List Judge.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF BARCLAYS WORKSHOP PTY LTD (ACN 105 332 090 (IN LIQUIDATION)

REASONS FOR JUDGMENT

1    By Interlocutory Application dated and filed on 20 May 2013 (the Interlocutory Application), the defendant sought an order pursuant to r 22.06 of the Federal Court Rules 2011 (FCR) for leave to withdraw admissions deemed to have been made by it as a result of the defendant’s failure to respond to the plaintiffs’ Notice to Admit dated 28 February 2013 served upon it on the same day (the Notice to Admit). The Notice to Admit was served pursuant to r 22.01 FCR.

2    On 28 February 2013, the solicitor for the plaintiffs forwarded the Notice to Admit by email sent to Mr Griffiths, the Managing Law Clerk employed by the solicitor for the defendant. That email and the Notice to Admit were copied to Mr Rodgers, who is the solicitor on the record for the defendant. The Notice to Admit comprises six paragraphs, each of which is intended to address certain matters pleaded in the defendant’s Defence. Each numbered paragraph in the Notice to Admit contains the following introductory words in respect of each admission sought:

That the fair market value of the goods referred to in [the relevant paragraph of the Statement of Claim] was more than [the amount asserted by the defendant in its Defence] as at [particular dates referred in the Defence].

3    In other words, the facts which the Notice to Admit addresses are expressed in terms of the fair market value of certain goods being more than a particular figure.

4    The lawyers for the defendant, through inadvertence, did nothing by way of response to the Notice to Admit. Mr Griffiths explained why that was so in his affidavits. His explanation comes to this: He simply overlooked the Notice to Admit and therefore failed to address the contents of that Notice with his client or at all. Mr Rodgers did not provide any explanation as to why he did nothing about the Notice to Admit. However, it is fairly obvious that he left the matter to Mr Griffiths and any explanation which he would offer would simply be to that effect.

The Pleadings

5    This case concerns the alleged sale of certain property belonging to the second plaintiff, Barclays Workshop Pty Ltd (in Liquidation) (the company), which the liquidator contends was spirited away from the company by means of transactions which are susceptible to challenge. The plaintiffs in the proceedings are the liquidator and the company itself. The causes of action relied upon are detinue, conversion, a statutory claim pursuant to ss 588FB, 588FE(2) and 588FF of the Corporations Act 2001 (Cth) (uncommercial transactions) and a second statutory claim pursuant to ss 588FC, 588FE(3) and 588FF of the same Act (insolvent transactions). The relief claimed by the plaintiffs is payment of the value of the goods which the plaintiffs assert in their pleading to be $262,672 or damages or compensation in the same amount. It is therefore part of the plaintiffs’ pleaded case that the value of the goods when the contraventions occurred was $262,672.

6    The relevant goods are described in paragraph 9 of the Statement of Claim as follows:

At all material times, the Company was the owner of the following goods:

a.    Hydraulic parts, hoses and storage systems;

b.    Hydraulic equipment, tools and machinery;

c.    Fittings, office computers, printers, furniture and other sundry items;

d.    Spare parts and retail stock items in shop;

e.    Workshop hoists, benches, lathes, drill press and sundry items; and

f.    Ford service truck registration number WWQ123 (VIN No. SGDGGG41902).

(collectively, the Goods)

7    The defendant takes issue with the plaintiffs’ case. It also pleads a positive Defence which is in the following terms:

In answer to paragraph 9, the defendant:

(a)    admits that the Company owned the Goods prior to their sale to the defendant;

(b)    says that it purchased:

(i)    the goods referred to in paragraph 9(a) for $50,000 by contract dated 7 October 2009;

(ii)    the goods referred to in paragraph 9(b) for $30,000 by contract dated 9 October 2009;

(iii)    the goods referred to in paragraph 9(c) for $20,000 by contract dated 16 October 2009;

(iv)    the goods referred to in paragraph 9(d) for $50,000 by contract dated 20 October 2009;

(v)    the goods referred to in paragraph 9(e) for $28,672.10 by contract dated 22 January 2010; and

(vi)    the goods referred to in paragraph 9(f) for $16,000 by contract dated 3 May 2010

(collectively, “the Contracts”);

PARTICULARS

In each case the terms of the Contracts were agreed verbally by Duncan Barclay on behalf of the second plaintiff and James William Kellam on behalf of the defendant on each of the above respective dates. Each such Contract was subsequently reduced to writing whereupon it was signed by the Company on 27 September 2010. Copies of the Contracts may be inspected at the defendant’s solicitor’s office by arrangement.

(c)    says that each of the Contracts involved an agreement not only to purchase the relevant goods, but also that they be leased back to the Company, as well as an agreement to permit the Company to keep the goods in the event that the sale price was repaid with interest calculated at a rate specified in each of the Contracts; and

(d)    otherwise does not admit the allegations in that paragraph.

8    It is therefore apparent that the defendant wishes to argue that the goods which the plaintiffs plead were unlawfully taken from the company were in fact transferred to the defendant pursuant to contracts for sale, the dates and terms of which are pleaded in paragraph 9 of the Defence.

9    It is therefore quite clear that there will be an issue at the trial as to the efficacy of the arrangements relied upon by the defendant and also as to the value of the goods. The total amount which the defendant asserts it paid for all of the goods is $194,672.10. It may be thought that the defendant might concede that it paid fair market value for the goods, but I have been told from the Bar table that the defendant does not concede that the prices which it asserts it paid for the goods represented fair market value as at the date of the sale transactions relied upon. It wishes to be free to argue that those prices exceeded the fair market value.

10    It is therefore obvious that the question of value of the goods which the plaintiffs allege were taken from the company is at the heart of the plaintiffs’ case and must be proven to the satisfaction of the Court in order for the plaintiffs to obtain any monetary relief.

Consideration

11    Pursuant to r 22.06 FCR, the defendant has applied for leave to withdraw the admissions which have been attributed to it by its failure to respond to the Notice to Admit. It is required to take that step because, once a Notice to Admit has been validly served, r 22.04 FCR provides that, at the expiration of 14 days after service, the served party is taken to admit the facts set out in the Notice.

12    The defendant submitted that the relevant principles were explained by Santow J in Drabsch v Switzerland General Insurance Co Ltd (unreported, Supreme Court, NSW, 16 October 1996) and that those principles have subsequently been adopted and applied on numerous occasions in this Court (as to which see Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 268 at [28]–[35]; Turner and Townsend Pty Ltd v Berry [2012] FCA 111 at 14; and Chyb v Commonwealth Scientific and Industrial Research Organisation [2012] FCA 872 at [17]). In Drabsch, Santow J said:

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 guideline 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 & Anor (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.

13    Counsel for the defendant then made the following submissions in support of his application.

14    First, he said that the admissions had not been made deliberately after due consideration by the defendant itself, nor had they been made with the benefit of legal advice.

15    Second, he submitted that the circumstances in which the deemed admissions arose were explained by Mr Griffiths in his affidavits. He submitted that the present case is clearly a case of inadvertence, rather than the result of a deliberate decision, let alone a deliberate decision on the part of the defendant itself.

16    Third, he submitted that the defendant had acted promptly once the consequences of its legal representative’s inadvertence had been revealed.

17    Fourth, he submitted that there was no suggestion that the plaintiffs had acted upon the admissions in some way which could not now be reversed.

18    Fifth, he submitted there was no prejudice to the plaintiffs.

19    Finally, he submitted that the deemed admissions are inconsistent with the defendant’s pleading. This is put on the question of liability rather than quantum.

20    Counsel for the plaintiffs relied upon a number of other authorities (Cox v Cox [2013] VSC 318 at [14]–[25] per Derham J; Rigato Farms Pty Ltd v Ridolfi (2001) 2 Qd R 455 at 458–459 [19]–[23] per de Jersey CJ; at 459 [27] per McPherson JA; and at 461 [32] per Williams J; and Permanent Trustee Company Ltd v Gulf Import and Export Company [2006] VSC 110 at [10] per Harper J). However, having looked at those cases, I do not think that they are authority for any different guiding principle but rather stand for essentially the same principle as was explained by Santow J in Drabsch.

21    Counsel for the plaintiffs submitted that I should not be satisfied with the explanation given on behalf of the defendant as to why the Notice to Admit was not properly addressed because Mr Rodgers himself has not given any explanation of his role in the matter. I have already addressed Mr Rodgers’ position at [4] above. Counsel also submitted that it was incumbent upon the defendant to provide detailed particulars of the issue or issues which it would raise at trial, if the admissions are withdrawn, so that the Court can understand the implications of allowing the withdrawal of the admissions at this stage. He may have even gone so far as to suggest that those particulars needed to be provided on oath but I do not think that the authorities go quite that far.

22    It seems to me that, in the circumstances of the present case, the defendant needs to demonstrate that the admissions were made as a result of some error or mistake. I think that, on the evidence, the defendant has discharged that obligation. Whilst it is most unsatisfactory that the person having the care and carriage of the matter in the office of the solicitor for the defendant paid no attention to an important email coming from the other side, nonetheless, it is the reason why nothing was done in relation to the Notice to Admit. It is not a case of the admissions having been made advisedly after due consultation with the client and after due consideration by the lawyers of the consequences of making the admissions.

23    Second, it seems to me that it is incumbent upon the parties to explain to the Court the implications of the withdrawal of the admissions on the proceedings in the future and, in particular, at trial. Counsel for the plaintiffs submitted that the admissions gave his clients an advantage, which they should not lose by the Court now granting leave to the defendant to withdraw the admissions. However, I have difficulty accepting that the admissions achieve very much at all in assisting the plaintiffs to prove their case.

24    As I have mentioned, when looking at the pleadings, it seems to me that it is part of the plaintiffs’ case (and an essential part of the plaintiffs’ case as pleaded) that the plaintiffs prove the value of the relevant goods at the times when the particular transactions relied upon by the defendant as sale transactions took place.

25    Sooner or later, the plaintiffs will have to decide exactly how they wish to put their case. However, whatever decisions are made in this regard in due course, one thing is clear: They will need to prove the value of the goods. The admissions, as presently drafted, do not do that. They certainly do not do it on their own and it is difficult to see how, even if taken with other relevant evidence, the admissions would satisfy the plaintiffs’ needs in terms of proof of value. The case is not yet ready for hearing. It is difficult to see what prejudice the plaintiffs will suffer if the admissions are permitted to be withdrawn.

26    I think that the appropriate course is for the Court to allow the admissions to be withdrawn and I propose to do so. However, I am concerned that the plaintiffs may encounter difficulties at trial if the goods themselves are not made available to the plaintiffs for the purpose of having the goods inspected and valued. I do not know the whereabouts of the goods at the moment. The transactions relied upon by the defendant suggest that the goods never left the possession of the company although it appears that, at least at the present time, the goods may be in the possession, custody or control of the defendant or possibly some third party.

27    I think that the plaintiffs are entitled to know what the defendant’s case is in respect of the movement and location of the goods at all times after the alleged transactions took place in 2009 and 2010. In particular, if the defendant contends that the goods are now in its possession, or at least at some stage came into its possession, the plaintiffs are entitled to know where the goods are now and how they got there.

28    In my judgment, it would be an appropriate exercise of the Court’s discretion, as a condition for allowing the admissions to be withdrawn, to require the defendant, by affidavit sworn or affirmed by its managing director, to file an affidavit within 14 days of today’s date in which the defendant specifies with particularity:

(a)    Whether any of the goods identified in paragraph 9 of the Statement of Claim filed herein ever came into the possession, custody or control of the defendant and, if so, precisely which of those goods came into the possession, custody or control of the defendant and when in the case of each item that occurred.

(b)    Insofar as any goods came into the possession, custody or control of the defendant, whether any of those goods subsequently left the possession, custody or control of the defendant and, if so, when in the case of each item that occurred and the circumstances in which that occurred.

(c)    Insofar as goods came into the possession, custody or control of the defendant which remain in the possession, custody or control of the defendant, which of those goods are still in the possession, custody or control of the defendant and what is the location of them.

(d)    Insofar as the defendant asserts that payment was made for any of the goods specified in paragraph 9 of the Statement of Claim, when was payment made, by whom, to whom and by what means.

29    I propose to order that the costs of the Interlocutory Application be the plaintiffs’ costs in the proceeding. I do that because, although the defendant always needed to obtain an order from the Court to be relieved of the consequences of its failure to dispute the Notice to Admit, the plaintiffs could have made its task easier by consenting to the order. Rather than doing that, the plaintiffs opposed the indulgence sought by the defendant. That opposition was not unreasonable but, in light of the decision, turned out to be unjustified.

30    It seems to me that it would be unduly harsh on the defendant to visit all of the costs of the Interlocutory Application on the defendant. On the other hand, the defendant should not have any costs associated with the Interlocutory Application.

31    There will be orders accordingly.

Associate:

Dated:    29 July 2013