Taylor v Dixon Advisory Limited [2010] ACTSC 2 (29 January 2010)

Last Updated: 8 February 2011

RICHARD TAYLOR v DIXON ADVISORY LIMITED

[2010] ACTSC 2 (29 January 2010)

PRACTICE and PROCEDURE – pleadings – whether admission of facts made in defence – whether proposed amended defence constituted withdrawal of admission – whether defendant should be permitted to withdraw factual admission – whether defendant should be permitted to amend defence and counterclaim after close of pleadings.

Court Procedures Rules 2006 rr 21, 483, 490, 492, 505, 507

Legislation Act 2001 s 151

Celestino v Celestino [1990] FCA 299

Reinicke v Neilson [2004] ACTSC 5

Wyer v Hunt [2005] ACTSC 15

Barker v Gifford [2005] ACTSC 55.

Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317

Sangora Holdings Pty Ltd v Dunstan (Supreme Court of Western Australia, Full Court, 13 April 1999, unreported)

Cropper v Smith (1884) 26 ChD 700

Clough v Frog (1974) 48 ALJR 481

Drabsch v Switzerland General Insurance Co Ltd (Supreme Court of NSW, 16 October 1996, unreported)

No. SC 457 of 2009

Judge: Master Harper

Supreme Court of the ACT

Date: 29 January 2010

IN THE SUPREME COURT OF THE )

) No. SC 457 of 2009

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: RICHARD TAYLOR

Plaintiff

AND: DIXON ADVISORY LIMITED

Defendant

ORDER

Judge: Master Harper

Date: 29 January 2010

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant have leave to withdraw its admissions of the facts asserted in paragraphs 2, 3 and 4 of the statement of claim.

2. The defendant have leave nunc pro tunc to file and serve the amended defence and counterclaim filed on 20 August 2009.

3. The time within which the plaintiff may file and serve a reply to the amended defence and counterclaim be extended to 19 February 2010.

4. The parties have liberty to apply in relation to costs on 3 days’ notice at any time until 26 February 2010.

5. If no application has been made by that date, the costs of the plaintiff’s application of 15 September 2009 and of the defendant’s application of 18 September 2009 be costs in the cause.

1. There are two applications before the Court in this action for damages for breach of the terms of a contract of employment.
2. The action was commenced in May 2009 by originating claim with a statement of claim attached. The plaintiff’s case is that he was employed by the defendant as a senior financial adviser under an agreement contained in a letter of 9 July 2004. It was a term of the agreement that the defendant would pay the plaintiff a quarterly bonus. The plaintiff resigned on 27 September 2008, and claims bonuses for the June and September 2008 quarters.
3. In June 2009, the defendant filed a defence. The defendant admitted entering the employment agreement but said that although dated July 2004 it was not signed until 19 July and was not to commence until 2 August 2004. The defendant admitted that the agreement provided for quarterly bonuses but denied that the plaintiff was entitled to bonuses for the June and September 2008 quarters. The defendant asserted that it was an implied term of the contract that the plaintiff owed the defendant an obligation of fidelity and good faith; there were express terms of the agreement that information coming to the plaintiff’s knowledge through the employment was strictly confidential, and that the plaintiff would not contact any client of the defendant for six months after termination of employment or work for a competing business in the Canberra region for six months. In breach of those terms the plaintiff, it was asserted, had given his present employer, Ord Minnett, confidential information including client lists, had solicited the defendant’s clients, and had taken employment immediately with a competing business. Further, the bonus was discretionary, and could be varied by the defendant.
4. The defendant then made a counterclaim for repayment of remuneration paid to the plaintiff during a period when the plaintiff was engaging in conduct in breach of the contract, damages for loss of business, and orders for the delivery up or destruction of confidential documents and electronic records in the plaintiff’s possession.
5. On 11 August 2009, the plaintiff filed a reply to the defence, and a separate answer to the counterclaim. The plaintiff conceded that on about 4 September 2008 he had sent to Ord Minnett a list he had created of the names of 185 clients he had advised during his employment by the defendant, and their estimated net worth. The sole purpose of doing so had been to establish the extent of his experience and competence. The material was provided on the basis that it would not be used in any way to damage the defendant’s business or to put the plaintiff in breach of his contract with the defendant. The plaintiff admitted that on leaving the defendant’s employment he had taken up a position with Ord Minnett, a competing business in the ACT, but he denied that that employment was in breach of contract.
6. I infer that the reply and the answer to counterclaim were served on the day of filing.
7. R 483 of the Court Procedures Rules 2006 relevantly provides that the pleadings close seven days after service of the answer to a counterclaim. Thus the pleadings closed on 18 August 2009: see s 151, Legislation Act 2001.
8. On 20 August 2009 the defendant filed an amended defence and counterclaim.
9. R 505 provides that a party may amend a pleading without either leave of the Court or the consent of the other party, once before the close of pleadings. The defendant did not have the leave of the Court or the consent of the plaintiff to file the amended defence and counterclaim. The defendant was out of time by two days, and the Court should not have accepted the document for filing.
10. In the amended defence, the defendant asserts that in about June to August 2007 the parties agreed to vary the terms of the agreement by substituting the terms contained in a letter from the defendant to the plaintiff dated 17 May 2007. The defendant asserts that the agreement to vary was partly in writing (the letter of 17 May), partly oral (a conversation between the plaintiff and a Mr O’Connell of the defendant on 13 June 2007) and partly implied, the implication arising from an email sent by the plaintiff to Mr O’Connell, and the continuation of the employment relationship thereafter. The varied agreement changed some of the arrangements about payment of bonuses, and increased the restraint period from six months to twelve months.
11. On 15 September 2009, the plaintiff’s solicitors filed an application asking for the amended defence and counterclaim to be struck out. The stated ground for the application was that the defendant had admitted that the contract of employment between the plaintiff and the defendant was that governed by the letter of 9 July 2004, that the plaintiff had relied on the admission, and that the defendant should not be permitted to withdraw it.
12. The plaintiff affirmed an affidavit in support of the application. He agreed that he had received the letter of 17 May 2007. He said that the letter referred to, but did not include or attach, schedules which he understood would set out the method of calculation of the quarterly bonus payments. Thereafter, there were a number of emails between the plaintiff and Mr O’Connell, in which the plaintiff asked for information. Neither the schedules nor the information were ever provided, and the plaintiff did not complete or sign the acceptance note at the foot of the letter.
13. The plaintiff further affirmed that when he was contemplating leaving his employment, early in September 2008, he contacted the defendant’s payroll department. He asked what documents were on his personnel file. He was told that the file contained his contract of 9 July 2004 and some payslips, only. No mention was made of the letter of 17 May 2007.
14. On 12 September 2008, he orally gave notice of his intention to resign. He said that he was happy to work through his notice period but assumed that the defendant would not wish him to do so. He handed over his laptop computer and building access card, and left the defendant’s office. He telephoned three days later and confirmed that he was not expected to return, and he did not do so. About three weeks later his salary was paid up to 26 September, the date the two-week notice period expired
15. The plaintiff started work with Ord Minnett on 27 October 2008.
16. The plaintiff says that at no time did he regard himself as bound by the letter of 17 May 2007, nor did anyone in the defendant’s camp suggest to him that he was bound by it, at any time prior to the filing of the amended defence and counterclaim.
17. He deposes that he did not solicit any of the defendant’s clients during the period of six months after his resignation. After the six months had elapsed, he began to contact some of those people. He did not use the defendant’s records to do so, but relied on his memory, the telephone book and the internet.
18. The plaintiff annexed to his affidavit a copy of an email he had sent Mr O’Connell on 10 June 2007. The email was lengthy and raised a number of issues about the letter of 17 May 2007. He asked for an opportunity to discuss the matter face to face with Mr O’Connell, and expressed confidence that they would be able to reach agreement. He also attached a copy of an email dated 12 June 2007 from Mr O’Connell, saying, inter alia, “You make some good points that we need to discuss ... I think we should schedule some time to catch up . . .”. As the plaintiff deposes, the meeting did not take place and no agreement was ever reached about the matters he had raised.
19. The defendant’s Melbourne solicitor affirmed an affidavit for the purposes of the application. He said that he had taken the conduct of the matter over from the Canberra office of his firm early in August 2009. He had reviewed the file and taken further instructions from Mr O’Connell, whom he described as the finance director of the defendant company. Mr O’Connell told him that he had not been involved in providing instructions to the Canberra office for the purpose of drafting the original defence. The solicitor annexed four subsequent emails between Mr O’Connell and the plaintiff, all sent on 23 August 2007. It is apparent from the emails that Mr O’Connell was based at the defendant’s Sydney office. The first email referred to a proposed meeting on 13 September between Mr O’Connell and the plaintiff. Mr O’Connell apologised for the fact that he was unavailable for that date, and suggested the following week. The plaintiff responded that he would not be in Sydney for a few months after 13 September and asked when Mr O’Connell would be in Canberra. Mr O’Connell replied that he was not sure, but would be “happy to run through things over the phone.” The plaintiff’s reply was:

Subject: Re: brief meeting to sign off on employment contract

Cool. All I really want to do is sign it. After our chat last time, there was very little that we agreed to change.

There really is no great rush, I just thought we could get this out of your in tray whilst I’m up there. Whatever, our paths will cross eventually.

. . .

20. Mr O’Connell has not put on an affidavit. I take it from the solicitor’s affidavit that the defendant will not be alleging that there was any further relevant correspondence or discussion about the “employment contract” after 23 August 2007.
21. I should say that I am unable to infer that the heading “brief meeting to sign off on employment contract” was chosen by the plaintiff. The same subject heading was used for all four of the emails annexed to the solicitor’s affidavit, and may well have originated with Mr O’Connell. I note that the plaintiff headed his email of 10 June 2007 “new contract sign-off”, which I am satisfied was a subject heading in his words.
22. On 20 January 2009, the Canberra office of the defendant’s solicitors wrote to the plaintiff, in what seems to have been the first intimation of hostilities after the plaintiff’s departure. The letter enclosed a copy of the plaintiff’s original employment agreement, constituted by the letter of 9 July 2004, endorsed with the plaintiff’s signed acceptance. The letter asserted that the plaintiff had breached a number of provisions of the agreement. The letter accused the plaintiff of “actively soliciting clients from Dixon Advisory to join your new employer Ord Minnett.” The solicitors also said that they were “instructed that whilst in the employ of Dixon Advisory you stole intellectual property which belonged to our client and forwarded it to your present employer Ord Minnett”. The letter demanded that the plaintiff “disclose details of all Dixon Advisory intellectual property which you took in the months leading to you ceasing your employment . . .” and threatened Supreme Court proceedings if the demand was not complied with. The letter made no mention of any amended contract of employment said to arise from the letter of 17 May 2007.
23. For the sake of completeness, I note that on 14 April 2009 the defendant sent a standard letter to the clients with whom the plaintiff had been dealing, accusing the plaintiff of dishonest, unethical and immoral behaviour, including theft, breach of trust and breach of statutory obligations. The plaintiff has commenced proceedings in this Court for damages for defamation in respect of the publication of the letter. There are additional parties to the defamation action, being two directors of the defendant company, and an apparently related company. The plaintiff has applied in those proceedings for an order that the two actions be consolidated. That application is opposed by the defendants and has not yet been heard. The defendants have filed a defence, relying on truth, qualified privilege and honest opinion, with a counterclaim for damages for breaches of contractual and equitable duties owed to the defendants.
24. There has been a considerable body of correspondence between the solicitors in the present action dealing with particulars of the defence and counterclaim.
25. The principal issue raised by the present application is whether the defendant, in its initial defence and counterclaim, made an admission which, in the amended defence and counterclaim, it now seeks to withdraw.
26. Broadly speaking, the plaintiff’s case is that the terms and conditions of his employment were governed by the defendant’s letter of 9 July 2004, which he signed. The case the defendant now wishes to advance is that the terms and conditions of the plaintiff’s employment were indeed governed by the terms of that letter during the early years of his employment, but that by the time his employment came to an end they were governed by the letter of 17 May 2007.
27. In the statement of claim, the plaintiff pleaded the 2004 letter. The defendant in its defence effectively admitted the plaintiff’s assertions of fact about the 2004 letter. The defence did not mention the 2007 letter.
28. The defence admitted the facts alleged in paragraph 1 of the statement of claim, subject to adding two additional facts. The defendant does not seek to alter its defence in relation to paragraph 1 of the statement of claim.
29. The defendant admitted paragraphs 2, 3, 4 and 5 of the statement of claim. Those paragraphs pleaded specific terms and conditions of the employment agreement, and the fact of the plaintiff’s resignation. In the amended defence, the defendant adheres to the admission of paragraph 5 as to the plaintiff’s resignation, but seeks to limit the admissions in relation to paragraphs 2, 3 and 4 to the period prior to June-August 2007, and to deny those paragraphs in relation to the period thereafter. It seems to me that this at least must be viewed as the withdrawal of an admission on the pleadings. The defendant had admitted that it was a term and condition of the employment agreement that the defendant would pay the plaintiff a performance-based bonus every three months, calculated in accordance with a formula set out in a schedule to the letter of 9 July 2004. The continuing partial admission, that those terms applied up to mid-2007, is an admission not responsive to the plaintiff’s claim. The plaintiff makes no complaint about any bonuses to which he became entitled prior to mid-2007, but only to bonuses for the last two quarters of his employment, part of the period in respect of which the admission is now sought to be withdrawn.
30. Senior counsel for the plaintiff goes further, and submits that, both by the original pleading and by its earlier correspondence, the defendant should be taken to have made an admission that the agreement governing the plaintiff’s employment was the letter of 9 July 2004.
31. Where a defendant makes a general admission of liability, the circumstances in which it will be permitted to withdraw the admission are limited and have been the subject of many decided cases, including, on appeal from this Court, Celestino v Celestino [1990] FCA 299, and in this Court Reinicke v Neilson [2004] ACTSC 5; Wyer v Hunt [2005] ACTSC 15; and Barker v Gifford [2005] ACTSC 55. The present case is not one where the defendant is said to have made a general admission of liability.
32. It seems reasonably clear that a party can make an admission of law, or of mixed fact and law, in a pleading: see Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at [69] per Gummow J.
33. Steytler J said in Sangora Holdings Pty Ltd v Dunstan (Supreme Court of Western Australia, Full Court, 13 April 1999, unreported) that it is a serious matter to make an admission in a pleading, and that an admission made in a pleading should not be permitted to be withdrawn without good cause. A withdrawal of an admission will be less readily allowed if it has stood for a long time, or if the withdrawal would cause significant prejudice to the other party.
34. On the other hand, the courts have long respected the principle stated by Bowen LJ in Cropper v Smith (1884) 26 ChD 700 at 710-711, that as soon as it appears that the way in which a party has framed its case will not lead to a decision of the real matter in controversy, this should be corrected if it can be done without injustice. This statement of principle was approved by the High Court in Clough v Frog (1974) 48 ALJR 481. R 21 of the Court Procedures Rules 2006 requires the Court to apply the rules with the objective of achieving the just resolution of the real issues in the proceedings.
35. The principles to be applied in determining an application to withdraw an admission were set out by Santow J in Drabsch v Switzerland General Insurance Co Ltd (Supreme Court of NSW, 16 October 1996, unreported). They may briefly be summarised as follows:
    1. Where a party makes a clear and distinct admission which is accepted by the opponent and acted upon, an application to withdraw the admission should not be freely granted.
    2. A party seeking to withdraw an admission must provide good reasons why the Court should disturb what was previously conceded.
    100. Where the Court is satisfied that an admission has been made after consideration and advice, and after a full opportunity to consider its case, an admission made with deliberateness and formality should ordinarily not be permitted to be withdrawn. A Court will not permit the withdrawal of an admission where the application to withdraw is actuated by purely tactical considerations.
    4. It will usually be appropriate to permit withdrawal of an admission where the admission is contrary to the actual facts. Leave may also be appropriate where the admission was made inadvertently or without due consideration of material matters. In such circumstances leave may be refused if the other party has changed its position in reliance on the admission.
36. In the present case, it seems to me relevant that the admission was made soon after service of the originating process, and that the amended defence was filed only a little over two months later. All of these things happened long before the action will be ready for trial and prior to discovery or any other interlocutory steps which may be open to the parties.
37. I reject the submission that the defendant is to be taken to have made admissions for the purposes of the action by its correspondence or conduct prior to the commencement of the action. Generally cases where parties have been held to admissions before action have been limited to instances of explicit admissions of, for example, breach of duty of care, or, more generally, of liability. There is no suggestion that defendant made any admission of that nature here.
38. It is not my role, on the hearing of an application of this kind, to conduct a mini-trial into the issue sought to be raised by the amendments to the defence. It seems to me that it is sufficient if I am satisfied that if the defence and counterclaim originally filed had been in the form to which it is now sought to amend it, the defendant would have been permitted to take it to trial. I am satisfied that there is nothing about the amended defence and counterclaim which would have stood in the way of that course.
39. The question is whether the defendant should be permitted to withdraw its earlier effective admission that the terms and conditions of the plaintiff’s employment agreement applicable at all relevant times were the terms pleaded in paragraphs 2, 3 and 4 of the statement of claim. On all of the evidence I am satisfied that the admission was made without due consideration of material matters, specifically without conferring with Mr O’Connell and reviewing all of his email correspondence with the plaintiff. I am satisfied that the withdrawal of the admission is not sought purely for tactical purposes. I am satisfied that there is a sufficient explanation about the circumstances which led to the admission being made, and the later decision to seek to withdraw it. I am also satisfied that not to permit the amendment would deprive the defendant of the opportunity to litigate a genuine matter in issue between the parties.
40. R 492 of the Court Procedures Rules permits a party to withdraw an admission made under r 490 only with the Court’s leave. R 490 provides that a party may, in a pleading, admit stated facts. I am satisfied that in the original defence and counterclaim the defendant made an admission within r 490, so that leave is required to withdraw the admission. For the reasons I have given, I am satisfied that such leave should be granted.
41. R 507 provides that a party may amend its pleadings after the close of pleadings only with the leave of the Court. For the same reasons, that leave should also be granted.
42. I grant leave to the defendant to amend its defence and counterclaim after the close of pleadings. I grant that leave retrospectively so that the amended defence and counterclaim filed on 20 August 2009 are to be taken to have been filed regularly.
43. The plaintiff should have a reasonable time to file, if so advised, a reply to the amended defence and an answer to the amended counterclaim.
44. The plaintiff’s application of 15 September 2009 will be dismissed.
45. As to costs, I take account of the fact that the plaintiff’s application has been unsuccessful. At the same time, it has been necessary for the defendant to come to the Court to obtain leave in respect of two issues, the withdrawal of admission issue and the amendment of the defence and counterclaim after the close of pleadings. Although I have granted that leave, it was necessary for the defendant to seek an indulgence on both aspects.
46. It is apparent from the length of the written and oral submissions on both sides that the issues were complex and that the outcome was far from a forgone conclusion.
47. In those circumstances my provisional view is that the costs of both applications should be costs in the cause. If either party wishes to submit that some other order or orders about costs should be made, I grant liberty to apply on three days notice, at any time until twenty-eight days after these reasons are delivered. In the absence of any application, an order will be taken to have been made at the expiry of that period that the costs of both applications are to be costs in the cause.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 29 January 2010

Counsel for the plaintiff: Mr BJ Salmon QC & Mr BJH Tallboys

Solicitors for the plaintiff: Griffin Legal

Counsel for the defendant: MR SJ Moore

Solicitors for the defendant: Slater & Gordon

Date of hearing: 25 September 2009

Date of judgment: 29 January 2010