Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309 (19 December 2003)

Last Updated: 24 December 2003

FEDERAL COURT OF AUSTRALIA

Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309

PRACTICE AND PROCEDURE: Application to withdraw admission contained in pleadings – application made three days after trial commenced – whether Primary Judge erred in principle in refusing application – trial judge considered all relevant circumstances taking into account the question of doing justice as between the parties – discretion held not to miscarry.

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 referred to
Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 applied
H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694 not followed
House v The King [1936] HCA 40; (1936) 55 CLR 499 referred to
Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 referred to

























JOHN ANTHONY JEANS v COMMONWEALTH BANK OF AUSTRALIA LTD (ACN 123 123 124)
N681 of 2003

HILL, MADGWICK AND CONTI JJ
19 DECEMBER 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N681 OF 2003

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	JOHN ANTHONY JEANS APPELLANT
AND:	COMMONWEALTH BANK OF AUSTRALIA LTD (ACN 123 123 124) RESPONDENT
JUDGES:	HILL, MADGWICK AND CONTI JJ
DATE OF ORDER:	19 DECEMBER 2003
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.
2. The appellant pay the respondent’s costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N681 OF 2003

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	JOHN ANTHONY JEANS APPELLANT
AND:	COMMONWEALTH BANK OF AUSTRALIA LTD (ACN 123 123 124) RESPONDENT

JUDGES:	HILL, MADGWICK AND CONTI JJ
DATE:	19 DECEMBER 2003
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT:

1 The appellant, Mr Jeans, appeals from the judgment of a Judge of this Court, Sackville J, dismissing his application against the Commonwealth Bank of Australia (‘the Bank’) in which he sought orders setting aside certain securities obtained by the Bank in 1998 and giving judgment in favour of the Bank in its cross claim against him.

2 The sole ground of appeal is that the learned Primary Judge should have allowed Mr Jeans’ motion brought after the hearing of the proceedings had commenced seeking to amend his pleadings and thereby to withdraw an admission made in the pleadings, namely, that the guarantee upon which the Bank relied in its cross claim had not been executed by him. Mr Jeans wished to assert, instead, that the signature which purported to be his signature on it had been forged by an officer of the Bank, Mr Cleary.

3 The proceedings in the Court were the second proceedings brought by Deangrove Pty Ltd (Receivers & Managers Appointed) (‘Deangrove’) and Mr Jeans. Mr Jeans was the sole shareholder in Deangrove.

4 The first proceeding had been commenced on 13 March 2000 and sought substantially the same relief as was sought in the second proceedings so far as concerned the guarantee. It was dismissed by reason of the applicants’ failure to comply with a self executing order requiring them to file pleadings by a certain date.

5 The second proceedings were commenced by leave of the Primary Judge on 26 October 2000. In these proceedings the applicants claimed an order setting aside or varying ‘the guarantee given ...[by Mr Jeans] in favour of ...[the Bank] in respect of facilities granted to ...[Deangrove]’ under a letter of offer dated 2 March 1998. The letter of offer related to a bill discount facility to be established by the Bank in the sum of $7.55 million to enable Deangrove to finance the acquisition of a site at Holloway’s Beach and to undertake development work on that site.

6 The applicants alleged that, in the course of negotiations relating to the proposed facility, the Bank’s officers (including Mr Cleary) had made certain misleading and deceptive representations and in reliance upon those representations Mr Jeans had entered into the guarantee. It was also alleged that the Bank had engaged in conduct which was unconscionable in breach of s 51AC of the Trade Practices Act 1974 (Cth). It was claimed that in the circumstances the guarantee said to have been entered into by Mr Jeans was void or otherwise unenforceable. We emphasise that Mr Jeans in his amended statement of claim positively asserted that he had entered into an unlimited guarantee of the obligations of Deangrove to the Bank.

7 The Bank, by its amended cross claim, claimed that a sum exceeding $3.6 million was due and owing to it by Mr Jeans under the guarantee. Mr Jeans’ defence to the cross claim admitted the Bank’s allegation that he had guaranteed the payment of monies to the Bank. We emphasise this admission.

8 In an affidavit sworn in the first proceeding Mr Jeans said:

‘From my Diary I am able to say that I had a meeting with Steve Cleary at 2pm of 4 June 1998 for the purpose of signing documents. I am not able at this time to say what documents were signed however from other searches conducted by me I say that Deangrove Pty Limited and I signed the following documents:

(a)	Equitable Mortgage (Company) now bearing date 12 June 1998...
(b)	Mortgage over real estate...dated 12 June 1998...
(c)	Guarantee by myself of the facility. I do not appear to have a copy of this document at this present time.’

9 In an affidavit sworn on 25 September 2002 in the present proceedings Mr Jeans said:

‘On 12 June 1998 I signed:-

(i) a contract for sale of land...;
(ii) I signed a guarantee for the benefit of the CBA a true copy of which is [exhibited];
(iii) I executed an equitable mortgage on behalf of Deangrove granted to the CBA a true copy of which is exhibited...’.

10 In an affidavit filed on the first day of the hearing Mr Jeans said:

‘On 3 June 1998, I had telephone conversations both with Steven Cleary and Peter Hocking [another officer of the CBA]. At 2:00 pm on that day at Mr Cleary’s request I went to the Bank’s offices in Sydney and was provided with security documents including the guarantee which is the subject of these proceedings. I signed the documents in the reception area where Steven Cleary had left them for me. Mr Cleary was not there and he did not witness my signature on the documents at that time. I had no conversation with Mr Cleary at the time I signed the security documents’.

11 We emphasise that the consistent position up until the first day of the hearing was that Mr Jeans had validly entered into the guarantee of Deangrove’s obligations to the Bank. The issue presented by the pleadings at the hearing was whether, as Mr Jeans alleged, the bank had been guilty of misleading and deceptive conduct by the making of false representations or was otherwise guilty of unconscionable conduct.

12 After the case had been opened Mr Jeans presented himself for cross-examination and was cross-examined by senior counsel for the Bank. On the third day of the hearing and in the course of cross-examination Mr Jeans was asked to look at the guarantee which purported to have Mr Jeans’ signature in two places. The first was his signature as a party to the guarantee. That signature purported to have been witnessed by Mr Cleary. The second was his signature by way of attestation of the common seal of Deangrove as its sole director and secretary.

13 At the outset of this part of the cross-examination Mr Jeans agreed that he was being shown a copy of the guarantee which he had executed, and accepted that, despite the date which appeared on the document, it had been signed on 3 June 1998. The cross-examination then continued:

‘Your signature appears on [page 12] or a copy of it at least?...A signature appears there, yes. It’s not the same as my normal signature which is on [page 13].

There is no doubt that it’s your signature though, is it?...I can’t confirm that right now because it’s different from my normal signature.

You are not seriously suggesting to his Honour that you didn’t sign this guarantee are you?...I signed [page 13]. That’s my normal signature. You are asking me if that’s my signature on [page 12]. And I’m saying that it is not my normal signature.

...

Are you suggesting to his Honour that you didn’t sign this guarantee in your own personal capacity?...I’m suggesting that the signature there is not my normal signature.’

14 Mr Jeans’ evidence was that he had never scrutinised the document and that when counsel drew his attention to the signature that was the first time he had noted that the signature appearing on it as his signature as guarantor differed from his signature in his capacity as director and secretary of Deangrove which appeared on the next page. He said that the signature purporting to be his signature on the guarantee was definitely not his signature and denied that he had personally executed the guarantee. It was this assertion that gave rise to the motion before the learned Primary Judge seeking orders that leave be granted to Mr Jeans to withdraw the admission in the amended defence to the cross claim that he had executed the guarantee and to amend the amended statement of claim to substitute for the claim that he had executed the guarantee a claim that it was a condition of the Bank’s offer of finance to Deangrove that Mr Jeans provide an unlimited guarantee. There were other consequential amendments which needed to be made to the pleadings in respect of which leave was also sought. Additionally Mr Jeans sought leave to amend the pleadings to allege that the Bank by Mr Cleary had added a signature to the guarantee purporting to be the signature of Mr Jeans and had done so deliberately and fraudulently.

15 A consequence of the amendments was that if leave was granted there would, for the first time, be tendered as an issue the question whether Mr Jeans had executed the guarantee and, if not, whether his signature had been fraudulently placed on the guarantee by Mr Cleary.

16 As already noted the learned Primary Judge dismissed the motion and declined to give the leave sought. The hearing then continued for some ten days. At the end of the hearing his Honour dismissed Mr Jeans’ substantive application finding that it had not been established either that the claimed misrepresentations had been made or that Mr Jeans had relied upon them. Despite a suggestion to the contrary by counsel for the Bank it is clear that his Honour’s decision on these ultimate issues was dependent upon findings his Honour made as to the credit of Mr Jeans and of Mr Cleary. It is not necessary to summarise his Honour’s judgment on these matters.

The Judgment on the Motion.

17 As his Honour noted, it was common ground that the relevant principles to be applied on the motion for leave were those dealing with an application to withdrawn an admission. His Honour summarised these principles. There was no suggestion on the appeal that his Honour applied the wrong principles or summarised them inaccurately. His Honour correctly rejected the approach taken in England in H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694 where it was suggested that, except in cases which gave rise to an estoppel, an admission might be withdrawn, at least if the other party was not prejudiced otherwise than in a way that might be cured by a costs order. Rather his Honour accepted the view advanced by Rogers CJ in Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 that a party should not be permitted easily to withdraw an admission as otherwise the making of an admission might become meaningless. Nevertheless there was a countervailing policy, his Honour accepted, that a party not be discouraged from making admissions out of fear that once given they might not be withdrawn.

18 The true position was, his Honour said, that there was no principle that admissions might or might not be withdrawn. Rather the Court had a broad discretion to weigh up all matters with the overall question being to ensure that there was a fair trial. His Honour accepted the principles stated by Santow J of the Supreme Court of New South Wales in Drabsch v Switzerland General Insurance Co Ltd (unreported, 16 October, 1996) as follows:

‘

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 guidelines 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.’

19 His Honour considered, also, the effect of the decision of the High Court in Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 which, contrary to the view of Rogers CJ in Coopers Brewery, rejected an emphasis upon case management as a ground for refusing an application to amend a defence, which application would lead to the vacating of a hearing date and an adjournment of the proceedings, and instead made it clear that the ultimate aim of the Court was the attainment of justice. Case management should not be allowed to prevail, their Honours said, over the injustice of shutting the applicants out of raising an arguable defence (see at 155).

20 Consistently with that judgment his Honour observed that, while case management was not an irrelevant consideration, it was neither decisive nor paramount in determining whether leave should be given to withdraw the admission. However, his Honour pointed out that the facts before his Honour were distinguishable from those in JL Holdings where the application was made six months before the trial date and not after the hearing had actually commenced. Further, as his Honour observed, the admission sought to be withdrawn was on a factual issue within the knowledge of the person making the admission.

21 His Honour then turned to weigh up the various factors relevant to the question of discretion. His Honour pointed out that, from the outset of the litigation, Mr Jeans had relied upon his execution of the guarantee. He was an experienced businessman and had been advised by competent lawyers. Mr Jeans had more than a fair opportunity to put forward any case open to him that he was not liable on the guarantee. His Honour noted that if leave were given it would open up new and quite different issues from those to that date presented for trial, namely whether Mr Jeans had in fact executed the guarantee (it being accepted that the mere difference in signatures did not itself establish this issue) and that these issues would no doubt include a defence by the bank (foreshadowed by Senior Counsel for the Bank) that Mr Jeans was liable under an oral agreement to guarantee or was estopped by his conduct from denying execution. The question of fraud on the part of the Bank and on the part of Mr Cleary would also require determination and would turn upon matters of credit. His Honour commented:

‘I should make it clear that I express no view as to Mr Jeans’ evidence at the trial. It is not appropriate that I should do so at a time when the evidence in the case is incomplete.’

22 Other matters which his Honour took into account were:

•	An adjournment would be inevitable if leave were given.
•	There had been previous adjournments or orders made vacating previous hearing dates.
•	There had been numerous failures on the part of the applicants to comply with directions made and his Honour had when vacating a previous hearing date made it clear that no further indulgences would be granted.
•	Delay would work unfairness to the Bank. It would be exposed to large amounts of costs which might prove to be irrecoverable despite an existing indemnity given by Mr Jeans to Deangrove for its costs and supported by a guarantee given by Mr Jeans.
•	The Bank and Mr Cleary would need to address the claim for fraudulent (or criminal conduct) which claim had not been hinted at in the three years since the litigation had been instituted.
•	The interest of justice demanded that Mr Jeans take responsibility for his conduct in the litigation.
•	Mr Jeans had given no adequate explanation for making the admission in the first place. Such explanation as he had given, namely that he had not scrutinised the guarantee which originally was not in his possession, but which had been produced to his advisers on discovery, was not satisfactory. He had not chosen to inspect the guarantee.
•	The admission was only sought to be withdrawn after the hearing had continued for three days.
•	The Bank’s cross-examination would not be prejudiced if leave was granted.

The Question on Appeal.

23 It was common ground between the parties that the tests to be applied in considering whether leave be granted to withdraw an admission were correctly stated by the learned Primary Judge. It was also common ground that the appeal, concerning as it did a matter of practice and procedure, could only succeed if the appellant showed that the learned Primary Judge made an error of principle such that his discretion miscarried and that the appellant had suffered prejudice: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170; House v The King [1936] HCA 40; (1936) 55 CLR 499.

24 Counsel for the appellant submitted that his Honour’s discretion miscarried on either or both of two grounds.

25 First, it was submitted that the learned Primary Judge had, despite disavowing doing so, taken into account his impressions on the credit of Mr Jeans made during the two days of cross-examination that had preceded the making of the motion. It is submitted that the leave to amend was refused because his Honour did not believe Mr Jeans when he said that the issue of execution of the guarantee had only arisen after the case had commenced. It is said that in doing so his Honour must be taken to have rejected the evidence given by Mr Jeans that the signature on the guarantee was not his signature. Otherwise, it was submitted the overwhelming importance of the fact of execution to the case would have required that it be permitted to be an issue.

26 Alternatively, or cumulatively, it was submitted that the question was one of balancing the prejudice to the parties. The prejudice to Mr Jeans was overwhelming as he was unable to advance the factual case he maintained. The countervailing prejudice to the Bank was not such as to outweigh the prejudice to Mr Jeans. It could be cured by a costs order and it had been accepted by counsel for Mr Jeans that such an order would necessarily follow. The need for an adjournment or the difficulty for the Bank in addressing a claim of fraud by one of its officers were not, it was said, sufficient reasons for refusing leave.

Reasons for Disallowing the Appeal.

27 In our view the appellant has not shown that the learned Primary Judge made any error in principle such as would justify allowing the appeal.

28 We were taken to the transcript of the proceedings in the period up to the hearing of the motion. It is unnecessary to summarise what happened. Suffice it to say that to the point of the hearing of the motion the cross-examination of Mr Jeans had involved matters of credit. Indeed, there were already grounds for his Honour to conclude that Mr Jeans’ evidence should not be accepted. But it is another thing to say that his Honour took these matters of credit into account in dismissing the motion.

29 It is clear that his Honour was conscious of the fact that the credit of Mr Jeans and, for that matter, of Mr Cleary would be relevant matters in determining whether Mr Jeans had executed the guarantee and any defence on the part of the Bank that might be advanced thereafter. But it is also clear, indeed, his Honour specifically stated, that for the purposes of the motion he would leave aside matters of credit. It is clear from the judgment on the motion that his Honour accepted that the question of execution of the guarantee involved a triable issue. But there is nothing in the judgment which suggested that his Honour decided that issue let alone decided it on the basis of a finding of credit. It appears to have been accepted in the course of argument on the motion that his Honour would not be invited on the motion to make an assessment of Mr Jeans’ credit but that the motion should be decided on the evidence as it stood, that is to say on Mr Jeans’ evidence that the signature on the guarantee was not his signature. This is consistent with what his Honour said on the question of credit set out earlier in these reasons.

30 There is not sufficient reason to go behind what his Honour said on the matter nor is there anything in his Honour’s reasons to suggest that his Honour in any way addressed the issue whether Mr Jeans had in fact signed the guarantee. Nor is there sufficient reason to suggest that his Honour was incapable of putting to one side any tentative view as to Mr Jeans’ credit which he might have formed as a result of the cross-examination which had taken place prior to the making of the motion.

31 The second submission reveals no error of principle. Once it is accepted, as it was, that the question whether leave should be given was one which involved weighing all the relevant circumstances, the weight which might be given to any particular circumstance is a matter for the Primary Judge in the exercise of his discretion.

32 We accept that if Mr Jeans had been given leave to withdraw the admission he had made the question whether he had executed the guarantee would have become a very significant issue in the application. While it might not, as his Honour said, have ultimately been determinative, refusal of the motion clearly locked Mr Jeans out for all time to have this issue determined. Failure to grant the motion thereby created a prejudice to Mr Jeans that could not thereafter be remedied. While this is clearly a very important matter to take into account in deciding whether leave should be granted it is not the only factor. Other factors, such as the prejudice to Mr Cleary and the Bank in dealing with the allegation of fraud some five years after the event will also be relevant. So too is the time at which the application is raised and the lack of an adequate explanation for the fact that the matter was raised at so late a time. Ultimately, as his Honour realised, the question is one of ‘the attainment of justice’ as Dawson, Gaudron and McHugh JJ observed at 143 in JL Holdings. That involves balancing all relevant circumstances including the prejudice which must attach to one party or the other. No error of principle having been shown, the appeal must be dismissed with costs.

I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Hill, Madgwick and Conti.

Associate:

Dated: 19 December 2003

Counsel for the Appellant:	JM Ireland QC
Solicitor for the Appellant:	Robert Butler
Counsel for the Respondent:	AG Bell SC and DA McLure
Solicitor for the Respondent:	Commonwealth Bank Legal
Date of Hearing:	1 December 2003
Date of Judgment:	19 December 2003