Supreme Court New South Wales Medium Neutral Citation: Fabrizio v Wickham Hill Investment Pty Ltd [2018] NSWSC 612 Hearing dates: 6 and 27 April 2018 Decision date: 10 May 2018 Jurisdiction: Equity Before: Robb J Decision: See paragraphs [79]-[83] Catchwords: CIVIL PROCEDURE — Pleadings — Amendment — Application for leave to withdraw admissions made in pleadings CIVIL PROCEDURE — Admissions — Admission of facts — Withdrawal of admissions — whether the Court should grant leave to withdraw admissions made in pleadings — whether admitted fact is likely to be false — whether the withdrawal of the admissions will further the interests of justice Legislation Cited: Civil Procedure Act, 2005 (NSW). Cases Cited: Drabsch v Switzerland General Insurance Co Ltd (unreported, Supreme Court of NSW, 16 October 1996) In the matter of JRJ Plumbing Supplies Pty Ltd (in liquidation) [2015] NSWSC 2026 In the matter of Dymocks Book Arcade Pty Ltd [2013] NSWSC 298 Category: Procedural and other rulings Parties: Judith Fabrizio (Plaintiff/First Cross Defendant) Franco Fabrizio (Second Cross Defendant) Wickham Hill Investment Pty Limited (Defendant/Cross Claimant) Representation: Counsel: D Allen (Plaintiff/Cross Defendants) A M Gruzman (Defendant/Cross Claimant) Solicitors: Kekatos Lawyers (Plaintiff/Cross Defendants) Cappello Rowe (Defendant/Cross Claimant) File Number(s): 2016/274962 Judgment 1. The application in the present matter was heard in the Applications List on 6 and 27 April 2018. 2. At the first hearing, the Court was concerned with an application by the defendant by notice of motion filed on 8 December 2017 to file an amended defence and an amended statement of cross claim. 3. During that hearing, it became apparent that the real issue in contention was that the effect of the amendments would be to withdraw admissions that the defendant had made in its initial pleadings. 4. When it was pointed out by the Court that, if the defendant wished to be given leave to withdraw admissions made in pleadings, it should specifically seek that relief, the defendant sought and obtained an adjournment to amend its notice of motion. The defendant was ordered to pay the costs of the day. 5. The defendant filed an amended notice of motion on 17 April 2018, by which it sought the following relief: 1. An order, pursuant to Uniform Civil Procedure Rule 12.6 or 19.1, or s 64 Civil Procedure Act that leave be granted to the Defendant/Cross-Claimant to file: (a) an Amended Statement of Cross Claim, in the form attached to this motion and marked "A"; and (b) an Amended Defence, in the form attached to this motion and marked "B". 2. Such further or other order as the Court deems fit. 3. The Defendant/Cross Claimant is granted leave to amend this Notice of Motion; 4. An order, pursuant to Uniform Civil Procedure Rule 12.6, that leave be granted to the Defendant/Cross Claimant to withdraw the admission at paragraph 4 of the Defence filed 3 May 2017 and any admission that units in a unit trust had been issued to the Plaintiff; 5. An order that the Defendant/Cross Claimant have leave to withdraw admissions made in the Defence filed in these proceedings to the extent set out in the proposed Amended Defence served on 13 November 2017. 6. Costs. 1. The plaintiff in these proceedings is Judith Mary Fabrizio. The defendant is Wickham Hill Investment Pty Ltd. The defendant has filed a cross claim against the plaintiff and her estranged husband, Franco Fabrizio. 2. The plaintiff's statement of claim was filed on 2 February 2017. It seeks the following relief: 1. A declaration that the Plaintiff: a. Holds Units in the Wickham Hill Unit Trust; b. That the Plaintiff holds 17.5% of the issued Units in the Wickham Hill Unit Trust. 2. An order that the Defendant is to produce for inspection by the Plaintiff, including her agents: a. Any Deed or other Document establishing the Wickham Hill Unit Trust; b. Any Deed or other Document evidencing the terms and governing the administration of the Wickham Hill Unit Trust; c. Any document recording past and present holders of the Units in the Wickham Hill Unit Trust; d. Any document recording the end of year financial position of the Wickham Hill Unit Trust including but not limited to end of year financial accounts; e. Any document recording the resolutions made by the Defendant as trustee of the William Hill Unit Trust; within 48 hours at place in Sydney during business hours. 3. An order that the Defendant provide to the Plaintiff a copy of: a. Any Deed or other Document establishing the Wickham Hill Unit Trust; b. Any Deed or other Document evidencing the terms and governing the administration of the Wickham Hill Unit Trust; within 48 hours. 4. An order that the Defendant specifically perform the Wickham Hill Unit Trust by issuing her with certificates for the Units or replacement certificates. 5. An order that Defendant not indemnify itself from property of the Wickham Hill Unit Trust for the cost of these proceedings. 6. Costs. 1. The plaintiff pleaded in pars 1 to 3 of her statement of claim that the Wickham Hill Unit Trust (the Trust) was established in June 2012, and that the defendant is the trustee of the Trust. The plaintiff does not know what documents govern the terms of the Trust. 2. Importantly, the plaintiff then pleaded, in par 4: 4. Upon establishment of the Trust, Units in the Trust were issued. 1. The plaintiff then pleaded in pars 5 and 6 that when the Trust was established it was the common mutual intention of the plaintiff, the defendant and other interested entities that the plaintiff would be issued units in the Trust, and in par 6 that valuable consideration was paid for the units by the plaintiff through her estranged husband. 2. Then, par 7 made the following allegation: 7. 17.5% of the units were issued to the Plaintiff. 1. The plaintiff then pleaded in pars 8 and 9 that the plaintiff has an implied contractual right to have a copy of, or to inspect, any document establishing the Trust, as well as a proprietary interest in any such document. The plaintiff also alleged a right of access to the Trust's documents based upon the fiduciary duty owed by the defendant. 2. Paragraph 10 contains an allegation that the defendant has breached its duties by refusing to give the plaintiff access to relevant Trust documents. 3. In pars 11 to 19 of the statement of claim, the plaintiff alleges that the defendant holds property on trust for the Trust, which was acquired for $6 million and is now worth $10 million. It is alleged that the defendant has leased the property for a rental of $600,000 per annum, but has not required the lessee to pay the rent. The plaintiff alleges that the defendant has a duty to ensure that the rent is collected, and has breached that duty. 4. The plaintiff then alleges: 20. [The defendant] as trustee of the Trust had a duty to pay distributions it has resolved to make in respect of each Unit. 21. In June 2013 [the defendant] resolved to pay the plaintiff a distribution from income of $3335. 22. On 11 March 2014 [the defendant] notified the Commissioner of Taxation that it has paid a distribution from income of the Trust of $3335 to the Plaintiff. 23. By reason of [the defendant] declaring that it was paying a distribution from income of the Trust of $3335 to the plaintiff, the plaintiff was obliged to include that amount in her tax return as income for the year ending 30 June 2013, which she did. 24. In breach of that duty [the defendant] did not pay the amount it as Trustee had resolved to pay in respect of the Units held by the Plaintiff. 1. The plaintiff then alleges in pars 25 to 28 the basis of her entitlement to inspect the Trust's documents. 2. Thus, although the plaintiff pleaded that she is entitled to a distribution of $3335 as a result of the resolution made by the defendant, the only relief that she is seeking, apart from the declaration that she holds 17.5% of the issued units in the Trust, and that she be issued with certificates for the units, is that orders be made that the defendant facilitate the plaintiff being given access to and an opportunity to inspect the Trust's documents. 3. The defendant filed a defence to the statement of claim on 3 May 2017. 4. Relevantly, the defendant responded to par 4 of the statement of claim by par 4 of the defence as follows: 4. The Defendant admits paragraph 4 of the Statement of Claim and further states that one (1) Unit in the Trust was issued to the Plaintiff as trustee for Frank Fabrizio ("Frank") at around the time the Trust was established. The Plaintiff held the units in the Trust on behalf of Frank or in the alternative Frank acted as agent of the Plaintiff in bringing about the issue of the Units to the Plaintiff and in entering into the 6 May Loan Agreement. Units with Wickham Hill Unit Trust were issued for the sole purpose of acquiring the winery known as Wickham Hill ("Target Factory"). 1. Although par 4 of the statement of claim only alleged that, upon the establishment of the Trust, units in the Trust were issued, par 4 of the defence went further than to admit that allegation. It contained a positive allegation that one unit in the Trust was issued to the plaintiff as trustee for her estranged husband. 2. Paragraph 6 of the defence contained allegations concerning an alleged loan agreement dated 6 May 2012 between the plaintiff's estranged husband and a gentleman called Risheng Lai, under which Mr Lai agreed to lend Mr Fabrizio $1 million for the purpose of acquiring what had been defined as the Target Factory. 3. The alleged effect of the loan agreement was that the loan to Mr Fabrizio would be secured by the Target Factory, and that if the loan was not repaid by 30 June 2015, then all interest in the Target Factory would "revert to" Mr Lai, who would have a right to take it over and sell it. The defendant alleged: (e) The Plaintiff held the units in the Trust on behalf of Frank or in the alternative, Frank acted as agent of the Plaintiff in bringing about the issue of the Units to the Plaintiff and in entering into the 6 May 2012 Loan Agreement. 1. The defendant alleged that Mr Fabrizio or the plaintiff breached the loan agreement when the loan was not repaid when it fell due. 2. The defendant also pleaded the terms of a 28 May 2012 loan agreement in par 6 of its defence. That loan agreement appears to be inconsistent with the 6 May 2012 loan agreement, in that it alleges that Mr Haiyang Xu agreed to lend Mr Fabrizio the sum of $1 million for the purpose of acquiring the Target Factory. It is alleged that Mr Xu would have the same rights as Mr Lai had under the earlier loan agreement. Sub-paragraph (j) is materially the same as sub-par (e) that is extracted above. 3. The effect of these allegations is pleaded by the defendant in par 6 of the defence as follows: (l) By 30 June 2015, any units in the Trust held by the Plaintiff were forfeited as a result of the breach of the 6 May 2012 Loan Agreement and the 28 May 2012 Loan Agreement. (m) The plaintiff no longer holds units in the Trust. 1. The defendant then pleaded, in response to par 7 of the statement of claim the following: 7. In response to paragraph 7 of the Statement of Claim, the Defendant repeats paragraphs 4, 5 and 7 above. 1. As par 7 of the statement of claim contains an allegation that 17.5% of the units were issued to the plaintiff, the effect of par 7 of the defence is that the defendant did not specifically respond to that allegation. In so far as the defendant repeated the paragraphs referred to, it clearly alleged that at least one unit had been issued to the plaintiff, and that "the units in the Trust" held by the plaintiff were held on trust for Mr Fabrizio, or alternatively Mr Fabrizio acted as the agent of the plaintiff for the purpose of entering into the two alleged loan agreements. 2. It does not appear that the defendant admitted that the plaintiff held 17.5% of the units in the Trust, unless the technical view is taken that such an admission was made as a result of the failure of the defendant to positively deny or not admit that allegation in par 7 of its defence. 3. The gravamen of the defence is that, although it admitted that at least one unit in the Trust was issued to the plaintiff, it alleged that "any units in the Trust held by the Plaintiff were forfeited as a result of the breach of the" two loan agreements, so that the plaintiff no longer holds any units in the Trust. 4. Although the defence contains an allegation that the consequence of the breach of the two loan agreements by Mr Fabrizio was that the interest in the Target Factory would revert to Mr Lai, or Mr Xu, who would have a right to take it over and sell it, no basis is pleaded in the defence as to why these events would have the effect that any units in the Trust issued to the plaintiff would be forfeited. If the defendant's allegations are accepted at face value, a consequence of the breach by Mr Fabrizio would be that one or both of Mr Lai and Mr Xu would be entitled to the Target Factory. That might reduce the assets of the Trust to nil, so that the units in the Trust held by the plaintiff would be worthless. It would not affect, however, the validity of the issue of the units. 5. The defendant then pleaded in par 8 that for the reasons set out in pars 4 and 7 of the defence, the defendant denied that the plaintiff is a unit holder of the Trust "and therefore does not have an implied contractual right or implied interest in any documents relating to the Trust". 6. For the reason that I have just given, that is not an effective defence to the plaintiff's claim that, as a unit holder in the Trust, she is entitled to be provided with access to and be allowed to inspect such documents of the Trust as her beneficial interest in the Trust would entitle her to have. 7. It should be mentioned that there was no reliance by either party on any terms of the instrument that created the Trust as either giving unit holders an entitlement to the Trust's documents, or denying them that right. 8. Paragraph 9 of the defence contains a similar assertion as to why the plaintiff is not entitled to access to the Trust's documents by reason of a breach of fiduciary duty by the defendant. 9. For the sake of completeness, it should be noted that, in par 18 of the defence, the defendant alleges a positive claim concerning the making of the 6 May 2012 and 28 May 2012 loan agreements, and the consequences of the breach of those agreements by Mr Fabrizio. The defendant repeated the positive allegation that the plaintiff held the units in the Trust on behalf of Mr Fabrizio, or that Mr Fabrizio acted as her agent in acquiring them. 10. As I read the allegations in par 18, there is no basis pleaded as to the mechanism by which the breach of the loan agreements would lead to the forfeiture of the units in the Trust held by the plaintiff. 11. It will now be appropriate to address the amendments that the defendant seeks to make by being given leave to file its draft amended defence and a draft amended first cross claim amended statement of cross claim. 12. First, as to the draft amended defence, the new par 4 would be a simple admission of par 4 of the statement of claim, which would take effect as an admission that units in the Trust were issued. 13. The positive allegation contained in the original par 4 of the defence would be deleted. 14. All of the allegations concerning the 6 May 2012 and the 28May 2012 loan agreements would be deleted, because those are allegations that would be moved to the amended cross-claim and revised. 15. The new par 7 of the amended defence would be in the following terms: 7. The defendant denies paragraph 7 of the Statement of Claim. In further answer to this paragraph, the defendant says: (a) That Frank Fabrizio became entitled to 17.5% of the Units in the Unit trust, subject to the terms of the 6 May 2012 agreement and the 28 May 2012 Loan Agreement (as pleaded in the cross claim); (b) Frank Fabrizio indicated an intention to have those units issued in the name of the plaintiff; (c) However, neither Frank Fabrizio nor the plaintiff ever issued an instruction to the defendant, for a transfer of units, and the plaintiff was never registered as the holder of units in the unit trust; and (d) Alternatively, if the plaintiff became entitled to have units in the unit trust issued to her, she did so as the trustee of Frank Fabrizio, and subject to his obligations under the 6 May 2012 Agreement and the 28 May 2012 Loan Agreement. 1. This new par 7 would effect a denial of the plaintiff's allegation that 17.5% of the units were issued to the plaintiff. It would admit that Mr Fabrizio became entitled to 17.5% of the units, but that was subject to the terms of the two loan agreements. Those terms would be as pleaded in the amended cross claim. 2. Put briefly, although the amended cross claim would be pleaded in somewhat more explicit terms to the pleading that it replaced, it substantially made the same allegations as would be deleted from the original defence, except that in par 8a it alleges: 8a. The effect of the 6 May 2012 Loan Agreement was to vest in Lai, once the Target Factory was acquired, the beneficial interest in the Target Factory, or in any corporate vehicle or trust in which the Target Factory would be held once acquired, as security for the repayment of the Lai Funds. 1. Strangely, par 9c of the draft amended cross claim, which pleads that effect of the 28 May 2012 loan agreement, only alleges that on breach "all interest in the Target Factory will revert to Xu and he has to (sic) right to take over the Target Factor (sic)". There is no equivalent allegation of a right to the beneficial interest in any corporate vehicle or trust in which the Target Factory would be held. 2. It should be noted that, even in relation to the expanded effect of the 6 May 2012 loan agreement upon breach, there is no positive identification of the term of that document that purports to have the effect that a breach of the loan agreement would give Mr Lai a beneficial interest in all units that had been issued in the Trust. 3. I have set out above the allegations in pars 20 to 24 of the statement of claim, concerning the defendant having resolved to pay to the plaintiff a distribution of income of $3335 in respect of the units in the Trust held by her, and the failure to pay that distribution. 4. In pars 14 and 15 of the original defence, the defendant did not admit those allegations. The amended defence would have the same effect. 5. During the course of the hearing on 27 April 2018, it became apparent that the only real issue between the parties was the opposition by the plaintiff to the defendant being given any leave to withdraw admissions that it had made to the effect that the plaintiff was a holder of units in the Trust, whether such admissions were to be found in the defence or the cross claim. The plaintiff is otherwise not concerned with the various amendments to its pleadings that the defendant seeks to make. 6. In support of her opposition to the defendant being given leave to withdraw the admissions, the plaintiff relies upon the fact that she has prepared and served her evidence in support of her claim on the assumption that she did not have to prove that she was a holder of units in the Trust, and she has not attempted to do so. 7. At the hearing, the plaintiff pointed to the evidence that caused her to make the allegations in pars 20 to 24 of the statement of claim concerning the resolution of the defendant to pay a distribution to her, and the notification of that fact to the Commissioner of Taxation, with the attendant consequences. 8. That evidence consisted of the Trust's Electronic Lodgement Declaration for its 2013 tax return, its 2014 tax return and its 2014 Financial Statements. The first two documents have not formally been signed on behalf of the defendant, but the modern practice is that documents of this type can be lodged electronically in a form that does not bear a signature. Proper practice would usually involve a properly signed tax return being preserved by the relevant tax agent. There was some positive evidence that the 2013 tax return had actually been lodged, but that may not have been the case for the 2014 tax return. The 2014 Financial Statements that were in evidence did not bear the signature of the relevant director of the defendant, Rui Yong Chen. 9. The 2013 return recorded the plaintiff as being a beneficiary of the Trust with a share of income of $3335. The 2014 tax return also showed the plaintiff as being a beneficiary of the Trust, with an income of $3492. The trial balance that apparently forms part of the 2014 Financial Statements records the plaintiff as having an opening balance of $3335.06 credit, with $126.24 tax deducted. 10. The plaintiff's solicitor, Jim Kekatos, gave evidence that he prepared the evidence for the plaintiff on the basis that an admission had been made that the plaintiff was a unit holder in the Trust. He also gave evidence of speaking to the accountant for the Trust for the period from June 2012 to sometime in 2016. The accountant made the following statements to him in the week before he prepared his affidavit: Jim when I prepared the tax returns for the years ending 2013 and 2014 of the [Trust], I looked at the register of unit holders of the [Trust] to see who the beneficiaries where (sic) and I saw that Judith Fabrizio was entered as a Unit Holder. I transferred all the documents relating to the [Trust] to Wong and Myers Accountants. 1. Mr Kekatos also said that the accountant informed him that there were applications for units and copies of unit trust certificates for all unit holders forwarded to the new accountants, and said: "One of the certificates I saw was in the name of Judith Fabrizio". 2. The defendant relied on the following evidence in response to that tendered by the plaintiff. 3. Mr Xu, who described himself in his affidavit in support of the defendant's notice of motion as its general manager since 2015, said that between 19 June 2012 and 18 October 2014, the sole director and secretary of the defendant was Mr Chen. Mr Xu said that on 28 May 2012 Mr Fabrizio, Mr Chen and another person, borrowed $1 million from Mr Xu under a loan agreement of that date. He said that the same three men borrowed $5 million from Mr Lai under a loan agreement dated 6 May 2015. (This is inconsistent with the allegation that the amount was $1 million in the defence and the cross claim). Mr Xu said that none of the funds have been repaid. 4. Mr Xu said that, after the statement of claim was received, he searched the defendant's office to find a unit register, which he could not find. He said that in about March 2015, in the course of responding to the statement of claim "I formed the opinion that Frank's interest in the Winery was probably held by Judith on his behalf". Mr Xu gave reasons for that belief. Those reasons include that Mr Fabrizio had said to him that he had put everything in the plaintiff's name, for a period the plaintiff held shares in the defendant, Mr Xu had no direct knowledge of who the unit holders were, and the plaintiff asserted that she was a unit holder and Mr Xu had no information sufficient to draw any different conclusion. 5. Consequently, Mr Xu caused the defendant to state in its defence that the plaintiff held one unit in the Trust. 6. Mr Xu stated his belief that the admission was made inadvertently and in error, without proper consideration of all the relevant material and circumstances that became available to him afterwards. 7. Mr Xu then referred to the results of further investigations and his consideration of the evidence relied upon by the plaintiff, and additional material that contradicts the admission. 8. That evidence includes an affidavit by Mr Fabrizio sworn on 22 September 2017 served on the defendant by the plaintiff. Mr Xu said he formed the opinion that the evidence contradicted the admission in that (note that the sub-pars start at (e)): (e) Frank deposes to a conversation in his Affidavit with respect to the [Trust] that suggests he was to be issued units. At paragraph 20 on page 5 Frank deposes that John Chen states "I will set up a unit trust and we all have equal units". (f) Frank does not attach a unit register or set out anywhere in his affidavit anything that would suggest that Judith was issued one unit. (g) The plaintiff has not relied upon any evidence, either from herself, Frank or John Chen, to show that Judith was issued with one unit in the [Trust]. I note that at the time the [Trust] was established, Chen was the sole director of the trustee and Frank was the general manager of the Winery. (h) Judith does not claim that she signed any unit certificate or application for units. (i) There is no evidence that Judith gave any consideration for a unit in the trust, and it appears that she did not give any such consideration. (j) There are no signed certificates or unit registers in the defendant's position that evidence the issue of unit (sic) to Judith. 1. I interpolate that the plaintiff responded to this evidence by saying that it is hardly surprising that Mr Xu did not find material in the plaintiff's evidence that proved that she had been issued units in the Trust, because that fact had been admitted. The plaintiff's submission that it would be absurd for the Court to permit the defendant to withdraw the admission simply because the plaintiff had not proved the fact has weight. 2. Mr Xu gave evidence of a discussion with Mr Lai in which he asked the latter whether he knew if a register was created for the Trust before 1 January 2016, and if so whether Mr Lai had a copy. Mr Lai's response was that he requested Mr Chen, Mr Fabrizio and the other person "not to allocate any units and not to create any unit register prior to repayment of interest to me and my principal". 3. Mr Lai gave evidence of a conversation with Mr Chen in about 2012, in which Mr Chen said words to the effect: "We will set up a unit trust but the units will be held on trust for you and Mr Xu who are the lenders, until the money is repaid". 4. The defendant's solicitor, Sarah Cappello, gave affidavit evidence in response to that given by Mr Kekatos, of her own discussion with the defendant's former accountant. One statement made by the accountant was, in relation to the schedule of people holding units in the tax return: "I can't remember if it was a spreadsheet or schedule but I wouldn't have made up the numbers". He confirmed that all documents were forwarded to the later accountants. He said that he could not remember seeing a unit certificate for the plaintiff, but said that the certificates were prepared by someone else. He also said that he did not specifically say to Mr Kekatos that the plaintiff was a unit holder. 5. There was no evidence from either side about whether any inquiries had been made of Wong and Myers, to see whether any relevant documents could be found. 6. There was no issue between the parties concerning the principles to be applied by the Court concerning the circumstances in which the Court should permit a party who has made a formal admission to withdraw that admission. 7. There are many authorities which have accepted the applicability of the principles set out by Santow J (as his Honour then was) in Drabsch v Switzerland General Insurance Co Ltd (unreported, Supreme Court of NSW, 16 October 1996). A convenient exposition of the authorities may be found in the judgment of Brereton J in In the matter of Dymocks Book Arcade Pty Ltd [2013] NSWSC 298, as follows: [8] There is no significant dispute as to the applicable principles, which were expounded by Santow J, as he then was, in Drabsch v Switzerland General Insurance Co Ltd NSWSC, 16 October 1996, (unreported), as follows (at pp 7–8): 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 [Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 per Rogers CJ Comm D, followed in IOL Petroleum Ltd v O'Neill per Young J (17 November 1995, unreported) and Apex Pallett Hire Pty Ltd v Brambles Holdings Ltd (Full Supreme Court of Victoria, 8 April 1988, unreported)]; 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; IOL Petroleum Ltd v O'Neill (above), in the context of withdrawing a concession made before the registrar; 3. Where a Court is satisfied that admissions have been made after consideration and advice such as from the parties' expert and after a full opportunity to consider its case and whether the admissions should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn; Coopers Brewery Ltd v Panfida Foods Ltd (above) at 745 and 748. Thus a Court would not lend its approval to the withdrawal of admissions where, by analogy with the making of amendments, this is actuated by purely tactical reasons; compare Devae Prufcoat Pty Ltd v Altex Industrial Paints Ltd (Cole J, 15 March 1989, unreported) 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; H Clark (Doncaster) Ltd v Wilkinson (above), in that respect not doubted; 5. Following Cohen v McWilliam, 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 upon another party. [9] That summary has been repeatedly endorsed: see Silver v Dome Resources NL [2005] NSWSC 265, [8]–[9] [Hamilton J]; Jeans v Commonwealth Bank of Australia Ltd [2003] 204 ALR 327 [18] (Hill, Madgwick and Conti JJ); SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816, [55]–[56] (White J); and Hill End Gold Ltd v First Tiffany Resources Corporation [2008] NSWSC 866, [31] (Brereton J). In Jeans, the Full Federal Court said (at [18]) that the true position was that there was no principle that admissions might or might not be withdrawn; the court had a broad discretion to weigh up all matters with the overall question being to ensure that there was a fair trial. [10] In SLE Worldwide, White J said (at [56]) that this general approach was guided by the principles expounded by Santow J: It is legitimate and it may be necessary to consider whether the party making the admission did so deliberately, or whether he did so in error, whether the significance of the admission has changed since it was made, for example by reason of other amendments, or whether new evidence has come to light. In this case there is no suggestion that the admission was made in error. There has been no change to the pleadings which has altered the significance of the admissions. It is not suggested that new evidence has come to light which justifies their withdrawal. Where a party, who is legally advised and does not suffer any disability, deliberately and without mistake, admits liability in whole or in part, and there are no relevant changes of circumstance, prima facie, justice or fairness to both parties does not require that it be allowed to change its mind. That is why admissions made with deliberateness and formality are not ordinarily permitted to be withdrawn. [11] His Honour then proceeded to hold (at [57]). It was not sufficient reason to permit SLE to withdraw its admission of liability that, on some grounds, it was reasonably arguable that SLE might not be liable: I therefore start from the position that the admissions deliberately and formally made should not be permitted to be withdrawn, unless sufficient cause is shown why they should be. I accept that on some of the grounds upon which the case between SLE and WGB might be decided, or the cross-claim between WGB and Gerling might be decided, it is reasonably arguable, considering only the terms of the two agreements and the pleadings, that SLE might not be liable to indemnify Gerling in respect of the disputed deductions. I do not consider that to be a sufficient reason for permitting SLE to withdraw the admissions. The prejudice to Gerling cannot only be measured in terms of the additional cost which it will incur in the litigation, or the costs thrown away by reason of the amendments. The prolongation of the litigation, which has already been prolonged for too long, with the inevitable expenditure of executives' time, is part of the prejudice which Gerling will suffer if the amendments are allowed. [12] Ultimately, consistent with what the Full Federal Court suggested in Jeans, "the question is one of the attainment of justice rather than trying to apply an artificial approach" [Sirius Shipping Corporation v Ship "Sunrise" [2006] NSWSC 164; [4] (Young CJ in Eq). And as the then Chief Judge has elsewhere observed, [For The Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 108 [3]]: Essentially, the court is after the truth … thus, in principle, an erroneous admission should be able to be withdrawn unless other factors outweigh. The principal factor that might outweigh is that there is such great prejudice to the other party, because of the way in which that party has prepared his or her case on the basis of the admission, that the leave should not be given. [13] The dichotomy presented by his Honour in the passage just referred to — namely, that an erroneous admission should be able to be withdrawn unless other factors outweigh and, on the other hand, that the chief outweighing factor is usually that there is such great prejudice to the other party that leave should not be given — is exactly the dichotomy that presents itself for decision and valuation in this case. 1. Although there are a great many authorities that bear upon this issue, I would only add reference to Brereton J's observation in In the matter of JRJ Plumbing Supplies Pty Ltd (in liquidation) [2015] NSWSC 2026 at [11], that one of the principles that apply to the withdrawal of an admission "is that the Court needs to be satisfied that the admission is being withdrawn not for purely tactical reasons but because there is a good basis for doing so". 2. In the present case, I am satisfied that the defendant was clearly under no disability and made a clear and distinct formal admission in its defence. The defence was drafted with the aid of the defendant's lawyers. Mr Xu's evidence proves that he thought about the matter, and had reasons satisfactory to himself as to why he should admit the plaintiff's allegation that she held at least one unit in the Trust. The effectiveness of the admission is supported by the fact that it was volunteered in response to par 4 of the statement of claim, and then repeated in par 7 of the defence. 3. The reasons that Mr Xu has given for having second thoughts do not in my opinion provide a satisfactory foundation for a case that in fact no units in the Trust were ever issued to the plaintiff. At best, the most that Mr Xu has been able to show is that subsequent enquiries have not proved that units were issued to the plaintiff, and the further enquiries have proved to be inconclusive. 4. The balance of the evidence given by the parties' solicitors of their conversations with the defendant's former accountant, albeit that the evidence is hearsay, provides substantial support on balance for the conclusion that the plaintiff was a unit holder in the Trust as reflected in the Trust's tax returns and Financial Statements. 5. The defendant did not apparently make further enquiries of the new accountants, and its failure to do so is unexplained. 6. Although the evidence provided by the unauthenticated tax returns and Financial Statements does not conclusively prove that units in the Trust were issued to the plaintiff, no positive reason has been given by the defendant as to why at the end of the day that evidence will not be sufficient to establish on the balance of probabilities that the plaintiff was a unit holder in the Trust. 7. In part, the defendant's position rests upon the proposition that there was some agreement with Mr Chen and the others that they would not issue units in the Trust until the various loans had been repaid, but the allegation that such an agreement was made is not inconsistent with the proposition that units were in fact issued, given in particular that even par 4 of the draft amended defence admits the allegation in par 4 of the statement of claim that units in the Trust were issued. 8. The plaintiff has accepted the defendant's admission and acted upon it by preparing and serving its evidence on the basis that it was accepted that the plaintiff was a unit holder in the Trust. I acknowledge the defendant's response, that the preparation of the case is at an early stage, and there is time for the plaintiff to supplement her evidence. However, it remains the case that the plaintiff has acted upon the defendant's admission. 9. The reality of the situation appears to be that the persons who now control the defendant were not in control of the company at the time when the units in the Trust may have been issued to the plaintiff. It appeared at the hearing that it was Mr Chen who was in control at the relevant time. Mr Chen is not in the camp of the defendant. The defendant does not have objective evidence that will enable it to know whether units were issued, whether unit certificates were created, or whether there was a register of units. Given that no inquiries have apparently been made of the later accountants, the Court must proceed upon the basis that, if the issue had to be determined at trial, questions of fact would have to be decided on the probabilities based substantially on such evidence as is presently available. 10. It follows that even though the defendant's desire to withdraw its admission may be genuine, it is in reality a tactical step that is based on a second thought and that its object is to throw back onto the plaintiff the need to start from scratch and to take on the evidentiary burden of trying to prove that all necessary steps were taken by the defendant to issue one or more units in the Trust to the plaintiff. 11. I am not satisfied that the defendant has justified the Court giving it leave to withdraw the admission, as the real consequence will be to cause significant delay in the progress of the proceedings and in all probability will also substantially increase the costs. 12. It must be remembered that, although it will be a forensic advantage to the defendant if the plaintiff fails to prove that she is a unit holder in the Trust, because her case will then fail, the case put by the defendant in its existing pleadings is that it does not matter that one or more units were issued to the plaintiff, because by means that do not emerge clearly from the defendant's pleading, the plaintiff's entitlement to any units in the Trust has been extinguished. 13. The primary factor, however, that has influenced my judgment as to the proper resolution of this dispute is that the defendant has not established that in all likelihood it has admitted a fact that is false. On balance, on the present evidence, the fact admitted is likely to be true, at least on the balance of probabilities. The defendant has not established any real likelihood that evidence will become available to it that will disprove the fact that has been admitted. Consequently, the withdrawal of the admission with the leave of the Court will not further the interests of justice, but will merely give the defendant a tactical advantage, and increase delay and cost, in a manner inconsistent with the application of s 56 of the Civil Procedure Act, 2005 (NSW). 14. The parties should confer in order to prepare short minutes of order which will have the effect of the Court granting leave to the defendant to amend its pleadings, except in so far as the amendments would have the effect of withdrawing the defendant's admission that the plaintiff was a unit holder in the Trust. Those short minutes of order should be provided to my associate, and the matter relisted if agreement cannot be reached. 15. The defendant must pay the plaintiff's costs of the notice of motion as amended, and there should also be the conventional order as to costs thrown away as a result of the amendments being permitted. The parties should include directions for the future conduct of the proceedings, and the orders should relist the matter before the Registrar at an appropriate time. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 May 2018