Vikram Misra, Barrister at Clarence Chambers, continues his series into practice and procedure. In this article, he shares a lesson in withdrawal of admissions under rule 12.6 of the UCPR by delving into Chiu v Sheh [2021] NSWSC 19. Follow the series here.
The recent case of Chiu v Sheh [2021] NSWSC 19 (“Chiu”) provides a timely reminder of the principles relating to the withdrawal of admissions under rule 12.6 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). Essentially, the rule permits the withdrawal of admissions in two circumstances; firstly, by way of consent between the parties and secondly, by leave of the court. This article will focus on withdrawals that are sought by way of leave.
The statutory framework
Withdrawal of admissions are facilitated under UCPR r 12.6, which states:
- A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time.
- Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court.
- A withdrawal under this rule is to be made by filing a notice of withdrawal stating the extent of the withdrawal.
- If the withdrawal is by consent, the notice under subrule (3) must be accompanied by a notice from each party whose consent is required by subrule (2) to the effect that the party consents to the admission or other matter being withdrawn in accordance with the notice of withdrawal.
What are the relevant questions and legal principles to be applied?
The first threshold question to be asked is whether or not the amendment of the pleadings amounts to either a withdrawal of an admission or of a matter that operates for the benefit of another party. If this is answered in the affirmative, then leave is required to effect the withdrawal. In Chiu, Slattery J conveniently summarised the relevant legal principles informing r 12.6 applications:
[23] Whether the admission operates “for the benefit of another party” must be determined objectively and can in most cases be judged on the face of the pleadings. A full and proper explanation for making the admission is required. It is undesirable for the case to be decided on a false issue by reason of the refusal to withdraw the admission. There must be some evidence to show how the admission was made (whether by mistake, confusion or inadvertence rather than being a deliberate course of conduct) and to show that the admission was erroneous. The balance of prejudice arising from the withdrawal of an admission is relevant to the Court’s exercise of its discretion.
What were the facts in Chiu?
The Plaintiff (Mr Chiu) brought proceedings on behalf of a partnership to recover a loan of $2,800,010.00 that he alleged the partnership made to the First Defendant (Mr Sheh). The other member of the partnership, Clifford and Mary Sheh Pty Ltd, a company controlled by the First Defendant’s parents, was joined as the Second Defendant in the proceedings.
The First Defendant sought to withdraw an admission he made in paragraph 4 of his Defence to the Statement of Claim. The Plaintiff opposed the withdrawal of the admission.
Paragraph 4 of the Defence originally admitted paragraph 4 of the Statement of Claim, which made the following allegation about the terms of the loan said to have been made between the parties:
“4. It was a term of the Loan Agreement that the defendant would repay upon the settlement of the sale of the defendant’s property at Lindfield or upon request all money advanced to the defendant by the partners of the partnership.”
In a subsequent amendment to the Defence, the admission to paragraph 4 of the Statement of Claim was withdrawn. It admitted the sale of the Lindfield property, however it pleaded a series of payments that were said to have been made at the direction of members of the partnership and which were alleged to have been applied in full satisfaction of the balance of the principal sum due to the partnership.
What was the decision in Chiu?
Slattery J held that the admission sought to be withdrawn was one that operated for the benefit of the Plaintiff as it admitted the terms of an alleged loan agreement. Thus, r 12.6(2) applied and the Court’s leave was required because the Plaintiff did not consent to the withdrawal. His Honour also found that the form of the proposed withdrawal was clear as it replaced an admission of paragraph 4 of the Statement of Claim with a denial.
Leave was granted to withdraw the admission on the following grounds:
Firstly, the mistake in making the admission had been explained. The source of the First Defendant’s claimed mistake was not just an inability to read English. His Honour accepted that the First Defendant was confused, made a mistake and that the admission in the August 2019 Defence was accidental. Moreover, an interlocutory motion was an inapt forum to determine on a final basis the First Defendant’s credibility on that single issue. Rather, the First Defendant’s credibility would be far better assessed as part of a matrix of other credibility issues that would be dealt with at final hearing.
Secondly, the withdrawal of the admission would involve little prejudice to the administration of justice, or to the Plaintiff. As to potential prejudice to the administration of justice, the matter was still some way from trial and the bulk of the affidavit evidence had not yet been filed. The withdrawal of the admission would simply add a few paragraphs to the parties’ affidavits to be filed and would be unlikely to result in any delay to the holding of the trial.
As to potential prejudice to the Plaintiff, the Plaintiff submitted that he had acted on the admission by executing a deed poll reversing the Second Defendant’s assignment to him of the partnership’s cause of action against the First Defendant. The Plaintiff submitted that if the Court were to grant leave to withdraw the admission, he would not be able to reverse the deed poll. The First Defendant neutralised this problem by organising for a letter from the Second Defendant, which indicated that if the admission was to be withdrawn, the Second Defendant would cooperate in reassigning its partnership cause of action against the First Defendant to the Plaintiff. Regardless, the Court held that by joining the Second Defendant to the proceedings, the Plaintiff would not need the assignment, as it is a well held principle of partnership law that one of two partners can sue a third-party in the name of the partnership and on behalf of the partners to recover a partnership debt.
Further, the Plaintiff was held not to have lost all forensic advantages if leave to withdraw the admission was granted. The Plaintiff could still field at trial his criticism of the First Defendant’s withdrawal of the admission and seek to show at trial that the admission was in fact correctly made despite the granted leave to withdraw.
Thirdly, the public interest in deciding the matter on the true facts was a strong factor in favour of granting leave. His Honour held that:
[35] If the admission is not permitted to be withdrawn, respect for the administration of justice as a process in which judges act on the evidence to infer true facts, will be put at risk. If the Court refuses leave to withdraw the admission, part of these proceedings will have to be conducted on a highly artificial basis. Either Mr Sheh [the First Defendant] will be gagged from saying he did not agree to repay the loan upon selling the Lindfield property, or his counsel will be barred from relying upon his evidence to that effect. Either way, the Court is put in the invidious position of appearing to suppress, or ignore, what Mr Sheh [the First Defendant] claims is his true recollection of a prominent term of the loan and forcing him to accept what he regards as a false narrative.
[36] Here those consequences are serious at several levels. In this case if leave were refused the Court would be presented with some needle-threading analytical tasks. One such task is satisfactorily reconciling (1) Mr Sheh’s [the First Defendant’s] acceptance of a counterfactual about the triggers for loan repayment which he rejects, with (2) other true (and probably uncontested) facts both within and surrounding the conversation about the loan. Moreover, judging Mr Sheh’s [the First Defendant’s] overall credit whilst forcing him to accept as true a false narrative is quite likely to lead to injustice. When as much is financially at stake for the parties, as it is in this case, such an artificial procedure is likely to produce a result that satisfies neither the Court nor the parties.
Fourthly, the broader context weighed in favour of granting leave, as the First Defendant was not responsible for any serious delay in the progress of the proceedings.
What orders as to costs were made?
In this case, although the First Defendant had been successful, the Court’s initial view as to costs was that the costs of the motion should be costs in the cause, with leave for the parties to apply for a different order as to costs. His Honour held:
[42] But whether the admission or its withdrawal were closer to the true facts may only be able to be determined after a factual contest at a final hearing. The Court is therefore inclined to the view that each party’s costs of the motion should be that party’s costs in the proceedings.
Key takeaways:
- Withdrawal of admissions are facilitated under UCPR r 12.6.
- The first threshold question to be asked is whether or not the amendment of the pleadings amounts to either a withdrawal of an admission or of a matter that operates for the benefit of another party. If this is answered in the affirmative, then leave is required to effect the withdrawal.
- A full and proper explanation for making the admission is required.
- There must be some evidence to show how the admission was made and to show that the admission was erroneous.
- The balance of prejudice arising from the withdrawal of an admission is relevant to the court’s exercise of its discretion.
Vikram Misra was admitted as a solicitor in 2012 and called to the NSW Bar in 2015. He maintains a broad commercial practice and is regularly briefed in matters relating to taxation law, property law, construction law and equity. Vikram has completed a Graduate Diploma in Taxation Law at the University of Sydney in 2015 and a Master of Laws majoring in construction law and contract law at the University of Melbourne in 2016. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn 
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