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Representation: Counsel:
J Raftery (Plaintiffs)
J Whealing (Defendant)
Solicitors:
Pivotal Lawyers (First Plaintiff / First Respondent)
Piper Alderman (Defendant / Applicant)

File Number(s): 2024/21311

Publication restriction: N/A

JUDGMENT

1. This is an application made by a defendant to withdraw an admission. The admission is contained in paragraph 17 of the Amended Defence, which states:

“In answer to paragraph 17 of the Statement of Claim, the Defendant:

(a) admits that the first CP has been satisfied (board of Pure Hydrogen has approved the transaction set out in the Terms of Agreement);

(b) that the shareholders of H Drive executed term sheets; and

(c) otherwise denies the paragraph”

2. The reference to “Statement of Claim” is in fact to an Amended Statement of Claim, paragraph 17 of which states:

“The Conditions Precedent were satisfied.”

3. The underlying dispute between the parties concerns an agreement for the sale of shares in HDrive Pty Ltd (HDrive) by the second plaintiff. The share sale agreement contained conditions precedent that required, amongst other matters, the execution of Term Sheets (Term Sheet****s) by the two other shareholders of HDrive. The conditions precedent were in the following terms:

“• The Board of Pure Hydrogen approving this transaction.

• Other shareholders of HDrive Pty Limited executing term sheets on agreed terms with Pure.”

4. These were the Conditions Precedent referred to in paragraph 17 of the Amended Statement of Claim. The Term Sheets to which paragraph 17 of the pleadings are directed are the Term Sheets in the second condition precedent.

5. The plaintiffs allege the share sale agreement has not been performed by the defendant and seek declaratory relief, orders for specific performance or, in the alternative, orders for certain shares to be returned to them.

6. The defendant submitted that paragraph 17 of the Amended Defence was badly drafted, and I agree. I asked the defendant’s counsel whether I should understand the word “denies” to have been left out at the start of paragraph 17(b) and was told I should not. The only way to understand it, then, is as beginning with “admits”, and this is implicit in the present application.

7. Paragraph 17 is also badly drafted because of sub-paragraph (c). I had thought on reading this sub-paragraph that the purpose of paragraph 17 as a whole was to put in issue the allegation that the term sheets were executed “on agreed terms with Pure”. However, the defendant’s counsel indicated that there was no dispute about this. He was not able to indicate to me what the purpose of sub-paragraph (c) was. I should make it clear that I make no criticism of him for this. As I understood it, he was not briefed until new solicitors were retained shortly before 1 June 2026, well after the Amended Defence was filed.

8. The basis for the defendant’s application is that sub-paragraph (b) is factually wrong. It is common ground that the Term Sheets were in fact signed by Gao Dongmei, HDrive International Pty Ltd and Macau Silkia Trading Co Ltd. It is also common ground that none of these three signatories was a registered shareholder of HDrive at any time. Instead, at the time the Term Sheets were signed, the registered shareholders were the second plaintiff, Zhang Yanhui and Huang Deer.

9. The plaintiffs do not, however, accept that the admission in paragraph 17(b) was wrongly made. They submit either that the signatories had the authority of the actual shareholders to execute the instrument, or that the precise satisfaction of this condition precedent was waived by the defendant. I will return to this, but it is convenient to note at this point that, as I have indicated, the defendant does not dispute that the Term Sheets were “on agreed terms with Pure” within the meaning of clause 11. Nor does it dispute that it received the shares in HDrive pursuant to the Term Sheets. It also appears clear that further share transfers contemplated by the Term Sheets themselves were made.

Principles

10. The defendant invokes rule 12.6 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR):

(1) A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time.

(2) 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.

(3) A withdrawal under this rule is to be made by filing a notice of withdrawal stating the extent of the withdrawal.

(4) 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.

11. It is common ground that paragraph 17(b) of the Defence contains an admission within the meaning of UCPR r 12.6(2). Nor did I understand there to be any dispute between the parties as to the principles to apply in considering whether to grant leave under UCPR r 12.6. The discretion is a very broad one and expressed in unconfined terms. It is to be exercised having regard to ss 56, 57, 58, 60 and 64(1)(b) of the Civil Procedure Act 2005 (NSW). The overall question is whether, having regard to these provisions, it is in the interests of justice to permit the admission to be withdrawn.

12. There are many authorities dealing with the application of these principles on particular facts and I was referred to some of them by the parties in submissions. It is sufficient to refer here to Yufeng Investment Group (Australia) Pty Ltd v Guo (2026) 118 NSWLR 548; [2026] NSWCA 3 at [39], where it was said that “sufficient cause” must be shown for the withdrawal of an admission on the pleadings, and that matters relevant to the exercise of the discretion included “the reason given for seeking to withdraw the admission, the stage of proceedings, and any prejudice suffered by the other party”.

13. The defendant refers to authorities that emphasise it will usually be appropriate to grant leave to withdraw admissions if they are made contrary to the actual facts. This may often be so. However, stopping the analysis at that point in the present case seems to me to obscure what would be put into issue if the amendment was allowed. That is whether — notwithstanding the fact that the signatories to the Term Sheets were not the actual shareholders — the condition precedent was nonetheless satisfied and/or whether its non-satisfaction could be a defence to the plaintiffs’ claims when the defendant itself received the shares pursuant to Term Sheets to which it agreed (and indeed made further transfers pursuant to those Term Sheets).

14. The plaintiffs submit that, in reality, these new issues would be false ones. They rely on a body of evidence that indicates that the signatories to the Term Sheets were the associates of the actual shareholders. The clearest statement of this is an affidavit of the principal of the defendant, Mr Brown, served by the defendant in the substantive proceedings but tendered by the plaintiff on this application. Paragraphs 48 and 49 of Mr Brown’s affidavit are in the following terms:

“48 The terms sheets for the other shareholders of HDrive were set up to be independent of each other. The two most important were Mr Su and Johnson Huang and their respective nominees. They claimed that they would secure a supply and distribution agreement for HDrive International Pty Limited. Their agreement was essential to any transaction. Any arrangement with Mr Aldridge while nice to have was not essential. HDrive at 30 June 2023 was, after losing distribution rights, a zombie company that had negative net worth and no shareholder support going forward. The equity was zero or negative at 30 June 2023. We had already set up a company HDrive International Pty Limited in May 2023.

49 On or about July 2023 Pure Hydrogen entered into agreements with Mr Su and Johnson Huang nominees (HDrive International Agreements) as there was no items in the term sheets where the parties disagreed. Copies of these terms sheets are attached at pages 32 to 41 of the Exhibit.”

15. The references to “term sheets” are to the Term Sheets the subject of the conditions precedent in clause 11. It is apparent from the first two sentences of paragraph 48 that Mr Brown considered the actual shareholders of HDrive to be the nominees of Mr Su and Mr Huang. It is apparent from paragraph 49 that Mr Brown was content to enter into the Term Sheets with nominees of these same individuals. lt is also apparent from paragraph 49 that there was nothing in the Term Sheets that were executed about which the parties disagreed. Paragraph 50 of Mr Brown’s affidavit goes on to note that transfers of shares were made pursuant to the Term Sheets themselves.

16. The defendant has not articulated in submissions or evidence how, having regard to Mr Brown’s evidence, they could succeed on the new issues that would be raised if the admission was allowed to be withdrawn. The conditions precedent in clause 11 were inserted (at least in part, if not wholly) for the defendant’s benefit. If the defendant did not accept that clause 11 had been satisfied, it is hard to see how it could have taken a transfer of the shares under the agreement to which clause 11 was a condition precedent. It is also hard to see how, having taken such a transfer, it could now resist a claim for specific performance on the basis that the agreement had not come into operation because a condition precedent had been satisfied. These difficulties are worse for the defendant if, as appears to be the case, the further share transfers contemplated by the Term Sheets themselves have taken place.

17. On the other hand, it is not hard to see why, having regard to Mr Brown’s evidence, the defendant would have been content with the Term Sheets, notwithstanding the identity of the signatories. Mr Brown was happy with their terms. His evidence suggests that he regarded the defendant as dealing in substance with Mr Su and Mr Huang and so was content if the Term Sheets were executed by their nominees.

18. I have used the expressions “hard to see” and “not hard to see” because I am not prepared to go so far as to say that a defence based on an argument that clause 11 was not satisfied because the actual shareholders did not sign the Term Sheet could not possibly succeed. However, no pathway through the difficulties I have referred to was articulated in evidence or submissions before me. The absence of any apparent pathway weighs against allowing the amendment.

19. Both parties accept that one consideration relevant to the exercise of the discretion is the explanation for the change in position involved in seeking to withdraw an admission. This requires an explanation for how the admission came to be made in the first place.

20. The plaintiffs refer to the statement of Slattery J in Chiu v Sheh [2021] NSWSC 19 at [23]:

“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.”

21. The plaintiffs also refer to authorities that deprecate the withdrawal of admissions for purely tactical reasons: Hill End Gold Ltd v First Tiffany Resource Corp [2008] NSWSC 866 at [31] (Brereton J), citing Drabsch v Switzerland General Insurance Co Ltd (Supreme Court (NSW), Santow J, 16 October 1996, unrep).

22. The explanation given by the defendant here is contained in an affidavit of a solicitor in the firm who now represents it. That firm came on the record shortly before 1 June 2026 this year. It is said in the affidavit that the admission was made as a result of a “miscommunication” between the defendant and its former solicitor. This part of the affidavit was objected to and I admitted this assertion as a submission which carried no further weight than the documents annexed to support it. The documents annexed were email correspondence and they do not support it. The correspondence — which consists of three emails in a larger chain where the other emails are redacted — indicates that in 2024 the defendant’s former solicitor and the principal of the defendant, Mr Brown, were in email communication about how to traverse paragraph 17 of the Amended Statement of Claim. The defendant’s former solicitor pointed out that the Term Sheets were not executed by the registered shareholders of HDrive and identified who those registered shareholders were. Mr Brown’s email of 22 August 2024 in response states:

“The shareholders of Hdrive Pty Limited did not sign term sheets with Pure Hydrogen or Hdrive International Pty Limited. The shareholders that signed were different but may be associates. I will see if I can locate the signed term sheets and email to you.”

23. The next thing that happened, so far as the evidence reveals, is that on 20 December 2024 the Amended Defence was filed containing paragraph 17(b). (It does not seem that there was any defence filed prior to this — the document perhaps should be described as a defence to the Amended Statement of Claim).

24. Thus, so far as the evidence reveals, Mr Brown and the defendant’s solicitor in settling the defence knew that the actual shareholders of HDrive had not executed the Term Sheets but nonetheless filed a defence admitting that they did.

25. I do not regard any of this as evidence of a miscommunication. It is plain that both Mr Brown and his solicitor knew who the actual shareholders were and knew that they did not execute the Term Sheets. Mr Brown’s email of 22 August 2024 suggests that he regarded it as significant to investigate whether the Term Sheets were signed by associates of the actual shareholders. The inference that I would draw from this correspondence, together with paragraphs 48 and 49 of Mr Brown’s affidavit (and the fact that there was no further evidence from Mr Brown himself on this application), is that in finalising the Amended Defence the defendant regarded it as immaterial that the Term Sheets had not been executed by the registered shareholders of HDrive, because they were executed by nominees of Mr Su and Mr Huang.

26. As a result, I am asked to allow the admission to be withdrawn in circumstances where I have not accepted the explanation that has been given for making it, and where the explanation that I would infer from the evidence as the correct one provides no basis for giving leave to withdraw it. This weighs very heavily against a grant of leave.

27. The authorities refer both to the need for an explanation as to why the admission was made and as to why the party who made it wants to withdraw it. In one sense the latter explanation has been given: it is because the admission is factually wrong in that the signatories to the Term Sheets were not the registered shareholders. But this explanation is not accompanied by any suggestion that Mr Brown has changed his position on the matters set out in paragraphs 48 and 49 of his affidavit, or that the reason that I have found the original admission was made has now changed. And, as I have said, no pathway has been articulated as to how the defendant could overcome the difficulties that I have identified if it were permitted to run a case that the condition precedent had not been satisfied by reason of the fact that the signatories to the Term Sheets were not the registered shareholders. Therefore, the explanation for wishing to withdraw the admission does not assist the defendant.

28. Both parties accept that overall case management principles are relevant to the exercise of the discretion. The matter was set down for hearing but that was vacated at a pre-trial directions hearing when the present application was foreshadowed. Accordingly, the position is that the matter does not presently have a hearing date. In one sense, the plaintiffs would not suffer prejudice if I allowed the amendment to be withdrawn, in that there will be plenty of time before the trial to investigate how to deal with the proposed amendment. There was no evidence before me as to whether there would be difficulty in contacting the individuals who signed the Term Sheets or the actual shareholders. No affidavits have been served from any of these people in the proceedings thus far.

29. However, the lack of prejudice to the plaintiff in the above sense has to be weighed against the other considerations in ss 56-60, and s 64 of the Civil Procedure Act. These include the need to identify the “real issues” in dispute and resolve them justly, cheaply and quickly. It seems to me that to allow the admission to be withdrawn would be to permit the dispute to expand to raise a defence that has not been shown to be of any significant merit, but which may nonetheless require the plaintiff to incur costs in investigating potential ways to deal with it. And, as I have said, I have rejected the explanation given for the making of the admission in the first place and found that the real explanation — that the “true facts” were regarded by the defendant as immaterial — would not support allowing the admission to be withdrawn. For these reasons, I am not prepared to grant leave under UCPR r 12.6.

30. I am conscious that the result of disallowing this application is that paragraph 17 of the Amended Defence will be left in a form that is unsatisfactory because of the denial in sub-paragraph (c). However, as I understand it, the plaintiffs were prepared to go to trial on the basis of this pleading and there is no application by the defendant to amend it that is independent of its application to withdraw the admission. Accordingly, I will not attempt to address this issue.

Orders

31. The defendant’s motion of 30 June 2026 is dismissed.

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