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[2012] NSWSC 39
procedural. The Notice of Motion filed 1 August 2011 was dismissed. The Applicants were ordered to pay the Respondents’ costs of the motion ([39]).
The Applicants wanted to take back an admission in their pleadings that they had acted for Ms Saad on a property transfer. The Court said that an applicant seeking to withdraw an admission must provide a proper evidentiary basis showing it was wrong or made inadvertently. Here, the documents tended to support the admission, and the solicitor who had verified it twice did not give direct evidence explaining the alleged error. The Respondents did not show prejudice, but that did not make up for the gap in the Applicants’ evidence. The motion was dismissed and the Applicants were ordered to pay costs.
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Permanent Custodians Limited commenced proceedings against John and Jakica Nobilo and their daughter, Judy Saad, seeking money and possession of land at Glenwood in connection with an alleged mortgage default ([3]). The Nobilos filed a defence and cross-claims. In their Second Cross-Claim, they alleged that Vincent Parisi and Anthony Pascale, solicitors and principals of Hunter Lawyers, had been retained by Saad in connection with the loan and mortgage. The allegations included that the solicitors acted for Saad in arranging a transfer of a 1% interest in the property ([4]–[7]).
No linked legislation citations have been extracted yet.
The pleading at the centre of this motion was the Defence to the Second Cross-Claim. In response to the allegation about the solicitors’ role, paragraph 22(a) admitted that they “acted for the Cross-Claimants’ daughter in relation to the 1% Transfer” ([8]). The same admission was included in the amended defence filed in December 2010 ([1]). The solicitors later sought leave to withdraw it and rely on a Further Amended Defence ([9]).
The Applicants relied on an affidavit from Siobahn Moore and documents in an exhibit. Neither Applicant gave an affidavit for the motion. In particular, there was no affidavit from Pascale directly stating that the admission was factually wrong or explaining how he came to verify pleadings containing it on two occasions ([10], [14]–[16]). The motion was opposed by the Nobilos, who relied on contemporaneous documents including correspondence and an invoice addressed to Saad. Those documents referred to the “Your transfer from Nobilo” and “Saad transfer from Nobilo” ([27]).
Johnson J dismissed the motion. The decision was not a final determination of whether the solicitors had, as a matter of fact, acted for Saad. It determined whether the Applicants had established a sufficient basis to withdraw their admission at that stage, on the evidence they chose to present. The Court ordered them to pay the Respondents’ costs of the motion ([38]–[39]).
The Court approached withdrawal of an admission as a discretionary question. The Applicants bore the onus of demonstrating that leave should be granted ([18]). The matters identified in the authorities included whether the admission was contrary to the actual facts or had been made inadvertently and without due consideration, alongside prejudice to each side ([19]). The Court recognised the general importance of reaching the truth, but also that the way the opposing party prepared its case in reliance on an admission could weigh against withdrawal ([20]).
The pivotal difficulty was evidentiary. The contemporaneous documents did not contradict the admission. Johnson J considered that they tended to support the conclusion that the Applicants acted for Saad for all purposes, including the 1% transfer ([30]). The Court noted that a clear documentary case pointing in the opposite direction could have supported the claim that the admission was contrary to the facts. But the Applicants’ arguments depended on construing a few documents in a way that might permit a contrary argument; they did not demonstrate that the argument was sound ([30]).
The Court also found that the evidence did not show that Pascale instructed Moore in a way that should have led to a different pleading, but that Moore misunderstood those instructions or otherwise made an error by including the admission ([31]). Instead, the evidence tended to suggest that the Applicants had reconsidered their case and perceived the admission to be against their interests at trial ([31]). That observation did not establish that the admission was wrong or inadvertent.
The absence of an affidavit from Pascale mattered because he had verified the pleading containing the admission twice. The Court agreed that the real issue was not Moore’s credibility, but the content and source of the evidence being relied on, without direct evidence from Pascale explaining the admission and his verification of it ([33]). The judge rejected the submission that obtaining such an affidavit would necessarily turn the application into a pretrial determination of the underlying trial issue. An affidavit could have supplied direct evidence about the alleged error without deciding the ultimate dispute ([34]).
The Applicants argued that Moore had not been cross-examined and that the Court should accept her evidence of inadvertence. Johnson J held that this did not answer the central problem: the onus remained on the Applicants to establish a proper foundation for the discretionary relief ([32]). Without Pascale’s affidavit, the case rested on inference and impression rather than direct evidence of factual error ([35]).
Finally, the Court accepted that the Respondents could not point to prejudice from withdrawal ([36]). But that was not decisive. The admission was in pleadings and had been verified twice by a solicitor who was himself a party to the proceedings, while the substantive hearing was listed to begin shortly, on 13 February 2012 ([36]–[37]). The motion was refused because the Applicants had not established the necessary basis for leave, not because the Court found that the Respondents had proved prejudice.
The judgment presents the governing approach as an established discretionary framework, rather than announcing a new rule. It states that the Court considers whether the admission is contrary to actual facts or was made inadvertently and without due consideration, and considers prejudice to both sides ([19]). It also records the general principle that an erroneous admission should, in principle, be capable of withdrawal in the pursuit of truth, unless other factors outweigh that course, particularly prejudice arising from reliance on the admission ([20]).
The judgment cites several authorities for those propositions. These include Drabsch v Switzerland General Insurance Co Limited and NM Rural Enterprises Pty Limited v Rimanui Farms Limited on the relevant considerations ([19]); For The Good Times Pty Limited v Coltern Pty Limited on truth and prejudice ([20]); and SLE Worldwide Australia Pty Limited v Wyatt Gallagher Bassett Pty Limited and Australia and New Zealand Banking Group Limited v Bechely-Crundall on error, new evidence, and the significance of whether the matter remains seriously in issue ([21]). These are propositions as stated or summarised by Johnson J; the judgment does not reproduce the full reasoning in those cases.
The decision’s contribution in this instance is its application of that framework to the evidence. The Court did not state that an affidavit from the solicitor who verified a pleading is an absolute requirement in every application to withdraw an admission. Rather, it found that the absence of Pascale’s direct evidence was significant in these circumstances, given that the admission had been verified twice and the other evidence did not establish how or why it was wrong ([33]–[35]).
There was therefore no identified “before and after” change in the legal test. The decision illustrates that a lack of prejudice to the other party does not automatically result in leave. The applicant must still establish a proper evidentiary basis for exercising the discretion ([28]–[29], [36]–[38]).
At [18], the Court states: “The onus lies upon the Applicants to demonstrate that leave should be granted to them to withdraw the admission.” In plain English, it was for the solicitors seeking to change their pleading to establish why the Court should permit the change. The other side did not have to prove the admission was correct before the application could fail.
At [29], the Court says that the Applicants needed to demonstrate that the admission was “contrary to the actual facts” or had been made “inadvertently and without due consideration of material matters.” This identifies the main factual basis the Court was looking for. It is not enough, on this judgment’s reasoning, that an admission has become inconvenient or that a different case is now preferred.
At [30], the Court contrasts documents that might clearly point away from the admission with the documents actually presented. The documents before the Court tended to support the Applicants having acted for Saad. The Court therefore considered that the Applicants had not shown the admission was contrary to the actual facts.
At [33]–[35], the focus turns to the source and directness of the evidence. The Court explains that the issue was not principally whether Moore was credible. It was that the application lacked an affidavit from Pascale directly addressing the alleged error and explaining his verification of the pleading twice. The Court’s phrase “inference and impression” at [35] captures the evidentiary weakness it identified: submissions about what may have happened did not directly establish the claimed mistake.
At [36]–[38], the Court acknowledges the absence of demonstrated prejudice to the Respondents, but still refuses leave. In plain English, the Applicants did not succeed merely because the other side could not identify harm from the proposed change. The Applicants’ own evidence still had to satisfy the Court.
The judgment is most relevant to an interlocutory application to withdraw an admission made in a pleading, particularly where the applicant says that the admission was mistaken or contrary to the facts. Its reasoning is especially pertinent where the admission has been repeated in amended pleadings or formally verified, and the application relies on a changed understanding of the case rather than direct evidence explaining the original admission.
It also provides a useful comparison where contemporaneous correspondence, invoices, file notes, or other documents appear to support the admission. In this case, the documents referred to the transfer and were addressed to Saad, and the Court considered that they tended to support the pleaded admission ([27], [30]). The judgment does not establish that a particular type of document will always be decisive. It demonstrates the importance Johnson J gave to the evidence actually produced on this application.
The decision may also be relevant where the person with direct knowledge of the preparation or verification of the pleading does not provide evidence. Here, Pascale was a party, a solicitor, and had verified the pleadings twice, yet did not provide an affidavit explaining the alleged error ([25], [33]–[35]). The judgment treats that omission as significant in context, rather than declaring a universal affidavit requirement.
The fact pattern is less closely matched where the evidence directly shows that an admission was inserted through a misunderstanding, or where clear contemporaneous material contradicts it. Johnson J expressly distinguished the situation where documents point clearly in the opposite direction from the admission ([30]). Even then, the judgment describes a discretionary assessment that includes prejudice, not an automatic entitlement to withdraw.
The supplied judgment contains no later judicial decisions applying, following, distinguishing, or criticising Permanent Custodians Limited v Nobilo. It therefore does not provide a basis to describe how later courts have treated this case, or to state whether its approach has subsequently been adopted or limited.
The judgment itself refers to an earlier related decision, Permanent Custodians Limited v Nobilo [2011] NSWSC 1494. Johnson J notes Davies J’s observation there about the nature of the dispute and says that the present application concerned the Applicants’ own instructions, not simply the instructions Moore received after becoming involved ([13]). Johnson J later agreed with Davies J that the real issue was the content and source of the evidence, particularly the absence of Pascale’s direct evidence ([33]). That is the only treatment of an earlier proceeding under the same case name described in the supplied text.
For the other authorities, the decision identifies principles and applies them to the motion, but does not give information about their subsequent history. Any account of later treatment would require sources beyond this judgment. No later authorities have been added here.
The judgment leaves the underlying factual question unresolved: whether the Applicants in fact acted for Saad in relation to the 1% transfer. Johnson J decided that the Applicants had not established a proper basis to withdraw their admission on the evidence presented for the motion. The Court did not conduct the substantive trial of the cross-claim or make a final finding on the solicitors’ role.
The decision also does not prescribe a fixed evidentiary checklist for future applications. It does not say that the person who verified an admission must always swear an affidavit, or that the absence of such evidence must always defeat an application. Its reasoning is tied to the circumstances before the Court: the admission had been verified twice by Pascale, the contemporaneous documents tended to support it, and the evidence did not directly explain how the asserted mistake occurred ([30]–[35]).
Nor does the judgment specify how much evidence is generally sufficient to establish inadvertence or factual error. It identifies the kind of gap that mattered in this case, but does not set a threshold applicable to all pleadings or all interlocutory applications. The Court’s approach remains an evaluation of the evidence and relevant circumstances in the particular application ([28]–[29]).
Finally, the judgment does not determine how the absence of prejudice should be weighed in every case. It accepts there was no identified prejudice here, but concludes that this did not overcome the Applicants’ evidentiary deficiency ([36]–[38]). Those limits are important when using the decision: it explains why this motion failed, rather than deciding every application to withdraw a pleading admission.
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JUDGMENT 1JOHNSON J : By Notice of Motion filed 1 August 2011, the Applicants, Vincent Parisi and Anthony Pascale, seek leave to withdraw an admission made in the Defence to the Second Cross-Claim filed on 21 June 2010. The application extends as well to the withdrawal of the same admission which was included in the Amended Defence to the Second Cross-Claim filed in December 2010. 2The application is opposed by the Respondents, John and Jakica Nobilo.
The Nature of the Proceedings 3On 17 December 2009, the Plaintiff, Permanent Custodians Limited, commenced proceedings against the Defendants, John and Jakica Nobilo, and their daughter Judy Saad, seeking judgment against the Defendants in a monetary sum and judgment for possession of land at Glenwood arising from alleged mortgage default. 4On 27 March 2010, Mr and Mrs Nobilo filed a Defence to those proceedings. They also issued two Cross-Claims, one against the Plaintiff and the other (on 28 April 2010) against the Applicants, Mr Parisi and Mr Pascale, who are both solicitors and the principals of the law firm known as Hunter Lawyers. 5The Defence and Cross-Claim filed by Mr and Mrs Nobilo allege that the loan was made to Ms Saad to enable her to refinance an existing loan. In effect, Mr and Mrs Nobilo were said to be guarantors and to have provided their property as security although, in the first instance, it was asserted that any mortgage is not effective in favour of the Plaintiff. 6By the Second Cross-Claim, Mr and Mrs Nobilo allege that the Applicants were retained by Ms Saad in connection with the loan and mortgage. One of the matters alleged to form part of the retainer was for the Applicants to arrange a transfer of 1% of the Glenwood property to Ms Saad, such transfer being a requirement of the lender. The Applicants were said to owe fiduciary duties to Mr and Mrs Nobilo as a result of advice given by them. 7Paragraph 33 of the Second Cross-Claim said: "By acting for Judy [the Third Defendant] in relation to the 1% Transfer, the Proposed Loan and the Proposed Mortgage, the cross-defendants had interests conflicting with their duties to the cross-claimants." 8Paragraph 22 of the Defence to the Second Cross-Claim relevantly said: "In relation to paragraph 33 of the Second Cross-Claim, the Cross-Defendants: a. admit that they acted for the Cross-Claimants' daughter in relation to the 1% Transfer; b. deny that they acted for the Cross-Claimants' daughter in relation to the Proposed Loan and Proposed Mortgage."
The Present Application 9The Applicants seek leave to withdraw the admission made in paragraph 22(a) of the Defence to the Second Cross-Claim. They wish to assert now that they did not act for Ms Saad, on what was described as the 1% transfer. 10In support of the application, the Applicants rely upon the affidavit of Siobahn Bridget Moore sworn 29 July 2011. In addition, the Applicants rely upon the documents contained in Exhibit AP1. 11Ms Avenell, counsel for the Respondents, objects to parts of the affidavit of Ms Moore, being paragraphs 13, the opening sentence of paragraph 18 and paragraph 36. The objection contends that this material is hearsay and contains conclusions expressed by the deponent. 12Section 75 Evidence Act 1995 provides that, in an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source. The portions of the affidavit of Ms Moore which are objected to do identify the relevant source. In these circumstances, I allowed these parts of the affidavit to be read, subject to submissions concerning the weight to be attached to them. 13As Davies J observed in his judgment of 9 December 2011 on a related question ( Permanent Custodians Limited v Nobilo [2011] NSWSC 1494 at [23]), the real dispute on the present application concerns the nature of the instructions the Applicants received themselves, rather than what instructions Ms Moore received when she came to act for the Applicants, after they were joined to the proceedings. 14Neither Applicant has gone on affidavit for the purpose of this application. Rather, reliance is placed upon the affidavit of Ms Moore which refers to affidavits of other persons, including Mr Pascale. 15Accordingly, there is no affidavit from Mr Pascale which asserts directly that the factual matters contained in the relevant admission are wrong, or explains how he came to verify pleadings containing that admission in June and December 2010. 16It will be necessary to assess the evidence relied upon on the application with this omission in mind. 17Ms Avenell read the affidavit of Stephen Blanks affirmed 5 August 2011 which annexed affidavits filed for the Applicants in the principal proceedings. Submissions were made concerning their content.
Applicable Principles 18The onus lies upon the Applicants to demonstrate that leave should be granted to them to withdraw the admission and to rely upon a Further Amended Defence to the Second Cross-Claim. 19The relevant principles to be applied on such an application are not in doubt. The Court will consider whether the admission is contrary to the actual facts or was made inadvertently and without due consideration of material matters. The Court will consider prejudice to the Respondents (if the admission is withdrawn) and prejudice to the Applicants (if the admission is not withdrawn): Drabsch v Switzerland General Insurance Co Limited (Santow J, 16 October 1996, unreported); NM Rural Enterprises Pty Limited v Rimanui Farms Limited [2010] NSWSC 969 at [11]. 20The Court is after the truth so that, in principle, an erroneous admission should be able to be withdrawn unless other factors outweigh that decision, with the principal factor that might outweigh the decision being 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: For The Good Times Pty Limited v Coltern Pty Limited [2007] NSWSC 108 at [3]. 21A Court may permit an admission in a pleading to be withdrawn if it is made in error or when new evidence has come to light: SLE Worldwide Australia Pty Limited v Wyatt Gallagher Bassett Pty Limited [2005] NSWSC 816 at [56]. It has also been said that, where an admission has been made by mistake, relief will be granted provided that the matter is seriously in question in the proceedings and the opposite party has not acted on the admission to its detriment: Australia and New Zealand Banking Group Limited v Bechely-Crundall (Sperling J, 11 June 1996, unreported).
Submissions of the Parties 22Mr Colquhoun, counsel for the Applicants, submits that the application should be granted upon the basis of the matters contained in Ms Moore's affidavit. He submits that it has been demonstrated that Ms Moore had received only limited instructions in relation to the allegations concerning the 1% transfer at the time of the preparation of the pleading containing the admission. Thereafter, according to the affidavit of Ms Moore, further investigations conducted in the context of preparing evidence on behalf of the Applicants revealed that, despite Ms Saad's involvement in the 1% transfer, the Applicants had acted for Mr and Mrs Nobilo in respect of the proposed transfer of an interest in the property to Ms Saad, and not for Ms Saad. 23Mr Colquhoun submits that Ms Moore has not been cross-examined on her affidavit, so that the Court should accept her evidence that the admission has been made inadvertently and that leave should be granted for it to be withdrawn. 24Mr Colquhoun submits that it was not to the point that Mr Pascale had not sworn an affidavit relied upon directly in support of the application. He submits that insistence upon such an affidavit on an application such as this would turn the application into an interlocutory factual dispute to be determined effectively ahead of trial. He submits that this was a trial issue which ought be determined by a Judge on the merits, and not left to resolution against the Applicants by way of the admission. He submits that there is no prejudice to the Respondents if leave to withdraw the admission is granted. He submitted, as well, that the purposes of s.56 Civil Procedure Act 2005 would be served if leave to withdraw the admission was granted. 25Ms Avenell relies strongly upon the decision of Brereton J in Stafford v Kekatos (No. 2) [2008] NSWSC 1044 at [32]-[33]. Ms Avenell submits that the decision of Brereton J has direct application to this case where there is no affidavit from Mr Pascale, the solicitor who had acted for Mr and Mrs Nobilo in 2006. This was particularly so, Ms Avenell submits, given that Mr Pascale had verified the pleading contained in the admission on two occasions. 26Ms Avenell did not assert that the Respondents were prejudiced, but submitted that the Applicants had failed to make out a case for the grant of leave, given that it had not been demonstrated that the admission had been made inadvertently and that it was contrary to the actual facts. 27Ms Avenell pointed to a number of contemporaneous documents in Exhibit AP1 and Exhibit SB1 which, she submitted, supported a conclusion that the Applicants did indeed act for Ms Saad on the 1% transfer. Amongst these documents were contemporaneous file notes which pointed to instructions being given to the Applicants directly by Ms Saad. Specific documents referred to included a letter from Mr Pascale to Ms Saad (copied to Mr and Mrs Nobilo) dated 11 May 2006 enclosing the tax invoice for fees and thanking Ms Saad for her instructions. The tax invoice, also dated 11 May 2006, was directed to Ms Saad and sought payment of fees for all steps which the Applicants appeared to have undertaken for Ms Saad and Mr and Mrs Nobilo. The letter from Mr Pascale to Ms Saad was headed "Your transfer from Nobilo" and the tax invoice was headed "Saad transfer from Nobilo" (Exhibit SB1, pages 142-143).
Decision 28In determining an application for leave to withdraw an admission, the Court has a broad discretion to weigh up all matters which are relevant to the application. The determination must be made by reference to the evidence adduced at the hearing of the application. 29It is necessary for the Applicants to demonstrate that the admission was contrary to the actual facts or was made inadvertently and without due consideration of material matters. 30This is not a case where the contemporaneous documents are inconsistent with the Applicants having acted for Ms Saad on the 1% transfer. If the contemporaneous documentation pointed clearly in the opposite direction to the admission made, then the Applicants could readily demonstrate that the admission was contrary to the actual facts. However, the contemporaneous documentation to which the Court was taken at the hearing of this application tends to support a conclusion that the Applicants were indeed acting for Ms Saad for all purposes, including the 1% transfer. Arguments to the contrary were based upon the construction of a few documents which might allow a contrary argument, but certainly do not demonstrate that the argument is good. 31Further, the evidence does not demonstrate that Mr Pascale instructed Ms Moore in a certain way (which ought to have seen the admission not being made), but with Ms Moore misunderstanding her instructions or, in some way, erring by including the admission in the pleadings. The evidence relied upon by the Applicants tends to suggest that further consideration has been given to the case which they seek to advance, with it being perceived that the admission is contrary to their interests at trial. 32In my view, approaching the present application on this basis does not require counsel for the Respondents to cross-examine Ms Moore so as to put these propositions. The onus remains upon the Applicants to demonstrate a proper foundation for the exercise of discretion in their favour. 33In my view, the decision of Brereton J in Stafford v Kekatos (No. 2) is pertinent. Indeed, considerations of this type were referred to by Davies J in his judgment of 9 December 2011 at [23]. With respect, I agree with Davies J that the real issue on the present application does not concern the credibility of Ms Moore's evidence, but the content and source of such evidence as the Applicants seek to rely upon, without any affidavit from Mr Pascale asserting directly that the admission is contrary to the actual facts and explaining how he came to verify pleadings on two occasions which contained that admission. 34I do not accept the submission of Mr Colquhoun that a consequence of an affidavit from Mr Pascale being read in support of the application would be a pretrial interlocutory hearing at which the Court would be required to consider and determine what the true facts were in this respect. Rather, the provision of such an affidavit (which asserted directly that the admission was contrary to the actual facts and explained directly how Mr Pascale came to twice verify pleadings which contained the admission) would furnish direct evidence on the issue to be determined on the application. 35As I mentioned during the course of submissions by Mr Colquhoun, if the Applicants had sought to rely upon such an affidavit, then the Judge hearing an application for leave to withdraw the admission may well have disallowed any cross-examination which sought to explore what was a trial issue. Without such an affidavit, however, the Applicants are left to make submissions based upon inference and impression, and not direct evidence of factual error. 36I accept that the Respondents cannot point to any prejudice for the purpose of this application. I bear in mind, however, that the admission was made in pleadings and was verified twice by a solicitor who was a party to the proceedings. 37I note, as well, that the substantive hearing of the proceedings is listed for 13 February 2012, with a five-day estimate. 38In all the circumstances, I am not persuaded that the Applicants should be granted leave to withdraw the admission, or to rely upon the Further Amended Defence to the Second Cross-Claim annexed to the Notice of Motion filed 1 August 2011. In my view, such a conclusion is not inconsistent with the purposes of s.56 Civil Procedure Act 2005 . 39I make the following orders: (a) the Notice of Motion filed 1 August 2011 is dismissed; (b) the Applicants are ordered to pay the Respondents' costs of the Motion.
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: 08 February 2012
Permanent Custodians Limited
Nobilo and Others
The Notice of Motion filed 1 August 2011 was dismissed. The Applicants were ordered to pay the Respondents’ costs of the motion ([39]).