Leave to amend - Principles
16 Until recently, the preponderance of authority in relation to the amendment of pleadings was to the effect that leave to amend would only be granted where it would not result in prejudice to the other party for which costs and appropriate procedural orders could not adequately compensation; see Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146, per Dawson, Gaudron and McHugh JJ, at 154-5; per Kirby J, esp. at 167ff. However, the approach endorsed in J L Holdings did not entail, as Heerey J pointed out in GMCA Pty Ltd v Black & Decker Inc [2007] FCA 1680, at [4], that "procedural indulgences must always be granted and that the salve of costs will always be sufficient". At the margins, it has been a vexed question of how considerations of justice, in the sense of allowing a party to advance a reasonably arguable claim, at whatever point in the litigation it may be raised, are to be reconciled with principles of case management which may militate, in the circumstances of a given case, against allowing a party to bring, maintain or amend a claim. The question has excited differences of judicial opinion, often expressed in robust terms. Ordinarily, however, the question turns on an exercise of discretion in the light of the factual circumstances of the particular case. As was recognised in Sali v SPC (1993) 116 ALR 625, this has meant that the grant or refusal of an amendment is mot appropriately to be left to the trial (or docket) judge, who exercises a discretion conferred by the relevant Rules of Court, which will not "lightly be set aside on appeal", because the test to be applied by the appellate court is that identified in House v The King (1936) 55 CLR 499 as applicable to reviews of the exercise of judicial discretion.
17 After the hearing of the motions with which I am now concerned, the High Court handed down its decision in Aon Risk Services v Australian National University (2009) 239 CLR 175. Practitioners for the parties sought, by correspondence with my Associate, an opportunity to put further submissions as to the effect on the present motions of what had been said in Aon. I accorded them that opportunity, and a brief written outline was submitted on each side.
18 Aon arose from damage sustained by the Mount Stromlo Observatory in Canberra during a fire in January 2003. The Australian National University initially claimed an indemnity from its insurers for the expenses which had arisen from the damage. Later, it sought, successfully, to add as a defendant its insurance broker, Aon Risk Services Australia Ltd. Soon after the commencement before a Judge of the Supreme Court of the Australian Capital Territory of the trial of the University's action, the University reached an out-of-court settlement with the insurers, but not with Aon. It then sought further to amend its statement of claim to add various allegations against Aon. The primary Judge granted the necessary leave: Australian National University v Chubb Insurance Co of Australia Ltd [2007] ACTSC 82, an appeal from which was upheld by a majority of the Court of Appeal of the Australian Capital Territory: Aon Risk Services Australia Ltd v Australian National University (2008) 227 FLR 388. The primary Judge and the majority of the Court of Appeal reached their conclusion principally by taking the approach which had earlier been endorsed by the High Court in J L Holdings.
19 In allowing the appeal and ordering that the University's application for leave to amend be dismissed, Gummow, Hayne, Crennan, Kiefel and Bell JJ said, at 217 of their joint judgment in Aon that;
An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
(citations omitted)
20 Their Honours reached that conclusion after indicating their perception of the deficiencies of the approach ordained by J L Holdings and observing at 212-3;
An important aspect of the approach taken by the plurality in JL Holdings was that it proceeded upon an assumption that a party should be permitted to amend to raise an arguable issue subject to the payment of costs occasioned by the amendment . So stated it suggests that a party has something approaching a right to an amendment. That is not the case. The "right" spoken of in Cropper v Smith needs to be understood in the context of that case and the Rule, which required amendment to permit the determination of a matter already in issue. It is more accurate to say that parties have the right to invoke the jurisdiction and the powers of the court in order to seek a resolution of their dispute . Subject to any rights to amend without leave given to the parties by the rules of court, the question of further amendment of a party's claim is dependent upon the exercise of the court's discretionary power.
(citations omitted)
21 Contrary to the submissions advanced on behalf of Beck before the reasons of the High Court in Aon were published, I consider that I am now bound to take the approach outlined in that case. I also reject the further submission subsequently advanced by Counsel for Beck that the High Court did not intend the approach which it endorsed to be of general application.
22 As well as delay and an apparent lack of diligence in prosecuting the claim sought to be raised by the proposed pleading, another factor to which significant weight must be attached in balancing the considerations for and against leave to amend is any prejudice which would be suffered by the other party if leave were granted. "Prejudice", in this context, has a broad connotation and comprehends, for example, the disadvantage suffered by one party upon the other's late application for vacation of a trial date (as in Menzies v CRCI Pty Ltd [2007] NSWCA 118), or arising from very late production of evidence on affidavit (as to which see Black & Decker (Australasia) Pty Ltd v GMCA Pty Ltd [2007] FCA 1623, per Finkelstein J).
23 The specific prejudice which Corrs claim they would suffer if leave were granted in this case arises from the significant lapse of time, said to be akin to that discussed by McHugh J in considering, in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551ff, whether a statutory limitation period should be extended. The same point was made by Kirby J, at 566, where his Honour referred to "the erosion of memory; the loss of documents; and the death, departure or disappearance of witnesses". It was to prejudice of that kind that Counsel for Corrs directed their submissions, the advice at issue having been given, as mentioned, in 1999. It should not be forgotten, however, that McHugh J also emphasised that it is important for the of the court to identify on the evidence what prejudice would be caused by a grant of leave or an extension of time, rather than to make its assessment on:
the basis of judicial generalities about time, the importance of finality and the usual desirability of prompt action for the fair trial of contested issues.
24 It may be accepted that prejudice of this type can be particularly acute where the claim sought to be raised impinges on the professional reputation, competence and probity of the party (see Australian Securities and Investments Commission v Lindberg [2009] VSC 70 per Robson J at [28]-[34]). At the hearing of these motions, however, counsel for Corrs did not point to any specific type of loss or erosion of evidence; it was merely put, as a hypothesis, that the memories of key witnesses will have faded. This is particularly significant here, as I mentioned, because much of what is alleged in the proposed pleading depends upon oral advice, some of it given almost ten years ago.
25 Where the facts are as clear as those in the present case I consider it open - and appropriate - to the Court to draw obvious inferences about the effect of the effluxion of time on a party's ability to defend or to respond to claims made against it. That approach finds support in Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins & Sells [1999] 3 VR 863, where Tadgell and Ormiston JJ, with whom Brooking J agreed, said, at 875;
Although there are many cases in which the necessity to establish prejudice has been stated as a condition precedent to the exercise of the power to dismiss for want of prosecution on the basis of delay, it is not correct, in our opinion, to say that the defendant is obliged to allege that prejudice upon affidavit as opposed to asking the court to infer from all the circumstances of the case that prejudice has been or will be likely to be suffered. This is not to deny that prejudice, actual and potential, must be established: it is merely a reminder that proof of any issue can be established by circumstantial evidence and of the necessary process of inference from such evidence. Nor are we suggesting, for it would be contrary to authority, that it is for the plaintiff to disprove prejudice; but the defendant is entitled to point to undisputed facts and ask the court to draw necessary logical inferences from them for this purpose.
26 Considerations of the type which they envisaged led their Honours to say, at 887, in terms which, I consider, apply with some force to the circumstances of this case, that;
this is a case where by its very complexity there has been shown to be a substantial risk that the defendant, in relation to the events made the subject of the present statement of claim, will suffer far more than minimal prejudice additional to that which it would have suffered had there not been the inordinate and inexcusable delay to which we have referred.
27 Against that background, it is convenient now to consider the respective positions of the parties and whether, in all the circumstances, Beck ought to have leave to file the proposed amended pleading exhibited to Mr Hagar's affidavit of 18 June 2009.