What happened
Tamaya Resources Limited was an ASX-listed mining company that collapsed in September 2008. The proceedings concern the circumstances surrounding the publication on 31 March 2008 of Tamaya's audited financial statements for the year ended 31 December 2007. In the Deloitte proceeding (NSD 327 of 2014), Tamaya sues its former auditor Deloitte Touche Tohmatsu (a firm) and three individual partners (including the signing partner Mr Biggs) for breach of the audit retainer, breach of duty of care and misleading or deceptive conduct. In the new directors' proceeding (NSD 328 of 2014), Tamaya and its liquidator sue eight former directors for breaches of duty, misleading representations in the 2007 annual report and insolvent trading from at least 31 July 2008.
As originally pleaded, the cases focused heavily on the acquisition of Iberian Resources Limited in February 2007, the characteristics of the Lichkvaz gold mine in Armenia, alleged overstatement of development and exploration properties, omission of provisions for bad debts, failure to impair assets, and the inappropriate use of the going concern assumption. Tamaya alleged that the 2007 financial statements did not give a true and fair view, did not comply with accounting standards, and that reliance on them allowed Tamaya to raise funds from investors, exposing it to a related shareholder class action. Loss and damage was claimed as the difference in net asset position between 31 March 2008 and liquidation, together with avoidable expenditure including "Iberian Advances".
These two proceedings are case-managed with an original directors' proceeding commenced in February 2013 and a shareholder class action commenced in May 2014. All four matters are to be heard together. The first trial date fixed for four weeks commencing 1 June 2015 was vacated on 13 March 2015. A second trial date of five weeks commencing 12 October 2015 was vacated on 31 July 2015. The matters were then listed for six weeks commencing 16 May 2016.
Between 11 March and 24 April 2015 Tamaya served its lay and expert evidence, including the report of independent expert auditor Mr Basford dated 11 March 2015. That report identified numerous additional deficiencies in the 2007 audit and financial statements, including impairment issues concerning Portuguese mines, a Chilean copper mine at Punitaqui, Charters Towers, deferred tax liabilities, gearing ratios, liquidity risk and capital management, and the impact of Chilean operational deficiencies on the going concern assumption. On 31 July 2015 Tamaya filed an interlocutory application seeking leave to file amended originating applications and substantially revised statements of claim. The proposed further amended statement of claim in the Deloitte proceeding expanded from 94 to 134 pages; the second further amended statement of claim in the new directors' proceeding expanded from 117 to 171 pages.
The amendments sought to plead the additional audit issues, to claim compensation under s 1041I of the Corporations Act 2001 (Cth), to allege contraventions of ss 1041E and 1041H by both the Deloitte parties and the first to sixth director defendants, to alter the date from which insolvent trading was alleged, and to introduce alternative claims based on proof of debt and contribution contingent on the outcome of the shareholder class action leave application. The claimed losses were refined to approximately $17.9 million in avoidable cash outflows, $2 million in additional liabilities between 31 March and 28 October 2008, and any liability in the shareholder class action. The Deloitte proceeding application was opposed in full. The new directors' proceeding application was opposed to varying extents by the eight directors.
The amendment application was heard on 21 and 22 September 2015. Gleeson J delivered judgment on 14 October 2015. In the Deloitte proceeding the entire application was dismissed with costs. In the new directors' proceeding leave was granted only to file an updated originating application referring to the second further amended statement of claim and to incorporate the unopposed amendments into that statement of claim; all other leave was refused. The plaintiffs were ordered to pay the defendants' costs thrown away by the allowed amendments and the costs of the interlocutory application.
Why the court decided this way
Gleeson J's reasoning is grounded in the statutory command in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) and the principles articulated by the High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. At [4] her Honour expressly adopted the statement in Aon at [98] that a just resolution does not require a party to be permitted to raise any arguable case at any point on payment of costs. The overarching purpose requires that civil practice and procedure provisions be interpreted and applied to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. Parties and their lawyers are under a positive duty to conduct proceedings consistently with that purpose.
The application failed on multiple overlapping grounds set out at [209]. First, the importance of the amendments to Tamaya's case was not sufficiently articulated. While the Chilean amendments were described in reply as "critical", no detailed explanation was given of how Tamaya's case would be materially weakened without them or of their relative significance compared with the existing Lichkvaz-focused case. The fact that the amendments brought the pleadings into line with evidence served in March and April 2015 was acknowledged but did not, of itself, demonstrate sufficient importance to outweigh the countervailing factors.
Second, the amendments concerned events more than seven years old and travelled well beyond the existing pleaded case. The additional audit issues were geographically and factually distinct, concerning assets on different continents from the Armenian mine that had been the focus of the original pleadings. The sheer volume of the proposed amendments (adding dozens of new paragraphs and sub-paragraphs detailing Chilean Mine Deficiencies, Going Concern Indicators, and fresh impairment analyses) demonstrated that they did not arise out of the same or substantially the same facts already pleaded.
Third, the explanation for delay was deficient. The liquidator had been appointed in December 2008 and had access to Deloitte's hard copy audit file since mid-2010. Public examinations of directors occurred in 2010 and of Deloitte officers in July 2014. The additional audit issues were identified by Mr Basford, first retained in November 2014, after he received electronic audit files in January and February 2015. However, there was no evidence from the liquidator explaining why these issues had not been identified earlier. The lawyers' internal processes showed that, although Ms Palmer appreciated by 13 March 2015 that the Basford report raised matters outside the existing pleading, a consensus to seek amendments was not reached until after the May 2015 mediation and the High Court's decision in Selig v Wealthsure Pty Ltd [2015] HCA 18. The Court was not informed at the 13 March or 31 July 2015 directions hearings of the true scope of the proposed expansion. At [185] Gleeson J found that the liquidator and lawyers had had ample opportunity, including through the liquidator's statutory powers, to identify the issues before proceedings were issued.
Fourth, the prejudice to the defendants was real and not wholly compensable by a costs order. Individual director defendants (some now resident overseas) faced a third round of proofing, re-review of approximately 50,000 documents, and the strain of litigation hanging over them for years with claims exceeding $50 million that imperilled their solvency and reputations. Deloitte partners had poor recollections of events and one was suffering significant stress. The insurance policy covering Deloitte was being eroded. No additional security for costs had been offered for the expanded case. The amendments would disrupt preparation for the May 2016 trial and carried a real risk that the six-week estimate would prove insufficient, potentially pushing the hearing into 2017 given the unavailability of senior counsel after June 2016 and the docket judge's commitments.
Fifth, allowing the amendments would be inconsistent with the efficient administration of justice and could diminish public confidence in the judicial system. The proceedings had already caused logistical difficulties for the Court. Two trial dates had been vacated. The six-week May 2016 listing had been fixed only by making the docket judge unavailable for part of the Full Court sittings. Further delay and inefficiency would waste publicly funded court resources.
Finally, the proposed s 1041E case against the Deloitte parties was inadequately pleaded. Paragraph 85.3(b) of the proposed FASOC failed to identify which of the four Deloitte parties made which statements, how the audit report constituted dissemination of information to the market, or the specific facts said to show that each defendant ought reasonably to have known the representations were false or materially misleading. The 56 pages of preceding paragraphs traversed reasonable auditor conduct but did not tie the mental element to the position of the individual defendants. That pleading was therefore liable to be struck out and was refused on that independent basis. The s 1041E and s 1041H cases against the directors, while not struck out as embarrassing, were refused for the general reasons of delay and prejudice given the serious nature of the allegations and the mental element involved.
These factors, taken together and weighed in light of Tamaya's prior opportunities to amend and the choices it had made in the litigation, led Gleeson J to refuse the contested amendments while allowing the limited unopposed changes and updated cross-references.
Before and after state of the law
Before this judgment the principles governing applications for leave to amend in the Federal Court were already settled by Aon and applied in numerous Full Court and first-instance decisions. Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) 187 FCR 261 had confirmed that the Aon factors applied in this Court and must be weighed having regard to the overarching purpose in s 37M. Cases such as Research in Motion Ltd v Samsung Electronics Australia Pty Ltd [2009] FCA 320; (2009) 176 FCR 66 and Caason Investments Pty Limited v Cao [2014] FCA 1410; (2014) 104 ACSR 67 had emphasised that leave will not be granted if the proposed amendment would be liable to be struck out or would cause prejudice, embarrassment or delay. The duty to prosecute diligently, especially in end-of-limitation litigation, had been recognised in Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Hoskins & Sells [1999] 3 VR 863 and Hong v Liew [2014] FCA 40.
This judgment did not change the law. It is a detailed application of those existing principles to a complex, multi-proceeding corporate insolvency dispute. It reinforces that the overarching purpose in ss 37M and 37N is not a mere aspirational statement but a mandatory consideration that can, and in this case did, prevail over a plaintiff's desire to plead the fullest possible case supported by late-served evidence. The judgment underscores that "sufficient opportunity to plead the case" is not open-ended; once a party has had a reasonable chance (including through liquidator's investigative powers), limits will be placed upon further re-pleading when delay, cost and prejudice are taken into account.
After the judgment the state of the law remains as stated in Aon, now buttressed by a lengthy and carefully reasoned first-instance example of how those principles operate when late amendments would expand already complex litigation, risk trial dates, and impose non-compensable prejudice on individual professional defendants. The decision confirms that expert evidence served outside the pleadings does not automatically entitle a party to amend to "bring the pleadings into line with the evidence" if the other Aon factors point the other way. It also illustrates that a defective pleading of a serious statutory claim (such as the s 1041E case) will be refused independently of the general discretionary factors.
Key passages with plain-English translation
At [4] Gleeson J stated: "Even so, a just resolution of proceedings does not require that a party be permitted to raise any arguable case at any point in the proceeding, on payment of costs: cf. Aon ... at [98]." In plain English, paying the other side's costs does not give a litigant a free pass to keep changing its case whenever it likes; the Court must also protect the opponent's right to finality and the public's interest in efficient justice.
At [90] her Honour found: "Tamaya has had ample opportunity to identify the issues now sought to be raised. That opportunity included the powers available to be exercised by the liquidator, including the power to obtain documents (including the Deloitte audit file) and to conduct public examinations before commencing proceedings." Plain English: the liquidator had the audit files since 2010 and could have examined people under oath years earlier; the new Chilean and impairment issues were not a sudden surprise that could only be discovered in 2015.
At [125] the judgment summarises the Aon principles and notes that they "apply to matters in this Court". This passage translates the High Court's multi-factorial test into a working checklist for Federal Court judges: importance of the amendment, extent of delay and cost, prejudice (assumed and proved), explanation for delay, the parties' litigation choices, detriment to other litigants, and the risk that the Court will be seen to tolerate inefficiency.
At [185] Gleeson J concluded that "the explanation for the delay in seeking leave to amend is deficient in the ways explained above. In particular, Tamaya did not explain why the additional audit issues did not come to Ms Banton's attention until they were raised by Mr Basford, in circumstances where they could have been identified before the proceedings were commenced." Plain English: it is not enough to say "our expert found new problems"; the lawyers and liquidator should have been looking for those problems from the outset, and the failure to do so cannot now be excused.
At [209(4)] the risk that the May 2016 six-week hearing "may not be sufficient" and "the trial may not be able to be rescheduled until before 2017" is identified as a significant factor. In plain English, once a judge has cleared his or her diary and rearranged Full Court sittings to accommodate a complex trial, a late amendment that threatens to derail that listing carries heavy weight against it.
These passages illustrate Gleeson J's methodical application of principle to the evidence of delay, the affidavits from defendants' solicitors about re-proofing and costs thrown away, and the absence of any compelling articulation of why the new claims were essential.
What fact patterns trigger this precedent
This precedent is triggered where a plaintiff in complex commercial or corporations litigation seeks leave to make substantial amendments after:
- the proceeding has been on foot for a significant period and at least one (or more) trial dates have already been vacated;
- expert or lay evidence has been served that is said to be "outside the pleading" but the plaintiff has delayed in seeking to regularise the position;
- the new allegations concern events many years in the past that were, or ought to have been, ascertainable by the exercise of reasonable diligence or through statutory investigative powers (such as a liquidator's examination powers or access to an auditor's file);
- the amendments would materially expand the scope of the case, require re-review of very large volumes of discovered documents, necessitate fresh witness evidence or re-proofing, and risk extending or vacating a fixed hearing date;
- the explanation for the timing of the application is based on the late identification of issues by an expert rather than on any newly discovered facts that could not have been found earlier;
- the defendants are individuals (directors, auditors) who face personal reputational and financial strain from the litigation and have already invested significant time and cost in preparing defences to the existing case; and
- no, or inadequate, additional security for costs is offered in respect of the expanded claim.
The precedent applies with particular force where the proposed new claims introduce serious allegations requiring proof of mental elements (such as knowledge or recklessness under s 1041E) or raise new statutory causes of action that do not clearly arise from the same facts already pleaded. It will also be relevant where the Court has already expended significant case-management resources on multiple related proceedings and the docket judge has made special arrangements to accommodate a fixed trial date.
Conversely, the precedent does not prevent all late amendments. Gleeson J granted leave for the unopposed amendments and for updates necessary to refer to the newly allowed pleading. Minor particularisation or amendments that do not expand scope, cause prejudice or threaten hearing dates, and are supported by a cogent explanation, remain available.
How later courts have treated it
Because the source judgment itself applies and does not post-date other decisions, this section necessarily focuses on how Gleeson J treated the authorities that bind or guide her. The judgment applies Aon at [125]-[134] as the governing framework, citing the plurality's statements at [94], [98], [102], [108], [111]-[112] and French CJ's observations at [5], [24], [30] and [93]-[95] about public resources, irreparable prejudice from delay, and the need to maintain confidence in the judicial system. These passages are treated as setting the metes and bounds of the discretion; they are not distinguished or read down.
Cement Australia is applied at [127] and [128] for the proposition that the weight to be given to the Aon factors may vary with the facts but that all relevant matters must be weighed. Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 is cited at [127] and [44] for the detriment to other litigants and the efficient disposal of the Court's caseload. The judgment cites but does not follow Selig v Wealthsure Pty Ltd only for the point that s 1041E carries a mental element and that damages for its contravention are not apportionable; the timing of the High Court's decision is noted as one (but not the decisive) reason for the late decision to plead that section.
Decisions such as Bishopsgate, Hong v Liew, Bi v Mourad and Richards v Cornford (No 3) are used at [129], [132]-[134] to emphasise the stress of litigation on individuals, the duty to prosecute diligently (especially near limitation periods), and the corrosive effect of delay on the administration of justice. These authorities are treated as reinforcing rather than limiting the Aon principles. The judgment distinguishes cases such as Leotta v Public Transport Commission (NSW) and Dare v Pulham on the basis that they concern amendments after evidence has been admitted at trial, not after evidence has merely been served.
The overall treatment is one of faithful application: the source judgment does not purport to restate or expand the law but demonstrates, through 214 numbered paragraphs of detailed factual analysis, how the existing principles operate when a liquidator seeks to enlarge a already-complex corporations case at a late stage. Later courts can therefore treat the decision as a thorough working example of the Aon calculus in the insolvency and auditors' liability context.
Still-open questions
The judgment leaves open precisely how the trial judge should determine the date from which any allowed amendments take effect for limitation purposes. At [162] Gleeson J declined to make findings about whether the new causes of action were statute-barred, noting the caution in Wardley Australia Ltd v Western Australia at 533-534, and at [166] accepted that the question of the effective date of amendments that do not introduce new causes of action could be left to the trial judge. That issue therefore remains for determination at final hearing.
The judgment does not finally resolve the pleadings debate about whether "approving, permitting and/or causing the Tamaya 2007 Annual Report to be published" can amount to the making of a statement or dissemination of information for the purposes of s 1041E or conduct in relation to a financial product for s 1041H. At [206] Gleeson J acknowledged the force of the directors' submissions on this point but considered that, had the amendments otherwise been allowed, those arguments should await final hearing. That pleading question therefore remains open.
The interaction between the liquidator's investigative powers and the obligation to plead with reasonable diligence is illustrated but not exhaustively defined. The judgment emphasises at [90] and [186] that the liquidator had access to the audit file since 2010 and could have conducted examinations, yet it does not lay down a bright-line rule about exactly when a liquidator will be taken to have "discovered" an issue. Future cases will need to examine the precise steps taken by a liquidator and its advisers in each case.
Finally, the weight to be given to the risk that a fixed trial date may prove insufficient remains a matter of evaluative judgment. Gleeson J assessed the risk as "relatively low" but still sufficient, when combined with the other factors, to refuse leave. How later judges calibrate that risk when senior counsel availability, docket commitments and the size of the expanded case differ will require case-by-case assessment. The judgment therefore provides a detailed factual yardstick rather than a prescriptive formula for every future amendment application.