(f) Was the delay adequately explained? (Ground 1(c))
114 The general context, as found by the primary judge, in which the amendment application sits in this case, with one marked exception, is similar to that in Aon. It was an application which was made late in the day, which was inadequately explained, which would, if acceded to, have necessitated the vacation of the dates set down for trial and which raised new claims. Unlike Aon, there is no positive finding that the failure to apply to amend earlier was the result of a deliberate tactical decision by Tamaya.
115 The challenge under this ground is that the primary judge addressed the wrong question, or acted on a wrong principle in assessing the adequacy of Tamaya's explanation for the delay in moving on the amendments. In this case, asking the wrong question or acting on a wrong principle are but two sides of the same coin.
116 All that Aon required, Tamaya submits, was for it to show that its amendment application was brought in good faith, as well as to 'bring the circumstances giving rise to the amendment to the court's attention': Aon at 215 [103] per the plurality. This, of course, begs the question, in this case, as to what constitutes the relevant circumstances. It is these circumstances which are then required to be weighed against the effects of any delay and meeting the objectives of the overarching purpose propounded by s 37M of the Federal Court of Australia Act 1976 (Cth).
117 Tamaya further submits that the Federal Court Rules 2011 (Cth) do not require a party to explain the inadequacies of original pleadings and that there is no warrant in the Federal Court of Australia Act 1976 (Cth) or the Court's rules to hold against a party their conduct before the proceeding commenced.
118 This has particular reference to the fact that, as is conceded by Tamaya, it could, with the exercise of due diligence, have identified, even before it commenced its proceedings, the claims it now seeks to make, at least those concerning the Chilean Operations case. As senior counsel for Tamaya put it, in effect, if an expert auditor (Mr Basford) identified that claim after the proceedings had commenced, the other, unnamed expert auditor retained by the liquidator at an earlier time, and who considered the same material, could have done so by the time the proceedings were instituted and by no later than August 2014.
119 This fact, Tamaya contends, was irrelevant to any consideration by the primary judge as to what was required by way of explanation as to the reasons for the delay in bringing its application further to amend its pleading.
120 We do not agree, for reasons we shall now explain.
121 As the primary judge observed at [127], the principles articulated in Aon apply to matters in this Court: Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [43] ('Cement Australia').
122 Whilst the power to grant, or refuse, an application to amend the originating application and to further amend the amended statement of claim under rr 8.21(1) and 16.53 of the Federal Court Rules 2011 (Cth) respectively is discretionary, some care is called for, as the plurality in Aon pointed out at [89], in characterising this as a very wide discretion. The discretion is not at large. Applying, analogously, what their Honours said at [89] to this case, the objectives in s 37M of the Federal Court of Australia Act 1976 (Cth) are to be sought in the exercise of the powers given by r 8.21(1) to amend the originating applications and by r 16.53 to further amend the statements of claim.
123 Section 37M(1) provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37M(2), without limiting the generality of subs (1), provides, relevantly, that the overarching purpose includes, as objectives, the efficient use of the judicial and administrative resources of the Court; the efficient disposal of the Court's overall caseload; and the disposal of proceedings in a timely manner.
124 Section 37M(3) and (4) relevantly provide that the Rules of this Court must be interpreted and applied, and any power conferred by them must be exercised, in the way that best promotes the overarching purpose.
125 The primary judge neither misconceived the relevant principles found in Aon nor did she apply any different principles in the exercise of her discretion. Her Honour's summary of relevant matters for consideration emanating from Aon are correctly set out at [127]. No challenge is made to the judgment in that respect. Indeed, Tamaya concedes that at the primary judge correctly stated the principle apt to this ground of appeal, namely the need for an explanation by the moving party for any delay in applying for leave to amend.
126 Nonetheless, Tamaya complains that the primary judge misapplied this particular principle. It contends that her Honour went too far in requiring that there be an explanation for the delay in its solicitor acquiring the relevant knowledge which grounds the proposed Chilean Amendments. Further Tamaya contends that her Honour's approach also contradicts the approach taken on other occasions, where practitioners had only recently become aware of the substance of proposed amendments, as in Cement Australia at [46] and [52].
127 There was no House v The King error as propounded in this ground of appeal. Properly understood, the complaint, as advanced in argument, is of a different kind: that the primary judge took into account, upon the consideration of the explanation for delay, an irrelevant consideration, namely facts and circumstances pre-dating the institution of the two proceedings.
128 It follows from Tamaya's submission that it apprehends Aon to stand as authority for the proposition that in considering the explanation for any delay in seeking to amend a pleading it is neither required of the party moving the amendment to advance, nor permissible for the Court to consider, facts or circumstances which predate the institution of a proceeding. Putting it differently, Aon, as Tamaya would have it, necessarily requires an explanation for any delay confined to facts and circumstances which have arisen only after the institution of proceedings.
129 However put, Aon is not such authority. So far as concerns delay in applying for leave to amend, it requires merely, as the primary judge correctly identified, that the explanation for it be adequate. What constitutes an adequate explanation will depend upon the particular case.
130 The primary judge found that Tamaya's solicitor, Ms Banton, was unaware of the additional audit issues at the time of instructing Mr Basford and that the first clear indication to Tamaya's solicitors of the way in which the additional audit issues interacted with the claims in the proceedings was the first draft of Mr Basford's report, provided on 25 February 2015. Her Honour further found that Ms Palmer, another of Tamaya's solicitors, first became aware of the possibility that the pleadings may need to be amended after the directions hearing of 13 March 2015. This was the extent of the explanation proffered for the delay.
131 The primary judge set out at length at [85]-[115] the background against which she concluded that the explanation proffered was inadequate in the ways described at [186]-[187].
132 Her Honour regarded the explanation given on behalf of Tamaya by Ms Banton as incomplete. It was incomplete because it did not reveal why the liquidator had seized on the Lichkvaz mine audit issues but not the audit deficiencies associated with the Chilean Operations subsequently identified by Mr Basford when he was engaged. The circumstances called for this to be explained. The liquidator had conducted examinations in 2010, had had the audit file since 2010 and had known enough to commence an audit case in 2014. Furthermore, he had conducted further examinations of the audit team in May 2014 and had the assistance of an unknown expert auditor in around August 2014. Granted that he did not then make the allegations now contained in the Chilean Amendments, the question was how could a liquidator in his position reasonably arrive at that position. That question was not answered by evidence from the liquidator's lawyers that they did not know about the claims. While Cement Australia was a case about what the lawyers knew, this was not such a case.
133 Absent such additional explanation, the primary judge concluded at [186] that she could not infer from Ms Banton's evidence that the liquidator was not aware of the additional audit issues before Ms Banton, nor that he did not make a deliberate decision to focus the proceedings on the Lichkvaz mine. Thus, as her Honour found, she could not determine to what extent the delay in pleading the additional audit issues was attributable to Tamaya's lawyers rather than to the liquidator.
134 The appellant challenges these conclusions as exhibiting relevant error in a number of ways.
135 First, it submits that nothing which occurred, or did not occur, prior to the institution of proceedings is relevant to a consideration of whether an explanation for delay is satisfactory. Thus Tamaya submits it had no burden to bring forward the kind of explanation which the primary judge found to be lacking.
136 We do not agree. Self-evidently, an application to amend a pleading will arise only after a proceeding has been commenced. Time elapsed prior to the issue of proceedings within the limitation period does not constitute any part of relevant delay: Birkett v James [1978] AC 297 at 322 and 334-335. These considerations are no barrier, however, to this Court considering facts and circumstances, including, as in this case, facts which could and should, with due diligence, have been known to Tamaya before, and after, it commenced the proceeding. We will return to this question later. But it would be quite artificial to exclude, in every case, evidence of facts and circumstances pre-dating the commencement of proceedings. Of course, the delay involved can only be delay after the commencement of the proceedings. However, we see no reason in principle why that delay may not be considered in light of the history of the proceeding, both before and after its inception. Such consideration may, and in this case does, bear both qualitatively and quantitatively upon the delay involved and, therefore, upon its degree of seriousness. Having regard to what could and should have been known by the liquidator and, we infer, thereafter Tamaya's solicitor before the commencement of proceedings means that the period of delay may be seen to commence immediately after the proceedings were instituted. Whilst the originating application and statement of claim were served approximately a month after they were filed, nothing turns on this.
137 The period of delay, thus viewed, is not from late February 2015, in the case of Ms Banton, or mid-March 2015, in the case of Ms Palmer, until when the application to amend was made on 31 July 2015, a period of approximately 5 months. Rather, it is to be seen as a delay commencing immediately after the filing of the proceeding and running up until the amendment application was filed, a period of approximately 16 months. The originating applications in the Deloitte Proceeding and the New Directors Proceeding were filed on 28 March 2014 and Tamaya served the respondents on 9 May 2014.
138 Tamaya further submits that this case is an example of new issues coming to light of which the solicitors were not previously aware and says that in this respect the case is analogous to the facts in Cement Australia at [47]ff. Further, it submits that it is a case involving the types of 'mistake of judgment' described by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710-711, and which were referred to by the plurality in Aon at [109]. Tamaya contends that it has, in effect, been punished for its failure to appreciate the need to make the amendments at an earlier point in time.
139 We do not accept this submission. Apart from other considerations to which we will return, it conflates the knowledge of Tamaya's solicitor with that of Tamaya itself.
140 As was underlined by the Full Court in Cement Australia at [51], Aon is not a one size fits all case, referring to what the plurality in Aon had said at [75], viz., that statements made in cases concerning amendments of pleadings are best understood by reference to the circumstances of those cases.
141 That observation is apt here. The result in Cement Australia turned on its particular facts. These were that the error in pleading the relevant market too broadly was an error of judgment by senior counsel for the ACCC. This explanation was accepted by the primary judge. It was for this reason that the amendment was sought. The submission by the Cement Australia parties was that an explanation was required from the ACCC itself. The Full Court rejected this submission, as had the primary judge.
142 Such a conclusion is understandable on the facts of that case. There was no question that senior counsel for the ACCC had not known of the relevant facts enabling a judgment as to the characterisation of the relevant market to be made. He had the relevant information but, as a consequence of his error of judgment, had not pleaded it as he wished to do, upon reflection, by an amendment.
143 The present case is quite different. There is no suggestion that either Tamaya's solicitors or counsel could, or should, have identified the Chilean Operations audit issues. This, rather, was a matter for expert audit advice. Indeed, that these issues ought be pursued, it was accepted, was the product of just such advice given in his draft report in February 2015 by Mr Basford. The primary judge at [95] observed that it was not obvious that the liquidator was dependent upon his lawyers to identify the issues.
144 That these issues had not been discerned until then, in the circumstances, called, in our view, for an explanation, not merely from the solicitors but also from the liquidator who, prior to the commencement of the proceedings, had conducted public examinations into the affairs of Tamaya. The primary judge was correct to so find. Such an explanation should have extended to the knowledge of the liquidator and that of the unknown audit expert who was retained by the liquidator sometime around August 2014. The audit file from which those issues were identified by Mr Basford in 2015 had been in the possession of the liquidator since 2010.
145 The context in which her Honour was considering the amendment application had several significant features. First, the liquidator had a general statutory duty to get in and investigate Tamaya's assets. That duty arose in 2008. Secondly, and relatedly, given that the Chilean Operations were the only operating cash-producing asset of Tamaya (see her Honour's reasons at [43]), one might have expected the liquidator to have made appropriate investigations as to its operations, financial position and accounting treatment in Tamaya's books at an early stage of the liquidation, and well before the present litigation was commenced. Thirdly, none of this remains in the realm of speculation. Orders of the Court were made in favour of the liquidator on 16 June 2010 requiring Deloitte to produce, inter alia, documents relevant to the Chilean Operations, the Portuguese assets and the Charters Towers assets. Deloitte produced the relevant documents on 30 June and 5 July 2010. One can infer that these were appropriately analysed by the liquidator and his staff within the short to medium term after they were produced. Further, public examinations were conducted of the former directors in July and October 2010. In all the circumstances, her Honour's view that an explanation was called for from the liquidator about a matter within his purview and expertise was wholly unremarkable. An opportunity to plead these new audit issues existed at the inception of these proceedings. Her Honour was left to speculate as to why Tamaya had not availed itself of such an opportunity. Tamaya, who was seeking a favourable exercise of a discretion, had not discharged its onus to provide an explanation called for by the context in which its application was brought. Alternatively expressed, her Honour was entitled to take the view that what had been offered was not 'a sufficient explanation capable of acceptance' by her, to use the language of Cement Australia at [52].
146 No such explanation was forthcoming. Had it been, it would have demonstrated that the liquidator was or was not aware of the Chilean issues because the expert auditor had or had not identified those issues.
147 Nor was the explanation given one as to a 'mistake of judgment' described by Bowen LJ in Cropper v Smith at 710-711. No such explanation was advanced before the primary judge and nor could it have been.
148 There are other reasons why Cropper v Smith is of no assistance to Tamaya. First, Cropper v Smith, as the plurality observed in Aon at [75], is best understood by reference to its own circumstances and the course of that litigation. It was not an application to amend to raise a new cause of action but proceeded pursuant to a rule of Court which required consideration of whether amendment was necessary to determine 'the real questions in controversy between the parties'. The circumstances of that case, and the force of the applicable rule, required the Court to permit the amendment, as the controversy or issue was in existence prior to the application for amendment. The amendment was to ensure all issues before the Court were resolved, not one to introduce a wholly new claim. The rule under consideration in Cropper v Smith was of a different kind to that at play in Aon, because the amendment sought in the latter case was to be seen as raising a new issue and thus it was not an amendment that was necessary to be made, but rather one which fell to be considered under the general discretion in r 502 of the Court Procedure Rules 2006 (ACT).
149 Secondly, as French CJ observed in Aon at [25], the House of Lords decision in Ketteman v Hansel Properties Ltd [1987] AC 189 ('Ketteman') manifests a marked departure from the approach of Bowen LJ in Cropper v Smith that a costs order is a cure all. Lord Griffiths in Ketteman said at 220 that:
'… justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes, and the legitimate expectation that the trial will determine the issues one way or the other…
Another factor that a judge must weigh in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently.'
150 Samuels JA in GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 ('GSA Industries'), which was also remarked upon by the Chief Justice in Aon, said at 716 that:
'the emollient effect of an order for costs as a panacea may now be consigned to the Aladdin's cave which Lord Reid rejected as one of the fairy tales in which we no longer believe.'
151 This same approach was followed by a majority of a Full Court of this Court in Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379 at 387 per Gummow J and at 391-393 per French J (as their Honours then were) ('Bomanite').
152 Thirdly, the plurality in Aon departed from the view expressed by Bowen LJ in Cropper v Smith at 711 that, in the context of an application to amend, an order for costs is a panacea that heals all. Their Honours said at [99] that the modern view was that even an indemnity costs order may not always undo the prejudice a party suffers by a late amendment. Their Honours also relied at [100] upon what had been said on this question in Ketteman by Lord Griffiths and by Gummow and French JJ in Bomanite.
153 Tamaya acknowledges that an explanation for delay in bringing the amendment application was called for but says that it provided such an explanation which the primary judge wrongly rejected as inadequate.
154 Just what explanation is called for will necessarily depend upon the particular case. The explanation will be given by, or on behalf of, the moving party. Affidavit evidence may or may not be necessary. In Cement Australia, for example, as the explanation was that the error was one of judgment by senior counsel for the ACCC, a statement by him from the bar table, to which no objection was taken, was accepted by the Court as sufficient.
155 It must be borne in mind that the explanation required is that of the moving party, not merely their solicitor or counsel. The client may very well know of matters relevant to the explanation for delay which are not known by the lawyers.
156 Evidence as to the explanation for delay will often be given by an applicant's solicitor from their own knowledge but that may, in some cases, not be sufficient. This is such a case. The primary judge was correct to conclude that the explanation offered by Tamaya was deficient because Ms Banton could not explain why she did not know of the Chilean audit issues until she was told by Mr Basford. Her Honour's approach does not involve any error of principle.
157 We observe, in this respect, that in Aon the plurality had regard to letters which were in the possession of the ANU one year or so before proceedings commenced and which bore on the issues the subject of the amendment application as relevant to the consideration of the adequacy of the explanation for the delay: Aon at [54] and [106].
158 In any event, Tamaya, as we have observed, concedes that the Chilean audit issues could have been identified before these proceedings were commenced. As we have said, why they were not may have many explanations. None of those explanations are before us.
159 Even assuming negligence, such conduct of litigation does not attract indulgence from the Court as it might previously have in different times: GSA Industries at 716, cited by French CJ in Aon at [25].
160 Further, as Heydon J observed in Aon at [131], the explanation for the delay in bringing the amendment application in that case, supported by an affidavit from the ANU's solicitor, did not go so far as to exclude the possibility that the relevant facts could have been known earlier. His Honour said:
'There was nothing to indicate that whatever was seen as relevant had not been available earlier if diligence had been employed.'
161 Tamaya further submits that her Honour's conclusions on this issue involved procedural unfairness, as neither Deloitte nor the Director parties asserted that the liquidator knew of the Chilean audit issues prior to the commencement of the proceedings. Had this been advanced, Tamaya says that it would have called the liquidator to be cross-examined.
162 Whether that would have occurred cannot be certain, particularly given Tamaya's submission that evidence of matters prior to the inception of proceedings is irrelevant to this question. Be that as it may, the submission is not a good one in any event. The onus lay on Tamaya to provide a positive explanation to the extent that it was necessary. In finding that it was not adequate the primary judge did not conclude that the liquidator did know of the Chilean audit issues but rather that she could not be satisfied that he did not know.
163 Moreover, that an explanation for the delay should include evidence of what the liquidator had done and knew was the subject of submissions made to the primary judge. This was not something which arose for the first time in her Honour's reasons for judgment.
164 This ground, whether as formulated in the Notice of Appeal or as re-characterised by us in the light of the way it was put in argument, should be rejected.