Tamaya Resources Limited (In Liq) v Deloitte Touche Tohmatsu  FCAFC 2
It is common in large complex cases for plaintiffs to seek to amend their claims during the course of the litigation. A plaintiff may be required to pay the costs thrown away but if its amendment application was brought in good faith and with a proper explanation, it would usually be able to amend its claim.
However, a recent appeal decision of the Full Court of the Federal Court has served as a useful reminder of the limits on amendments to a plaintiff's case. Reliance on Aon Risk Services may not be sufficient, particularly in circumstances where there is a significant delay in the pursuit of the amended claims.
Key points from the Full Court’s dismissal of the plaintiff’s appeal in Tamaya include:
- Consideration of the delay in pursuing amendments can take into account the conduct of the plaintiff prior to proceedings being commenced;
- Liquidator plaintiffs should act promptly in pursuing claims following an investigation/examination process – commencing proceedings late in limitation periods will bring unwanted case management risks;
- It always pays for a plaintiff to put in the hard work on its claim prior to the commencement of proceedings, rather than adopting an “amend as you go” approach;
- The passage of time from the factual events relevant to the amendments can prejudice the defendants, in the diminished recollection of witnesses/instructors and the pressure and strain involved with the litigation.
Ultimately, the Court will look at all the circumstances of the case and balance the prejudice to the plaintiff if the amendments are refused against the prejudice to the defendants if they are allowed. This takes into account the overarching purpose of the Court to facilitate the resolution of disputes as quickly, inexpensively and efficiently as possible.
The amendment application was complex. Tamaya, a listed mining company, was placed into voluntary administration in October 2008.
Its liquidators conducted examinations of directors in 2010 and Tamaya commenced proceedings against directors in February 2013.
Tamaya subsequently commenced further proceedings in early 2014 against its former auditors, Deloitte and also various directors, relating to the preparation and publication of Tamaya’s 2007 financial statements.
The 2013 and 2014 proceedings were each commenced just within the six year limitation period.
In August 2014, Tamaya’s liquidators conducted further examinations – this time of various individuals from Deloitte. The liquidators were assisted in this process by an audit expert.
In December 2014, Tamaya retained another audit expert, Mr Basford, for the 2014 Proceedings. At that time, the proceedings were all set down for trial commencing 1 June 2015.
In March 2015, Tamaya served the expert report of Mr Basford on the defendants. It was apparent that the issues raised in Mr Basford’s report travelled well beyond the case as pleaded by Tamaya. However, Tamaya maintained that it did not need to amend its case. For various reasons, including the new issues in Mr Basford’s report, the June 2015 trial date was vacated and a new date was set for October 2015.
Across April and May 2015, the defendants made clear that if Tamaya wished to run a case that included issues from Mr Basford’s report, it would need to amend its case. However, Tamaya only notified its intention to amend in June 2015 and a proposed amended claim was not provided until July 2015.
The amendments proposed were substantial, adding approximately 50 pages of pleadings to Tamaya’s existing claim. The defendants opposed the substantive amendments sought and the need for the Court to determine the amendment application led to a vacation of the October 2015 trial date.
The primary judge refused Tamaya’s amendment application on numerous grounds and Tamaya appealed to the Full Court.
Delay in pursuing amended claims
A significant issue on the appeal was whether the primary judge was able to consider the actions and circumstances of Tamaya and its liquidator prior to the commencement of the 2014 Proceedings. Tamaya argued that the primary judge was only entitled to look at the delay in pursuing the amendments since the commencement of the proceedings.
The Full Court disagreed. Although the relevant delay involved can only be the delay after the commencement of the proceedings, it said “there is 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.”
The Full Court said a plaintiff was required to give an “adequate explanation” of the delay and this requirement may vary upon the particular circumstances of a case. In this case, it was insufficient for Tamaya to simply rely on evidence from its solicitors that they only became aware of issues in Mr Basford’s report following receipt of his draft report in February 2015. The liquidation had long history, including examinations conducted in 2010 and 2014. The latter were with the assistance of an audit experts. As such, an adequate explanation of the delay needed to address the liquidator’s knowledge of the issues in Mr Basford’s report and an explanation as to why he had previously either not appreciated those issues or otherwise determined not to pursue them. This was particularly so given Tamaya conceded that the issues in Mr Basford’s report could, with due diligence, have been identified prior to the commencement of the proceedings.
Loss of Trial Date
Another significant factor in the appeal was that if the amendments were allowed, it was common ground that the May 2016 trial date would be lost. Further, the Full Court accepted that the effect of allowing the amendments would be to delay the hearing of the case until 2017.
Tamaya argued that the primary judge incorrectly considered the further delay of the trial as a factor weighing against the discretion to allow the amendments. It submitted the risk of losing the hearing date was an irrelevant consideration. The Full Court described this as an “outlandish proposition” and stated that the risk posed to a hearing date could never be said to be irrelevant to the exercise of discretion in considering an amendment.
Prejudice from Passage of Time
The relevant events in the proposed amendments took place almost a decade earlier. This raised concerns about witnesses' recollection.
Tamaya argued that the period for assessing the prejudice to the defendants with such diminishing recollections was not the period between the relevant events and the trial, but rather the time between commencement of the proceedings and the amendment application (being 16 months).
The Full Court again rejected this argument, stating it would be artificial to consider diminishing recollection only from the commencement of the proceedings. Rather, the Court should simply consider the prejudice that will be caused by the amendments, including the state of the recollection of witnesses.
The Full Court also noted that the issue of diminished recollection does not only relate to witnesses. It also prejudices the ability of those involved to give proper instructions to their lawyers and increases the general strain of litigation for the defendants.