Case Note: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27

“the torpid languor of one hand washes the drowsy procrastination of the other”.

The landscape of interlocutory skirmishes about the amendment of pleadings shifted on its axis on 5 August 2009, with the judgment of the High Court in Aon Risk Services Australia Ltd (Aon) v Australian National University (ANU). The decision has been widely reported in legal commentaries and the media.

It concerned whether ANU should be granted an adjournment of trial and leave to amend its statement of claim against Aon, when the parties were three days into a  four week trial.

ANU had commenced proceedings against 3 insurers claiming indemnity in relation to the Mt Stromlo bushfires in 2003.  Aon was joined later, on the basis that it had acted negligently in failing to renew insurance over certain properties. The trial was set down for four weeks. On the first day of hearing, ANU and two of the three insurers commenced mediation. By the third day, ANU had settled its claims against the three insurers. It then sought an adjournment of the hearing on the basis that certain events had occurred and information received before and after the mediation that made it necessary to seek leave to amend its statement of claim against Aon. The primary judge granted the adjournment and granted leave to amend. A majority of the Court of Appeal dismissed Aon’s appeal against the primary judge’s orders, but ordered ANU pay Aon’s costs of the amendment on an indemnity basis. The High Court allowed Aon’s appeal against the decision of the Court of Appeal, and ordered that ANU’s application for leave to amend its statement of claim, be dismissed.

The High Court took the opportunity to consider how Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 had been applied in practice across the country and to restate the relevant principles. J L Holdings is often relied upon as authority for the proposition that a party will be entitled to amend its pleading unless the other party can demonstrate specified, identified prejudice. Practitioners frequently relied on the statement in the joint judgment¹ that case management was “not an end in itself … that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim.”.

In Aon Insurance Gummow and Kiefel JJ granted special leave to appeal. Kiefel J had been the trial judge in J L Holdings who had refused to grant leave to amend the Defence, a decision upheld by the Full Federal Court but reversed by the High Court.

In Aon Insurance the application to amend was made under the relevant rules of the Court Rules Procedure 2006 (ACT), which commenced after J L Holdings. The amendment sought fell within r 502 of Chapter 2 of those Rules, which required the Court to exercise its discretion². Rule 21 (which is based on rule 5 of the Uniform Civil Procedure Rules 1999 (Qld)³) set out the objects and purposes of Chapter 2 of the ACT rules:

(1) The purpose of this chapter, and the other provisions of these rules in their application to civil proceedings, is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.

(2) Accordingly, these rules are to be applied by the courts in civil proceedings with the objective of achieving —

(a) the just resolution of the real issues in the proceedings; and

(b) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

(3) The parties to a civil proceeding must help the court to achieve the objectives. 

In considering the authorities on applications for leave to amend, French CJ (who agreed with the orders in the joint judgment) noted that the facts in J L Holdings were different in material respects to Aon Insurance:

28.  Both the primary judge and the Court of Appeal in the present case regarded the decision of this Court in J L Holdings as determinative of the approach they should take to the amendment application. But that case was factually very different. As counsel for Aon pointed out in written submissions:

1. The applicant had explained, and the Court had accepted, that the application was made late because a material fact had only recently been discovered.

2. The application was made before a hearing date was fixed and, once it had been fixed, the period of six months intervening between the application and the commencement of trial meant that the hearing dates would not be imperilled.

3. The point sought to be raised could not be avoided at trial, as it was apparent on the face of certain documents.

In reversing the decision of the Full Federal Court, which upheld the primary judge’s refusal to grant leave to amend the defence, this Court held case management principles to be relevant, but said that they could not be used to prevent a party from litigating a fairly arguable case [footnotes omitted].

The Chief Justice restated the principles in this way:

30. It might be thought a truism that “case management principles” should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, J L Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502. Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes.

The joint judgment expressed it even more directly:

111.  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 J L 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.

112. A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.

113. In the past it has been left largely to the parties to prepare for trial and to seek the court’s assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. [footnotes omitted]

They went on to note that an order for costs will no longer be regarded as a panacea that heals all: “The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment”.⁴

Heydon J (who agreed with the orders in the joint judgment) expressly stated⁵ that in jurisdictions having rules similar to rr 21 and 502 (such as Queensland), J L Holdings has ceased to be of authority. In doing so, he noted that: “There is a common opinion — it is far from universal, but it is common — within the judiciary and the legal profession that Queensland v J L Holdings Pty Ltd, whether it has been correctly understood or not, has had a damaging influence on the conduct of litigation.”

The Court held that matters relevant to the exercise of the discretion to grant leave to amend included:

• the extent of the delay in seeking to amend;
• the costs associated with that delay;
• prejudice to the opposing party if leave were granted;
• the nature and importance of the amendment to the party applying;
• the point the litigation had reached, relative to the trial commencement date;
• prejudice to other litigants awaiting trial dates; and
• the explanation for the delay in applying for the amendment. 

In allowing the appeal, the High Court held that the primary judge and majority in the Court of Appeal had not had sufficient regard to these important features of ANU’s application for leave to amend⁶:

• It sought to introduce new and substantial claims which would require Aon to prepare a new Defence as if from the beginning;
• The application was brought during the trial and would require abandonment of the remaining scheduled weeks of trial;
• There was a question whether even indemnity costs would overcome the prejudicial effects on Aon;
• ANU deliberately offered no explanation about why the case had been allowed to proceed to trial in its existing form when the basis upon which it was seeking to amend had been known to it for at least 12 months;
• The abandonment of the trial would have deleterious effects on other litigants whose trial dates would have to be put back.

The Court found that adjourning the trial date and granting leave to amend would, in those circumstances, be contrary to the case management objectives of rule 21.

Chief Justice French was damning about the conduct of the proceedings and the decisions below:

4.  Save for the dissenting judgment of Lander J in the Court of Appeal, the history of these proceedings reveals an unduly permissive approach at both trial and appellate level to an application which was made late in the day, was inadequately explained, necessitated the vacation or adjournment of the dates set down for trial, and raised new claims not previously agitated apparently because of a deliberate tactical decision not to do so. In such circumstances, the party making the application bears a heavy burden to show why, under a proper reading of the applicable Rules of Court, leave should be granted.

5. In the proper exercise of the primary judge’s discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system. Given its nature, the circumstances in which it was sought, and the lack of a satisfactory explanation for seeking it, the amendment to ANU’s statement of claim should not have been allowed. The discretion of the primary judge miscarried.

6. It appears that a factor in the decision of the primary judge and of the Court of Appeal was the decision of this Court in J L Holdings. That case arose out of an entirely different factual setting. However, to the extent that statements about the exercise of the discretion to amend pleadings in that case suggest that case management considerations and questions of proper use of court resources are to be discounted or given little weight, it should not be regarded as authoritative. For the reasons set out more fully below, I would allow the appeal. I agree with the orders proposed in the joint judgment[16].

But not as damning as Heydon J⁷:

156. Conclusion. The presentation and adjudication of the case in the courts below do cause it to merit a place in the precedent books. The reasons for placing it there turn on the numerous examples it affords of how litigation should not be conducted or dealt with. The proceedings reveal a strange alliance. A party which has a duty to assist the court in achieving certain objectives fails to do so. A court which has a duty to achieve those objectives does not achieve them. The torpid languor of one hand washes the drowsy procrastination of the other. Are these phenomena indications of something chronic in the modern state of litigation? Or are they merely acute and atypical breakdowns in an otherwise functional system? Are they signs of a trend, or do they reveal only an anomaly? One hopes for one set of answers. One fears that, in reality, there must be another.

Tracy Fantin

EQUITY CHAMBERS

Footnotes

1. [1997] HCA 1; (1997) 189 CLR 146 at 154 per Dawson, Gaudron and McHugh JJ.
2. The Court held that the application to amendment did not fall within rule 501, which requires the Court to make an all necessary amendments for the purposes of deciding the real issues in the proceeding, or correcting any defect or error in the proceeding or avoiding multiple proceedings.
3. 5 Philosophy—overriding obligations of parties and court

   (1) The purpose of these rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.

   (2) Accordingly, these rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of these rules.

   (3) In a proceeding in a court, a party impliedly undertakes to the court and to the other parties to proceed in an expeditious way.

   (4) The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.

   Example—

   The court may dismiss a proceeding or impose a sanction as to costs, if, in breach of the implied undertaking, a plaintiff fails to proceed as required by these rules or an order of the court.

4. at [99]
5. at [133]
6. at [104] — [110]
7. The Court was also critical of the time taken by the Court of Appeal to deliver its judgment — nearly 6 months –  and by the Primary Judge to deliver his decision to grant leave to amend — of 11 months, the latter being described in the Joint Judgment as “deplorable”. 

Photo of Mount Stromlo Observatory by Enoch Lau