FEDERAL COURT OF AUSTRALIA

Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondents’ costs of the application for leave to appeal and the appeal, as taxed or agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellants pay the respondents’ costs of the application for leave to appeal and the appeal, as taxed or agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1. Introduction

1    On Wednesday 23 December 2015, this Court made orders dismissing both of the appellant’s appeals with costs. These are the Court’s reasons for making those orders.

2    The appellants (compendiously, ‘Tamaya’) appeal by leave from orders made by a judge of the Court refusing, in part, applications to amend two complicated sets of pleadings in separate proceedings. Those orders followed a vigorously contested application in which most of the amendments sought were opposed. Those two proceedings, along with a third, are presently listed for a final hearing of six weeks duration commencing on 16 May 2016. In each case the applicant is Tamaya. Although the cases differ in significant elements, they reflect efforts by the liquidator of Tamaya to recover from its former directors and auditors losses alleged to have been suffered by it as a result of various transactions into which it entered. There is a fourth proceeding which is a shareholder class action. In it a group of Tamaya’s shareholders sue Tamaya, some of its former directors and its auditors in relation to effectively the same matters. Because Tamaya is in liquidation that case cannot proceed without the leave of the Court. A decision on an application so to proceed is presently reserved before a judge of the Court. The class action is not, therefore, listed for trial.

3    Not all of the amendments sought by Tamaya were opposed by the respondents. The primary judge granted leave to amend the pleadings in respect of those amendments that were not so opposed. In relation to all of the remaining amendments the primary judge refused leave, although for disparate reasons. Her Honour did so in relation to one of the proposed new causes of action against the firm Deloitte Touche Tohmatsu (‘Deloitte’) on the basis that it would be liable to be struck out. In relation to the balance of the proposed amendments, her Honour, to put the matter compendiously, concluded that the prejudice which would flow to the various respondents if leave were to be granted outweighed the prejudice to Tamaya if leave were refused: cf. Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (‘Aon’).

4    In this Court, Tamaya submits that her Honour’s orders should be set aside on three grounds: first, because the exercise of her Honour’s discretion miscarried in the sense discussed in House v The King (1936) 55 CLR 499; secondly, because it was said that the primary judge had failed to accord Tamaya procedural fairness; and, thirdly, because her Honour was said to have erred in concluding that a proposed claim under s 1041E of the Corporations Act 2001 (Cth) against Deloitte should not be permitted as it was liable to be struck out.

5    These reasons are structured as follows:

2. Four related suits

6    Tamaya was a mining company listed on the Australian Stock Exchange. It had mining interests in Portugal, Armenia, Chile and Queensland. In this Court the focus of the parties was largely upon the Armenian and Chilean operations. Except where otherwise necessary, it is not necessary to pay close attention to the operations in Portugal or Queensland. Senior Counsel for Tamaya accepted that unless Tamaya could succeed in relation to Chile it could not otherwise succeed. We proceed on the same basis.

7    On 27 February 2007, the directors of Tamaya resolved to acquire an interest in a Soviet era gold mine in Southern Armenia known as Lichkvaz. Tamaya was to effect the acquisition by acquiring shares in an entity called Iberian Resources Limited (‘Iberian’). It appears that at some point thereafter Tamaya became financially distressed. On 26 October 2008, Tamaya was placed in voluntary administration and, in December of the same year, liquidators were appointed. Since then it has been undergoing a winding up.

8    In 2010, the liquidators carried out public examinations of some of the Tamaya’s directors. Orders were also obtained from this Court requiring Tamaya’s auditors, Deloitte, to produce documents, including the audit file. There then followed then a period of gestation. On 8 February 2013, just inside the six year limitation period, Tamaya sued those of its former directors who had been responsible for the decision to acquire, through Iberian, the Lichkvaz gold mine. The thrust of this case is that the characteristics of the Lichkvaz mine were such that it would have been virtually impossible for a company the size of Tamaya to turn it into a venture which was commercially viable. This proceeding is entitled Tamaya Resources Limited (in liq) v Callaghan & Ors and is identified as proceeding NSD 185 of 2013. We will refer to it, as the parties do, as ‘the Original Directors Proceeding’.

9    It appears that at some point, probably on or around 30 November 2012, the liquidators entered into an arrangement with a litigation funder called International Litigation Partners No 2 Ltd. On 28 March 2014, Tamaya commenced two further cases. Both of these were concerned with the circumstances leading to the publication, on 31 March 2008, of Tamaya’s audited financial statements for the year ended 31 December 2007 (‘the 2007 financial statements’). One of these proceedings – Tamaya v Deloitte & Ors, NSD 327 of 2014 – was brought against the auditors, the other – Tamaya v Callaghan & Ors, NSD 328 of 2014 – was brought against the directors who had resolved to publish the 2007 financial statements. It was said that the 2007 financial statements did not comply with relevant accounting standards, were not free from material misstatement and did not give a true and fair view of the financial position and performance of Tamaya as at 31 December 2007. The primary judge identified the crux of the alleged problems with the financial statements as being:

(a)    overstatement of the value of Tamaya’s development properties and exploration properties;

(b)    omission of a provision for bad and doubtful debts owed to Tamaya as a standalone entity by Iberian;

(c)    overstatement of the fair value of the net identifiable assets acquired by the purchase of Iberian;

(d)    failure to impair unspecified assets;

(e)    failure to recognise impairment losses in respect of the net identifiable assets acquired by the purchase of Iberian, well in excess of the amounts reported; and

(f)    the use of the going concern assumption, which should not have been used in light of the ‘Lichkvaz Processing Information’ (the detail of which need not encumber these reasons).

10    We shall refer to these two proceedings as, respectively, the Deloitte Proceeding and the New Directors Proceeding, again adopting the nomenclature of the parties.

11    It will be observed that both cases were commenced three days before of the expiration of a period of six years following the date of the publication of the 2007 financial statements, 31 March 2008.

12    The loss and damage claimed in these two proceedings is premised on an allegation that disclosure of Tamaya’s true financial position on 31 March 2008 would have caused it to cease trading almost immediately and be wound up. The suggested loss would appear to be the difference between the net asset position of Tamaya as at 31 March 2008 (when it is alleged it should have been wound up) and that position on 26 October 2008 when it was, in fact, placed in voluntary administration.

13    On 28 May 2014, a class action was commenced in relation to the 2007 financial statements by shareholders of Tamaya who claim that, but for the misrepresentations alleged to be contained in those financial statements, they would not have acquired their shares at all or, if they had acquired them, that the market price of the shares at the time of acquisition would have been lower in a market which had been correctly informed of Tamaya’s position. In doing so, the class members rely, in part, on the principle not yet definitively established, referred to as ‘indirect causation’: cf. Caason Investments Pty Ltd v Cao [2015] FCAFC 94. The class members also allege that they were misled by a share purchase plan issued by Tamaya on 1 May 2008. The defendants to this class action are Tamaya, Deloitte and the directors who resolved to issue the 2007 financial statements on 31 March 2008. We will refer to this proceeding as ‘the Shareholder Class Action’. This action is also funded by International Litigation Partners No 2 Ltd under a funding agreement dated on or around 16 May 2014. It will be observed that the same funder is on both sides of the record. The desirability of permitting such arrangements is something which warrants investigation by the legislature.

14    It will be observed that the Shareholder Class Action was commenced outside of the six year period following the dates of both the publication of the 2007 financial statements, 31 March 2008, and the issue of the share purchase plan, 1 May 2008.

3. The proposed amendments

15    On 31 July 2015, Tamaya filed an interlocutory application in the Deloitte Proceeding and the New Directors Proceeding seeking leave to file an amended originating application and a further amended statement of claim. The proposed amendments to both cases are interspersed throughout the documents and account for around an additional 50 pages to pleadings which are already very complicated. Setting them out in full would not, in this case, be helpful. We will approach the matter as the parties and the primary judge did, largely in a summary fashion except where a more detailed examination is demanded by the context.

16    In this Court, Tamaya identified its amendments to both cases as falling into three categories:

(a)    The Chilean amendments

17    These amendments (‘the Chilean Amendments’) related to Tamaya’s Chilean mining operations (‘the Chilean Operations’), which had not previously been the focus of Tamaya’s attention. It was said, in effect, that the Chilean Operations had not been performing well and that this had not been adequately disclosed. Further, Deloitte had failed to detect deficiencies in the discharge of its audit function for the 2007 year. It was then to be alleged that, if the deficiencies had been adequately exposed, Tamaya’s secured creditors would have appointed receivers very shortly after 31 March 2008. So viewed, the Chilean Amendments gave rise to the same damages as the Deloitte Proceeding and the New Directors Proceeding as currently pleaded did, viz., an earlier ceasing of Tamaya’s trading activities, but arrived at by an additional path.

(b)    Liability, causation and quantum amendments

18    There was no single unifying theme by which this set of amendments could be conveniently described. The claims included:

(i)    allegations that Tamaya’s Portuguese operations should have been tested for impairment;

(ii)    allegations that Tamaya’s Charters Towers asset in Queensland should have been impaired;

(iii)    allegations bringing the pleadings into line with what Tamaya’s audit expert witness, a Mr Basford, thought should have been disclosed in the 2007 accounts;

(iv)    amendments relating to what should have been stated in 2007 accounts in relation to the going concern statement (together with notification of certain alleged misstatements);

(v)    allegations that if the Chilean deficiencies had been disclosed, the secured creditors would have appointed receivers on or shortly after 31 March 2008 (this overlapped with the previous topic); and

(vi)    amendments to reflect the damages case advanced in the report of Tamaya’s damages expert, a Mr Searby.

19    Tamaya submitted that these amendments reflected evidence already filed and did not broaden the controversy between the parties.

(c)    New allegations

20    Under this third heading, Tamaya put forward four sets of allegations which it conceded were new:

(i)    a new claim for indemnity or contribution arising from the Shareholder Class Action;

(ii)    a new claim for damages arising from s 1041E of the Corporations Act 2001 (Cth);

(iii)    an amendment concerning the possible future adjudication of shareholder proofs in respect of the Shareholder Class Action, which would arise in the event that leave to proceed against Tamaya was not granted; and

(iv)    in respect of the New Directors Proceeding, amendments pleading the contingent loss arising from the Shareholder Class Action as part of Tamaya’s case on loss and damage.

21    The categorisation of the amendments into these four sets of allegations is Tamaya’s analysis. Indeed, as will be seen, Tamaya was critical of the primary judge for allegedly treating all of the amendments compendiously and without due regard to this taxonomy.

4. The History of the Amendments and the Course of the Proceedings

22    As we have said, both the Deloitte Proceeding and the New Directors Proceeding were commenced on 28 March 2014. At that time Tamaya’s solicitors were Piper Alderman. Ms Banton was a partner of that firm and was on the record as Tamaya’s solicitor. She said in one of her affidavits that the reason she included no allegation in either proceeding as originally drawn about the Chilean Operations was because neither she, nor anyone else at Piper Alderman, was aware of the potential for making such claims.

23    Of course, at the time the Deloitte Proceeding and the New Directors Proceeding were commenced the Original Directors Proceeding had been on foot since 8 February 2013. However, that proceeding related to the narrower allegation that the directors had erred in making the decision to acquire the Lichkvaz mine.

24    Deloitte’s solicitor gave evidence that despite the Deloitte Proceeding being filed on 28 March 2014, it was not served until 9 May 2014. It came before the Court for its first directions hearing on 14 May 2014.

25    On 10 June 2014, Piper Alderman notified the solicitors for Deloitte that the liquidators proposed to carry out further examinations to satisfy both themselves and the litigation funder that the Deloitte Proceeding had sufficient prospects of success. There was a directions hearing on the next day, 11 June 2014. On that occasion the Deloitte Proceeding was stood over to 22 August 2014 to permit these examinations to occur. The proceedings themselves were also fixed for a hearing of four weeks duration, commencing on 1 June 2015.

26    As contemplated by the orders of 11 June 2014, examinations of the Deloitte personnel were then conducted by the liquidators between 11 and 24 July 2014 before the Supreme Court of New South Wales. We note that on 14 July 2014, one of the liquidators resigned his position, leaving Tamaya with a sole liquidator, a Mr Campbell-Wilson. Deloitte was also issued with a summons for production which, on 30 July 2014, it responded to by producing a number of documents. It is to be noted that this was a process in which the liquidator was using his own statutory powers to gauge the liability of Tamaya’s auditors. Further, it is not in dispute that in carrying out that process the liquidator was assisted by an audit expert. This expert was not identified in this Court although his or her existence was not in dispute. Whoever it was, it was a different person to the expert audit witness who Tamaya proposes to call at trial, Mr Basford. Pausing there, it is clear that by August 2014 the winding up had been in train for six years, there had been two rounds of public examinations including of the Deloitte audit staff and the liquidator had had the benefit of expert audit advice. It is incontestable that, by August 2014, the liquidator had had a reasonable opportunity to formulate any claims Tamaya had against its auditors.

27    Within two weeks, on 12 August 2014, Tamaya indicated that it proposed to amend its statement of claim against Deloitte. Nine days later, on 21 August 2014, Piper Alderman informed Deloitte’s solicitors of the fact that the liquidator had now concluded a litigation funding agreement with International Litigation Partners No 2 Ltd.

28    On 22 August 2014, there was another directions hearing. A number of matters were raised at this hearing:

(a)    Tamaya was ordered to file and serve its proposed amended statement of claim by 5 September 2014 and Deloitte was ordered to file and serve its defence and any cross-claims by 17 October 2014;

(b)    there was discussion about Tamaya’s evidence. Deloitte’s counsel indicated that they wished to see Tamaya’s evidence before the end of the Law Term if the hearing date on 1 June 2015 was to be achievable; and (102)

(c)    Counsel for Tamaya indicated that, whilst it would be delivering narrative statements of fact, it needed to be understood that these were works in progress which would be updated.

29    Ultimately, and despite these pronouncements, no formal direction was made about the filing or service of Tamaya’s evidence.

30    The proposed amended statement of claim was due on 5 September 2014. A little late, a draft of the pleading was delivered on 8 September 2014 (6 and 7 September 2015 were the weekend). Despite having had the benefit of an examination of the auditors and their audit file and despite having the further benefit of expert audit advice in the formulation of the amended pleading, no case was then advanced in relation to the Chilean Operations. On 11 September 2014, Deloitte consented to the amendments. There then ensued three weeks of correspondence about further and better particulars, at the end of which, on 2 October 2014, the amended statement of claim was filed.

31    It is useful to pause at this point to survey the manner in which the litigation had been conducted. The proceeding had been commenced on 28 March 2014 at the very threshold of the limitation period. By 2 October 2014, all that had happened, on the face of the record, was two directions hearings and the amendment of the statement of claim which, at first blush, may not appear to be much in the way of achievement for six months’ pendency in the list. However, such broadbrush statements leave out of account the process of further examination which the liquidator conducted. That process occupied the period from 10 June 2014 to 30 July 2014. Deloitte was critical of the time it took Tamaya to formulate its first round of pleading amendments after that process but, in the end, the draft was served one working day after it was due.

32    We do not, in those circumstances, accept that there was any significant delay in Tamaya’s camp between 28 March 2014 and 2 October 2014 in terms of the formal steps it was taking in the litigation. On the other hand, we can see no reason not to conclude that by August 2014 the liquidator had had more than a reasonable opportunity to raise a case against Deloitte arising from the Chilean Operations. It is unclear to us why the liquidator, with the benefit of his examinations, the audit file and an audit expert, did not raise the claims arising from the Chilean Operations in August 2014. Possible explanations for this failure may include:

(i)    a deliberate tactical decision not to pursue such a case;

(ii)    incompetence on the part of the anonymous audit expert;

(iii)    an error within the liquidator’s own office; and

(iv)    the views of the litigation funder.

33    As will be seen, the primary judge was critical of Tamaya for failing to throw any light on this issue. Tamaya, on the other hand, said it was enough that it led evidence that its own lawyers were unaware of the claims arising from Chilean Operations. We return to the resolution of this debate below.

34    On 21 November 2014 there was a further directions hearing. At this time, Tamaya was directed to file and serve its lay and expert evidence and narrative statements of fact by 30 January 2015. That order was made within 8 months of the commencement of the proceeding. We do not consider that that was an unusual state of affairs in an auditors’ negligence case. When the order was made it does not seem to us that Tamaya was in a state of default.

35    No doubt prompted by the orders of 21 November 2014, Piper Alderman shortly retained an expert in the duties of auditors on 2 December 2014. That expert was Mr Basford and he was engaged by means of a letter of instruction dated 2 December 2014. Piper Alderman’s retainer letter made no reference to the claims arising from the Chilean Operations. The solicitor on the record for Tamaya, Ms Banton, said that the reason there was no such reference was because she was quite unaware of any such issue.

36    On 21 November 2014, Deloitte itself had been ordered to file its defence by 5 December 2014, which it did. Nevertheless, Tamaya suggested that Deloitte had been guilty of delay in this regard and that its defence had originally been due on 17 October 2014. This mattered because Tamaya would subsequently fail to deliver its narrative statements of fact by 30 January 2015. Tamaya sought to parry responsibility for that failure by putting it at the door of Deloitte on the basis that its own failure to deliver the statements was caused by Deloitte’s failure to serve its defence by 17 October 2014. The argument is without merit. The order that Tamaya file its narrative statements by 30 January 2015 was made at the same time that Deloitte was ordered to serve its defence on 5 December 2014. That timetable was not breached by Deloitte.

37    Two weeks after Mr Basford had been retained by Piper Alderman, one of its solicitors, a Ms Palmer, met with him to discuss his work. This dialogue began around 17 December. As a result of her discussions with Mr Basford, Ms Palmer came to appreciate the need to obtain the laptop which Deloitte had used for the audit. On 18 December 2014, Tamaya applied for orders to obtain that access.

38    Another directions hearing then took place on 19 December 2014. At that time, an extension of time was granted to Tamaya to file its narrative statements from 30 January 2015 to 10 February 2015. Significantly, Tamaya was also ordered to pay security for costs in four tranches. In accordance with the Court’s orders of 21 November 2014, Deloitte’s own evidence had to be filed and served by 2 April 2015. Understandably, therefore, the solicitors for Deloitte began to make arrangements to confer with its potential witnesses in February and March 2015.

39    The seeds of some difficulty were sowed on 19 December 2014. It was apparent that Mr Basford needed to have access to the Deloitte audit laptop to perform his work but an application for access to it had only been filed on 17 December 2014. It appears to have been assumed in Tamaya’s camp that the laptop would be forthcoming in sufficient time to allow Mr Basford to do his work and to complete it by 10 February 2015. Given the time of year, this appears to us to have been somewhat optimistic.

40    The security for costs orders also assumed, from a timetabling perspective, that the orders would be complied with. There was reason to think that this was a warranted assumption because of the conclusion by the liquidator of a litigation funding agreement on around 30 November 2012. However, there were some unexpected events. In short succession over the Christmas-January period the following occurred:

(a)    the staff at Piper Alderman working on the case left that firm and, on 12 January 2015 took up employment at another firm, Squire Patton Boggs (‘Squires’); and

(b)    it appears that Piper Alderman then sought to secure payment of its own costs by exercising a lien over funds of Tamaya which it held for the purpose of meeting the order for security for costs. This led to the security not being paid and the proceedings being stayed.

41    A directions hearing took place on 11 February 2015. By that time, Tamaya had failed to serve its evidence by the preceding day when it was due. Tamaya’s lawyers were encountering difficulties in their preparation due to a lack of access to all of the material and files (which itself appears to have been a consequence of the change of solicitors and the attempts by Piper Alderman to secure the payment of its fees). Regardless, responsibility for this lay upon Tamaya.

42    In any event, this was certainly the docket judge’s forthright view at the next directions hearing on 11 February 2015. A series of directions were then made on 12 February 2015 with a view to getting the matter back on track. The security was to be provided that day and the stay would then be lifted. Importantly, one of the directions required Tamaya’s evidence to be served by 11 March 2015. Tamaya and the funder were ordered to pay the costs of the directions hearing on 11 February 2015. Tamaya was also ordered to provide discovery to Deloitte.

43    At some point in February, it is not precisely clear when, Ms Palmer had a discussion with Mr Basford. It is likely that during that discussion Mr Basford mentioned to her the possibility of additional claims against Deloitte arising from the Chilean Operations. However, a large number of other matters were also touched upon during that discussion which was conducted in a somewhat dense fashion, so that Ms Palmer did not at that time fully appreciate that Mr Basford was contemplating fresh claims outside of the present pleading. However, that situation shortly changed. On 25 February 2015 Mr Basford provided Ms Palmer with a draft report. When she received it Ms Palmer realised for the first time the existence of potential claims in relation to the Chilean Operations.

44    Of course, these matters lay outside the terms of Mr Basford’s initial letter of instruction of 2 December 2014 for, as already noted, Ms Banton had no knowledge of any claims arising from the Chilean Operations at the time that it was drafted. Consequently, a decision was made to issue Mr Basford with a fresh letter of instruction encompassing these new claims.

45    At around this time, or possibly a little later, a debate appears to have developed amongst Tamaya’s advisors as to whether Mr Basford’s views about the Chilean Operations would necessitate an amendment to the pleadings. Like the primary judge, we are surprised that there could be any such debate. The idea that a whole new case might be conducted under the guise of further particulars is untenable. It was, as the primary judge correctly held, quite unrealistic to imagine that amendments to the pleadings would not be required.

46    The docket judge had directed that Tamaya’s evidence be served by 11 March 2015. Tamaya largely met this deadline, although its compliance in part spilled over to 12 March 2015 and was not formally complete until 24 April 2015. On 11-12 March 2015 it served a number of experts reports and narrative statements of facts. These included an unsigned copy of Mr Basford’s final report (the sealed version was not served until 16 March 2015 but nothing turns upon this). The letter accompanying the narrative statements indicated that they were works in progress which would be updated as lay evidence for both sides was served.

47    It was obvious to Deloitte’s advisors from the moment Mr Basford’s report was received that it was outside the case which Tamaya had pleaded. It should have been obvious to those acting for Tamaya.

48    A directions hearing was scheduled for 13 March 2015. At that hearing, senior counsel for Deloitte informed the Court, inter alia, that it was taken by surprise by the Chilean Amendments which they had not previously understood to be in issue. In light of that they did not anticipate being in a position to serve the evidence of their audit expert (a Mr O’Connor) until the end of June 2015. The point was also made by senior counsel that the claims were outside Tamaya’s pleaded case.

49    The docket judge pressed counsel for Tamaya on the issue of whether it wanted to amend its case. Counsel maintained that Tamaya did not need to amend and it did not seek to do so. This position was untenable. At the same time, Deloitte sought an adjournment of the 1 June 2015 hearing on the basis that it could not respond to Mr Basford’s report by that time. Eventually, the docket judge acceded to Deloitte’s adjournment application and refixed the matter for a five week hearing commencing on 12 October 2015.

50    It is always important to bear in mind the benefits of hindsight, but the steps just described involved events which were contradictory:

(a)    if the claims arising from the Chilean Operations were outside the pleadings then a question immediately arose as to whether those issues were to be addressed at the trial or not. Whilst cases are generally conducted on the pleadings, it is always possible for other issues to be determined if that is the way the case is eventually run;

(b)    the fact that Deloitte had indicated that Mr O’Connor could deal with Mr Basford’s report but only by the end of June 2015 concealed an assumption, therefore, about one of two situations:

(i)    Deloitte were content to have the case conducted outside the pleadings. As will be seen, it was quite clear that this was not ever Deloitte’s position; or

(ii)    Deloitte were expecting that Tamaya would amend its pleading to include the fresh matters raised by Mr Basford.

(c)    Tamaya announced its position that it did not believe it needed to amend its pleadings.

51    Once (c) had occurred, then unless and until the question of whether the pleading needed to be amended was resolved there could be no clarity as to whether Mr Basford’s fresh matters were involved in the litigation or not. At first blush, Deloitte’s position that Mr O’Connor could meet Mr Basford’s report by the end of June 2015 may seem inconsistent with its insistence that the case was to be conducted on the pleadings. However, it was not; Deloitte were merely taking the reasonable position that the substance of the case could be met without giving away its entitlement to have the case conducted, as surely litigation of this kind practically must be, on the pleadings. Tamaya’s refusal to accept that amendment was necessary left the proceedings in a procedurally vulnerable state which is the source of many, but not all, of the present difficulties. It is important to keep in mind that this problem was entirely Tamaya’s fault.

52    In any event, the docket judge vacated the 1 June 2015 hearing date and fixed the cases for a five week hearing commencing on 12 October 2015.

53    Ms Palmer read the transcript of the 13 March 2015 directions hearing. Upon doing so she became aware of the need to amend the pleadings. It is not clear that this view was shared by the other lawyers acting for Tamaya, although it was a view which was, with respect, obviously correct.

54    On 20 March 2015 Tamaya provided its second tranche of discovery, bringing the number of documents it had made available up to 8,161.

55    On 1 April 2015, Deloitte’s solicitors informed Squires that Tamaya would be held strictly to its pleading and, further, that because Mr Basford’s evidence was outside the pleading its adduction would be opposed on relevance grounds. Lest there was any doubt about the matter, Deloitte’s solicitors then repeated the same point on 15 April 2015 in further correspondence.

56    On 17 April 2015, Tamaya delivered further evidence from the agent for Tamaya’s secured lenders. The evidence was to the effect that if they had known of the matters referred to by Mr Basford then they would have appointed a receiver shortly after 31 March 2008. This evidence laid the foundation for the recovery of losses from Deloitte incurred by Tamaya after that date.

57    At the time this evidence was delivered, Squires denied that such a case was outside the pleading. This was an untenable position which should not have been asserted. It was not only obviously wrong, but also inconsistent with Tamaya’s failure to provide discovery in relation to the Chilean Amendments (which would have been discoverable if the case was within the pleadings). Deloitte was told that it would be wise for them to prepare the case on the basis of the narrative statements.

58    This was an unsound proposition. If Tamaya’s position was that the case it advanced was within the pleadings then there was no reason to suggest that Tamaya needed to assume that the case it should meet appeared anywhere apart from those pleadings. The suggestion that it should meet the case advanced in the narrative statements seems to involve some sort of internal recognition that what was in the pleading was different to what was in the narrative statements.

59    On the same day, the docket judge made orders in chambers. The respondents were ordered to put their evidence on by 17 July 2015 and a further directions hearing was fixed for 31 July 2015. At the same time, the docket judge made orders requiring the conduct of a mediation.

60    Deloitte’s solicitors continued to press for the amendment to the pleading. The mediation was scheduled for 6 May 2015. Despite Deloitte’s insistence that the pleading be amended, Deloitte’s solicitors relented slightly and told Squires, on 29 April 2015, that this did not need to be done before the mediation. We do not read into that posture any wavering by Deloitte from its insistence that the pleading needed to be amended. Rather, it was a pragmatic approach to the imminent mediation process. At the same time, however, Deloitte’s solicitors asked Squires to indicate, by 11 May 2015, whether Tamaya was going to amend its case.

61    The mediation took place on 6 May 2015 but it was immediately clear that the conciliation process had failed. The 11 May 2015 date, by which Deloitte’s solicitors had asked to be informed of Tamaya’s attitude to the issue of amendment, passed without any such indication.

62    On 13 May 2015 there was a development when the High Court delivered its reasons for judgement in Selig v Wealthsure Pty Ltd (2015) 320 ALR 47 (‘Selig’). That case concerned the question of whether claims under, inter alia, s 1041E of the Corporations Act 2001 (Cth) could be apportioned under Div 2A of Pt 7.10 of that Act. The Court held that they could not.

63    This was of tactical significance to Tamaya. If it made an allegation under s 1041E it meant that Deloitte would not be able to reduce its liability by reference to its share of the blame but would be liable for the whole of any loss. All of Tamaya’s claims were presently confronted with an exposure to apportionment of that kind.

64    Beginning in the middle of May 2015, Squires began to consider whether Tamaya should amend. We would observe at this juncture that this position should have been reached three months earlier.

65    On 19 May 2015 there was a directions hearing in the Shareholder Class Action. Tamaya was the respondent to that claim but was represented by different lawyers. This Court was told during the hearing that this different representation was to assist in the management of any conflicts which might arise from the liquidator’s position. It is not true, therefore, that Tamaya was not represented at this hearing, although it is true that the representatives were different. The primary judge was of the view that Tamaya should have announced its intention to amend on 13 March 2015 and, if not then, at this directions hearing.

66    By this time, Deloitte had been complaining about the fact that parts of Mr Basford’s report lay outside the pleading for several months. On 21 May 2015 solicitors for some of the directors made the same point. They lifted the tempo of the debate by indicating that they would not be preparing any evidence to meet those aspects of the case which were not within the pleading. It was more or less at that point that a decision was made within Tamaya’s team to seek to amend, that is to say, towards the latter part of May 2015.

67    On 15 June 2015, Squires notified Deloitte’s solicitors that it was working on amending its case. They anticipated that it would be served two days later on 17 June 2015.

68    On 18 June 2015, Squires informed the directors of the same matter whilst not conceding that it was necessary.

69    There had, meantime, broken out a new theatre of disputation. It concerned Deloitte’s discovery obligations in relation to the new matters raised by Mr Basford. On 16 June 2015, Tamaya had sought discovery of this material from Deloitte. On 23 June 2015, Deloitte declined to give discovery for reasons which require a slight digression from this narrative. Part of the loss claimed by Tamaya from Deloitte consisted of the damages it might be required to pay the shareholders in the Shareholder Class Action. Deloitte now deployed an argument that unless the Shareholder Class Action proceeded then Tamaya would suffer no loss which could be recovered. There are, perhaps, some nice questions as to whether the logic of this argument is completely sound but these are not presently material. What is material is Deloitte’s submission that until such time as the docket judge determined whether he would grant leave to the shareholders to proceed against Tamaya in liquidation, there was no issue between the parties to which discovery might reasonably be seen as being directed. Deloitte was, therefore, content to provide discovery, but if and only after the docket judge had resolved the question of leave to proceed in the shareholders’ favour. Tamaya then sought to outflank that argument by pointing to the shareholders’ right to lodge proofs of debt with the liquidator for the same amounts even if leave was not forthcoming from the docket judge.

70    Throughout June 2015, various promises were made by Squires that amended pleadings would soon be delivered but these promises were never met. In fact, draft pleadings were not delivered in the Deloitte Proceeding or the New Directors Proceeding until 10 July 2015 and 27 July 2015, respectively. Some of the directors informed Squires that they would not be serving their evidence (then due on 17 July 2015) until they saw the amendments.

71    On 21 July 2015, Deloitte’s solicitors informed Squires that a formal amendment application would need to be pursued.

72    A directions hearing was scheduled for 31 July 2015. At 8.54 am on that morning, Tamaya served its formal application to amend. The directions hearing which then ensued canvassed a broad number of issues.

73    First, the docket judge vacated the five week hearing scheduled to commence on 12 October 2015. Secondly, during the course of the directions hearing, counsel for Deloitte expressly said that Deloitte were not prejudiced by having to meet the Chilean Amendments. Its argument was that the October trial dates could not be maintained because of other aspects of Tamaya’s proposed amendments.

74    There were two aspects to this difficulty:

(a)    the new claim advanced under s 1041E could not be met in time. This claim, it will be recalled, became more valuable against Deloitte after the High Court’s decision in Selig on 13 May 2015. However, s 1041E involves an allegation of misrepresentation which has a mental element to it. Until the appearance of that new allegation, Deloitte had decided it did not need to call any members of the audit team and were proposing to meet the case on the basis that what was involved was, in effect, a battle between audit experts. Now that the s 1041E claim was raised this required that position to be revisited;

(b)    complaint was made about Tamaya’s attempt to render irrelevant the Shareholder Class Action issue by the device of each shareholder lodging instead a proof of debt for the same amount with the liquidator.

75    What appears to have caused the trial to go off, then, was the proposed s 1041E case which could not be met, even if allowed, by the October dates. The position in relation to the proof of debt issue is perhaps less clear. There were also difficulties from the directors’ perspectives.

76    For practical reasons, the amendment application was not dealt with by the docket judge and was referred instead to the primary judge who heard it on 21-22 September 2015 and gave judgment on 14 October 2015.

77    Before turning to the issues which arise, two further procedural developments should be noted. First, on 18 September 2015, Tamaya provided substantial further discovery on the issues arising from the Chilean Amendments. It is very difficult to understand why, if Tamaya genuinely believed that the case arising from the Chilean Operations was encompassed in the present pleading (as it had claimed for many months), these documents were not discovered at a much earlier stage. Secondly, following the directions hearing on 31 July 2015, the matter was listed for hearing for six weeks commencing on 16 May 2016. At the time this occurred, it was not suggested that six weeks would not be sufficient if the amendments were permitted.

5. Were there House v The King errors? (Ground 1)

78    Ground 1 of the Notice of Appeal contended that the primary judge had erred in the exercise of her discretion in refusing the amendments in a way which enlivened appellate scrutiny under House v The King. Seven distinct such errors were alleged. It is convenient to deal with them largely in the order in which they appear in the notice of appeal.

(a) Was the nature of the amendments adequately explained? (Ground 1(a))

79    Ground 1(a) of the Notice of Appeal was as follows:

‘1.    The primary judge’s discretion miscarried because her Honour:

a.    mistook the facts, or had regard to an irrelevant consideration, in finding that the Appellants had not explained the importance of the amendments (at [155]) and [209](1)), and in doing so failed to have regard to failing to [sic] the prejudice that would be suffered by the Appellants in the event leave to amend the originating applications and the pleadings was refused;’

80    The primary judge dealt with the topic of the nature and importance of the proposed amendments under a heading to that effect at [153]-[166]. She also summarised those conclusions at [209](1). The critical part of her Honour’s reasoning was at [155] and [209]:

‘155     The importance of the amendments to Tamaya’s cases was not explained in any detail, either in written or oral submissions. In reply, Mr Withers said that the Chilean amendments are critical for Tamaya but the submission was not developed. It was not suggested that Tamaya would fail if leave to amend were not granted. Nor was it explained how the amendments would have any particular value for Tamaya’s case. The relative significance of the additional audit issues, in comparison with the issues concerning the Lichkvaz mine, was not explained.

…

209    I have concluded that the Court should not grant leave to allow the disputed amendments for the following reasons:

(1)    I am not satisfied that the amendments are sufficiently important to Tamaya’s case to justify the significant disruption to the defendants and the wasted resources that would result if the amendments were allowed. Although the amendments were asserted to be critical, Tamaya did not seek to explain the impact on its case if the amendments were not allowed. I recognise the desirability of including the alleged s 1041E contraventions in the claim, on the basis of their non-apportionability. However, I am not satisfied that the amendments are necessary or appropriate “to facilitate the just resolution of” the disputes in the proceedings having regard to the matters set out below.

Tamaya emphasised that the purpose of pleading the additional audit issues was to bring the pleadings into line with the evidence. I do not consider that purpose to demonstrate the importance of the amendments to Tamaya’s case, in the absence of a clear explanation of the importance of the additional audit issues to the case;’

81    It is [155] which is the focus of this ground of appeal. For present purposes it has four elements upon which it is useful to expand:

(a)    Tamaya submitted that the amendments were critical to its case but went no further than the making of that submission to establish the point;

(b)    in particular, Tamaya did not submit that, but for the amendments, its case would fail. We would read the third, fourth and fifth sentences of [155] (which include this statement) as being examples of ways in which the importance of an amendment might be established. Hence, we would not read the third sentence as involving the proposition that such a submission needed to be made in every case. Her Honour was merely pointing to ways in which the argument might have been (but was not) put;

(c)    Tamaya had not explained how the amendments had ‘particular value’ to its case. As we explain below, we do not think, with respect, that this was correct; and

(d)    the relative significance of the new audit issues in comparison to the Lichkvaz mine issues had not ben explained.

82    The way we would construe [155], her Honour was not saying that Tamaya was bound to put arguments of the kind referred to in paragraphs (b)-(d) of the preceding paragraph. Her Honour was simply saying that no attempt had been made to show the importance of the amendments to Tamaya such as, for example, arguments of the kind set out in paragraphs (b)-(d) above. We detect, therefore, no error in her Honour merely setting out those examples. In particular, contrary to the submission of Mr Hutley SC, who appeared for Tamaya on the appeal with Mr Withers and Mr Hartford-Davis, the primary judge was not requiring Tamaya to submit that its case would fail without the amendments.

83    However, we do not think that her Honour was correct, with respect, when she observed at [155] that it had not been explained how the amendments would have any particular value to Tamaya’s case.

84    No doubt there was an obligation to explain the importance of the amendment to Tamaya. As the High Court said in Aon at [102], ‘[f]actors such as the nature and importance of the amendment to the party applying cannot be overlooked’. Whilst that is clear, it is difficult to be definitive about what an inquiry into the importance of an amendment is likely to involve as much will depend upon the circumstances of each case.

85    However, in this case it clearly encompassed a consideration of whether the Chilean Amendments were of substance and presented a real case warranting serious attention. To read the primary judge’s reasons is to see, at once, that her Honour regarded the Chilean Amendments as involving such a case. Although her Honour was critical of Tamaya at various points, not once did she suggest that the Chilean Amendments were frivolous or unimportant. Indeed, the whole judgment proceeds upon the assumption that the proposed case was substantive.

86    That being so, it seems to us that it must follow that the ‘importance’ to Tamaya of the Chilean Amendments (to use the language of Aon) was that they would add a real and substantive set of allegations to its case. We do not think that Tamaya was required under Aon to go any further in demonstrating the importance of the amendments. No doubt, if it had wished, it could have gone further and maybe doing so would have strengthened its hand in the discretionary process. But it was not correct to say, with respect, as the primary judge did at [155], that Tamaya had not explained how the Chilean Amendments had any particular value to it, for it had already satisfied her Honour that the Chilean Amendments presented a real case for consideration. Its value to Tamaya was that it was a substantive case.

87    That conclusion means that ground 1(a) is made out. This is a conclusion, however, which leads nowhere. Her Honour was plainly aware that the Chilean Amendments were important, in the sense that they were not frivolous. And, in consequence, her Honour necessarily took that matter into account. Whilst it is true that, at [155], her Honour mistook what was needed to be shown to make good the idea of ‘importance’ under Aon, this did not prevent her Honour from otherwise taking the significance of the amendments into account and it is plain that she did. Once that is appreciated it will be seen that the error in [155], such as it is, is one of labelling and has no material consequence.

88    This matters because it is established that an appellate court need not re-exercise a discretion if the error enlivening its existence is not material to the outcome of the decision in the Court below: State Bank of New South Wales v Brown (2001) 38 ACSR 715 at [108]. That is the case here. Accordingly, whilst ground 1(a) is established, we would not regard it as providing a basis to re-exercise her Honour’s discretion. To put the matter another way, whichever way one looks at it, the primary judge was well aware that the Chilean Amendments involved a real case.

(b) Was there prejudice caused by the passage of time? (Ground 1(b)(i))

89    Ground 1(b)(i) alleged that the primary judge had:

‘b.     addressed the wrong question, or acted on a wrong principle, in having regard to events prior to the commencement of the proceedings in making findings that:

i.    the Respondents were prejudiced by the period of time that had elapsed since the events in question ([209](2) and [209](9));’

90    Tamaya had three submissions about this. First, the primary judge had assessed the effect of delay on the recollection that witnesses might have of the events in question although this was not itself suggested by Tamaya to be inappropriate. Instead, it submitted that this assessment had to be carried out in relation to the correct delay. The correct period to be assessed was not, so it was said, the time between the occurrence of the events giving rise to the litigation and the trial but instead the time between the commencement of the proceedings and the amendment application (i.e., in this case, 16 months).

91    We do not accept this argument. The primary judge was correct to ask herself what the state of the recollection of witnesses would be if the amendments were allowed. It would have been wholly artificial to ask how much the witnesses’ recollection had been diminished in the 16 months since the commencement of the proceedings. The principal prejudice to be examined is not the prejudice occasioned by the procedural delay in bringing forth the amendments (although that is relevant); it is the prejudice that the amendments will themselves occasion if granted.

92    Secondly, it was submitted that, in relation to the Chilean Amendments, Deloitte did not, in fact, suggest it was going to call any witnesses. This is not, however, strictly correct. It is true that the Chilean Amendments by themselves could be met by Deloitte without the need to call any members of the audit team. After the addition, however, of the non-apportionable claim under s 1041E this state of affairs would be potentially changed because of its inclusion of a mental element which Deloitte might need to address. Because the primary judge did not permit the claim under s 1041E as against Deloitte, however, this had the consequence that it would not have needed to have called the audit witnesses. Thus, at least in relation to that case, it is true that there was no possibility of the degradation of memory adversely effecting Deloitte. That aspect of Tamaya’s submission should be accepted. However, the primary judge was alive to this. At [209](2) her Honour said:

‘The amendments concern events which occurred over seven years ago and travel well beyond the scope of the case currently pleaded. The defendants are likely to be disadvantaged by the requirement to defend the proposed new claims so long after the relevant events. In saying this, I acknowledge that the position may, to some extent, be mitigated by the existence of the audit file, however, I do not accept that this should be considered a complete answer to the well-recognised potential difficulties of answering claims after several years;’

93    We can detect no error in this. The prejudice involved does not solely relate to the diminished recollection of witnesses. It extends also to the ability of those involved in the events to give instructions and to the strain which the litigation and its prolongation necessarily entail. In any event, it is tolerably clear that her Honour was not denying that the audit file might be useful; she was simply saying that it was not necessarily a panacea to all of the difficulties which might arise.

94    Thirdly, it was submitted that once the primary judge had refused the s 1041E claim it followed that her Honour should have permitted the balance of the Chilean Amendments. Essentially, this is the same argument as the previous argument. Accordingly, we reject it.

(c) Did the primary judge err in thinking that the proceedings had been conducted inefficiently? (Ground 1(b)(ii))

95    This ground of appeal was that the primary judge had erred in concluding that:

‘ii.    the “proceedings” had been conducted inefficiently ([209](3));’

96    The full finding by the primary judge was as follows:

‘209    I have concluded that the Court should not grant leave to allow the disputed amendments for the following reasons:

…

(3)    To allow such extensive amendments, in relation to facts that were ascertainable at the time the proceedings commenced, and after such a long time, would be to permit the proceedings to be conducted in a manner which is not “as quickly, inexpensively and efficiently as possible”. In this case, if the amendments were allowed, there would be additional costs that include re-reviewing documents and re-proofing witnesses and significant extra costs arising from the case management of the expanded case. These kinds of additional costs not only increase the expense of the proceedings but are demonstrably inefficient;’

97    Her Honour also said (at [154]):

‘There is no reason to believe that the additional audit issues could not, with reasonable diligence, have been identified before the proceeding was commenced.’

98    Tamaya’s submission was that the primary judge had erred because s 37N of the Federal Court of Australia Act 1976 (Cth) applied only to proceedings which were already on foot. What [154] and [209](3) showed was that the primary judge had impermissibly taken into account delay before the commencement of the proceedings and this lay outside s 37N.

99    Deloitte and the directors did not cavil with the proposition that s 37N does not give rise to obligations before proceedings have been commenced and there are, indeed, first instance authorities to that effect in this Court: see, e.g., Mondello v Mondello Farms Pty Ltd [2012] FCA 1062 at [12] per Besanko J. Instead, they submitted that Tamaya’s submission did not fairly characterise the primary judge’s reasoning process.

100    As Deloitte correctly submitted, it is demonstrably inefficient for a party who has had a reasonable opportunity to formulate a case to wait until one year after the proceeding has been commenced to do so. There may be subsequent, and adequate, explanations for such an inefficiency and it may ultimately be that, despite it, an amendment will be permitted. But neither of those observations makes incorrect the notion that what has happened was inefficient. When read in its entirety, we do not accept that [209](3) says any more than this self-evident observation, even in light of [154]. The primary judge was simply saying that there appeared to be no good reason why the allegations had not been initially included. Ground 1(b)(ii) should be rejected.

(d) Was Tamaya given ample opportunity to plead its case? (Ground 1(b)(iii))

101    At [209](6) the primary judge said:

‘Tamaya has had an ample opportunity to plead its case before now and has previously been given leave to file amended pleadings in each proceeding;’

102    Her Honour had previously dealt, at length, with the opportunity that Tamaya had had in relation to its pleadings. She did so at [85]-[119]. There is no reason to set those parts of the judgment out in full. The facts are:

(a)    Tamaya obtained Deloitte’s audit file in 2010;

(b)    the audit file included the documents relating to the additional audit issues;

(c)    Tamaya provided an affidavit on 10 December 2014 that it did not require discovery from Deloitte because it had obtained access to the audit file;

(d)    the initial proceedings were commenced in March 2014;

(e)    at that time Tamaya had had six years to formulate any claim arising from the Chilean Operations and had had the audit file for four years;

(f)    the proceedings were adjourned in 2014 so that Tamaya could consider the outcome of its examination of the Deloitte audit partners; and

(g)    the amended claim propounded in August 2014 was formulated with expert audit assistance.

103    In those circumstances, it seems to us that the conclusion that Tamaya had had ample opportunity to formulate its claims is irresistible. In substance, Tamaya sought to deflect this criticism by again submitting that events preceding the commencement of its proceedings could not be taken into account. For the reasons we have already given, that submission should be rejected. Ground 1(b)(iii) should be rejected.

(e) What was the relevance of the hearing date? (Ground 1(b)(iv))

104    This ground was that the primary judge had erred by finding that:

‘iv.    there was a “significant risk” the trial may not proceed in 2016 and that was a factor weighing against the exercise of discretion in the Appellants’ favour ([209](4));’

105    The relevant part of the judgment is at [209](4):

‘There is a significant risk that the trial may not proceed in 2016 if the amendments are allowed if the docket judge concludes that the trial cannot be heard within the six weeks currently allocated. I consider this to be a relatively low risk: having now listed the proceedings for trial on three occasions, it seems reasonable to assume that Foster J would be very determined to maintain the May 2016 trial dates. However, that determination may yield to considerations of procedural fairness. If the trial went off to 2017, in my view, that would impose an unacceptable strain on the defendants, having regard both to the length of time since the events under consideration and the degree of unnecessary disruption caused to the defendants by the inefficient manner in which Tamaya would have been permitted to conduct the proceedings;’

106    Also relevant is [210]:

‘There are four matters which may lead to a conclusion that the amendments should be allowed despite the considerations set out above. They are:

(1)    The defendants have had the evidence (or substantially all of the evidence) upon which Tamaya will rely since March and April this year;

(2)    The defendants can probably be prepared for a trial on the expanded case commencing in May 2016;

(3)    Tamaya can be ordered to pay the costs thrown away by the amendment on an indemnity basis, so that it will bear the costs of the wasted resources insofar as they can be identified and quantified;

(4)    If a trial on the expanded case could be heard in May 2016, which seems likely albeit not certain, that would be a relatively quick hearing of proceedings commenced in 2013 and 2014.’

107    Tamaya’s primary submission was that the issue of the relatively low risk that the May 2016 hearing would be lost should have been an irrelevant consideration. This is, with respect, an outlandish proposition. We do not accept that the degree of risk posed to the hearing date could ever be said to be irrelevant to the discretion involved in considering whether to grant an amendment.

108    The balance of Tamaya’s written submissions in chief on this issue were directed to showing that the matter had been listed by the docket judge for a period of six weeks at a time when all parties involved were fully cognisant of what was contained in the proposed amendments. The endpoint of this argument was to show that it was not open to the respondents, now, to submit that the six weeks put aside would be inadequate. However, the fact is that senior counsel for Tamaya conceded before the primary judge that a prolongation of the hearing by 2-3 weeks was possible as a result of the amendments. That concession was properly made. Before this Court it was accepted by all parties that if the amendments were permitted the May 2016 hearing date would be lost.

109    Tamaya sought to downplay the significance of this matter. It submitted that it was to be seen as the result of the manner in which Deloitte and the directors had opposed the amendment application. As we apprehended it, the argument was that if Deloitte and the directors had not opposed the amendment application when it was originally made on 31 July 2015, the May 2016 hearing date would have been maintainable. There are two problems with this submission. First, there is still the fact, now agreed by all, that the hearing will not be completed in the six weeks allotted to it if the amendment be granted. Regardless of whose fault this is, it remains a fact which cannot be ignored. Secondly, we do not consider that the submission sits at all well in Tamaya’s mouth. Underlying it is the unarticulated proposition that somehow the directors and Deloitte are to be seen as having acted unreasonably in resisting the amendment application, with the consequence that the Court would not reward that behaviour by utilising the delay generated by it (and thereby the loss of the May 2016 hearing date) as a reason for refusing leave to amend.

110    Two reasons present themselves to reject this argument. The first is that we detect no unreasonable behaviour by the directors or Deloitte. They were confronted with an amendment application attended by these matters:

(i)    it had been delayed by four months in circumstances where the only explanation for that delay is incompetence or profound unreasonableness on the part of Tamaya’s solicitors;

(ii)    it raised a case which ought reasonably to have been included when the case was first filed; and

(iii)    it arose in circumstances where two sets of trial dates had already been lost, in respect of cases whose commencement lay at the edge of the limitation period.

111    To suggest that it was unreasonable for the directors and Deloitte to resist such an application to amend is unrealistic. There is no warrant for visiting the consequences of the delay upon those parties.

112    The second point relates to the first and is this: if anyone has behaved unreasonably in the current situation it is Tamaya. It is Tamaya’s failure to bring the amendment application in March 2015 when it was perfectly obvious that the amendment was needed which is much more likely to be the cause of the loss of the May 2016 hearing date.

113    We detect no error in her Honour’s treatment of this matter. This ground should be rejected.

(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 [127](4) 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.

(g) Did the primary judge approach the question of security for costs correctly? (Ground 1(d))

165    In the primary judgment, her Honour noted at [180](g) that:

‘…The Deloitte parties noted that Tamaya’s previous provision of security for costs has been completely exhausted and Tamaya has not agreed to pay, nor made any offer to provide further security for costs. Tamaya’s litigation funder has not given an undertaking in relation to the Deloitte parties’ costs. The solicitor for the Deloitte parties expects that, even if further security is ordered, a substantial portion of the Deloitte parties’ actual costs will not be recoverable in the event that they are ultimately successful in defending the claims against them.’

166    Her Honour then accepted that this constituted a species of prejudice at [184]:

‘I also accept that there is prejudice arising from the fact that no additional security for costs has been offered in respect of the proposed expanded case so that, if the amendments were allowed, the defendants would face uncertainty as to the extent to which they are at risk of irrecoverable costs in the event that they succeed in the litigation.’

167    This was then summarised at [209](7) as a reason for declining leave in these terms:

‘Tamaya has not offered security for costs in relation to the expanded case;’

168    Tamaya initially submitted that this had involved a denial of procedural fairness by the primary judge because no such submission had been made by the parties. However, when it emerged that Deloitte had in fact explicitly made such a submission in writing to the primary judge this submission was withdrawn.

169    The remaining part of the argument was that the primary judge had mistaken the facts in this regard or had taken into account an irrelevant consideration. This argument was based on the fact that Tamaya had written to Deloitte on 13 August 2015 offering to pay security. However, that letter was not brought to the attention of the primary judge. In its submissions in chief, Tamaya had argued that no party had addressed her Honour about the letter of 13 August 2015 because none of the respondents had submitted that Tamaya had not offered to pay security for costs. But, as accepted by Tamaya at the hearing of this appeal, that was not correct. In fact, the reason her Honour did not refer to the letter of 13 August 2015 was because no-one took her to it. In that circumstance, it was hardly erroneous of her Honour not to give it attention. This ground should be rejected.

170    We would also reject Tamaya’s varied form of the argument to the effect that its failure to offer security could not be seen as a species of prejudice. It was said that it was difficult to see how this could be prejudicial. We do not agree. It was well within the permissible range of relevant considerations to think it prejudicial to require the repsondents to go through the process of seeking security with the further cost and delay this would involve. This argument too should be rejected.

(h) Were the amendments approached in an indiscriminate fashion? (Ground 1(e))

171    The precise terms of Ground 1(e) were that the primary judge erred in that her Honour:

‘reached an unreasonable or unjust result in failing to differentiate between the different categories of amendments advanced by the Appellants in the different proceedings to which those amendments related.’

172    As we noted at the outset, Tamaya submitted that it had suggested to the primary judge that its proposed amendments fell into three categories:

(i)    the Chilean Amendments;

(ii)    other amendments to expand the pleadings to accommodate matters arising from Tamaya’s evidence including liability, causation and quantum; and

(iii)    a third category including new matters including claims for contribution and under s 1041E.

173    The submission advanced in this Court was that a proper exercise of the amendment discretion required the primary judge ‘to consider the way that the different discretionary factors bore upon’ these categories.

174    It is difficult to know what to make of this submission, which exhibits the same lack of discrimination of which it accuses the primary judge. Instead of identifying as a matter of principle what it said required these three categorise to be approached differently, Tamaya sought instead to identify three examples of the problem (whatever it was). This approach was said not to be exhaustive. This Court is left in the situation that the nature of the problem has not been identified beyond the three examples said to illustrate it. In those circumstances, we propose only to deal with the three examples themselves.

175    The first of these was that the primary judge should not have made the findings she did at [209](2) in a general way. Paragraph [209](2) was in these terms:

‘The amendments concern events which occurred over seven years ago and travel well beyond the scope of the case currently pleaded. The defendants are likely to be disadvantaged by the requirement to defend the proposed new claims so long after the relevant events. In saying this, I acknowledge that the position may, to some extent, be mitigated by the existence of the audit file, however, I do not accept that this should be considered a complete answer to the well-recognised potential difficulties of answering claims after several years;’

176    It was submitted that these observations were inapposite to the Chilean Amendments in the Deloitte Proceeding. This was because it was said that the Deloitte audit partners were not going to be called as witnesses. This submission proceeds, however, by ignoring [180]-[181] and [183]. There the primary judge considered in detail the prejudice advanced by Deloitte. Relevantly, her Honour said:

‘180    On behalf of the Deloitte, the following aspects of prejudice were identified:

(a)    The strain arising from allegations of contravention of s 1041E;

…

181    I accept that these various submissions identify matters of real prejudice to the various defendants.

…

183    I also accept that the amendments, if allowed, would cause significant non-compensable prejudice to the defendants by increasing the unavoidable strain of the litigation on them. That prejudice would be particularly acute because of the length of time since the events the subject of the proceedings, which exacerbates the strain of preparing a defence due to loss of recollection, and because of the large expansion of the matters in issue, including the issue of states of mind in 2007 and 2008.’

177    Tamaya’s submission again impermissibly assumes that relevant prejudice lies only in the degraded ability of a party to give evidence. Her Honour’s reasons show her, however, to have been alive to other species of prejudice such as strain. When regard is had to these paragraphs it is evident that this submission is of little substance. Largely it is based on [209], but [209] appears in a part of the judgment headed ‘Conclusions about Disputed Amendments’ which is, with respect, self-evidently a set of conclusions. Many of Tamaya’s submissions treated these conclusory paragraphs as if they stood on their own, when in fact, they were summaries of other parts of the judgment.

178    The second example was said to be constituted by her Honour’s approach to the claims under s 1041E in the New Directors Proceeding. Bearing in mind that Tamaya’s complaint under this ground is that the primary judge should have dealt with the claims separately, this submission fails on its own terms. At [209](9) her Honour said:

‘In relation to the s 1041E case against the director defendants, that case should not be allowed for the further reason that it is unfairly prejudicial having regard to the serious nature of the case and the mental element that would be required to be addressed more than six years after the relevant events.’

179    This is an example of the particular claim being dealt with individually, contrary to the argument.

180    Tamaya’s submission about this was, nevertheless, that the primary judge should have permitted the s 1041E amendment against the directors because she had rejected the respondent’s criticism of the pleading, had accepted the explanation for the delay and had accepted a submission that the potential scope of s 1041E had only gradually become obvious. This submission involves a misrepresentation of what the primary judge had held. It is apparent from [209](9) that her Honour took into account the serious nature of the case and the effect upon the directors of having to meet a case on s 1041E’s mental elements many years after the events in question. Tamaya’s response to this was that [209](9) was erroneous because it involved a consideration of events prior to the litigation. We have already rejected this argument. It was also put that Tamaya did not accept that the matter in [209](9) could outweigh the points disclosed in [210]. This submission misconceives the nature of this Court’s review jurisdiction.

181    The third example was that the primary judge should not have refused leave to a series of amendments relating to typographical errors and cross-referencing. But Tamaya’s case to the primary judge was that the amendments fell into the three categories set out above. Some of those categories contained typographical errors. Tamaya never put forward a submission that these required separate consideration. Its responsive submission about this matter in this Court was:

‘Further, whilst it may be accepted that substantive injustice does not arise from the refusal to grant leave to correct typographical matters, it was hardly for Tamaya to identify to what parts of the pleading the Deloitte Parties would take no substantive objection.’

182    But it was for Tamaya to identify those which were not objected to. It was certainly not for her Honour. There is no substance in this point. In those circumstances, ground 1(e) must be rejected.

6. Did the primary judge deny Tamaya procedural fairness? (Ground 2)

183    Ground Two was as follows:

‘The primary judge denied the Appellants procedural fairness by making findings that were not sought by any of the Respondents, nor raised by her Honour during the course of argument, namely by:

(a)     finding that the Appellants had not adequately explained why the proposed amendments were important to the Appellants’ cases ([155] and [209](1));

(b)     inferring that the liquidator was aware of, and made a deliberate decision to not to focus upon, the additional audit issues ([186] and [95]); and

(c)     criticising the Tamaya Parties for their conduct at directions hearings ([105] and [115]).’

184    There is no substance to ground 2(a). On any view, Aon required Tamaya to explain the nature and significance of the amendments. It was, therefore, on notice that it had to address that very issue. Indeed, its written submissions expressly dealt with that matter.

185    In relation to ground 2(b), Tamaya submitted that the primary judge drew an adverse inference from the fact that there was no evidence from the liquidator explaining when he became aware of the additional audit issues. The passage identified by Tamaya was at [95]:

‘The evidence does not reveal when the liquidator became aware of the additional audit issues. It is not obvious that the liquidator was dependent upon his lawyers to identify the issues. The evidence does not explain why the proceedings focussed on the Lichkvaz mine until Mr Basford identified the additional audit issues.’

186    We assume that the inference lies in the last sentence. There was certainly evidence explaining why the lawyers had not identified this issue and, in that context, the last sentence may reasonably read as involving an inference that explanation was called for but was not forthcoming.

187    It was this that Tamaya submitted was procedurally unfair. It was said that no such submission had been put against it and it had not been put to any of its witnesses that the liquidator knew of the Chilean Amendments and deliberately withheld disclosure of them from his solicitors. We deal with this argument below at [212] and following and reject it.

188    As to ground 2(c), Tamaya pointed to [105] and [115]. At [105], the primary judge concluded that the docket judge should have been told on 13 March 2015 that Tamaya needed to consider whether it should seek leave to amend in light of Mr Basford’s report. It is difficult to understand precisely how this argument operates. It appears to proceed on the basis that the primary judge should have forewarned Tamaya’s counsel that she was thinking of concluding that the docket judge should have been told on 13 March 2015 that Tamaya needed to consider whether to amend the pleadings in light of the Basford report. The next necessary step in the argument must be that if it had been told this then it would have done something which it did not do. At [27] of its written submissions in chief it was suggested that it would have pointed out that its lawyers did not turn their minds to the issue of whether to amend until after the directions hearing. Such a submission would have, however, made no difference at all because the primary judge was already aware of that fact which she expressly referred to at [101]. It was, in any event, no answer to the point the primary judge was making.

189    In relation to [115], the procedural unfairness was said to arise from the fact that Tamaya was not represented at the directions hearing on 19 May 2015. What the primary judge said at [115] was this:

‘The evidence does not reveal precisely when Tamaya decided to seek leave to amend the pleadings. If it is correct to infer that the decision was made when counsel was briefed to assist with drafting amended pleadings (as opposed to being briefed to advise on whether amendments should be sought), then it would be unsatisfactory that the defendants were not informed of Tamaya’s decision to seek [leave] until mid-June 2015. The decision should have been made as soon as practicable after the unsuccessful mediation. Tamaya should have informed Foster J that it intended to seek leave to file amended pleadings when the shareholders class action was listed before him on 19 May 2015, so that he could have made appropriate directions to case manage the necessary application for leave to amend.’

190    Assuming in Tamaya’s favour that no party had submitted that Tamaya should have signalled its intention to amend on 19 May 2015, this point goes nowhere. All the primary judge was saying – surely correctly – was that Tamaya should have moved as soon as practicable to indicate its need to amend. Further, as noted at [65] above, this submission is incorrect insofar as it claims that Tamaya was not represented on 19 May 2015.

191    In its written submissions Tamaya pursued two additional points about procedural fairness which were not encompassed in the notice of appeal. These were that:

(a)    no notice was given to it of the criticism made of the time it took to prepare the amendments; and

(b)    no notice was given by the primary judge of her intention to rely upon the failure to offer additional security.

192    At the hearing of the appeal, (b) was not pressed. The respondents did not address (a) and we do not think that we should decide a matter not raised in the notice of appeal.

193    We reject Ground 2.

7. The pleading of s 1041E (Ground 3)

194    The principle pleading was at para 85.3(b) of the proposed further amended statement of claim. Relevantly, it was in these terms:

‘85.    Further or alternatively by reason of the matters set out in paragraphs 74A to 82:

…

85.3    in providing the Tamaya 2007 Annual Audit Report to Tamaya and making the Tamaya 2007 Financial Report Representations and the Tamaya 2007 Conduct of Audit Representations, Deloitte:

…

(b)    made statements or disseminated information that was false in a material particular or materially misleading in contravention of s 1041E of the Act in circumstances where Deloitte ought reasonably to have known that the Tamaya 2007 Financial Report Representations and the Tamaya 2007 Conduct of Audit Representation were false in a material particular or materially misleading.’

195    The expression ‘Deloitte’ was defined in para 26 of the proposed pleading to include Mr Biggs, Mr Harris and Mr Leotta. The primary judge thought that the pleading in para 85.3(b) was defective for four reasons:

(a)    properly construed, paras 74A to 82 did not contain any allegation that Mr Leotta or Mr Harris had issued the Tamaya 2007 Annual Audit Report. Hence, para 85.3(b) was liable to be struck out vis-à-vis those two men;

(b)    if the pleading somehow did allege that the two men had issued the Tamaya 2007 Annual Audit Report it was opaque as to how they did so and, therefore, not adequately pleaded;

(c)    paragraph 85.3(b) was deficient because it did not provide any particulars for how any of the Deloitte parties ought reasonably to have known that the alleged representations were false in a material particular or materially misleading; and

(d)    paragraph 74 was deficient because it was not adequately particularised. It alleged as follows:

‘74.    By reason of the matters pleaded in paragraphs 71 to 73, in giving the Tamaya 2007 Annual Audit Report, Deloitte and Biggs represented to Tamaya and to the market of current and potential investors and creditors in and of Tamaya:

74.1    that in the opinion of Deloitte and Biggs:

(a)    the Tamaya 2007 Annual Report was prepared in accordance with and complied with the Act, the Regulations, and all applicable Accounting Standards and other mandatory professional requirements in Australia;

(b)     the Tamaya 2007 Annual Report gave a true and fair view of the financial performance and positon of Tamaya and its consolidated entities as at 31 December 2007; and/or

(c)     there were no circumstances requiring Biggs or the 2007 Auditor to notify ASIC of the existence of circumstances amounting to a significant contravention of the Act;’

196    The primary judge concluded that this was not adequately particularised as it was not indicated how the provision of the Tamaya 2007 Audit Report involved a representation by Deloitte to the market.

197    Pausing there, it will be seen that some of these criticisms related to inadequate particularisation but some involved outright pleading deficiencies.

198    It is useful to deal with (a) first. It will be observed that para 85.3, in terms, picks up by reference the ‘Tamaya 2007 Financial Report Representations’ and the ‘Tamaya 2007 Conduct of Audit Representations’. These were defined in paras 74.1 and 74.2 respectively. They both share a common introductory paragraph which was as follows:

‘74.    By reason of the matters pleaded in paragraphs 71 to 73, in giving the Tamaya 2007 Annual Audit Report, Deloitte and Biggs represented to Tamaya and to the market of current and potential investors and creditors in and of Tamaya:’

199    The primary judge was well aware (see [191]) that the definition in para 26 of the pleading of ‘Deloitte’ was wide enough to bring all three persons into the allegation in para 74 (and hence into para 85.3). But her Honour then proceeded to construe paras 73 and 74 as not having that meaning in [194]. Her Honour there held:

‘On a fair reading of paragraphs 73 and 74, taking into account the specific reference to Mr Biggs in paragraph 74, the references to “Deloitte” are references to the first defendant and should not be construed to imply allegations that either of Mr Harris or Mr Leotta issued the “Tamaya 2007 Annual Audit Report”.’

200    Tamaya’s submission was this:

‘This was in error. Paragraph [45.4] alleges inter alia that “Deloitte” made statements or disseminated information by using the “Deloitte Reports”. Paragraph [73] alleges that “Deloitte” issued the Tamaya 2007 Annual Audit Report. Paragraph [85.3] describes the content of the alleged representations, made by “Deloitte and Biggs”. By paragraph [27] [sic], the term “Deloitte” is defined to include each of the Deloitte parties.’

201    This submission does not explain what the error in [194] is. Indeed, it fails to engage with the primary judge’s reasoning which frankly acknowledged the significance of para 26. In that circumstance, no error is established. That being so, the pleading deficiency identified by the primary judge remains unanswered. Nor can it be said that that problem is one merely involving the provision of particulars. The pleading is defective.

202    It is likely, on the other hand, that Tamaya is correct in submitting that matters (b)-(d) are issues which go only to particulars. But the primary judge did not err in refusing to grant leave to amend to raise such an unparticularised case. No doubt her Honour could have permitted the amendment but required further particulars but she was not bound to do so. Given the pleading defect she had identified it is hardly surprising that the primary judge did not take that course.

203    Even leaving all that aside, we would be disinclined to interfere where no attempt was made in this Court to provide the missing particulars.

204    Ground 3 should be rejected.

8. Should the amendments be allowed?

205    For the reasons we have given, Tamaya has succeeded in demonstrating that the primary judge erred in concluding that Tamaya had not explained the importance of the amendments but otherwise fails. However, as we have explained above, this minor error was not material to the outcome. In that circumstance, this Court is not obliged to re-exercise the discretion: State Bank of New South Wales v Brown at [108]. For that reason, the appeals will be dismissed.

206    Even if that were not so we would not have exercised the discretion any differently. The primary judge was plainly correct in her conclusions.

207    The matter before us differs from that which was before her Honour in only three ways:

(a)    it is not now in dispute that the May 2016 dates are no longer achievable if the amendments are allowed;

(b)    this Court is aware that there is no longer any issue about security for costs; and

(c)    the Court accepts that the proposed amendments are important to Tamaya.

208    The effect of the amendments, if allowed, will be that the case will go over to 2017. That will be nearly a decade after the events in question. Recollections will be frayed and the lucid ability to give sensible instructions degraded. Further, the continuation of the litigation, with its personal allegations, exposes the individual respondents to ongoing strain.

209    The question is whether Tamaya should be permitted to raise an admittedly substantive case which will cause prejudice of that kind. An indispensable element in weighing those countervailing factors is knowing how it is that Tamaya came to find itself making such an amendment application in July 2015.

210    Part of the answer to that question is known. Between March and July 2015 no amendment application was pursued because of an unreasonably held view that it was not necessary.

211    But the balance of the question remains unanswered. The Court knows that Tamaya’s lawyers were not aware of the issues arising from Chilean Operations until February 2015. But what of the long period—some seven years—before that? The material before this Court establishes that by August 2014 the liquidator had had the benefit of examining the auditors to gauge their liability, that he had had access to the audit file and that he had also had the benefit of expert audit advice. Further, he had conducted extensive examinations several years before. Without being told what went wrong, it is impossible to say that Tamaya had not had a reasonable opportunity to formulate the Chilean Amendments by August 2014 or even by the commencement of these proceedings.

212    It was submitted that the most likely inference was that the amendments were not brought forward at that time because they had not been conceived of. This inference was to be drawn because of the solicitor’s evidence that she was unaware of the claims in December 2014. It was said that if Tamaya had been aware of the claims it is hardly likely that it would have concealed this from its own solicitors. The solicitor’s lack of knowledge of the claims therefore proved Tamaya’s own ignorance.

213    But this does not follow. The undisclosed expert may have advised in August 2015 that a case based on the Chilean Operations was not worth pursuing. If advice of that kind had been proffered then it is easy to understand why the solicitors might not have been informed that there was any such case.

214    What, instead, the Court is presented with is a case where a liquidator, armed with the benefit of examinations and expert audit advice does one thing, but later receives subsequent audit advice from another expert and does another. Before this Court can visit upon the respondents the prejudice which we have outlined above it needs to know why this change of position occurred. We do not know why because it has not been explained. Without that explanation, the balancing process called for by an assessment of the interests of justice cannot be undertaken.

215    If the question of discretion had arisen, we would have dismissed the application to amend.

9. Disposition

216    It was for these reasons that the Court dismissed both appeals on Wednesday 23 December 2015 with costs.

Associate:

Dated:    15 January 2016

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