FEDERAL COURT OF AUSTRALIA

HFPS Pty Limited (Trustee) v Tamaya Resources Limited (In Liq) (No 2) [2016] FCA 446

ORDERS

THE COURT ORDERS THAT:

1.    By 5 May 2016, the plaintiffs serve upon the solicitors for the eighth and ninth defendants (the Deloitte defendants) a draft of the Orders which they contend give effect to Reasons for Judgment published this day (HFPS Pty Limited (Trustee) v Tamaya Resources Limited (In Liq) (No 2) [2016] FCA 446).

2.    By 10 May 2016, the solicitors for the Deloitte defendants inform the solicitors for the plaintiffs whether or not they agree that the form of Order propounded by the plaintiffs gives effect to the said Reasons for Judgment.

3.    In the event that the parties reach agreement as to the appropriate form of Order to be made, by 11 May 2016, the parties provide to the Associate to Foster J the agreed form of Order after which time the Court will make orders giving effect to the said Reasons for Judgment.

4.    In the event that the parties do not agree on the appropriate form of Order, the plaintiffs and the Deloitte defendants are to submit to the Associate to Foster J immediately after 11 May 2016 the form of Order for which each party contends together with a Submission of no more than two (2) pages after which time the Court will decide the form of Order to be made on the papers.

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

REASONS FOR JUDGMENT

FOSTER J:

1    By Interlocutory Application filed on 14 August 2015, the plaintiffs sought the leave of the Court to amend their Originating Application filed on 28 May 2014 and their Amended Statement of Claim filed on 29 October 2014 in accordance with the draft documents annexed to their Interlocutory Application and marked with the letters “A” and “B” respectively.

2    By the same Interlocutory Application they also sought an order pursuant to s 33K and/or s 33ZF of the Federal Court of Australia Act 1976 (Cth) granting leave to the plaintiffs to amend the definition of group members to whom this proceeding relates.

3    In my judgment (HFPS Pty Limited (Trustee) v Tamaya Resources Limited (In Liq) (No 1) [2016] FCA 442) delivered immediately before this judgment, I described this proceeding and certain other associated proceedings in the following terms:

1    This proceeding was commenced on 28 May 2014 as a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth).

2    In 2008, the plaintiffs acquired shares in Tamaya Resources Limited (In Liquidation) (Tamaya), which is the first defendant in this proceeding.

3    The second to seventh defendants were the directors of Tamaya in 2007 and 2008. The eighth defendant, Deloitte Touche Tohmatsu (Deloitte), was the auditor of Tamaya in 2007 and 2008. The ninth defendant, Timothy Biggs, was the Deloitte partner in charge of the relevant audits of Tamaya (the eighth and ninth defendants, together, the Deloitte defendants).

4    This proceeding is one of four proceedings that have, to date, been case managed together. I formed the view at an early stage that all four proceedings should be heard together. The other three proceedings are:

(a)    Proceeding NSD 185 of 2013. In this proceeding, Tamaya is the sole plaintiff and its directors are the defendants. In this proceeding, Tamaya claims damages or compensation against its directors for losses suffered by it as a result of the acquisition by Tamaya of Iberian Resources Limited in 2007.

(b)    Proceeding NSD 327 of 2014. In this proceeding, Tamaya and its liquidator are the plaintiffs and Deloitte, Mr Biggs and two other partners of Deloitte are the defendants. In this proceeding, Tamaya claims damages or compensation against Deloitte and its partners as a result of alleged misstatements in Tamaya’s financial statements and report for 2007.

(c)    Proceeding NSD 328 of 2014. In this proceeding, Tamaya is the sole plaintiff and its former directors are the defendants. In this proceeding, Tamaya seeks damages or compensation in relation to alleged misstatements contained in Tamaya’s financial report for 2007.

5    On 26 October 2008, Messrs Hutchison and Gibbons were appointed as joint and several administrators of Tamaya at a meeting of its directors.

6    On 19 December 2008, the same gentlemen were appointed as joint and several liquidators of Tamaya at a meeting of Tamaya’s creditors. Thereafter, Tamaya has remained in liquidation.

7    In this proceeding, the plaintiffs allege that Tamaya contravened the continuous disclosure requirements imposed upon it by the Corporations Act 2001 (Cth) and the ASX Listing Rules in respect of its 2007 Annual Financial Statements and also made misrepresentations in respect of those statements and the 2007 Annual Report. The plaintiffs also allege that, in the course of raising funds under a Share Purchase Plan and Sophisticated Investor Placement, Tamaya misrepresented the use to which the funds so raised would be put. The plaintiffs also allege that the director defendants breached the statutory and equitable duties owed by them to Tamaya in respect of the same matters and that Deloitte and its partners failed in their duties owed to Tamaya in respect of the same matters.

8    In the current iteration of the plaintiffs’ pleaded case (the Amended Statement of Claim filed on 29 October 2014) (ASC), the group members to whom this proceeding relates are those persons who:

(a)    Acquired shares in Tamaya in the period from, and including, 28 May 2008 to, and including, 27 October 2008; and

(b)    Are alleged to have suffered losses or damage by or resulting from the wrongful conduct of the defendants as pleaded in the ASC.

(See par 4 of the ASC and par 2 of the Originating Application filed on 28 May 2014.)

4    On 31 July 2015, Tamaya Resources Limited (In Liq) (Tamaya) or Tamaya and its liquidator (as the case may be) had applied for leave to amend the Originating Application and current Statement of Claim filed in each of the related proceedings. The amendments in respect of which leave was sought by Tamaya and its liquidator in those proceedings were substantially the same as those sought by the plaintiffs in this proceeding.

5    The amendments sought by Tamaya in proceeding NSD 185 of 2013 were resolved by agreement prior to the hearing of Tamaya’s application for leave to amend in that proceeding.

6    The Interlocutory Applications by which leave to amend was sought in proceeding NSD 327 of 2014, proceeding NSD 328 of 2014 and in this proceeding were heard by Gleeson J on 21 and 22 September 2015. Her Honour gave judgment in respect of the applications made in proceedings NSD 327 of 2014 and NSD 328 of 2014 (Tamaya Resources Ltd (In Liq) v Deloitte Touche Tohmatsu [2015] FCA 1098 (Gleeson J’s judgment)) on 14 October 2015. Her Honour refused leave to amend except in respect of those amendments which were not opposed by the defendants. In circumstances which I will describe more fully later in these Reasons, her Honour deferred consideration of the Interlocutory Application filed by the plaintiffs in this proceeding (see [15] of Gleeson J’s judgment).

7    On 19 November 2015, the Full Court granted leave to Tamaya and its liquidator to appeal from the orders made by Gleeson J on 14 October 2015 in proceedings NSD 327 of 2014 and NSD 328 of 2014.

8    On 15 December 2015, the Full Court heard the appeal. On 23 December 2015, the Full Court dismissed the appeal with costs. On 15 January 2016, the Full Court published its Reasons for dismissing the appeal with costs (Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 (the Full Court judgment)).

9    In January 2016, Tamaya and its liquidator filed a Special Leave Application in the High Court seeking leave to appeal from the Full Court judgment. That application was discontinued in March 2016.

10    The decisions made by Gleeson J and by the Full Court have a critical bearing upon the application for leave to amend filed by the plaintiffs in this proceeding.

11    After Gleeson J gave judgment on 14 October 2015, it was necessary to address the outstanding amendment application in this proceeding. The defendants took the view that the plaintiffs had agreed to abide the outcome of the amendment applications made in proceedings NSD 327 of 2014 and NSD 328 of 2014. The plaintiffs did not accept that view of life and argued that, because there were significant differences between proceedings NSD 327 of 2014 and NSD 328 of 2014, on the one hand, and this proceeding, on the other hand, and also significant differences between the conduct of Tamaya and its liquidator in the proceedings brought by them and the conduct of the plaintiffs in this proceeding, the Court should, in effect, allow them to argue their application as if Gleeson J’s judgment and the Full Court judgment did not exist.

12    A further hearing of the plaintiffs’ amendment application took place on 30 November 2015.

13    Later, on 2 December 2015, the plaintiffs filed a Second Further Amended Interlocutory Application in this proceeding. By that Application, the plaintiffs claimed:

1.    An order, pursuant to Rules 8.21(1) and 16.53 of the Federal Court Rules 2011 (Cth.), that the First Plaintiff and the Second Plaintiff be granted leave to file the:

a.    Amended Originating Application in the form annexed to this interlocutory application and marked “A”; and

b.    Further Amended Statement of Claim in the form annexed to this interlocutory application and marked “B”.

2.    An order, pursuant to section 33K and/or section 33ZF of the Federal Court of Australia Act 1976 (Cth.) (the Act), that the First Plaintiff and the Second Plaintiff be granted leave to amend the description of the group members to whom this proceeding relates by way of amendment to paragraph 4 of the Amended Statement of Claim in the form annexed to this interlocutory application and marked “B”.

2A.     An order pursuant to section 33X(5) of the Act that notice be given of the amendment to the description of group members.

2B.     The form and content of the notice (which is annexed to this interlocutory application and marked “C”) be approved pursuant to section 33Y of the Act.

2C.    The notice shall be sent by no later than 3 weeks from the date this order is made, by prepaid ordinary post to all shareholders recorded on the Tamaya Resources Limited share register who acquired interests in the shares issued by Tamaya Resources Limited between 28 May 2008 and 27 October 2008.

2D.    By no later than 1 week from the date this order is made, the Plaintiffs shall cause a representation of the Notice to be displayed on the website of the Plaintiffs’ solicitors (Maurice Blackburn).

2E.     An order that the amendment to the description of the group members does not take effect until 9 weeks from date of this order.

2F.     An order, pursuant to sections 486 and 511 of the Corporations Act 2001 (Cth.) and section 33ZF of the Act that the liquidator of the first defendant, Mr Philip Campbell-Wilson of Ernst & Young, permit the plaintiffs (by their solicitors) to inspect and copy the share register of the first defendant to enable them to identify the names and addresses of those persons/entities who acquired interests in the shares issued by Tamaya Resources Limited between 28 May 2008 and 27 October 2008 for the purpose of giving notice to them pursuant to section 33X(5) of the Act.

3.    Costs of the interlocutory application be costs in the cause.

4.    Such further or other order as the Court thinks fit.

14    The parties agreed to defer consideration of the claims for relief made in pars 2A, 2B, 2C, 2D, 2E and 2F of that Application until after the claims for relief made in pars 1 and 2 had been determined. These claims for relief will need to be addressed when this proceeding is next before the Court for case management.

15    By these Reasons for Judgment I determine the plaintiffs’ application for leave to amend and their application to amend the group definition (pars 1 and 2 of the Second Further Amended Interlocutory Application).

16    I note that, at the hearing on 30 November 2015, all of the director defendants were represented and actively opposed the plaintiffs’ amendment application. As I mentioned in the judgment delivered earlier today, the plaintiffs, Tamaya and the director defendants have now settled the claims made by the plaintiffs against Tamaya and the director defendants in this proceeding and Tamaya and its liquidator have settled the claims made by them against the director defendants in proceedings NSD 185 of 2013 and NSD 328 of 2014 leaving the Deloitte defendants as the only active defendants in the litigation. Because of these settlements, I shall direct my attention in the main to the submissions made by the plaintiffs, on the one hand, and those made by the Deloitte defendants, on the other hand, when dealing with the plaintiffs’ amendment application.

17    There was no opposition to the requested amendment to the group definition. I see no reason not to make Order 2 as sought. I will, therefore, do so when I come to make orders giving effect to these Reasons.

Leave to Amend

The Plaintiffs’ Submissions

18    The plaintiffs made submissions both in writing and orally in support of their application for leave to amend. In part, the plaintiffs relied upon earlier Written Submissions dated 11 September 2015 which had been prepared for the purposes of the hearings before Gleeson J on 21 and 22 September 2015.

19    In order to deal with the impact of Gleeson J’s judgment on the plaintiffs’ application for leave to amend and, in particular, the circumstance that the plaintiffs are accused of having agreed to abide by the outcome of Gleeson J’s judgment, the plaintiffs submitted that, because her Honour (according to their lights) approached the discretionary considerations relevant to the applications before her globally and largely without discriminating between Tamaya’s proposed amendments in order to reach her conclusion that all opposed amendments should be disallowed, the proposal put forward by the plaintiffs to her Honour and agreed in by the defendants at the September hearings before her Honour was deprived of any real effect. In this way, having endeavoured to put to one side her Honour’s judgment and the findings which she made in that judgment, the plaintiffs then endeavoured to persuade me to look at the matter afresh without paying any regard either to her Honour’s judgment or to the Full Court judgment. At par 18 of their Written Submissions filed for the purposes of the hearing before me, the plaintiffs set out a list of so called “findings” made by Gleeson J. This list was highly selective and did not constitute a fair conspectus of the relevant findings made by her Honour.

20    In conformity with directions made by me prior to the hearing, each of the defendants was required to indicate with specificity which paragraphs in the proposed amended pleadings were not opposed and which paragraphs in those pleadings were opposed. In light of those indications, the plaintiffs were then required to respond by identifying to the defendants which of the opposed amendments were still pressed. Schedules were prepared as directed. It is fair to say that, in their response, the plaintiffs indicated that they intended to press all of the amendments which were opposed by the defendants.

21    At par 20 of the Written Submissions prepared for the purposes of the hearing before me, the plaintiffs summarised the substance of the proposed amendments in the following terms:

20    Those paragraphs fall largely into the following categories:

(a)    amendment of the description of Class Members to those investors who purchased shares in Tamaya pursuant to the Share Purchase Plan (SIP) or the Sophisticated Investors Placement (SIP) (Proposed FASOC paragraph 4.1);

(b)    introduction of a claim for breach of s. 1041E of the Corporations Act 2001 by Tamaya (Observing that judgment in the Plaintiffs’ application for leave to proceed against Tamaya is presently reserved), Deloitte and the named directors of Tamaya (Directors) (At paragraph 195 FASOC with respect to Tamaya, paragraph 195H FASOC with respect to the directors and paragraphs 209.4A FASOC with respect to Deloitte);

(c)    amendments to bring the Class Action pleading into conformity with the Plaintiffs’ narrative statement of facts (For example, paragraphs 61A to 61Z and 64A to 64Q FASOC);

(d)    amendments to bring the Class Action pleading into conformity with the evidence identified as being relied upon from the Related Proceedings (For example see the reliance on the report of W Basford dated 11 March 2015 (and served by Tamaya in the Related Proceedings) at sections J.2 Audit Evidence, J.3 Impairment of Non-Current Assets, J.4 Acquisition and Consolidation Accounting and paragraph 200.3 of the FASOC and particulars to paragraphs 224.6, 225.7, 227.3 and 228 of the FASOC with respect to the Campbell­Wilson Report and affidavits of J Trollip and C Peterson served in the Related Proceedings), being, primarily, the particularisation of the audit evidence in the Related Proceedings;

(e)    amendments to bring the Class Action pleading into line with what are referred to as the “additional audit issues” in the Judgment (Judgment paragraph 42) comprising primarily those matters with respect to Tamaya’s operations in Chile, Portugal and Charters Towers; and

(f)    typographical, formatting and grammatical corrections.

22    I note that the categorisation of the amendments contained in par 20 which I have extracted at [21] above is virtually identical to the categorisation of the proposed amendments put forward by the plaintiffs in their Written Submissions provided to Gleeson J in September 2015.

23    At [41]–[46] of her judgment, Gleeson J set out in summary form her understanding of the substance of the proposed amendments propounded in proceedings NSD 327 of 2014 and NSD 328 of 2014.

24    At [15]–[21] of their judgment, the Full Court also described the proposed amendments propounded in those two proceedings. Their Honours said:

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.

25    For present purposes, I think that the Full Court’s description of the proposed amendments is a sufficient and accurate description of the amendments proposed in proceedings NSD 327 of 2014 and NSD 328 of 2014.

26    It is readily apparent from a comparison between the description of the proposed amendments in proceedings NSD 327 of 2014 and NSD 328 of 2014 provided by Gleeson J and by the Full Court that, in substance, the amendments propounded by Tamaya and its liquidator in those proceedings are virtually identical to the amendments now being propounded by the plaintiffs in this proceeding.

27    The plaintiffs made specific submissions as to the significance of the proposed amendments. It is not necessary to refer to these submissions in detail. It may be accepted for present purposes that the amendments are considered by the plaintiffs to be significant and that they have advanced credible reasons to the Court as to why they are of that view.

28    Next, the plaintiffs submitted that the time taken for them to propound the proposed amendments was not excessive and was explained by the evidence of Mr Coves. These submissions ignore the lapse of time between the relevant events and the commencement of proceedings on 28 May 2014 and also ignore the true impact of the plaintiffs in the present proceeding consciously and deliberately deciding to “piggy back” Tamaya and its liquidator in the three related proceedings.

29    The plaintiffs submitted that they were not in a position to ascertain the facts that underpinned the additional audit issues sought to be raised by the proposed amendments until the service of Mr Basford’s report on 11 March 2015. This submission was challenged by the Deloitte defendants. Those defendants argued that ILP, as the litigation funder of Tamaya, its liquidator and the plaintiffs in this proceeding, was in a position to know about these matters and probably did know about these matters. This submission, of course, only serves to highlight the deep and ongoing connection between the present proceeding and the three related proceedings.

30    The plaintiffs also submitted that they were not really in a position to bring forward the new claim under s 1041E of the Corporations Act 2001 (Cth) until the High Court delivered its decision in Selig v Wealthsure Pty Ltd (2015) 320 ALR 47 on 13 May 2015. While that proposition has some superficial attraction, the issue of proportionate liability in this context had been the subject of lively debate ever since the trial judge delivered his decision in Selig, which, of course, was some years before 2015. More importantly, in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1, the Full Court of this Court had expressed the contrary view to that which had been expressed by the Full Court of this Court in Selig. The ABN AMRO decision was handed down on 6 June 2014. It is fair to say that, until the High Court delivered its judgment, the controversy concerning proportionate liability in this context was well and truly alive. However, it is not the case that the High Court’s judgment was the first occasion that a competent lawyer dealing with a case such as the present could have and should have turned his or her mind to the question of proportionate liability.

31    Finally, the plaintiffs submitted that there would be no real prejudice occasioned to the defendants if the amendments were allowed. This submission ignored the impact of Gleeson J’s judgment and the Full Court judgment. In particular, the rejection by Gleeson J and the Full Court of the proposed amendments in respect of the additional audit issues meant that Tamaya and its liquidator had to reconsider the evidence of Mr Basford and others in order to bring that evidence into line with the existing pleadings in the related cases. They have now done so and served a new report from Mr Basford as well as other fresh evidence. If the amendments in this proceeding were allowed, the earlier expert report of Mr Basford would be relied upon by the plaintiffs in this proceeding even though it could not be relied upon in the other proceedings. Such an outcome would lead to confusion if this proceeding and proceeding NSD 327 of 2014 were heard together, as presently planned. Significant case management issues would arise. The plaintiffs’ submissions did not come to grips with these practical problems.

The Submissions of the Deloitte Defendants

32    The Deloitte defendants made detailed submissions both in writing (in their Written Submissions dated 13 November 2015) and orally before me at the hearing on 30 November 2015.

33    I have come to the view that, for the most part, the submissions made on behalf of the Deloitte defendants are sound and should be accepted.

34    For this reason, and meaning no discourtesy, I will not refer to their submissions in detail at this point. Rather, I will move on in order to explain my reasons for refusing leave to amend, which I shall do in the next section of these Reasons. I recognise that many of the reasons which I shall give reflect submissions and arguments made by the Deloitte defendants.

Discussion and Decision

35    Given the way in which the plaintiffs in this proceeding have approached the conduct of this proceeding, it would be entirely unreal for the Court to consider the present application without paying close regard to Gleeson J’s judgment and to the Full Court judgment because, at the end of the day, for reasons which I will now explain, the current application for leave to amend must stand or fall with the same applications made in the three related proceedings.

36    On 21 November 2014, after doing very little in this proceeding between May and October 2014, the plaintiffs were ordered to file and serve all of their lay and expert evidence and a Narrative Statement of Facts and Contentions by 30 January 2015 and otherwise to identify which parts of the evidence served in the three related proceedings they intended to rely upon. That order was made in those terms because the Court recognised that the plaintiffs in this proceeding would be relying upon all of the expert evidence tendered by Tamaya and its liquidator in the three related proceedings as well as the facts and contentions propounded by those parties in the Narrative Statement of Facts and Contentions required to be filed in each of those proceedings. On 19 December 2014, the date for the plaintiffs’ evidence to be served was extended to 10 February 2015 (for all evidence and the required narrative statement) and to 18 February 2015 (for notification as to which evidence in the related proceedings would be relied upon).

37    In January 2015, the plaintiffs defaulted in the payment by way of security for costs which they were obliged to make in that month. This led to this proceeding being stayed. The related proceedings were also stayed for the same reason. During this period, the legal representatives of the plaintiffs were instructed by the litigation funder not to take any steps to progress the preparation of evidence and the other documents required by the Court to be filed and served. In particular, they were instructed not to inspect or review documents made available from the discovery processes undertaken in the related proceedings. That decision led to delay in the plaintiffs’ filing their evidence and the other documents which they had been ordered to file.

38    The time by which the plaintiffs were to serve their evidence and otherwise comply with the orders first made on 21 November 2014 was again extended in April 2015. By 15 May 2015, it appears that the evidence to be relied upon at the final hearing was known either because it had been filed in this proceeding or was the subject of notice by reference to material filed in one or more of the three related proceedings.

39    On 12 May 2015, the solicitors for the Deloitte defendants wrote to the plaintiffs’ solicitor drawing his attention to the fact that a significant portion of the Narrative Statement of Facts filed by the plaintiffs and the report of Mr Basford relied upon by them were outside the pleaded case and asking whether the plaintiffs proposed to seek leave to amend their pleading.

40    On 19 May 2015, at a case management hearing held on that day, Counsel then appearing for the plaintiffs informed the Court that the plaintiffs would seek leave to amend the Amended Statement of Claim in order to include a claim based upon the High Court’s decision in Selig. It was not suggested that any other amendments would be required or sought. Despite the impression given by the terms in which that indication was conveyed to the Court, there is no doubt that consideration had been given well before the delivery of the decision in Selig as to whether or not leave to amend to include a claim under s 1041E of the Corporations Act should be included in the plaintiffs’ pleadings.

41    Of course, as already noted, the Court was not told on 19 May 2015 that the plaintiffs had under active consideration the possibility that they would seek leave to amend to include other issues (including the audit issues) in their pleadings.

42    On 19 June 2015, the solicitor for the plaintiffs sent a letter to the solicitor for the Deloitte defendants in which he stated that the plaintiffs proposed to seek leave to amend their current pleading and would circulate an amended pleading after consideration of Tamaya’s proposed amended pleadings in the related proceedings. An amended pleading was substantially completed by 24 June 2015 but a decision was made not to serve it at that time.

43    At the case management hearing held on 31 July 2015, Counsel who then appeared for the plaintiffs informed the Court that they would “piggy back” on whatever amendments were allowed in the related proceedings. Notwithstanding this submission, the Court ordered the plaintiffs to serve any amendment application by 14 August 2015. The final form of the proposed amended pleadings was not provided until 21 September 2015, the first day of the hearing before Gleeson J.

44    On 21 August 2015, Notices of Ceasing to Act were received from Mr Coves’ law firm. New solicitors were retained in early September 2015.

45    Throughout the period that this proceeding has been on foot, the plaintiffs have regarded themselves as “piggy backing” the three related proceedings. On more than one occasion, Counsel appearing for the plaintiffs told the Court that the plaintiffs were “piggy backing” the related proceedings and did not intend to initiate claims independently of the claims made in the related proceedings or in the absence of those claims being made in the other proceedings. An example of this occurred on 13 March 2015, when Counsel for the plaintiffs remained silent while Counsel for Tamaya told me that Tamaya was of the view that no amendments were necessary in the related proceedings to bring the pleaded case into line with the Narrative Statement of Facts and the evidence filed in those proceedings. As Mr Lindholm had so neatly described the relationship between this proceeding and the other three proceedings, this proceeding was the “tail of the dog not the head of the dog”.

46    At the case management hearing held on 31 July 2015, Counsel for the plaintiffs conducted the following exchange with me (at Transcript p 13/1–31):

HIS HONOUR: All right. Now, Mr Hyde, are you proposing to amend your pleading?

MR HYDE: Yes, your Honour, in two respects. The first is to bring our case – pleaded case in line with our statement of facts, issues and contentions, but as your Honour is aware, we are a piggyback proceeding, and insofar that there are amendments which are - - -

MR ..........: .....

MR HYDE: - - -  allowed in the proceedings, we will have to adopt those for abundant caution, because we seek to rely upon the evidence served by the plaintiff in the other proceedings. It will be put against us if we don’t mirror the pleadings which are propounded and advanced in that trial that – that evidence may be outside our pleaded case, so that, for abundant caution, we will adopt whatever pleadings are allowed by the court. We have worked on our pleading and brought it into line- - - 

HIS HONOUR: Excuse me, Mr Hyde.

MR HYDE: But, your Honour, on Tuesday, we were served with the 328 amendments, which are, at least on first blush, substantial. I haven’t had time to consider what further amendments we need to make to our draft amended pleading to bring it into line with that. Then, your Honour, we have the situation where some respondents have said, “We consent to certain paragraphs and oppose others.”

It seems inefficient for us to draft a pleading which picks up every paragraph we think we need to rely upon for your Honour to ultimately say some of these, or all of them, are not allowed, and the most efficient course would be for us to – having identified our positions, that we will piggyback on whatever amendments are allowed, insofar as they relate to the class, to then circulate that once that issue is determined, your Honour.

47    At par 52 of their Written Submissions, the Deloitte defendants set out the Transcript record of a number of statements made by Counsel for the plaintiffs to Gleeson J at the hearing which took place before her Honour on 21 September 2015. I now reproduce the extracts included in par 52 of the Deloitte submissions:

Then at the hearing on 21 September 2015, the Plaintiffs’ counsel approached representatives for the other parties during an adjournment of the proceedings, as a result of which when called upon to address the Plaintiffs’ motion he said to the Court (T78.24-37; T79.26-36; T80.6-17 (SG10 tab 8)):

“Your Honour, I’ve spoken to my learned friends about a way forward to alleviate your Honour having to look at in detail at the moment the amendments put forward by my client’s [sic] case and it’s on the basis that your Honour would deliver a ruling in respect of the company’s amendments and that within a period of, say, seven days the defendants in the class action could indicate what paragraphs we’ve put forward are still objected to and perhaps put forward some short written submissions to which we would respond and either dealt with on the papers or by short oral application.

Because on the large part, our amendments mimic, adopt [all of] the points of principle which Mr Hutley has been taking the court to, the concepts are largely the same, there is one substantive issue which our application brings forward which the company’s application doesn’t and that’s in relation to amending the group definition.”

“[M]y client’s proposal is to avoid your Honour having to look at four sets of pleadings to try and distinguish between them as to if there is any real substance in the changes or not.

The most appropriate use of the court’s time and resources would be for your honour to consider the points of principle which are raised by Mr Hutley’s submissions, which we adopt as oral submissions and Mr Withers’ written submissions we adopt as the points of principle … it would be an efficient use of the court’s time.”

“… But your Honour, that seems to be the only point of high principle that distinguishes my client's position on the primary underlying issues that arise in the company’s proceedings [viz. the application of limitation issues to cross-claims] because the class action in effect mimics, as explained in the affidavit of Mr Coves and various submissions, the position in the company’s – so your Honour, I’m in the court’s hands but to avoid further cost and expense and the court having to consider another form of a similar pleading, and it’s not on all fours, the most efficient and prudent course, in my submission, would be to allow a period of say, seven days following judgment in the company’s applications for the defendants in the class action to indicate their position with respect to each of the amendments put forward by my client and then we can narrow the issues substantially, your Honour.”

48    The extracts reproduced at [47] above include emphases made by the Deloitte defendants in the paragraph of their Submissions to which I have referred.

49    The Court was not told on 21 September 2015 that the plaintiffs intended all along to reserve the right to argue that there were relevant discretionary considerations which put them in a different position from Tamaya and its liquidator. The Deloitte parties have submitted to me that, had they known that the plaintiffs would argue this point, they would never have agreed to the proposal to defer consideration of the plaintiffs’ amendment application.

50    In my judgment, the plaintiffs should not be permitted to resile from the position which they adopted at the hearing before Gleeson J on 21 September 2015 and the position which they had adopted at all times in case management hearings before me up to and including the case management hearing conducted on 31 July 2015. In any event, the circumstances to which I have referred provide independent adequate discretionary reasons for refusing the present application for leave to amend. This reality was acknowledged by the plaintiffs when they submitted in writing to Gleeson J that the fate of the relevant amendments in this proceeding was entirely dependent upon the grant or refusal of Tamaya’s amendment application.

51    At [209] of Gleeson J’s judgment, her Honour gave nine reasons why she proposed to disallow the disputed amendments in the related proceedings with which she was dealing. She said:

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;

(2)    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;

(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;

(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;

(5)    The explanation for the delay in seeking leave to amend is deficient in the ways explained above. In particular, Tamaya did not explain why the additional audit issues did not come to Ms Banton’s attention until they were raised by Mr Basford, in circumstances where they could have been identified before the proceedings were commenced;

(6)    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;

(7)    Tamaya has not offered security for costs in relation to the expanded case;

(8)    In any event, the s 1041E case against the Deloitte parties should not be allowed because it is not properly pleaded;

(9)    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.

52    All of the reasons which her Honour gave are apt to be applied to the application for leave to amend made by the plaintiffs in the present proceeding. In their Written Submissions, the Deloitte defendants explained why this is so. It is not necessary to set out that explanation here. Their explanation is cogent and I accept it.

53    It must be remembered that, with one minor exception, the Full Court found no error in her Honour’s reasoning and upheld the decision which she had made. There is every reason for me to regard that decision as dispositive of the present application in circumstances where the plaintiffs have so regularly and manifestly hitched their wagon to the Tamaya horse.

54    The Deloitte defendants made detailed submissions identifying a number of pleading defects in the claims sought to be made pursuant to s 1041E of the Corporations Act. There is considerable force in those submissions. However, it is not necessary for me to address those specific submissions given that I propose to refuse leave to amend on the more fundamental discretionary bases relied upon by Gleeson J in her judgment.

55    At pars 106–108 of their Written Submissions, the Deloitte defendants submitted that there was no proper foundation for the allegations concerning the impairment of the Chilean mine in any event. They said:

Absence of basis for allegations concerning impairment of Chilean Mine

106.     There is no basis for the proposed allegations, central to the additional audit issues and the ultimate conclusion of the issues raised in respect of the Chilean Mine, that it should have been impaired in the amount of $17.6 million.

107.     There is presently no evidence addressing the alleged impairment of the Chilean Mine in the amount of $17.6 million. It is now known that Mr Basford has conceded he is unable to assess any impairment in respect of the Chilean Mine because there is insufficient information to form any view as to the value of any impairment (Palmer 2 (08.09.2015) – see her comment in the table on p 9 of the affidavit. That there was no evidence addressing this aspect was also acknowledged by Ms Palmer in cross-examination, and she indicated Tamaya would seek to put on further evidence in chief from its expert (Mr Basford) concerning the impairment of the Chilean assets (T28.21-29.22 (21.09.2015))). Despite this, the proposed FASOC adopts a $17.6 million impairment (FASOC [166B.1], [186.5(c)], [200.3(e)(3)]). As revealed in cross-examination of Ms Palmer, having conceded that there was no evidence that there should be an impairment of $17.6 million, Tamaya apparently hoped to plug this hole by seeking further document production and putting on a further expert report in chief (T28.21-T29.22). Now that Tamaya’s amendments have been disallowed, there will be no occasion for it to do that and there is simply no evidence of the alleged impairment.

108.     How the allegation of a $17.6 million impairment can responsibly be made is inexplicable. Mr Basford has said there is insufficient information to form a view as to the matter. How then can the Plaintiffs – who have not read the discovered documents and not engaged any expert auditing assistance – have a reasonable basis to make the allegation? How is the representative of the Plaintiffs able to independently certify the pleading? The suggestion that the Plaintiffs may instead rely on discovered documents and inferences drawn from the existing evidence is, in those circumstances, no rejoinder (Plaintiffs’ Submissions (06.11.2015) at p 10).

56    Those submissions are correct and I accept them. It would be a wrong exercise of the Court’s discretion to allow an amendment for which there was no arguable basis in fact.

57    Finally, allowing the amendments will give rise to significant case management issues. Such issues were well and truly in play in September 2015 when her Honour heard the applications to amend in the related proceedings and have subsisted ever since.

58    For all of the above reasons, I refuse the plaintiffs’ application for leave to amend except to the extent that the amendments sought are not opposed. In this regard, I note that each of the defendants has indicated to the plaintiffs which amendments are opposed and which are not. In those circumstances I propose to direct the plaintiffs to provide to my Associate a form of order giving effect to the decision which I have made. It may be that, in light of the settlement of proceeding NSD 185 of 2013, proceeding NSD 328 of 2014 and the claims made by the plaintiffs in this proceeding against the director defendants and against Tamaya, the plaintiffs do not wish to or need to amend their pleadings as against the defendants with whom they have settled. If that be the case, the order which I intend to require the plaintiffs to provide to my Associate should provide only for leave to amend being granted in respect of those amendments which are not opposed by the Deloitte defendants and for a dismissal otherwise of the plaintiffs’ application for leave to amend.

Costs

59    The Deloitte defendants have sought their costs of the present application on an indemnity basis. In support of their application for indemnity costs, the plaintiffs submitted that the pursuit of the amendment application in toto following Gleeson J’s judgment was not merely ill-advised but amounted to a flouting of the overarching responsibilities of litigants embodied in s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth) and amounted to the maintenance of an application which they should have known had no real prospects of succeeding.

60    I do think that the plaintiffs failed to pay appropriate regard to the impact of Gleeson J’s judgment on the application to amend which they filed in this proceeding. I cannot help but think that they took the course of action which they did in an endeavour to keep alive their prospects of being granted leave to amend pending the decision of the Full Court in the appeal from Gleeson J’s judgment. On and after 19 November 2015, the plaintiffs’ lawyers were aware that leave to appeal had been granted and were also aware that the hearing of the appeal was likely to be expedited. In order properly to discharge their responsibilities to the Court, the plaintiffs were obliged to pay appropriate and careful regard to Gleeson J’s judgment and to make an assessment as to whether, in truth, as the Deloitte defendants submitted the plaintiffs had led her Honour to believe, their application in this proceeding would stand or fall with the applications made by Tamaya and its liquidator in the related proceedings. However, the plaintiffs did not approach the matter in this way. Rather, they took their chances and endeavoured to re-agitate the entire application as if her Honour’s judgment had nothing to do with the present application.

61    For the reasons which I have briefly outlined at [60] above, I consider that an order for indemnity costs against the plaintiffs in favour of the Deloitte defendants is warranted. In light of the settlements reached between the plaintiffs, Tamaya and the director defendants, the plaintiffs and the director defendants may wish to agree an appropriate costs order as between those parties. In the absence of agreement, I would make the same costs order in favour of the director defendants as the order that I intend to make in favour of the Deloitte defendants.

62    There will be orders accordingly.

Associate:

Dated:    28 April 2016

SCHEDULE OF PARTIES