Federal Court’s refusal to grant leave to amend pleadings

21 April 2022
Scott Couper, Partner, Brisbane

On 11 February 2022 in Canavan v ICRA Rolleston Pty Ltd (Receivers and Managers Appointed)(in liquidation) [2022] FCA 117 the Federal Court of Australia refused to permit the Plaintiff to amend his points of claim less than two weeks before trial.

In considering the legal principles and matters relevant to the exercise of the court’s discretion in an application for leave to amend points of claim in the Federal Court, of particular importance in this matter was the Plaintiff’s past conduct, the impact to the impending trial date, the inevitable prejudice to the liquidators and creditors of the company and lack of explanation as to the lateness of the request.

The background

The Plaintiff, John Canavan (Canavan) is the sole director of the First Defendant being the failed mining company ICRA Rolleston Pty Ltd (Receivers and Managers Appointed)(in liquidation)(the Company).

Liquidators Marcus Ayres and Stephen Parbery, the Second Defendants, were appointed to the Company on 7 September 2021 at the second meeting of creditors. Prior to that time they had been the administrators, as appointed by Rolleston Coal Holdings Pty Ltd (RCH), replacing the voluntary administrators originally appointed by Canavan.

The liquidators, funded by RCH, had investigated and identified various potential claims against Canavan as director of the Company.

Canavan commenced proceedings on 23 September 2021 seeking orders that the liquidators be replaced by other liquidators of his choosing due to his concerns the liquidators might not, as liquidators of the Company, discharge their duties with independence and impartiality.

At the first case management hearing, on 22 October 2021 Canavan requested the urgent hearing of the matter due to the prejudice of a delay, contending that it is more difficult to succeed the longer a liquidator is in office.

All affidavit evidence was filed by the parties by the end of December 2021.

A final hearing was listed for 21-23 February 2022 to accommodate Canavan’s request. Special arrangements had been made for the listing which was during the month of Full Court sittings and accordingly had an immediate impact on other cases in the court.

On 15 December 2021 the Plaintiff filed a three page Notice to Produce seeking production from the liquidators of 15 broad categories of documents to be produced eight days later. The liquidators produced documents and objected to production of a document falling within the scope of the notice which was a confidential Joint Venture Interest Sale Agreement which the Plaintiff had brought earlier proceedings in the Supreme Court for access to without success.

On 7 February 2022, less than two weeks before the trial, the Plaintiff sent an unfiled interlocutory application, supporting submissions and affidavit material to the judge presiding over the case management hearing in the proceeding that day and seeking a hearing that day of an application to amend his points of claims. No party was in the position to deal with the material or application which was then set down for 11 February 2022. In the intervening period three affidavits were filed by the Plaintiff, including one that spanned 1280 pages.

The legal principles

The Court’s powers to amend points of claim, derived from Rules 8.21(1) and 16.53 of the Federal Court Rules 2011 (Cth) are considered with the objectives and overarching purpose of section 37M of the Federal Court Act 1976 (Cth) being to facilitate the just resolution of disputes according to law and as quickly, inexpensively, and efficiently as possible.

With reference to the principles set out by Gleeson J in Tamaya Resources Ltd (in Liq) v Deloitte Touche Tohmatsu [2015] FCA 1098 the matters relevant to the Court’s discretion are:

  • the nature and importance of the amendment to the party applying for it;
  • the extent of the delay and the costs associated with the amendment;
  • the prejudice that might be assumed to follow from the amendment, and that which is shown;
  • the explanation for any delay in applying for that leave;
  • the parties’ choices to date in the litigation and the consequences of those choices;
  • the detriment to other litigants in the Court; and
  • the potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification.

The decision

Downes J dismissed the application for leave to amend save only for those pleadings that were not objected to by the parties on the following basis:

  • Allowing the amendments would require the other parties to obtain considerable further evidence the result of which would mean the trial would need to be adjourned and it was uncertain as to when it could come on again for trial.
  • The Court had experienced significant dislocation in accommodating the Plaintiff’s request for an urgent trial which was listed during the Full Court sitting month of February – thereby impacting the Court and other litigants.
  • No explanation was provided as to why the amendments were not made at an earlier time or within the original points of claim filed.
  • The proposed cause of action sought to be added by the amended points of claim lacked merit.
  • The Plaintiff failed to provide sufficient evidence to explain why:
    • the claims were not made in the original points of claim;
    • the documents said to give rise to the allegation were not sought at an earlier time;
    • the Plaintiff didn’t have access to the documents or couldn’t obtain them at an earlier time;
    • less than two weeks before the trial the application was brought to make such significant amendments to the pleadings.
  • The two affidavits filed by the Plaintiff’s solicitor raised more questions than they answered and were hopelessly inadequate for the purposes of an application to amend so close to trial.
  • The Plaintiff had from an early stage requested the matter be heard urgently, the court accommodated it and no consideration was now given by the Plaintiff as to the wider case management implications of the delay on the court and other litigants.

Ultimately, a refusal of the application achieved a fair balance of the competing interests. That is, the Plaintiff had been given a reasonable opportunity to bring his challenge to the liquidators’ appointments (even if he would not be able to take every point he now belatedly sought) and the liquidators and the insolvent estate would not be put to the inevitable irrecoverable expense and delay associated with an adjournment.

Key takeaway

This Federal Court decision is a reminder to those prosecuting a claim to focus on gathering evidence as early as possible to ensure the originating application covers all the significant causes of action and not to rely on or expect that late amendments will be allowed.

To creditors and those defending such matters the decision provides comfort when faced with similar director or ex-director litigants delaying the progression of winding up.

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Authored by:

Scott Couper, Partner
Claudia Dennison, Senior Associate

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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