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The Death of JL Holdings - Limitations on Amendments to Pleadings

CaseFlash 13 August 2009

In Aon Risk Services Australia Limited v Australian National University (2009) HCA 27, the High Court effectively over-ruled its 1997 decision in Queensland v JL Holdings Pty Limited and has made it clear that parties will not automatically be entitled to amend their pleadings at any stage of a case.  The decision has substantial procedural implications and gives judges more power to administer court lists in the manner they see fit.  The significance for litigants is that they will need to ensure their cases are properly prepared at an early stage so as to avoid the need for late amendments to their pleadings.

Facts

In January 2003, bushfires around Canberra severely damaged the Mt Stromlo Observatory Complex.  ANU, which owned the observatory, sued 3 insurers in the ACT Supreme Court for indemnity for losses caused by the bushfires.  ANU then joined its insurance broker (Aon) to the proceedings in June 2005, with the claim against Aon being limited to its alleged failure to arrange the renewal of insurance over some of the property owned by the University. 

3 days into the time allotted for a 4 week trial in November 2006, ANU reached a settlement with its insurers.  It then indicated that its claim against Aon should be adjourned as it wished to apply for leave to amend its statement of claim to allege a substantially different case – namely that Aon had been obliged to ascertain, and declare to insurers, correct values for the University’s property and to provide advice to ANU regarding its insurance.  The judge at first instance granted leave to amend the pleadings and indicated that the matter was governed by the decision in JL Holdings.  This decision was upheld by a majority of the ACT Court of Appeal.

Decision

The court examined the circumstances in which parties should be granted leave to amend their pleadings and the matters to be considered by judges in exercising their discretion in that regard.  The court paid particular attention to what is seen as the central proposition to emerge from JL Holdings – namely that an application for leave to amend a pleading should be approached on the basis that a party is entitled to make an amendment to raise an arguable claim at any time, subject to compensating the other parties by paying for any costs thrown away by reason of the amendment.  All 7 High Court judges expressed the view that this aspect of JL Holdings was inconsistent with earlier decisions of the High Court and that this principle should not be applied in future.  The majority judgment observes that parties have the right to bring such claims as they wish but limits will be placed upon their ability to make changes to their pleadings, ‘particularly if litigation is advanced’

The court held that all matters relevant to the exercise of the power to permit an amendment should be weighed up by a judge.  The factors to be considered include the extent of any delay resulting from the amendment; any wasting of costs; any case management concerns; the importance of the amendment; the potential for prejudice to other parties; any explanation for a late amendment; and, importantly, how far along the litigation process the matter has advanced by the time the amendment is sought. 

In the case before the court, the amendment sought to introduce substantial claims which would have required Aon to defend a completely new case.  In addition, the matter was significantly advanced and the ANU did not have a valid explanation for the late amendment.  These matters appeared to be decisive factors in the High Court’s decision that the University’s application for leave to amend should be dismissed.  The matter was then remitted to the ACT Supreme Court for final determination.

Significance of decision

The High Court has emphasised the importance of the courts’ supervision of litigation processes.  Litigants of course have the right to choose what proceedings they wish to bring and how their claims are to be framed but limits will now be placed on the ability of parties to make changes to their pleadings – particularly when litigation is well-advanced.  Parties can no longer simply offer to pay costs and rely on JL Holdings as a basis for seeking a late amendment to their pleadings.  Judges now have a number of matters to weigh up when making decisions about late amendments and they will be entitled to place more emphasis than before on their particular court’s case management principles.


Alistair Little, Partner
Sydney

CaseFlash 13 August 2009
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