Amending Pleadings After the Commencement of Proceedings

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Aon Risk Services Australia Ltd v Australian National University

The case of Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 raised questions regarding the limits of seeking leave to amend pleadings. An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs.

Facts of Aon Risk Services Australia Ltd v Australian National University (2009)

The Canberra bushfires in 2003 destroyed the Australian National University’s (“ANU”) Mt Stromlo Observatory. ANU’s insurance policy distributed the risk between three insurers. ANU commenced proceeding against three insurers, seeking to be indemnified for losses resulting from damage to buildings and their contents. The insurers filed defences arguing that ANU understated the value of the premises and omitted individual buildings. 

On the first day of trial, ANU and the insurers mediated and reached a settlement two days later. On the 3rd day of the trial, ANU sought to adjourn the trial so that it could file an Amended Statement of Claim enlarging its claim against its broker, Aon Risk Services Pty Ltd (“Aon”). The Amended Statement of Claim raised an alternative claim against Aon that it was negligent in failing to arrange insurance coverage for the omitted items damaged by the fires. The trial was subsequently adjourned by Justice Gray of the Supreme Court, and an interlocutory hearing was held two weeks later, to determine whether ANU’s proposed amendments should be allowed. 

Leave to amend and the adjournment were opposed by AON. The trial judge (Gray J) on 12 October 2007 granted leave to amend. The Amended Statement of Claim introduced new claims against AON, including that AON had affected insurance without obtaining the University’s instructions, and that AON owed and breached a duty to the University in relation to the valuation of the buildings and contents. AON sought leave to appeal from this order.

The Court of Appeal (Higgins CJ and Penfold J; Lander J dissenting) dismissed the appeal. The majority held that leave to amend was properly granted by the trial judge, on the basis that leave should only be refused where the opposing party would suffer specific prejudice, irremediable by a costs order, as a result of the proposed amendment, relying on the decision of this Court in State of Queensland v. J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146.

Aon appealed to the High Court of Australia.

Held

The High Court allowed Aon’s appeal, holding that to allow ANU to amend their pleadings would have too significant a prejudicial effect on Aon. ANU had already been afforded their last opportunity to provide an intelligible and unobjectionable pleading but failed to do so. The interests of justice were not to be served by prolonging the matter.

The Court found that, in exercising their discretion under rule 501 and 502 of the Court Procedures Rule 2006 (ACT), the trial judge and Court of Appeal erred in not having sufficient regard to the following factors:

  1. ANU sought to introduce substantial new claims which would effectively require Aon to restart their defence;
  2. The application was brought during the time set for trial and adjournment would vacate the remaining scheduled weeks of trial;
  3. Even indemnity costs would not overcome the prejudice to Aon from the substantial delay and necessity of defending new claims;
  4. ANU had known the importance of proper valuation for 12 months and offered no explanation for the delay in seeking leave to amend; and 
  5. Granting the application and adjournment would delay the hearings of other litigants and undermine public confidence in the legal system.

ANU’s pleadings included substantive amendments, the trial date had already been set, no explanation had been given for the late amendment and costs would be an inadequate remedy. 

Aon principally argued that the amendment should have been refused because:

  1. It was not ‘necessary’ under rule 5011, as it did not concern the ‘real issues’ and new proceedings would be barred by estoppel or abuse of process; and
  2. It should have been refused under rule 5022 on the JL Holdings approach due to irremediable prejudice, or that JL Holdings should be reconsidered.

The above list is not exhaustive.

Key statement of Aon Risk Services Australian Ltd v Australian National University (2009)

The principles as mentioned above in Aon Risk Services Australia Ltd v Australian National University (2009) applied in the case were stated by Justice Gummow at [93]:

“…the rules concerning civil litigation no longer are to be considered as directed only to the resolution of the dispute between the parties to a proceeding. The achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the Court and upon other litigants”.

In the case of Sali v SPC Ltd (1993) 116 ALR 625 Justice Toohey and Gaudron explained that case management reflected at [158]:

“[t]he view that the conduct of litigation is not merely a matter for the parties but is also one for the court and the need to avoid disruptions in the court’s lists with consequent inconvenience to the court and prejudice to the interests of other litigants waiting to be heard …”.

Key Takeaways of Aon Risk Services Australian Ltd v Australian National University (2009)

It is important to point out that this case affirmed not only the landscape of amendment applications, but also the Court’s approach to interlocutory applications generally. Multiple judges have affirmed that Aon’s statements are ‘of general application’ as the ‘public interest in the proper and efficient use of public resources’ must necessarily permeate all aspects of the dispute resolution framework. 

Significance of Aon Risk Services Australia Ltd v Australian National University

In the case of Parmac Investments Pty Ltd v Logan City Council [2009] QPEC 79 Justice Robin commented on the High Court’s decision stating that the case:

“will change the culture that has developed since the earlier decision in Queensland v JL Holdings … One would expect that in the future greater regard will be paid to case management … considerations, and to the implications of delay, which … include uncertainty and the stresses and pressures that those involved in litigation may come under.”3

This case has notably shifted the existing position concerning the ability of parties to amend pleadings. This decision will be relevant to Australian Government departments and agencies involved in Court litigation. Although the decision was centred on particular Court rules in the ACT, the High Court made it explicit that the principles addressed in their judgment will be applicable in other jurisdictions as well. 

In Aon Risk Services Australia Ltd v Australian National University, the High Court unequivocally held that parties do not have an absolute, unhampered ‘right’ to amend pleadings at any stage of litigation, subject to costs. The Aon Risk Services Australia Ltd v Australian National University (2009) decision should lead to greater efficiencies, less cost and quicker resolution of commercial disputes. 

[1] Court Procedures Rule 2006 (ACT).

[2] Court Procedures Rule 2006 (ACT).

[3] Parmac Investments Pty Ltd v Logan City council [2009] QPEC 79 at [8].

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