FEDERAL COURT OF AUSTRALIA Ensham Resources Pty Limited v AIOI Insurance Company Limited [2012] FCA 537 Citation: Ensham Resources Pty Limited v AIOI Insurance Company Limited [2012] FCA 537 Parties: ENSHAM RESOURCES PTY LIMITED ACN 011 048 678 v AIOI INSURANCE COMPANY LIMITED ARBN 096 302 466, MITSUI SUMITOMO INSURANCE COMPANY LIMITED ARBN 000 525 637, SOMPO JAPAN INSURANCE INC ARBN 000 837 801, TOKIO MARINE & NICHIDO FIRE INSURANCE COMPANY LIMITED ARBN 000 438 291 and NISSAY DOWA GENERAL INSURANCE CORPORATION LIMITED File number: NSD 1256 of 2010 Judge: EMMETT J Date of judgment: 23 March 2012 Legislation: Insurance Contracts Act 1984 (Cth) s 28 Cases cited: AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Atkinson v Fitzwalter [1987] 1 WLR 201 Date of hearing: 1, 7, 9, 10, 16 February and 19, 20, 21, 23 March 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 79 Counsel for the applicant: JC Sheahan SC, CL Cochrane Solicitor for the applicant: Freehills Counsel for the respondents: AS Bell SC, V Whittaker, D Klineberg Solicitor for the respondents: King & Wood Mallesons IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1256 of 2010 BETWEEN: ENSHAM RESOURCES PTY LIMITED ACN 011 048 678 Applicant AND: AIOI INSURANCE COMPANY LIMITED ARBN 096 302 466 First Respondent MITSUI SUMITOMO INSURANCE COMPANY LIMITED ARBN 000 525 637 Second Respondent SOMPO JAPAN INSURANCE INC ARBN 000 837 801 Third Respondent TOKIO MARINE & NICHIDO FIRE INSURANCE COMPANY LIMITED ARBN 000 438 291 Fourth Respondent NISSAY DOWA GENERAL INSURANCE CORPORATION LIMITED Fifth Respondent JUDGE: EMMETT J DATE OF ORDER: 23 MARCH 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondents be granted leave to file a third further amended defence in the form initialled and dated by Justice Emmett on 23 March 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION nsd 1256 OF 2010 BETWEEN: ENSHAM RESOURCES PTY LIMITED ACN 011 048 678 Applicant AND: AIOI INSURANCE COMPANY LIMITED ARBN 096 302 466 First Respondent MITSUI SUMITOMO INSURANCE COMPANY LIMITED ARBN 000 525 637 Second Respondent SOMPO JAPAN INSURANCE INC ARBN 000 837 801 Third Respondent TOKIO MARINE & NICHIDO FIRE INSURANCE COMPANY LIMITED ARBN 000 438 291 Fourth Respondent NISSAY DOWA GENERAL INSURANCE CORPORATION LIMITED Fifth Respondent JUDGE: EMMETT J DATE: 23 MARCH 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant, Ensham Resources Pty Limited (Ensham), owns and operates an open-cut coal mine on the flood plain of the Nogoa River, near Emerald in Queensland. Heavy rainfall between 17 and 20 January 2008 caused the Nogoa River and Old Winton Creek to overflow and breach earth levees surrounding pit B, pit C and pit D of the mine, with consequent inundation of those pits by water on 19 and 20 January 2008. There was resultant loss and destruction of, and damage to, certain of Ensham's property and consequent interruption of its business. Ensham suffered loss as a consequence. 2 On 22 January 2008, Ensham gave notice to the respondents (the Insurers) of a potential claim under a policy of industrial special risks insurance entered into between Ensham and the Insurers on 17 September 2007 (the Policy). Between 18 August 2008 and 8 April 2010, Ensham made claims under the Policy. No payments have been made by the Insurers, and, on 21 September 2010, the Insurers declined cover under the Policy. On 24 September 2010, Ensham commenced this proceeding for recovery of loss alleged to be suffered as a consequence of the Insurers' failure to indemnify Ensham under the Policy. 3 The Insurers filed a defence on 9 November 2010 alleging, inter alia, that: the Policy does not cover the losses claimed; Ensham failed to comply with its duty of disclosure under the Act and made misrepresentations before the Policy was entered into; and by the operation of s 28(3) of the Act, the liability of the Insurers under the Policy is nil by reason of the prejudice suffered by the Insurers as a consequence of the misrepresentation and non-disclosure. 4 The Insurers' refusal to provide cover was made in reliance on s 28 of the Insurance Contracts Act 1984 (Cth) (the Act). Section 28 applies where a person who became the insured under a contract of general insurance upon the contract being entered into either failed to comply with the duty of disclosure or made a misrepresentation to the insurer before the contract was entered into. The duty of disclosure, under s 21 of the Act, is a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter: that the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or that a reasonable person in the circumstances could be expected to know to be a matter so relevant. 5 Under s 28(2), if the failure to comply with the duty of disclosure was fraudulent or a misrepresentation made to the insurer was made fraudulently, the insurer may avoid the contract. Under s 28(3), if the insurer is not entitled to avoid the contract or, being entitled to do so, has not done so, the liability of the insurer is reduced to the amount that would place the insurer in the position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made. 6 The defence of 9 November 2010 was subsequently amended in respects that are not presently relevant. Neither in the defence of 9 November 2010, nor in any amendment, did the Insurers allege fraudulent non-disclosure or misrepresentation on the part of Ensham. However, by interlocutory application dated 25 January 2012, as amended on 7 February 2012 and 5 March 2012, the Insurers now seek leave to amend their current defence to allege that they have avoided the Policy under s 28(2) of the Act, by reason of fraudulent non-disclosure or misrepresentation on the part of Ensham. They rely on material discovered by Ensham and material produced in response to subpoenas in late 2011 and early 2012. 7 In July 2011, the Court heard an application on behalf of Ensham for orders that certain preliminary questions be heard and decided before other questions raised in the proceeding. After substantial argument, Ensham indicated that it would not press for preliminary determination of issues if an early final hearing on all issues were available. The parties agreed that they would be ready for a full final hearing to commence on 19 March 2012, and that date was fixed for the hearing. 8 The hearing of the application for leave to file a third further amended defence began on 1 February 2012, together with other interlocutory applications. The hearing was adjourned to 7 February 2012. The hearing did not finish then and was adjourned to 9 February 2012. At the end of the hearing on 9 February 2012, counsel for the Insurers foreshadowed the possibility of reformulating the proposed third further amended defence to accommodate criticisms of the pleading in its then current version. I indicated that the Insurers should provide any further version of the proposed third further amended defence to Ensham by 2pm on 10 February 2012. I gave leave to the parties to raise any problems at short notice on the afternoon of 10 February 2012, and otherwise stood over the interlocutory hearing to 16 February 2012. 9 The parties took up the invitation to raise difficulties late in the afternoon of 10 February 2012. Senior counsel for the Insurers indicated that they had not been in a position to finalise a further version of the proposed third further amended defence. However, part of that explanation was that further documents had been received by way of discovery earlier in the week. Those documents were said to have a bearing on the form of the proposed pleading. Possible further evidence in support of the application for leave to amend was foreshadowed, and the further interlocutory hearing for 16 February 2012 was confirmed. 10 On 16 February 2012, the Court was informed that both parties were of the view, possibly for different reasons, that the fixture for the final hearing commencing on 19 March 2012 was no longer feasible. Accordingly, that fixture was vacated by consent and directions were given for the further hearing of all necessary interlocutory applications, including the Insurers' application for leave to file a proposed third further amended defence, on 19 March 2012. 11 The second further amended defence of the Insurers, as it presently stands, relies on s 28(3) of the Act. Thus, paragraph 29 asserts that, as at 17 September 2007, the date that the Policy was entered into, Ensham was aware of certain matters. Paragraph 30 asserts that each of those matters was relevant to the decision of the Insurers whether to accept the insurance and, if so, on what terms, and was known to Ensham to be so relevant or, alternatively, was such that a reasonable person in the circumstances would be expected to know it to be so relevant. Next, paragraph 31 asserts that none of those matters was disclosed to the Insurers before the Policy was entered into. Paragraph 35 then asserts that, in the circumstances set out in paragraphs 29, 30 and 31, Ensham failed to comply with its duty of disclosure under s 21 of the Act. Finally, the second further amended defence asserts that, if the failure to disclose had not occurred or the misrepresentation had not been made, the Insurers would not have been liable to make any payment under the Policy and, accordingly, under s 28(3) of the Act, their liability for Ensham's claims is reduced to nil. 12 The amendments proposed include the insertion of additional matters in paragraph 29 and the insertion of paragraphs 31A, 34A and 40A. I shall set out what I understand to be the essence of the relevant allegations that would be made in the proposed third further amended defence. The language below is not a direct quotation, but is a paraphrase of my understanding of the effect of the proposed paragraphs: As at 17 September 2007, the date when the Policy was entered into, Ensham was aware of the following matters (the Relevant Matters): (b) Ensham had not finished construction of a proposed interim B pit levee in the area west of the B pit and that levee was not at a level to protect against a 1 in 100 year flood. (c) There would not be effective levee protection for the B pit in the area west of that pit at or before the time of the onset of the 2007-2008 wet season. (c1) Ensham's plan of operations for the period 1 June 2007 to 31 May 2008 (the Mining Plan) contemplated that, in that period, the interim B pit levee would be penetrated by mining activity or, alternatively, that there would be mining activity carried out in the area west of the interim B pit levee. (c7) There was a possibility that Ensham would conduct mining operations in the area west of the interim B pit levee without adequate levee protection of those mining operations from the risk of flood. (c8) There was a possibility that Ensham would temporarily remove the interim B pit levee, or part of it, in the period covered by the Policy in order to gain access to the area west of the interim B pit levee. (c9) It was possible that Ensham would carry out mining activities in the B pit area without effective levee protection from the risk of flood. (d) The levee banks around B pit were not continuous or at the height required to provide protection from a 1 in 100 year flood. 31A. The failure by Ensham to disclose the Relevant Matters or any one or more of them was fraudulent within the meaning of s 28(2) of the Act, in that the failure occurred with an intention to deceive the Insurers, or a reckless indifference as to whether or not proper disclosure to the Insurers had been made, with an intention that the Insurers act upon the disclosure provided by Ensham, in that: (b) … (i) The state of mind and knowledge of Ensham was constituted by the knowledge of one or more of Messrs Graham Morris, Peter Westerhuis, Colin Moffatt and John Seedhouse. (ii) The relevant intention to deceive or reckless indifference is to be inferred from the combination of each of: (A) The roles and responsibilities that each of Messrs Morris, Westerhuis, Moffatt and Seedhouse performed and assumed within Ensham's operations; (B) Their respective responsibility for, or participation in, the provision of disclosure to the Insurers for insurance risk assessment purposes; and (C) The obvious significance, which must have been appreciated by each of Messrs Morris, Westerhuis, Seedhouse and Moffatt, of any one or more of the Relevant Matters to the Insurers' decision to insure Ensham against the risk of damage from flood. (iii) The relevant intention to deceive or the relevant reckless indifference may be inferred from the combination of each of the following matters: (A) The fact that Ensham had strong commercial reasons to mine in the area on the west side of the interim B pit levee (the relevant area) in the period of cover of the Policy. (B) If any of the Relevant Matters had been disclosed to the Insurers, there was a real risk that the Insurers would have declined to provide cover, would have required that the Policy include an exemption or an exclusion in respect of flood, would have refused to provide cover unless until either or both of the B pit and the relevant area had adequate flood protection or would have only offered renewal on materially different terms adverse to the interests of Ensham. (C) If the risk referred to in paragraph (B) had materialised, Ensham would either have had to defer mining in the relevant area, contrary to what it had planned for the period covered by the Mining Plan, and thus would have lost the revenue that it had expected to achieve from that mining activity, or, alternatively, proceed with mining in the relevant area without the benefit of insurance, or insurance for flood cover, or with cover on materially different terms, which would have exposed it to the risk of catastrophic and uninsured loss leading to flood, which it did not wish to occur. (D) Each of Messrs Morris, Westerhuis, Moffat and Seedhouse had knowledge of each of the matters referred to in paragraphs (A), (B) and (C). 34A. By reason of the matters referred to in paragraph 31A, the Insurers were entitled to, and have, avoided the Policy under s 28(2) of the Act, by letter dated 25 January 2012 from the solicitors for the Insurers to the solicitors for Ensham. 40A. By reason of the Insurers' avoidance of the Policy, the Insurers are not liable to indemnify Ensham. 13 Each of the matters referred to in paragraph 29(b), (c) and (d) was in the second further amended defence. Proposed paragraphs 29(c1), (c7), (c8) and (c9), however, are additions. 14 Paragraph 31A(b)(iii) above is an addition to the proposed third further amended defence that was propounded by the Insurers following matters raised in the course of argument on 20 March 2012. Clearly, a distinction is to be drawn between fraudulent intent, on the one hand, and the motive for such fraudulent intent. While fraudulent intent in making a misrepresentation or failing to disclose is an essential element, the motive for making the misrepresentation or failing to disclose is not an essential element. On the other hand, in so far as motive is relied upon as a basis for drawing an inference as to fraudulent intent, the motive should be particularised in relation to any relevant state of mind. Hence, in paragraph 31A(b)(iii), the Insurers particularise the motive of Ensham that they say gives rise to an inference of fraudulent intent in relation to the alleged non-disclosure. 15 The basis for the application to amend at this late stage is that, until certain documents that were received in late 2011 and in early 2012 had been examined by the solicitors for the Insurers, the Insurers were not in a position to allege fraudulent or reckless non-disclosure or misrepresentation. Ensham asserts, on the other hand, that all of the essential facts that now give rise to the allegation of fraudulent non-disclosure were known to the Insurers at the time when the original defence was filed on 9 November 2010. That being so, it says, there is no explanation for the delay. Delay is particularly serious where a party seeks to plead fraud at a late stage in a proceeding. An amendment to add an allegation of fraud should not normally be permitted where the facts giving rise to the plea of fraud were all known at the time of the original pleading. Fraud is a very serious allegation to make against a person and may, if not raised at the outset, be difficult to investigate properly at a later stage in the proceeding. The more serious the allegation that is made, the more clearly satisfied must the Court be that no prejudice will be caused that cannot be compensated for in some satisfactory way, before allowing a proposed amendment (see Atkinson v Fitzwalter [1987] 1 WLR 201 at 210 and 219). THE INSURERS' KNOWLEDGE 16 It is apparent that the Insurers have for some considerable time had in mind at least the possibility of avoiding the Policy for fraudulent non-disclosure, and have communicated that to Ensham. On 21 September 2010, the Insurers' solicitors wrote to Ensham's solicitors asserting that the Insurers had had concerns for some time about the adequacy of Ensham's disclosure and the representations made by or on behalf of Ensham when the Policy was entered into. The letter asserted that there was not only a failure to disclose but there was misrepresentation about relevant facts. The letter attached a schedule (the Evidence Summary) summarising the evidence relevant to several matters that were said to be the subject of non-disclosure as follows: (a) The levees at B and C pits were not at uniform 1 in 100 year flood levels, and suffered from erosion and sporadic maintenance. (b) Ensham had expert advice that higher levees should be constructed for adequate flood protection, initially as part of the Ensham Central Project, but then for the interim B pit levee. (c) Ensham had not completed the interim B pit levee and did not intend to do so before the impending 2007- 2008 wet season, despite having approval for it, as a consequence of which B pit was not properly protected from flooding. Rather, Ensham took a deliberate risk in leaving B pit vulnerable to flood. 17 The letter of 21 September 2010 asserted that none of the Insurers, had they received proper disclosure, would have underwritten the Policy in 2007 without there being imposed an exclusion for flood until such time as the recommended new levees were constructed to the 1 in 1000 year flood level, plus one metre, and a flood sub-limit of $100 million, subject to the mine being protected by levees constructed to the 1 in 1000 year level plus one metre standard. The letter then asserted that a final position had not yet been taken by the Insurers as to whether there had been fraudulent non-disclosure or misrepresentation. The letter said, however, that Ensham's conduct appeared reckless in the relevant sense for the purpose of s 28(2) of the Act. The letter purported to reserve the position of the Insurers in that respect. 18 A number of assertions were made in the Evidence Summary in relation to each of the matters of alleged non-disclosure. In relation to the first matter of non-disclosure described, the Evidence Summary said that the Insurers had been informed that levee banks were built to a height that would accommodate a 1 in a 100 year flood and had been designed by a specialist. It said that those statements misrepresented the protection provided by the levees because, although they might originally have been designed and constructed to provide protection from a 1 in 100 year flood, they no longer provided such protection at the time of the inception of the Policy. The Evidence Summary asserted that, in the absence of a regular and consistent maintenance program, the flood protection provided by the levees was diminished. It stated that Ensham obviously and correctly considered that the existence of the levees and the level or protection they provided were matters requiring disclosure to the Insurers. It stated that the state of disrepair of the levees was a relevant matter that ought to have been disclosed to the Insurers, but was not. It asserted that Ensham was aware that the existing levees did not provide 1 in 100 year flood protection by June 2006 at the latest, and that the representations made to the Insurers in relation to protection by the levees were wrong. Whatever relevance that matter may have to the proceeding generally, it is not a matter directly relevant to the proposed allegation of fraudulent non-disclosure. Nor is the second matter of non-disclosure alleged, which related to estimated loss figures, presently relevant. 19 In relation to the third matter, being the alleged advice that higher levees should be constructed for adequate flood protection, the Evidence Summary asserted that Ensham had proposed to extend the levees on the north-western side of B pit further west to allow for the advance of the western face of that pit. That process was said to involve the development of an interim levee 300 metres further west to provide immunity against a 1 in 100 year flood event, which would ultimately be replaced after a proposed life of one to two years by a levee further west providing 1 in 1000 year flood protection. 20 In relation to the fourth matter, the Evidence Summary asserted that Mr Morris had made an application to the Nogoa River Floodplain Board (the Board) for approval for the construction of the proposed interim levee but that it was represented by Ensham at that time that the levees were adequate to protect against a 1 in 100 year flood event. 21 The Evidence Summary asserted that, in December 2006, an earthmoving contractor was engaged to carry out rehabilitation works and to build up the interim B pit levee. By the time the contractor arrived on site in December 2006, the original western arm of the B pit levee had been demolished and construction of the interim levee was suspended in March 2007. The construction was not completed when the contractor left the site on 1 August 2007. 22 The Evidence Summary also asserted that Ensham seemingly suspended the building of the interim levee on the assumption that it could move straight to building the final levee and that an exemption for the permit required to construct the final levee would be granted by the Board. Ensham made an application for exemption from the need to obtain permission for the construction, and was advised by 25 August 2007 that an exemption would not be granted. The Evidence Summary asserted that, therefore, Ensham was aware, prior to the inception of the Policy, that: the next pre-strip of soil would nudge the intended interim B pit levee; there would not be sufficient time to complete the final levees before the wet season commenced at the end of 2007, as the environmental impact statement process would not be complete; and the existing levees surrounding B pit were incomplete, such that B pit was not protected against a 1 in 100 year flood. 23 The Evidence Summary asserted that, while Ensham had the resources to complete the interim B pit levee, no formal arrangements were made to complete the levee and that that position remained the same until and beyond inception of the Policy. It asserted that the Insurers were not informed of the low points in the interim B pit levee as part of the renewal process and that Ensham recognised that that was an issue that should have been disclosed to the Insurers. 24 The Evidence Summary also asserted that the original B pit levee may not have been in place during the construction of the initial stages of the intended interim levee and that, if the original levee was not in place while the interim levee was being built, B pit did not have protection at all against any flooding event. The Evidence Summary asserted that the western arm of the original B pit levee had been removed at the time of the inception of the Policy and, therefore, at the time of the flood. As a result, it asserted, at both September 2007 and January 2008, the B pit levee was incomplete. The Evidence Summary asserted that the Insurers were mistakenly not informed of the low points in the B pit levee as part of the renewal process and that the interim B pit levee was not completed to design specifications. Those matters, it asserted, were matters that were relevant to the Insurers' consideration of the renewal of the Policy, but were not disclosed. Thus, it is clear that the Insurers, through their solicitors, had some inkling that there was non-disclosure of the state of the levees insofar as they offered protection against flood. 25 In the course of the interlocutory hearing in July 2011, the question of reliance on s 28(2) was adverted to. The Insurers' solicitors were advised by Mr AJ Meagher SC, then senior counsel for the Insurers, in July 2011, that the documents disclosed at that stage did not justify pleading deliberate or reckless non-disclosure. 26 However, on 23 December 2011, the Insurers' solicitors wrote to Ensham's solicitors indicating that, during the course of reviewing documents produced on subpoena, and in particular a subpoena addressed to Ensham's brokers (Marsh), as well as recently discovered documents, they proposed to revisit the pleading to consider alleging fraudulent non-disclosure. The letter said that the solicitors were concerned that material that had been recently produced, which went to the state of Ensham's knowledge of the risk of flood at the time of inception of the Policy, was not included in Ensham's discovery. The solicitors said that they were well aware of the serious nature of such a plea and that it would not be the Insurers' intention to seek to amend the defence without very careful consideration and advice. The letter stressed that, at that stage, no decision to make such an application for leave to amend had been made. 27 Rule A.37 of the Advocacy Rules provides that, prior to alleging any matter of fact amounting to fraud, a solicitor must have reasonable grounds to believe that available material by which the allegation could be supported provides a proper basis for it and that the client wishes the allegation to be made, after having been advised of the seriousness of the allegation. Mr Peter Stockdale is a principal of the solicitors for the Insurers. Mr Stockdale asserted in affidavits filed on behalf of the Insurers that he was not able to satisfy himself that he could comply with Rule A.37 in making an allegation of fraud until after receiving certain materials, to which I shall refer below. Mr Stockdale identified materials the availability of which, he says, satisfied him that he is now in a position to make the allegation of fraud. Certain of the materials were first produced on subpoena. Others were produced on discovery by Ensham. Further materials consisted of plans annexed to an affidavit filed on behalf of Ensham. It is desirable to say something about the new materials. 28 A copy of a file note dated 2 October 2007 (the October Meeting File Note) was produced on subpoena by Marsh. Mr Stockdale first saw a copy of the October Meeting File Note on 28 November 2011. The October Meeting File Note records a meeting attended by Messrs John Seedhouse, Colin Moffatt and Richard Bradshaw from Ensham and Mr Chris McKeown from Marsh. The meeting was called by Ensham to discuss their B pit mine development plans. 29 The October Meeting File Note ended with a note that Ensham would draft a disclosure notice to Marsh summarising their plans for insurers to sign off. Such a draft was prepared and sent to Marsh (the Draft Disclosure Notice). For reasons that are not presently apparent, Marsh omitted to send the Draft Disclosure Notice to the Insurers. However, the Insurers received the Draft Disclosure Notice in the course of discovery, and have had the document for some time. Mr Stockdale said in an affidavit that he regarded the October Meeting File Note as evidencing Ensham's awareness of the materiality of disclosure of the position regarding the levee and mining position in respect of B pit. 30 In the course of cross-examination, Mr Stockdale said that a further fact to be taken from the October Meeting File Note, which he says gave rise to the fraud allegation, was that at the October meeting, Mr Moffatt of Ensham made a deliberate misrepresentation to Mr McKeown of Marsh that, although Ensham was considering continuing to mine in the expanded area prior to obtaining approval for the final levee, there would still be a minimum of 1 in 100 year protection at the mine site. That fact is not reflected in the Draft Disclosure Notice. 31 The Draft Disclosure Notice was sent by Ensham to Mr McKeown on 23 October 2007. It stated that the potential for flooding of the B pit, during a 1 in 100 year rainfall event, had been mitigated by the existing levee system for about the last ten years. It said that Ensham's development plans "identified the need to extend the current B pit mining operation to the west as an ongoing source of low ash coal". The Draft Disclosure Notice said that the existing B pit levee lay within that extended mining area, requiring the construction of a new levee that would provide flood mitigation "for the remaining forecast tenure of B pit". The document said that the process of levee establishment required approval by a number of regional and state authorities, who sought to establish a number of matters about the levee's impact on neighbours to the mine. The document said that the process of approval to construct the new levee was not expected to be complete until a number of months after the commencement date for mining operations in the extended B pit area, and that, following an assessment of the risk of flooding and impact on the B pit area over the next six months, it was considered that, in the unlikely event that a flood event did occur, certain actions would be initiated, including monitoring Fairbairn Dam's inflow and capacity reduction, with calculation of dam spill-over, and construction of temporary levee structures designed for minor flood event mitigation if dam spill-over was considered imminent. Mr Stockdale conceded in the course of cross examination that Ensham's awareness of the materiality of disclosure of the position regarding the levee and the mining position in respect of B pit was not new to him, and that that was a matter that he had understood was able to be shown for two years prior to receipt of the copy of the October Meeting File Note. 32 Another recent document, produced on subpoena by the Queensland Department of Environment and Resource Management, is a mining plan of operations for the period 1 June 2007 to 31 May 2008, which was prepared by Ensham and lodged with the Environmental Planning Authority on 27 May 2007 (the Mining Plan). In an affidavit, Mr Stockdale said that the Mining Plan contemplated that, in the period 1 June 2007 to 31 May 2008, which included the wet season, the interim B pit levee would be penetrated by mining activity, thus further reducing the efficacy of such flood protection as it otherwise afforded. Mr Stockdale first had access to the Mining Plan on 28 November 2011. 33 Mr Stockdale, in the course of cross-examination, accepted a number of matters in relation to the Mining Plan, as follows: The Mining Plan in isolation told him nothing more than that, as at May 2007, Ensham's plan was both to do something in the area occupied by the interim B pit levee and to build the final B pit levee. Penetration of the B pit levee would not reduce flood protection for the mine if the final B pit levee was in place. It was not news to him, when he received the Mining Plan in December 2007, that replacement of the interim levee by the final levee was Ensham's intention and that Ensham's activities in B pit in 2007 included mining in a westerly direction. The possibility that Ensham might start mining before the final levee was in place was not something that emerged from the Mining Plan. Mr Stockdale had known since December 2009 that Ensham's mining development plans in the second half of 2007 called for the need to mine in the area occupied by the interim B pit levee. Mr Stockdale had known since before the proceeding commenced that, by September 2007, the likely next pre-strip in the B pit would nudge the interim B pit levee. Mr Stockdale had known since before the proceeding commenced that Ensham's plan to build a final B pit levee had been frustrated by the refusal of permission by government authorities and that, unless something changed, it would not likely be able to build a final levee before the wet season. Even in conjunction with any other information Mr Stockdale had, the Mining Plan did not tell him anything beyond what he knew about Ensham's plans for mining an interim B pit before the proceeding commenced. 34 Certain mine survey data (the Mine Survey Data) was provided by Ensham on 26 October 2011 by way of discovery. Mr Stockdale asserted in an affidavit that the Mine Survey Data demonstrated the impending and progressive impact of mining operations in B pit on the interim B pit levee. The Mine Survey Data was in a proprietary digital format. Accordingly, it was necessary to instruct a specialist surveyor to access and interpret the data. The work of the specialist surveyor is still ongoing. Mr Stockdale received some preliminary work from the specialist surveyor on 20 January 2012 that suggests that, from March 2007 at the latest, up to and including September 2007, there was a gap of approximately 500 metres in length in the B pit levee. The depth of the gap is also shown in the Mine Survey Data. The B pit levee bank is approximately 1,800 metres long. 35 The Mine Survey Data is the raw binary data that underlies certain contour maps and other diagrams to which Mr Stockdale referred in an affidavit. While Mr Stockdale referred in the affidavit to a gap of approximately 500 metres in length, there is no mention of that gap in the proposed amended defence. Indeed, it is less than the 825 metre gap in the interim B pit levee alleged in the particulars furnished by the Insurers to Ensham on 23 June 2011. On 19 May 2011, Ensham's solicitors served a request for further and better particulars of the Insurers' defence. The response of 23 June 2011 included a marked up version of a December 2007 contour map upon which there were indicated the sections of the levee around B, C and D pits that were alleged not to be continuous at the height that would provide 1 in 100 year flood level protection. Mr Stockdale conceded that, before the proceeding commenced, he could have worked out the length of the gap in the interim B pit levee, as it appears in the December 2007 contour map. 36 An affidavit of Mr Graham Campbell, sworn on 6 December 2011, was served on the Insurers' solicitors on 9 December 2011. Contour and survey maps, and diagrams of the Ensham mine compiled from data in Ensham's database (the Campbell Material) are annexed to it. The Campbell Material demonstrates the impending and progressive impact of mining operations in B pit on the interim B pit levee and, in particular, the fact that, prior to the commencement of the wet season, mining had reached or was on the verge of reaching the interim B pit levee itself. Mr Stockdale said in an affidavit that the Campbell Material enabled his clients to understand better the impending and progressive impact of mining operations in B pit on the interim B pit levee. 37 In relation to the Campbell Material, Mr Stockdale conceded in cross examination that he had known, before the proceeding commenced, the fact that, prior to the commencement of the wet season, mining had reached, or was on the verge of reaching, the interim B pit levee. In re-examination, Mr Stockdale was referred to an incursion in the interim B pit levee in a diagram from the Campbell Material (the December 2007 diagram). He said that he regarded the incursion as more substantial than the nudge referred to in a letter from Ensham's solicitors of 4 December 2009. The December 2007 diagram is based upon the same survey data as the December 2007 contour map. A comparison of the December 2007 diagram with the December 2007 contour map reveals that the incursion in the B pit levee is the same in both. 38 Mr Stockdale asserted in an affidavit that the material described above gave him critical information and context additional to that previously available to him. He said that it was necessary to reconsider the thousands of documents already provided to the Insurers by Ensham, in light of the information and context provided by the additional material. That process took longer than it might otherwise have taken because of interruptions during the Christmas period. Mr Stockdale met with senior counsel in early January 2012. He asserted that it was only after that process was completed that he was able to form a view that it was possible for him to comply with Rule A.37 in making an allegation of fraud, as contained in the proposed amended defence. He said that the process of informing the Insurers fully of the nature and seriousness of the allegation for the purpose of obtaining their instructions did not conclude until 24 January 2012. It was necessary, he said, to seek instructions from five separate clients, who are located in Japan and who have varying levels of proficiency in understanding and communicating in English. 39 On 8 February 2012, while the Insurers' application for leave to amend was part-heard, Mr Stockdale received further documents on discovery. Mr Stockdale drew attention to three of the further documents then produced as giving rise to further information relevant to the question of fraudulent non-disclosure (the 2012 documents). 40 The first of the 2012 documents is an email dated 1 October 2007 from Richard Bradshaw of Ensham to Chris McKeown of Marsh. The email was a precursor to the meeting that took place between Ensham and Marsh on 2 October 2007, which is the subject of the October Meeting File Note. The email asked Mr McKeown to come over to discuss a particular scenario concerning insurance. The email said that the issue was with temporarily taking down a levee bank. Mr Stockdale understood that to be a reference to the possibility of removing the interim B pit levee. Mr Stockdale said that that was the first time that he had become aware of discussion concerning the removal of the B pit levee by Ensham in the context of disclosure to the Insurers. Apart from that email, Ensham has not discovered any other documents dealing with the reason for convening the meeting of 2 October 2007 with Marsh, or who at Ensham proposed such a meeting. 41 Mr Stockdale was aware, prior to seeing the 1 October 2007 email, that Ensham was considering mining in the area to the west of the B pit without having approval for the extension of the B pit levee. He assumed that it was contemplated that the interim B pit levee would be penetrated by mining activity during the period from 1 June 2007 to 31 May 2008. However, he said that the email was the first document that expressly conveyed to him that Ensham was contemplating that the flood protection for the mine that existed at that time might be compromised by the removal of a levee, in circumstances where there would be no other levee protection to the west of B pit. The October Meeting File Note makes no reference to the possibility that Ensham would remove any levee. It refers to the necessity of building new levees and the possibility of mining before levees were approved. Mr Stockdale did not understand that as being in any way related to the removal of a levee. He did not regard that possibility as being implicit in the October Meeting File Note. 42 On 14 August 2009 the Insurers' solicitors had asked Ensham's solicitors, on the assumption that the Ensham B pit levee was never completed, when the decision was taken by Ensham not to complete the interim B pit levee, and at what point in time Ensham became aware that neither the interim B pit levee nor the final B pit levee would be completed prior to the onset of the 2007-2008 wet season. Ensham's solicitors responded, in their letter of 4 December 2009, that the progress of the mine in B pit was such that, at the end of September 2007, it became clear that the next pre-strip would nudge the interim B pit levee. Ensham recognised that it had to resolve how best to proceed, including whether to finish the interim B pit levee, to find a means of expediting the final B pit levee or to pursue some other option. They said that Ensham sought to involve its Insurers in that process, and met with Marsh on 2 October 2007 to discuss their options in relation to the mine and their desire to update insurers. They said that, as a result of that meeting, Ensham prepared the Draft Disclosure Notice for Marsh to send to the Insurers, a copy of which was enclosed with the letter. They said that, due to an oversight on Marsh's part, the Draft Disclosure Notice was never sent to the Insurers, and that Ensham only became aware after the flood occurred that the Draft Disclosure Notice was never sent. 43 Mr Stockdale considers that the possibility of the removal of the interim B pit levee, or any other levee, whether on a temporary or permanent basis, is significant, because it is a matter that may have been known to Ensham prior to the inception of the Policy. Mr Stockdale has been instructed that it would have been material to the Insurers' assessment of insurance risk, and therefore should have been disclosed. 44 Mr Stockdale considers that the combination of the terms of the email of 1 October 2007, the October Meeting File Note and the Draft Disclosure Notice give rise to an inference that the non-disclosure of the possibility of removing the interim B pit levee was fraudulent within the meaning of s 28(2). Accordingly, he considers that the non-disclosure by Ensham of the possible taking down of the levee may constitute a distinct and new ground for the avoidance of the Policy from its inception. 45 The second of the 2012 documents is an email dated 22 October 2007 sent by Mr Colin Moffatt, Ensham's General Manager Technical, to Mr Richard Bradshaw, Ensham's Manager Business Analysis, attaching a document (the Moffatt Draft Disclosure Notice). The Moffatt Draft Disclosure Notice is in similar terms to the Draft Disclosure Notice. Prior to seeing the email of 22 October 2007, Mr Stockdale had understood that Richard Bradshaw was the author of the Draft Disclosure Notice. However, the email of 22 October 2007 indicates that Mr Moffatt either was the author, or had at least a significant involvement in its drafting. 46 Neither the Draft Disclosure Notice nor the Moffatt Draft Disclosure Notice makes any reference to the possibility of the removal of any levee. Indeed, the documents refer to the requirement of constructing a new levee that would provide flood mitigation for the remaining forecast tenure of B pit. Mr Stockdale understood from other parts of the Draft Disclosure Notice that approval for such a new levee might not be procured until after mining had commenced. However, he did not understand the document to give any indication, express or implied, that Ensham had in contemplation the removal of the interim B pit levee at the time. 47 The third of the 2012 documents comprises minutes of a CEO Team Monthly Meeting of Ensham held on 16 August 2007 (the CEO Meeting), which was attended by Mr John Pegler, Ensham's then CEO, Mr John Seedhouse, Ensham's then Chief Financial Officer, Mr Peter Westerhuis, Ensham's then General Manager – Operations and Mr Colin Moffatt. The minutes of the CEO Meeting disclose that those present at the meeting were informed that no exemption would be granted for the construction of the proposed new B pit levee. Mr Stockdale understands that that refers to Ensham's application to the Board for an exemption with respect to its proposed final B pit levee, and to a communication to Mr Graham Morris by Mr Mike Brady of the Board on 15 August 2007 that the exemption would not be given. Mr Stockdale attaches significance to the fact that the CEO Meeting was attended by Messrs Pegler, Westerhuis, Moffatt, Seedhouse and Morris. Accordingly, Mr Stockdale regards the minutes of the CEO Meeting as confirming that members of the most senior management of Ensham were aware, no later than 16 August 2007, that Ensham did not have permission to build the proposed final B pit levee and that the interim B pit levee was incomplete. The New Facts 48 The Insurers contend that the new material described above discloses some twelve pieces of information that were not previously known to the Insurers and their advisors. Mr Stockdale says that it was not until he had been provided with that additional information that he was in a position to advise the Insurers that they would be justified in avoiding the policy under s 28(2) of the Act, and was accordingly instructed to file a defence in the form now proposed. I shall say something about each piece of information. 49 First, the Mining Plan identified the precise area that was intended to be mined during the period of the Policy. It covered the period 1 June 2007 to 31 May 2008. The Mining Plan included figure 2, which identifies the precise area of planned disturbance during that period. Thus, the Mining Plan shows that there was going to be mining on the western side of the existing levee, which could happen in one of two ways, namely, by mining through continuously, on the one hand, or by going to the other side of the levee and restarting, on the other hand. Both of those possibilities are fraught with problems if there is no levee protection, though the latter possibility has never been suggested. The cross-examination of Mr Stockdale suggested that the materials showed that the mining would go through the levee. That would be more than the nudge referred to in the correspondence to which I have referred. The fact that the Mining Plan identified for the first time the very area that was going to be mined during the period of the Policy is not one of the matters raised by Mr Stockdale in his affidavits. Nevertheless, I accept that the Mining Plan did disclose that additional information. 50 Secondly, Mr Stockdale accepted that he knew before receipt of the Mining Plan that Ensham's activities in B pit in 2007 included mining in a westerly direction. However, he said that it was news to him that Ensham might start mining before the final levee was in place. He said that that emerged as part of "the jigsaw that one tries to put together when understanding what [was] happening", particularly in the period from when the Board refused the application for exemption in relation to the construction of the final levee. He considered that the Mining Plan gave some life to the plans that existed within Ensham at the time when it received news as to what further work was to be done during the relevant period. 51 Thirdly, the email of 1 October 2007 disclosed that Ensham was contemplating the temporary taking down of the B pit levee. None of the other materials that had been provided to the Insurers or their solicitors had indicated that that was a possibility. Although the Insurers and their solicitors knew about the meeting between Marsh and representatives of Ensham on 2 October 2007, which I have referred to above, the material that had been furnished to them previously conveyed a different impression from that given by the new information, namely, that the issue that brought about the meeting was the taking down of the B pit levee. The summary that had been furnished by Ensham's solicitors to the Insurers' solicitors was to the effect that the meeting of 2 October 2007 was held to consider options that included expediting the final B pit levee, completing the interim B pit levee, and other options. There was no mention of the possibility of taking down the levee and mining without a levee. Accordingly, the Insurers contend, there was previously no basis for making an allegation that there was a proposal that the levee would be taken down or removed, or that there was a proposal to mine through the levee. In cross-examination, Mr Stockdale accepted that an inference might have been available to him, before seeing the email of 1 October 2007, that Ensham was contemplating the possibility of compromising flood protection for the mine by removing a levee, but said that he had seen nothing that expressly said that Ensham would be removing a levee. He said that in considering the difference between an innocent non-disclosure and a fraudulent non-disclosure, the knowledge and intent of witnesses and the way they express themselves is critical as to what inference can be drawn. 52 Fourthly, the October Meeting File Note disclosed for the first time that, as early as 2 October 2007, very shortly after the inception of the Policy, Ensham was considering continuing to mine in the expanded area, prior to obtaining approval for the final levee. The Insurers say that that makes all the easier the drawing of an inference that that was under consideration at the time of inception of the Policy. While documents already available indicated that that possibility may have been under consideration as at 23 October 2007, when the Draft Disclosure Notice was sent to Marsh, that was some three weeks later than the date of the October Meeting File Note. The Insurers contend that the suggestion in the October Meeting File Note is far more concrete. While Mr Stockdale did not refer to that matter in his affidavit, he did raise it in the course of cross-examination. 53 Fifthly, the October Meeting File Note records that Mr Moffatt indicated that there would still be a minimum of 1 in 100 year flood protection available at the mine site. Mr McKeown is recorded as saying that, on the basis that there was no major change to the flood protection levels, he would not expect "any major pushback" from the Insurers. That, the Insurers contend, suggests the deliberate suggestion of Marsh and the Insurers. There is no such suggestion in the Draft Disclosure Note. The statement of Mr Moffatt recorded in the October Meeting File Note is curious. It may be possible to construe the statement as saying no more than that Ensham had no proposal to do anything until protection against a 1 in 100 year flood was available. However, the balance of the October Meeting File Note appears to be inconsistent with that construction. The response of Mr McKeown, recorded in the document, is that on the basis that there was no major change in the flood protection level he would not expect any major push back from the Insurers. That suggests that Mr McKeown understood that the 1 in 100 year flood protection was and would continue to be available. 54 Sixthly, the October Meeting File Note discloses the identity of the representatives of Ensham who attended the meeting with Marsh, being Messrs Seedhouse, Moffatt and Bradshaw. That was the first indication of the seniority of those involved in the proposed disclosure the subject of the Draft Disclosure Notice, and their awareness of the materiality of disclosure. While Mr Stockdale did not refer to the matter of taking down a levee in his affidavit, it is significant that that possibility was not hinted at in the Draft Disclosure Notice, which had been previously provided to the Insurers' solicitors in the course of discovery. 55 Seventhly, the email of 22 October 2007 indicated for the first time that Mr Moffatt was substantially involved in the preparation of the Draft Disclosure Notice. The previous disclosure had been of a communication from Mr Bradshaw to Marsh. The email of 22 October 2007 was, the Insurers contend, the first disclosure of the involvement of a person in Ensham of Mr Moffatt's seniority. The Insurers and their advisors have had the Draft Disclosure Notice since 4 December 2009. Mr Stockdale said that the email informed him that the Draft Disclosure Notice was the work of more than Mr Bradshaw alone, although he accepted that it would have been reasonable to assume that to be the case in any event. However, I accept that, while the email of 22 October 2007 does not indicate the extent of the specific involvement of Mr Moffatt, it does show that he had some involvement, and that the fact of Mr Moffatt's involvement was new information. 56 Eighthly, the minutes of the CEO Meeting of 16 August 2007 disclosed that people of the degree of seniority of Messrs Morris, Westerhuis, Moffatt and Seedhouse were aware of the Board's rejection of Ensham's application for an exemption, to which I have already referred. The Insurers had been aware for some time that Mr Morris was responsible for dealing with the application for exemption from the Board and that he reported to Mr Westerhuis. The minutes disclose the identity of three other employees whose minds the Insurers say are relevant. 57 Ninthly, the minutes of the CEO Meeting disclosed that those senior members of Ensham's staff were aware of the Board's rejection no later than 16 August 2007. While Ensham admitted, on the pleadings, that it was aware on 25 August 2007 of the written rejection of the application for exemption, the minutes show that senior members of Ensham's staff were aware nine days before that time. The Insurers contend that nine additional days were therefore available for Ensham to develop what it would do, and to make disclosures to the Insurers. 58 Tenthly, the minutes of the CEO Meeting disclosed that the fact of the Board's oral rejection was notified to those senior members of Ensham's staff one day after Mr Morris had received it from Mr Brady. That indicates, the Insurers contend, that it was regarded as a important matter, not a minor or peripheral one. 59 Eleventhly, the Campbell Material showed the extent of the encroachment of mining on the B pit levee, and in particular the depth of the depletion of the levee, in that its height was significantly below the 1 in 100 year flood level. The Campbell Material shows that the level of the incursion into the B pit levee is at 145.4 metres, whereas the next contour is at 152.4 metres, which, while some seven metres higher, is itself below the level necessary for protection against a 1 in 100 year flood. While the Insurers had previously had the December 2007 contour map, which showed the status of mining operations as at 28 December 2007, and disclosed the same information as the Campbell Material, Mr Stockdale appears to have regarded the Campbell Material as more informative as to the extent of the nudge. 60 Finally, the Insurers rely on an email of 21 November 2007 from Mr Moffatt to Mr Seedhouse, which was first provided to the Insurers' solicitors on 11 October 2011. The email referred to Ensham's purpose of gaining access rights to 140 million tonnes of coal lying beneath the floodplain of the Nogoa River. The email said that Ensham was then mining about 500 metres either side of the main channel of the Nogoa River, with levee structures protecting the mine workings. Mr Moffatt referred to the fact that government authorities would not give approval for Ensham to block the waterway by extending the existing levees, and said that, if Ensham did not extend the levees, it would have to stop mining in that area, which Ensham could not afford to do, as the area represented the only part of the leased land that contained a specific type of coal. Mr Moffatt said that he had even discussed mining without levee protection, something that had been discussed as an option some nine months before. The Insurers contend that that indicates that the possibility of mining without levee protection had been under consideration by Ensham for some time before inception of the Policy. GROUNDS FOR OPPOSING THE AMENDMENT 61 Ensham opposes the proposed additions of paragraphs 29(c1) to 29(c9) on the basis that the Insurers' delay in amending its innocent non-disclosure case in that way has not been explained adequately or at all, and in that the new issues introduced by the amendment attract the prejudice inherent in any late pleading. Ensham also opposes the proposed new paragraphs 31A, 34A and 40A, alleging fraud, on the grounds that: the delay in pleading fraud is not adequately explained; the fraud allegation, as pleaded, is insufficiently cogent as to warrant its introduction at such a late stage; and Ensham has been and will be prejudiced by the lateness of the allegation of fraud. Unexplained Delay 62 Under modern case management regimes, a strict approach should be taken to late amendments. The delay and costs incurred by late amendment are undesirable and, in particular, delay has deleterious effects not only upon the other party to the proceeding but to other litigants. Costs will not always be a sufficient compensation for prejudice caused by an amendment. A party does not have an entitlement to amend simply upon payment of costs incurred by reason of the amendment. In determining whether to give leave to amend, the Court must weigh all matters relevant to the exercise of the discretion to permit amendment. Those relevant matters include the need for an explanation for any delay in applying for leave to amend, the impact of the amendment on the parties and other litigants who may be affected by delays and adjournments and the waste of costs (see AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [111]-[114]). 63 Ensham asserts that, rather than including a plea of fraudulent non-disclosure in the original defence of 9 November 2010, the Insurers waited nearly 15 months, until eight weeks before the date fixed for the final hearing on liability, set down over a six week period, to apply for leave to amend to make this serious allegation. Ensham contends that all of the essential facts that have given rise to the proposed fraud allegation were known to the Insurers and their advisors at the time of the filing of the defence of 9 November 2010. In those circumstances, Ensham says, there is no explanation for the delay. 64 For reasons which I have briefly summarised, there is new information to be gleaned from the documents and other materials that have been provided towards the end of 2011 and in early 2012. To some extent, the information constitutes variations on a theme, but I consider that it is fair to say that significant new information has become available since October 2011, well after the time when an order was made that the trial begin on 19 March 2012. 65 Ensham nevertheless maintains its contention that all of the essential facts that have given rise to the fraud allegation in the current version of the proposed third further amended defence were known to the Insurers at the time of filing of the original defence on 9 November 2010. It says that the explanation offered by Mr Stockdale in his affidavit cannot be treated as an explanation for delay. 66 Mr Stockdale was cross examined by senior counsel for Ensham. He was not challenged in his assertion that, up until the emergence of the material described above and his examination of that material in the context of other documents, he held the genuine position that he was not able, acting responsibly, to plead the issue of fraudulent non-disclosure. It was not suggested to him that the Insurers made any forensic decision to hold back on the making of their application for leave to plead fraudulent non-disclosure. Further, it was not put to Mr Stockdale that it was unreasonable for him not to have raised the pleading of deliberate or reckless non-disclosure at some earlier time. In that regard, it is significant that, as at July 2011, Mr Stockdale was advised by Mr Meagher SC, who was then appearing for the Insurers, that the documents disclosed at that stage did not justify pleading deliberate or reckless non-disclosure. Mr Stockdale was not cross examined about the advice he received from Mr Meagher. Mr Stockdale is a very experienced litigation solicitor, and he swore in his affidavits that he did not believe, in July 2011, that there was material that would justify an allegation of deliberate or reckless non-disclosure. He also swore that, as a consequence of receiving the additional material described above, he considered that such material justified making the allegations that would be made by the proposed third further amended defence. 67 I accept Mr Stockdale's evidence. As I have said, it was not suggested to him that he had not genuinely held that belief. While it is possible that somebody else might have taken a different view, the view that was taken by Mr Stockdale, it seems to me, was a reasonable and rational one. 68 In those circumstances, the delay from November 2010 to January 2012 is adequately explained. As I have said, as early as September 2010, the Insurers' solicitors had written to Ensham's solicitors expressing concern about the adequacy of the disclosure prior to inception of the Policy. The letter expressly stated that a final position had not yet been taken as to whether there had been fraudulent non-disclosure. It also asserted that Ensham's conduct appeared to have been reckless in the relevant sense for the purpose of s 28(2), and reserved the position of the Insurers. One might expect, therefore, that, in those circumstances, Ensham and its advisors would have been alive at least to the possibility of the Insurers making such an allegation in their defence. There has been no suggestion on behalf of Ensham that, notwithstanding the stance taken in the letter of 21 September 2010, Ensham acted to its detriment on the understanding that there would be no allegation of fraudulent or reckless non-disclosure. While it is unfortunate that the amendment is being sought at this stage of the proceeding, I do not regard that as sufficient reason, of itself, to withhold the grant of leave. Adequacy of the Case 69 Ensham drew attention to several drafting matters in the latest version of the proposed third further amended defence. The Insurers had foreshadowed that they would make further amendments to the most recent version to accommodate those complaints. Indeed, earlier this afternoon, I received a further version of the proposed third further amended defence. 70 Ensham, however, says that the pleading overlooks what is necessary to satisfy the requirement to give particulars of the relevant fraudulent intent. It says that the critical aspects of the fraud case are pleaded in terms of Ensham being aware of certain possibilities, as alleged in paragraph 29(c7), paragraph 29(c8) and paragraph 29(c9). The relevant knowledge of those possibilities is attributed to Messrs Morris, Westerhuis, Moffatt and Seedhouse. Ensham says that, even if it be assumed that one or more of those persons had knowledge of such a possibility at the relevant date, no basis has been pleaded to support a conclusion that that person must have realised that disclosure of a bare possibility of that kind was required to satisfy the duty of disclosure under the Act. It says that its action in arranging a meeting with its brokers, Marsh, to discuss additional disclosure to the Insurers on the topic of temporarily taking down a levee bank, as Ensham did in early 2007, is consistent with a developing awareness that, as work proceeded, the possibility was becoming one that should be raised with the Insurers. Thus, Ensham says, the facts pleaded are perfectly consistent with an honest approach to disclosure. 71 However, Ensham has not suggested that the pleading is defective, nor that the circumstances alleged are incapable of constituting fraudulent non-disclosure. Rather, the resistance to the amendment is put on the basis that the allegation is insufficiently cogent to warrant introduction at this stage. The cogency of the allegation may be a factor to be weighed in the balance in considering prejudice. While it may be fair to say that the proposed fraudulent non-disclosure pleading is not a particularly strong one, it is certainly one that is open on the material that is now available, and I do not consider that any weakness in it is of such a degree as to warrant refusing leave to amend. Prejudice 72 The modern view is that even an order for indemnity costs may not always undo the prejudice suffered by a party as a consequence of a late amendment. Justice cannot always be measured in money, and the Court must weigh in the balance the strain that litigation imposes upon litigants. Non-compensable inconvenience and stress on individuals are significant elements of modern litigation, and costs, even if awarded on an indemnity basis, will not compensate for the time lost and duplication incurred where litigation is delayed. While personal litigants are likely to feel the strain more than business corporations or commercial persons, corporations are also subject to pressures imposed by litigation. While corporations do not have feelings, their employees and officers, who may be crucial witnesses, must bear the strain of impending litigation, and the disappointment when it does not reach finality. The object in case management of minimising delay recognises the ill-effects of delay upon the parties to proceedings, as well as upon other litigants who are seeking a resolution of their disputes (see AON v Australian National University at [99]-[101]). 73 The consequences of granting leave to amend have changed during the course of the hearing of the interlocutory application, insofar as there is now no longer a date fixed for final hearing of questions of liability. It is possible that a hearing could be accommodated by the Court in June and July of 2012. Ensham has foreshadowed that it would contend, supported by evidence if necessary, that it will suffer further prejudice by the granting of leave to amend if such dates became available and Ensham, by reason of the new pleading of fraud, was not in a position to agree to such dates. 74 The proposed new pleading certainly raises a very serious allegation of fraudulent non-disclosure. That allegation raises new factual issues. Ensham complains that it has already lost the benefit of the early hearing fixed for 19 March 2012. That is, the benefit of the concession that it made, by not pressing its application for separate determination of certain questions in exchange for an early hearing date, has been lost. However, it is by no means clear that it was the making of the application for leave to amend that alone caused the hearing fixed for 19 March 2012 to be vacated by consent. 75 Ensham asserts that the potential impact on its present and former employees who are affected by the allegations of fraudulent non-disclosure is significant. If their probity is to be put in question, Ensham says, that should have been done in a timely fashion, when they were best able to give an account of their conduct whereas it is now more than 4 years after the inception of the Policy. Further, Ensham says, the impact of lapse of time on the recollection of witnesses is likely to be significant, particularly for witnesses who have not previously been interviewed and who are no longer employed by Ensham. Ensham says that many hundreds of thousands of documents of potential relevance to the litigation have been collected, but that its ability to use them to resist the late allegation may be diminished with time. It says that imperfect recollection and the unavailability of key people could undermine its ability to locate key documents. Instead, it will be compelled to rely upon conducting keyword searches of the documents in its solicitors' database. 76 Both Mr Westerhuis and Mr Moffatt are still employed by Ensham. Ensham's solicitors have already taken proofs of evidence from each of them, and from Mr Morris, which include matters such as: their knowledge of the deficiency in the height of the interim B pit levee at the time of the renewal of the Policy; their involvement in the preparation of information furnished to the Insurers prior to the inception of the Policy; their knowledge of the meeting with Marsh on 2 October 2007; and their knowledge of the Draft Disclosure Notice sent to Marsh. In their discussions with those three prospective witnesses, Ensham's solicitors asked, in the context of non-disclosure, whether each was conscious that the deficiency in the disclosure was something that needed to be disclosed and their awareness as to whether the deficiency should have been disclosed. 77 One of the complaints that had been made on behalf of Ensham in relation to the earlier version of the proposed third further amended defence was the absence of particulars of the individuals whose mental state was relevant to the knowledge and intent of Ensham. That deficiency has been remedied in the latest version of the proposed defence. There has been no further evidence adduced on behalf of Ensham to suggest that there are any particular difficulties with any of the four individuals identified in giving evidence and assisting with the preparation of an answer to the allegation of fraudulent non-disclosure. If each of the individuals denies deliberately or recklessly failing to disclose the matters that are the subject of the allegations of fraudulent non-disclosure, that evidence would not be difficult or time-consuming to adduce, either in writing or orally. 78 The four individuals whose mental state is relied upon are identified with particularity and full particulars are provided as to the matters relied upon to found inferences of deliberate disclosure or reckless indifference. In the light of the vacation of the date fixed for final hearing, and in the absence of further evidence of prejudice, the criticality of the hearing date ceases to be of such importance in terms of the prejudice to Ensham. The Insurers say that, in circumstances where no current final hearing date has been fixed, and Ensham's solicitors are still producing documents on discovery, and where the magnitude of the claim runs into hundreds of millions of dollars, there is no significant prejudice to Ensham that would follow from the proposed amendment. CONCLUSION 79 I do not find this question an easy one to resolve. Had there been a date still fixed which would be prejudiced by the amendment, it may well be that I would reach the conclusion, in balancing all of the relevant matters, that it would be an unfair prejudice to Ensham to allow the amendment at this stage. However, I am satisfied, as I have said, that the Insurers, through Mr Stockdale, have adequately explained why it is at this stage that the amendment has been brought. While there can be no doubt that there is some prejudice to Ensham in having the amendment allowed, there would also be a real prospect of prejudice to the Insurers if they were deprived of the opportunity of raising the alleged fraudulent non-disclosure, albeit, as I have said, and without having seen all of the relevant material, that I do not presently regard the case as particularly strong. I am satisfied, though, that the case is one that it is open to the Insurers to raise, on the basis of the material that has now been provided. In those circumstances, I propose to give leave to the Insurers to file a further amended defence. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 31 May 2012