Amending your pleadings? Yamaha Motor? Yamahave to think again - The Federal Court reviews the law pertaining to amendments
Pending the article on statutory derivative actions, I came across a very interesting case that is fresh-off the presses. Hong Leong Finance v Low Thiam Hoe [2016] 1 MLJ 301 was decided in August 2015 and it sets the benchmark for applications to amend pleadings.
O. 20 of the Rules of Court 2012
An application to amend pleadings is made pursuant to O. 20 of the Rules of Court 2012 (“ROC 2012”).
Numerous circumstances have been provided for by the ROC 2012 but practitioners should be especially cognisant of O. 20, r. 3 ROC 2012 which allows for a party to amend its pleadings once, without the leave of Court, before the close of pleadings.
O. 18, r. 20 ROC 2012 specifies that pleadings will be closed 14 days after the service of a reply. Parties must remember that the close of pleadings may be shortened by a harried Registrar (in accordance with O. 34, r. 1(1) ROC 2012).
To ensure that one isn’t caught out, it pays to place the 14-day time period on record.
The legal position of yore- Yamaha Motor
The seminal case on amending pleadings would be that of Yamaha Motor v Yamaha Malaysia [1983] 1 MLJ 213. Here, the Federal Court outlined the 3 basic questions that every Judge must consider when faced with an amendment application:
Is the application bona fide?
Would the prejudice caused to the other side be compensated for with costs?
Would the amendments turn the suit from one character into a suit of another and inconsistent character?
If the application is bona fide, the prejudice is compensated for with costs and the amendments do not change the character of the suit, then “an application for amendment should be allowed at any stage of the proceedings particularly before trial, even if the effect of the amendment would be to add or substitute a new cause of action, provided the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the original statement of claim.” [Emphasis added]
An application to amend pleadings may also be brought after trial, provided there are cogent reasons for doing so and a suitable award as to costs would satisfactorily compensate the Respondent for the prejudice caused.
As a general rule, any amendment prior to the delivery of the decision (provided it satisfies Yamaha Motor) would be allowed.
Refer:
Yoong Leok Kee Corporation v Chin Thong Thai [1981] 2 MLJ 21 (FC)
Abdul Johari Bin Abdul Rahman v Lim How Chong [1997] 1 MLJ 629 (CA)
Wu Siew Ying v Gunung Tunggal Quarry & Construction [2008] 2 MLJ 69 (CA)
Peh Teck Quee v Dato’ Hamzah Bin Abdul Majid [1999] MLJU 543 (HC)
Cheok Swee Lee v Loo Choo Teng [1996] MLJU 266 (HC)
The Federal Court takes a hard stance on delay- Hong Leong Finance
Enter the ROC 2012. In all previous matters, Yamaha Motor was taken as the be-all and end-all for amendment applications.
This has now been changed pursuant to the Federal Court’s decision in Hong Leong Finance v Low Thiam Hoe [2016] 1 MLJ 301.
The fact pattern of Hong Leong Finance
In Hong Leong Finance, the Defendant/Borrower entered into a loan agreement with the Plaintiff/Financier. The Defendant defaulted and the Plaintiff initiated a suit.
The matter was subsequently fixed for trial. The Defendant put in an application to amend his Defence (several days before trial). The Amended Defence sought to introduce 2 new defences.
The High Court Judge dismissed the application to amend due to gross delay. The Defendant appealed against the dismissal (Amendment Appeal) but partook in the trial. After trial, the Judge found for the Plaintiff/Financier. The Defendant appealed (the Substantive Appeal).
The Court of Appeal
The Court of Appeal heard both appeals and allowed the Amendment Appeal. As of right, the Court of Appeal also allowed the Substantive Appeal and ordered that the matter be reheard.
Of crucial importance was the fact that the Court of Appeal relied solely on Yamaha Motor to serve as the basis of its jurisprudential analysis.
The Federal Court- Questions of law
The Plaintiff/Financier then appealed to the Federal Court on the following questions of law:
(a) Whether the principles in Yamaha Motor Co Ltd v Yamaha Malaysia Sdn Bhd & Ors (supra) are the sole consideration in deciding an application made on the eve of the trial, to amend pleadings to introduce a new case.
(b) If the answer to Question 1(a) is in the negative, what are the principles a court should properly apply, in deciding such an application in lieu of the Yamaha Motor principles? (2) Where an appellate Court, after full trial of an action, allows a statement of defence to be amended to introduce a new and distinct defence, should the Court as a consequence ordinarily direct: (a) a new trial only in respect of the issues arising from the new defence; or (b) a new trial of all the issues, including those that have already been tried and decided by the High Court?
The Federal Court refines Yamaha Motor
Of great import would be the Federal Court’s finding that Yamaha Motor is still good law where the amendment application is prompt:
The principles in Yamaha Motor in our view were laid down in respect of an application to amend that was made at an early stage of the proceedings in particular before the trial commences.
However, due to the new case management regime, the Federal Court emphasised that the progress of a case is no longer in the hands of the parties. Instead, the Court was the driving force behind the matter.
Where an application to amend is put in at a very late stage, it would cause a disruption to the administration of justice which would affect not only the parties but also the Court and the judicial process as a whole.
The refined test
Considering the above, the Federal Court laid down the following considerations:
[33] Having considered the facts and the circumstances of the present case, our views are as follows: (a) when dealing with an application to amend the pleadings, which introduce a new case in the claim or defence, on the eve of the trial, the principles in Yamaha Motor are not the sole considerations; (b) the principles in Yamaha Motor applies to cases where the application to amend the pleadings is made at an early stage of the proceedings; (c) that there has to be a cogent and reasonable explanation in the applicant’s affidavit as to why the application was filed late; (d) that the application to amend the pleadings is not a tactical manoeuvre; (e) that the proposed amendment must disclose full particulars for the court to ascertain if there is a real prospect of success in proving the same; and (f) that lateness in the application to amend the pleadings cannot necessarily be compensated by payment of costs.
Salient takeaways
From the above, it is manifest that Yamaha Motor is no longer the sole go-to authority for practitioners. This is compounded by the fact that most amendment applications tend to be made rather late in the day (normally after the exchange of Draft Bundles or Witness Statements).
Practitioners would do well to remember that Hong Leong Finance is the new test to be considered when an application is even slightly delayed. For convenience’s sake, it may be best to ensure that the Affidavit in Support for every amendment application put in after the close of pleadings contains the following:
Explain that the application is made bona fide, that costs will remedy any perceived prejudice and that the amendments will not turn the suit to a different character;
Provide a cogent reason as to why the application to amend was filed late (specify how late, if necessary);
Explain that the application to amend is not a tactical manoeuvre;
Disclose full particulars of the proposed amendment.
Only then would an application to amend satisfactorily comply with Hong Leong Finance.
Practitioners will now have to be guarded as to their pleadings and to ensure precision when drafting; amendments are no longer a given under the Rules of Court 2012.
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