Ensham Resources Pty Limited v AIOI Insurance Company Limited

Ensham Resources Pty Limited filed a lawsuit against AIOI Insurance Company Limited, seeking to enforce a policy of insurance. The Insurers argued that the policy was void due to fraudulent non-disclosure and misrepresentation by Ensham regarding the adequacy of flood protection at its mining sites. The Federal Court of Australia was tasked with determining whether the Insurers could amend their defence to include allegations of fraudulent non-disclosure.

The central legal issue was whether the Insurers could amend their defence to include allegations of fraudulent non-disclosure, despite the near-finalisation of the discovery process and the lack of a significant prejudice to Ensham. The Court had to balance the prejudice to Ensham against the Insurers' right to raise the issue of fraudulent non-disclosure, considering the magnitude of the claim and the adequacy of the evidence provided.

The Court concluded that while there was some prejudice to Ensham in allowing the amendment, there was also a real prospect of prejudice to the Insurers if they were prevented from raising the alleged fraudulent non-disclosure. The Insurers had provided sufficient evidence to support the amendment, and the absence of a fixed final hearing date reduced the significance of any potential prejudice to Ensham. The Court was satisfied that the Insurers had adequately explained the delay in bringing the amendment and that the case was one that was open to them to raise based on the material provided.

Accordingly, the Court granted the Insurers leave to file a third further amended defence, allowing them to include allegations of fraudulent non-disclosure in their defence. The Court's decision recognised the Insurers' right to raise the issue while mitigating potential prejudice to the Plaintiff by allowing the amendment under specific conditions.