Biseja Pty Ltd v NSI Group Pty Ltd

[2006] NSWSC 1496

CITATION:	Biseja Pty Ltd v NSI Group Pty Ltd [2006] NSWSC 1496
HEARING DATE(S):	5 December 2006
JURISDICTION:	Equity
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	12/05/2006
DECISION:	Not every assumption need be proved; report admitted
CATCHWORDS:	EVIDENCE – opinion – expert evidence – construction industry practices – whether proper matter for expert opinion – need for proof of assumptions – whether proof of every assumption is a condition of admissibility of report – distinction between fundamental and other assumptions
CASES CITED:	Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
PARTIES:	Biseja Pty Ltd (plaintiff) NSI Group Pty Ltd (defendant)
FILE NUMBER(S):	SC 2969/06
COUNSEL:	M Willmott SC w M Sneddon (plaintiff) G Moore w F Hicks (defendant)
SOLICITORS:	L Capolupo & Co, Solicitors (plaintiff) William Costis & Associates (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Tuesday, 5 December 2006

2969/06 Biseja Pty Limited v NSI Group Pty Limited

JUDGMENT (ex tempore)

1 HIS HONOUR: The cross-claimant Biseja sought to read an affidavit of Gregory James Incoll sworn 13 October 2006 which annexes a report of that witness of the same date. Mr Incoll holds the degrees of Bachelor of Engineering and Masters in Engineering, is a Fellow of the Australian Institute of Company Directors, and has 23 years project and development management experience. He was asked by the solicitors for the cross-claimant to answer the following questions:

1: By reference to the terms of the building contract for stage 2, what, if any, services provided by NSI by reference to the Affidavits of Mark Magill and Emade Semaan were in addition to the services that were required to be provided under the building contract.

2: What would be the usual rate for project management services for projects such as this.

3: Based on the evidence provided and your conclusion as to the services and activities provided/performed that were not part of the obligations of NSI pursuant to the building contract please provide an assessment of the reasonable cost or value of those services.

2 For the purpose of answering those questions he was briefed with the relevant documents and affidavit material including, in particular, an affidavit of Emade Semaan sworn 16 June 2006 and affidavits of Mark Magill, both sworn 8 September 2006. He was also briefed with a copy of the relevant building contract.

3 In his report he introduces Part 1.0 paragraph 1 by describing it as responding to the following questions

a) By reference to the terms of the building contract for Stage 2 what, if any, services provided by NSI by reference to the Affidavits of Mark Magill and Emade Semann were in addition to the services that were required to be provided under the building contract?
b) What would be the usual rate for project management services for projects such as this?
c) Based on evidence provided and your conclusion as to the services and activities provided/performed that were not part of the obligations of NSI pursuant to the building contract please provide an assessment of the reasonable cost or value of those services?

4 Part 1 of the report describes his brief, his approach to answering the questions and the structure of his report. Part 2 is entitled “Relevant Training and Experience” and sets out his qualifications as an expert. Part 3, entitled “Building Contract Review”, considers and expresses some conclusions about the Building Contract in question. In paragraph 28 Mr Incoll concludes that the building contract “is a standard form style of the Contract for Sale by a builder, with construct only obligations”. If Part 3 of the report were relied on as evidence informing the interpretation of the contract, it would be inadmissible for that purpose, and I will not admit it in any event for that purpose. In particular, I would not have regard to any evidence from the witness as to whether, as this expert asserts, the building contract is a “construct only”, as opposed to a “design and construct” contract. That issue is one exclusively for me and not for construction industry experts. Should I admit other parts of the report, then Part 3 will be admitted only for the purpose of outlining the assumptions on which the witness has approached the questions that he has answered, and not as evidence of the correctness of those assumptions.

5 No objection is taken to Part 4 of the report, which is entitled “Required Development Roles” and summarises the respective roles of the developer, project manager and builder in a project. Prima facie, a description of the roles usually performed by each of those participants in a development project would properly be the subject of expert evidence.

6 The first question posed of Mr Incoll is answered in Part 5 of the report, entitled “Services Provided By NSI”. In Part 5, Mr Incoll reviews the affidavits with which he was briefed as to the works said to have been performed by NSI, and comments in respect of each aspect of those works as to whether or not it was within the role normally undertaken by a builder under a “construct only” contract.

7 There is evidence which, if accepted, would establish that some elements of the works to which Mr Incoll refers in Part 5 of his report were performed by NSI. In particular, the works to which he refers in paragraphs 34 and a substantial part, though not all, of paragraph 42 are the subject of evidence which, as I have said, if accepted, would establish that those works were done by or on behalf of NSI. However, at least at this stage, the evidence on which Mr Incoll relied for assuming that NSI had performed certain other works – in particular, that referred to in paragraphs 36, 37, 40, 41, and parts of 42 of his report – has been rejected. Mr Incoll recorded that the basis of the assumptions which he made as to those matters was contained in parts of or annexures to the affidavits of Mr Semaan and Mr Magill, and those parts have been rejected.

8 Part 6 of Mr Incoll’s report answers the second question he was posed. It expresses a view as to the usual rate of remuneration for project management services for projects of the type presently in question.

9 Part 7 applies the answer to Part 6 to the contract price in the instant case and really amounts to no more than a mathematical calculation of what the reasonable cost of project management services in this case would be.

10 Part 8 summarises the preceding three parts by providing Mr Incoll’s answers to the three questions to which I have referred.

11 There are substantially two grounds of objection to Mr Incoll’s report. The first is that, at least in respect of question 1, the matter on which he opines is not a proper matter for the expert opinion of an engineer or project manager, being a question of construction of the relevant contract. The second is that the assumptions – or at least material assumptions – upon which his opinion depends have not been and will not be proved.

12 So far as the first is concerned, this relates, as I have said, to the first question posed of Mr Incoll. On its face, that question is one of interpretation of the building contract. If there were no more to it than that, the objection would be correct. However, reading Part 5 of Mr Incoll’s report as a whole, I think its effect plainly enough is that, having assumed that the contract is a “construct only” contract, he proceeds to analyse each aspect of the works claimed to have been performed by NSI, and to characterise them as falling within or without what a builder under such a contract would normally, as a matter of construction industry practice, do. The content of Part 5 of the report is typically phrased in terms of what is normally done by a builder under such a contract, or what is typically a builder’s or a project manager’s role or responsibility in such a setting. On that basis, I think it is evidence of what would be common practice in the construction industry as to the respective roles of a builder and a project manager, which those negotiating such a contract could be assumed to know as part of background matrix to their negotiations. On that basis, but not on the basis that it is direct evidence of what the contract means, I would admit Part 5, subject, however, to the other objection.

13 The second objection is that Mr Incoll’s opinions are based on assumptions which have not been proved and are not able to be proved and, accordingly, that his opinion is inadmissible. This objection is based on what was said by Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. In particular, his Honour said (at 743, [85]) that if evidence tendered as expert opinion is to be admissible, then, so as far as the opinion is based on facts observed by the expert, those facts must be identified and admissibly proved by the expert, and so far as the opinion is based on ‘assumed’ or accepted’ facts, they must be identified and proved in some other way. In addition, it must be established that the facts on which the opinion is based form a proper foundation for it.

14 That does not mean that the assumed or accepted facts, as Heydon JA described them, have to be proved in the same manner that the expert assumed or thought that they might be proved. In particular, if the affidavit evidence probative of the assumed facts is rejected, that does not mean that the assumed facts cannot be proved in the case by other means. This is plainly demonstrated by the circumstance that experts are often permissibly asked to express an opinion based on a number of assumptions, in the absence of any evidence to make good these assumptions, leaving it open to the parties to call witnesses to prove these assumptions at the trial.

15 What Heydon JA said was addressed not to the means of proof of the assumed or accepted facts, but the necessity that the expert opinion be based on facts which are ultimately proved in one way or another. An expert opinion is valid and persuasive only to the extent that the facts assumed are established, but it is quite immaterial to that line of reasoning how those facts are established. Thus, if despite the rejection of the affidavits which the expert used as his basis for making assumptions, the facts asserted in those affidavits are proved by other means at the trial, the opinion is still based on assumed facts which are ultimately proven, and is nonetheless valid. Accordingly, if the facts which the expert assumes can be proved by means other than the affidavits of Mr Semaan and Mr Magill, to the extent that they have been rejected, the opinion may still be valid and of weight.

16 Nor do I think that what Heydon JA said means that every fact assumed by the expert must be proven as a condition of the admissibility of the expert’s report, although the absence of proof of any one or more of the assumed facts may ultimately be significant, if not fatal, to the weight which will be attributed to the report. Makita does not require an expert to predict in advance every possible combination or permutation of the evidence that the fact-finding process might determine, in order for the report to be admissible. If any one or more assumption which the expert makes is not proved, it will typically be necessary for an expert to express an opinion as to the effect on his ultimate opinion of the absence of that assumption. Departures from the assumed state of affairs to the actually proved state of affairs will often require supplementary evidence (to address the differences), cross-examination, and judgment as to the impact or significance of the departure of the proved state of affairs from the assumed state of affairs, but I do not accept that it is necessary to prove every one of the assumptions made by an expert before his report is admissible; whereas some assumptions may be fundamental so that without them the opinion cannot stand, others may not be critical to the opinion.

17 Against that background, I return to Part 5 of Mr Incoll’s report. As I have said paragraphs 36, 37, 40, 41, and parts of 42 are founded on assumptions drawn from affidavit material which has been rejected. Those assumptions relate to aspects of the services said to have been provided by NSI. Some of those aspects have been proved by other evidence, in particular the supplementary affidavit of Mr Semaan read this morning; others may be proved by other evidence, including documentary evidence, yet to be tendered. To the extent that rendering of the relevant services is not proved, the opinion will be of no weight or utility in respect of that matter; but, to the extent that any such provision of services is proved, the opinion will be of use in identifying whether or not that aspect is a function normally performed by a builder or normally performed by, for example, a project manager. It is not at this stage clear that any one or more of those assumptions will plainly not be proved. It does not follow, as I have said, from the rejection of the initial means of proving them, that the assumptions will not and cannot be proved. Accordingly, I would not reject Part 5 of the report on the basis of the Makita objection.

18 So far as Part 6 is concerned, as I have said it expresses a view as to an appropriate rate for project management services for equivalent projects. As I read paragraphs 49-53, the opinion does not depend on assuming that any particular aspects of the services said to have been performed by NSI were performed; rather, it simply asks and answers what rate would be charged for project-managing this contract. An adjustment is made, it is true, in paragraph 52, for the assumption that some services had already been performed on behalf of the developer. That seems to be an adjustment in favour of the cross-defendant. It is not apparent that failure to establish any one or more of the assumptions referred to in Part 5 would affect the answer given in Part 6. Even if the extent of services ultimately proved did affect that answer, that would be a matter of difference between the assumed state of facts and the proved state of facts which could be covered by supplementary evidence, cross-examination and judgment. I will not reject Part 6.

19 So far as Part 7 is concerned, although paragraph 54 does refer to “the services and activities provided/performed that were not part of the obligations of NSI pursuant to the building contract”, it is plain when read as a whole that Part 7 simply involves the mathematical application of the result of Part 6 to the contract price. I do not think that the admissibility of Part 7 is sufficiently undermined by any shortcoming in proof of the assumptions in Part 5 to vitiate the conclusion in Part 7.

20 So far as Part 8 is concerned, I do not take it to do anything more than summarise what has preceded it.

21 I admit the report of Mr Incoll annexed to his affidavit in its entirety.

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