Clack v Murray - [2018] WASCA 120

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   CLACK -v- MURRAY [2018] WASCA 120
CORAM:   MARTIN CJ
BUSS P
MURPHY JA

HEARD:   5 FEBRUARY 2018
DELIVERED          :   19 JULY 2018
FILE NO/S:   CACV 25 of 2017
BETWEEN:   GREGORY RAYMOND CLACK
First Appellant
SHELLEY MAE CLACK
Second Appellant
AND
DANIEL MURRAY
First Respondent
LYNDA MURRAY
Second Respondent
BRADLEY RICHARD DENTON
Third Respondent
RAELENE JOY DENTON
Fourth Respondent
ACN 120 016 499 PTY LTD UNDER EXTERNAL ADMINISTRATION (FORMERLY MYDOMAINE PTY LTD)
Fifth Respondent

ON APPEAL FROM:
Jurisdiction              :   DISTRICT COURT OF WESTERN AUSTRALIA
Coram:   LEVY DCJ
Citation: MURRAY v MYDOMAINE PTY LTD [2016] WADC 109
File Number            :   CIV 2874 of 2012

Catchwords:

Evidence - Admissibility of expert evidence - Expert evidence as to value - Principles as to extent to which an expert may rely on hearsay evidence

Legislation:

Nil

Result:

Appeal dismissed

Representation:

Counsel:

First Appellant	:	Dr E M Heenan
Second Appellant	:	Dr E M Heenan
First Respondent	:	Mr T H Offer
Second Respondent	:	Mr T H Offer
Third Respondent	:	No appearance
Fourth Respondent	:	No appearance
Fifth Respondent	:	No appearance

Solicitors:

First Appellant	:	AustAsia Legal Pty Ltd
Second Appellant	:	AustAsia Legal Pty Ltd
First Respondent	:	McAuliffe Legal
Second Respondent	:	McAuliffe Legal
Third Respondent	:	Classic Legal
Fourth Respondent	:	Classic Legal
Fifth Respondent	:	In Person

Case(s) referred to in decision(s):

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21
English Exporters (London) Ltd v Eldonwall Ltd (1973) 1 Ch 415
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Smith v Chadwick (1884) 9 App.Cas 187
Williams v Milotin (1957) 97 CLR 465
Wright v The Municipal Council of Sydney (1916) 16 SR (NSW) 348

JUDGMENT OF THE COURT:

Summary

Following a trial in the District Court, Daniel Murray and Lynda Murray (the first and second respondents - together the Murrays), were awarded damages against a number of parties including Gregory Raymond Clack and Shelley Mae Clack (the appellants - together the Clacks). The Murrays' claim arose from their purchase of an apartment at Palm Cove in North Queensland for investment purposes.
The Clacks appeal against that judgment. The only issue raised by their appeal relates to the admissibility of expert evidence relating to the true value of the apartment at the time of its purchase. The Clacks assert that the evidence was inadmissible. They further assert that as a consequence, the Murrays failed to prove any loss and damage, and the judgment in their favour should be set aside.
For the reasons which follow, the trial judge was correct to conclude that the evidence was admissible. The appeal should be dismissed.

The reasons of the trial judge

There is no attack upon any ruling or finding made by the trial judge other than his ruling that the expert evidence with respect to the value of the apartment was admissible, and his finding as to the loss and damage suffered by the Murrays in reliance upon that evidence. It is appropriate to set the context for that issue with an overview of the non‑contentious findings made by the trial judge.
In 2009, the Murrays purchased apartment 216 in an apartment block known as Cowrie Apartments on Coral Coast Drive, Palm Cove in North Queensland for the sum of $365,000, with a rebate of $15,000 from the vendor at settlement (that is - an effective price of $350,000).
The Cowrie Apartments comprised four separate apartment blocks named Cowrie Spindle, Cowrie Tiger, Cowrie White and Cowrie Red. All four blocks had been built in the 1980s. Some of the apartments within the Cowrie Spindle block had been refurbished with modern fit‑outs by a group of companies called the Indigo Group. The apartment purchased by the Murrays was one of the apartments which had been refurbished by the Indigo Group. The Indigo Group entered into leases with Novotel Hotel for the lease of those apartments. The apartments were then sold to investors subject to that lease.
The Clacks were significant shareholders and effective controllers of MyDomaine Pty Ltd, which carried on business as MyPortfolio. The nature of the business was to encourage investment in real estate. Mrs Clack was a licensed real estate agent. On 17 April 2008, MyDomaine Pty Ltd entered into a commercial arrangement with Indigo Real Estate Pty Ltd (a member of the Indigo Group) for the marketing of properties in Queensland, including apartments in the Cowrie Apartments complex in Palm Cove. In the latter half of 2008, Mrs Clack and MyDomaine Pty Ltd negotiated a number of sales of the refurbished apartments in the Cowrie complex at a price of $360,000 or more.
MyPortfolio marketed apartments within the Cowrie complex to potential investors in Western Australia. In response to a radio advertisement comprising part of the marketing campaign, Mrs Murray spoke to Mrs Clack. Mrs Clack made arrangements for Bradley Richard Denton and Raelene Joy Denton (the third and fourth respondents - together the Dentons), who were working for MyPortfolio, to meet with Mr and Mrs Murray to discuss the services which MyPortfolio could provide. Various representations were made in the discussions which followed, and which preceded the purchase of the apartment.
The trial judge found that each of the Clacks, the Dentons and MyDomaine Pty Ltd were liable for negligently misrepresenting to the Murrays that MyPortfolio represented them, rather than the sellers of real estate. The trial judge also found that the Clacks, the Dentons and MyDomaine Pty Ltd were liable for negligently misrepresenting to the Murrays that MyPortfolio provided an unbiased consultative service, and negligently failed to advise the Murrays of the risks associated with property investment. The trial judge also found that MyDomaine Pty Ltd and the Clacks were liable for fraudulently misrepresenting to the Murrays that MyPortfolio acted for them rather than for the sellers of real estate.
The trial judge also found that the Murrays acted in reliance upon the negligent and fraudulent misrepresentations and the negligent failure to advise of risk in entering into the contract to purchase the apartment. However, he also found that the Murrays had negligently contributed to the loss they suffered by failing to heed warnings they had received, and by failing to obtain independent advice and a valuation which had been recommended to them. Accordingly, he concluded that any damages to which they were entitled should be reduced by 10% by reason of their contributory negligence.
None of these conclusions are contested in this appeal.
The damages to which the Murrays were entitled by reason of the negligence and fraud was the difference between the price which they paid for the apartment ($350,000) and its true value at the time they contracted to acquire the apartment. On behalf of Mr and Mrs Murray, evidence of the true value of their apartment at the time they contracted to acquire it was led from Mr Craig Rodney Myers, a qualified and registered valuer who had been employed by the firm of Herron Todd White in Cairns, North Queensland, for his entire career. His evidence was to the effect that the true value of the apartment at the time the Murrays contracted to acquire it was $308,200. That evidence was led over objection. No other evidence of value was adduced by any party. The trial judge accepted Mr Myers' evidence and concluded that after allowing for the contributory negligence which he had found, the Murrays were entitled to damages of $37,620.[1] Judgment was entered in favour of the Murrays in that amount, apportioned as against the various defendants.[2]
[1] $350,000 minus $308,200 = $41,800 minus 10% = $37,620.
[2] No allowance appears to have been made for interest on the damages, for reasons which are not apparent.
The trial judge also ordered the Clacks and the Dentons to pay the Murrays' costs of the action.[3] As the trial occupied seven days of hearing,[4] and involved issues which required the trial judge to deliver more than 90 pages of reasons, and was followed by a further substantively contested argument with respect to costs, which required the trial judge to deliver more than 30 pages of supplementary reasons, it is a fair inference that the combined costs of the parties vastly exceeded any reasonable assessment of the amount truly in issue. The materials before this court do not enable any assessment of the extent to which responsibility for this state of affairs should be attributed to the parties, the legal representatives or a combination of all. Cases like this, in which the legal costs of the parties vastly exceed the amount truly in issue, diminish the public standing of the legal profession and the administration of civil justice, and rightly so.
[3] By the time judgment was entered, MyDomaine Pty Ltd was insolvent and in liquidation.
[4] After the first listed day of hearing was not fully occupied.

The evidence of Mr Myers

As the evidence turns upon the admissibility of the evidence given by Mr Myers, it is necessary to set out the course of that evidence in some detail.
Mr Myers' evidence comprised his oral testimony and a bundle of documents generally described as his expert report, which became exhibit 46. That bundle includes a statement of the evidence to be given by Mr Myers and a written valuation report which he prepared in respect of the apartment acquired by the Murrays. As the issue raised in the appeal concerns only the admissibility of Mr Myers' evidence with respect to the value of the apartment acquired by the Murrays at the time they contracted to acquire it, it is unnecessary to refer to his evidence on other topics.
The written valuation report contains a description of the locality, title particulars, and the apartment. Under the heading 'Sales Evidence', details are provided in respect of five sales of apartments in Palm Cove between 1 September 2008 and 20 February 2009. The sales prices for those apartments range between $250,000 and $310,000. Based upon those sales, the report concludes by assessing the value of the apartment acquired by the Murrays at $280,000. That valuation did not include any chattels other than fixed floor coverings, window coverings and light fittings, and assumed that the property was not subject to a lease.[5]
[5] Valuation report, GAB 151.
Also included within the bundle of documents described as Mr Myers' expert report was a document described as ' QVAS sales data listing', and apparently published by the Queensland government, which sets out particulars with respect to various sales of real estate in the Palm Cove area.
At a relatively early stage in Mr Myers' evidence-in-chief, counsel for the Clacks advised the court that counsel for the Murrays had been put on notice that the information contained within the valuation report relating to the five comparable sales upon which reliance was placed would have to be proven.[6]
[6] ts 255.
Mr Myers' evidence was to the effect that he could not recall the precise process which he followed in order to identify the comparable sales upon which he relied. That evidence should be viewed in the context of his evidence that he had undertaken more than 200 valuations in the Palm Cove area. He was, however, able to describe the general practice which he followed in order to identify comparable sales, and had no reason to believe that he would not have followed his general practice on this occasion.[7]
[7] ts 260-2.
Mr Myers stated in his oral evidence that since preparing his report, he had been able to identify three of the comparable sales upon which he had relied within the 'QVAS sales data listing' document that was included within the bundle of documents comprising his report.
When counsel for the Murrays endeavoured to lead evidence-in-chief from Mr Myers with respect to the value of the apartment which the Murrays had acquired, objection was taken on the ground that the comparable sales had not been proven.[8] When counsel for the Murrays endeavoured to lead evidence in response to that objection, counsel for the Clacks suggested that the QVAS sales listing data document could be tendered by consent.[9] That document was then tendered, by consent, as exhibit 39.[10]
[8] ts 265.
[9] ts 267.
[10] ts 269.
After the objection was taken, a short adjournment was granted to enable Mr Myers to go back to his office to review his file for the purpose of ascertaining the materials upon which he relied in relation to the relevant comparable sales. When his evidence resumed, he identified valuations within Herron Todd White, the firm by which he was employed, relating to three of the comparable sales upon which he had relied. Those valuations were tendered pursuant to s 79C of the Evidence Act 1905 (WA). They were initially marked for identification until, in due course, the trial judge ruled that they were admissible.
Mr Myers identified information upon which he had relied in relation to the other two comparable sales as being written materials obtained from a proprietary source outside his employer. When objection was taken to the tender of those documents, they were marked for identification.
A similar approach was taken to the tender of the bundle of documents together described as Mr Myers' expert report. It was initially marked for identification on the basis that there would be further argument with respect to its admissibility in due course.[11]
[11] ts 299.
In the course of his evidence, Mr Myers indicated that best practice involved taking a minimum of three comparable sales for the purpose of assessing value.[12]
[12] ts 293.
During his evidence-in-chief, Mr Myers was taken to another valuation report relating to the Murrays' apartment (which was not received in evidence as truth of its contents),[13] where reference was made to a number of other sales by RJR Investments and Palm Cove Apartments Pty Ltd. With reference to those sales, Mr Myers observed that in some cases where developers do large developments and sell a lot of apartments at particular prices, they might not provide a true indication of where the market sits.[14] Mr Myers gave evidence to the effect that those sales were not included within the comparable sales to which he had regard because they appeared to be 'outliers' - at $220,000 they appeared to be quite low.[15] He took the same view in relation to the resale of those apartments at more than $350,000 - namely, they were 'outliers'.[16]
[13] ts 248 - 252.
[14] ts 301.
[15] ts 302.
[16] ts 302.
In this context, counsel for the Clacks advised the court that the on-sales of five apartments by RJR Investments all post-dated the purchase of the Murrays' apartment by some time and were not therefore relevant to the assessment of the value of the apartment acquired by the Murrays at the time it was acquired.[17]
[17] ts 306.
In cross‑examination, Mr Myers confirmed that the apartment which he had valued was in the Cowrie Spindle building.[18] He accepted that if the apartment had been sold furnished, that would add at least $10,000 to the value.[19] Mr Myers also accepted in cross‑examination that if the property had been sold subject to a five-year lease at a rental above the normal rate of return (as was the fact), $18,200 should be added to the value of the property which, if sold furnished (as was the fact), would have a total value of $308,200.[20]
[18] ts 308.
[19] ts 309.
[20] ts 315.
The following exchange took place between Mr Myers and counsel for the Clacks:[21]
Do you accept that aside from your concerns about false market value, that a sale of an apartment in the same building, which has been fitted out exactly the same between arms-length transactions, would be a good indication of the market value of the property?---Yes, in general terms.
So the reason you haven't included any such sales is because of your concern that those - that such sales by Palm Cove Apartments of other properties in the same building may have been presented as evidence of false market value?---No. It would have been because of two reasons. I just would have looked at them as an outlier. So they seemed to be quite high. And also my knowledge that they sold subject to a lease. Whereas, I am valuing the unit on an unfurnished basis. So they didn't provide comparable evidence because of the lease.
[21] ts 318.
In the course of further questions on the same topic, Mr Myers observed that there had been complexes in which dozens of units had sold for very high prices which had not been achieved on the local market. He referred to units being sold in China, Singapore or Victoria with sophisticated marketing achieving prices that could not be replicated on the local market.[22]
[22] ts 320.
The following exchange then took place:[23]
And that's simply because you're not aware of any being marketed to anybody in Queensland?---Look, I've gone through a lot of - a lot of - a lot of files. We have a lot of file notes about the history of the complex at that time. And yeah, there were - there was additional information which hasn't made it into any of my reports as reasons why I didn't use them and why I considered them to be outliers.
[23] ts 320.
We digress to observe that, as will be seen, Mr Myers' evidence to the effect that he had also taken into account information drawn from files that he had seen to support his conclusion to exclude the sales as 'outliers' is a central plank of the argument advanced in support of the appeal. It is sufficient at present to note that, after this evidence was given, counsel for the Clacks did not ask any questions about the information to which Mr Myers had referred.
In the course of cross‑examination, Mr Myers was taken to the QVAS sales data listing where his attention was drawn in particular to a number of sales of apartments in the same complex for $360,000 or more which had preceded the Murrays' purchase of their apartment. Mr Myers pointed out that almost all of those apartments were purchased by people in Western Australia and one by people resident in Brisbane. In that context he expressed the view that, 'In my experience it looked like something strange was going on'.[24]
[24] ts 323.
In re‑examination, Mr Myers confirmed that of the transactions to which his attention had been drawn by counsel for the Clacks, all the purchasers were from Western Australia, except for one purchaser from Brisbane. The lack of any local transactions had reinforced his concerns. In that context he said, 'I just didn't view them as reliable evidence'.[25] In that context he was asked whether the period over which the outlying sales occurred was of significance, to which he responded:[26]
Well, it allows you to judge whether they're just normal sales or whether there's something else going on. If all of a sudden there's a whole heap of units selling for much more than the established rate that was previously achievable and then all of a sudden we've got a dozen sales at a much higher rate, that would be cause for concern as a professional valuer.
[25] ts 325.
[26] ts 325.
After Mr Myers concluded his oral evidence, the trial judge heard argument with respect to the admissibility of the various documents which had been marked for identification. In that context, counsel for the Clacks observed:[27]
Your Honour's determination on MFI 40, 41 and 42 will answer the question about whether his [Mr Myers] opinion about the value of the property is admissible I accept. I'll make arguments about weight in submission.
[27] ts 333.
MFIs 40 - 42 were the valuations of three of the properties upon which Mr Myers relied as comparable sales by other valuers within Herron Todd White. The trial judge ruled those documents were admissible pursuant to s 79C(2)(a) of the Evidence Act and that ruling has not been challenged. Nevertheless, counsel for the Clacks now contends, contrary to the position initially adopted at trial,[28] that Mr Myers' evidence of value is not admissible.
[28] ts 333. See [35] above.

After further argument, the trial judge ruled that the documents which had been tendered from the files of Herron Todd White in relation to the other two comparable sales upon which Mr Myers had relied were not admissible. Counsel for the Murrays then tendered specific reports from the QVAS sales data listing in relation to those two properties, without objection.
The trial judge then heard argument with respect to the admissibility of Mr Myers' evidence of the value of the apartment. Contrary to the position previously foreshadowed by counsel for the Clacks, the objection to Mr Myers' opinion of value was maintained notwithstanding the admission of MFIs 40 - 42 into evidence. The argument advanced in objection to the evidence was, in essence, the argument advanced in support of this appeal. In short, it was, and is, contended that because Mr Myers relied upon unidentified information on files to support his conclusion that the transactions to which he had been taken by counsel for the Clacks were 'outliers' and had been excluded from consideration, his opinion was based upon unproven hearsay, contrary to the principles enunciated in Pownall v Conlan Management Pty Ltd.[29] The trial judge rejected that argument on the ground that the principles enunciated in Pownall required proof of matters that had been taken into account for the purposes of expressing the relevant opinion, but did not require proof of matters that had not been taken into account.[30]
[29] Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370.
[30] ts 370.

The reasons of the trial judge relating to Mr Myers' evidence

In his reasons for decision, the trial judge summarised the evidence given by Mr Myers, and which we have set out above. After referring to the submission made on behalf of the Clacks to the effect that Mr Myers had relied upon 'undisclosed hearsay in the form of undiscovered and unproduced file notes and additional information' to exclude the sales of Cowrie Spindle apartments by Palm Cove Apartments Pty Ltd, the trial judge observed:[31]
Mr Myers accepted that, 'in general terms', a sale of an apartment in the same building, which had been fitted out exactly the same, between arms‑length transactors would be a good indication of the market value of the Property (ts 318).
During the trial the plaintiffs floated the notion that the defendants had deliberately set out to create a false market. Mr Myers had noted that the sale of the Cowrie Spindle apartments had not been marketed to local buyers. Whilst he accepted that he did not know whether any of the sales of the Cowrie Spindle apartments by Palm Cove Developments Pty Ltd were engineered so as to create a false market (ts 316 ‑ 317), he said:
I think there's enough concern with the purchasers all coming from the same place and the contracts of sale being in such a close proximity and it's on the other side of the country (ts 322).
It is clear that Mr Myers had formed the view that there was something untoward about the sale of the Cowrie Spindle apartments (ts 323). Mr Myers ultimately described the sales of Cowrie Spindle apartments by Palm Cove Apartments Pty Ltd for about $365,000 as 'outliers' (ts 302). Mr Myers, as a qualified and very experienced property valuer with specialist knowledge of the Palm Cove market was well placed to know whether these prices were anomalies in the market.
[31] [2016] WADC 109 [313] - [315].
The trial judge then set out the QVAS sales data listing. After referring to the location of the purchasers in the transactions which had been excluded from consideration by Mr Myers he observed:[32]
In the circumstances, the mere fact that nine properties were sold for at or above $360,000 does not lead to the conclusion that they represented what the true market value for renovated apartments in Palm Cove was at the time. Each of those sales was through a specific marketing agreement and every one of the purchasers came from either interstate or Brisbane. They were not local purchasers.
Mr Myers was qualified and very experienced in his area of property valuation. He was generally an impressive witness who made relevant concessions when appropriate. The defendants did not call any expert opinion evidence to contradict Mr Myers.
Given the stark contrast between the sale price of properties sold by MyDomaine as opposed to those sold by others, it is not surprising that Mr Myers was reluctant to rely upon the properties sold by MyDomaine. In my opinion a prudent valuer such as Mr Myers was right to exclude the properties sold by MyDomaine as 'outliers' when arriving at his opinion of market value.
[32] Reasons [323] - [325].
Accordingly, the trial judge accepted that the true market value of the apartment acquired by the Murrays at the time they acquired it was $308,200.

The grounds of appeal

There are two grounds of appeal. They are:
1. The trial judge erred in law in admitting the inadmissible opinion evidence of Mr Craig Myers, which was inadmissible because the opinions he expressed inextricably relied upon specific hearsay not disclosed or admitted into evidence.
Particulars
Mr Myers opined that the market value of the apartment purchased by the first and second respondents was $308,200, on the basis of his consideration of certain other sales which were in his opinion comparable.
Mr Myers opined that certain sales of apartments similar to the one purchased by the first and second respondents, in the same apartment complex, by the same vendor, at or above the purchase price paid by the first and second respondents were not comparable because they were 'outliers'.
In forming the opinion that the above sales were 'outliers', Mr Myers relied on specific hearsay which was not disclosed or admitted into evidence, namely 'additional information' in 'files' and 'file notes' concerning the history of the complex in which the apartments were located.
2. As a consequence, the trial judge erred in fact and in law in finding that the first and second respondents had suffered loss and damage, and the trial judge ought to have dismissed the action, because damages were the gist of the causes of action relied upon.
The proposition advanced in the second ground of appeal to the effect that 'damages were the gist of the causes of action relied upon' must be accepted.[33] Because the only evidence of the value of the apartment at the time the Murrays contracted to acquire it was the evidence given by Mr Myers, if that evidence was inadmissible, the Murrays will have failed to establish a necessary component of the causes of action upon which they succeeded, the second ground of appeal must be allowed, and the judgment in their favour set aside. On the other hand, if the evidence of Mr Myers was admissible, the second ground of appeal cannot succeed and the appeal must be dismissed. Therefore, the outcome of the appeal depends entirely upon the outcome of the first ground of appeal.
[33] In respect of the causes of action in negligence - see Williams v Milotin (1957) 97 CLR 465, 474, in respect of the cause of action in deceit, see Smith v Chadwick (1884) 9 App.Cas 187, 195 - 196.

Ground 1

Ground 1 falls to be assessed in a context in which Mr Myers' opinion as to the value of the apartment at the time the Murrays contracted to acquire it was based upon the five comparable sales identified in his written report. The ground of appeal does not challenge the evidentiary basis for the expression of that opinion, and, by omission, implicitly accepts that the five comparable sales upon which Mr Myers relied were proven. Rather, ground 1 is directed to the matters which Mr Myers did not take into account for the purposes of forming his opinion as to value - namely, the sales which he described as 'outliers'.
The essential proposition underpinning ground 1 of the appeal is to the effect that the admissibility of Mr Myers' opinion did not depend only upon proof by direct evidence of the comparable sales which he took into account, but also upon proof by direct evidence of all facts, matters or circumstances which he took into account when deciding to exclude other sales on the ground that they were not comparable. The fundamental difficulty with this proposition is that not only is it unsupported by direct authority (as counsel for the appellant conceded),[34] it is contrary to authority which has been recognised and applied in Western Australia.
[34] Appeal ts 16.

English Exporters (London) Ltd v Eldonwall Ltd

The decision of Megarry J[35] in English Exporters (London) Ltd v Eldonwall Ltd[36] is generally regarded as a leading authority in this area, and has been cited with approval in this court. The case is directly on point, as it concerns the extent to which a valuer can permissibly rely upon matters drawn from his own knowledge and experience, and which are not proven by direct evidence on the one hand, as compared to specific transactions upon which he relies for the formation of an opinion as to value, on the other hand, and which must be proven. Megarry J expressed the principles relating to the former category of case, being the category later described as 'non-specific hearsay' by Pattenden[37] in the following terms:[38]
As an expert witness, the valuer is entitled to express his opinion about matters within his field of competence. In building up his opinions about values, he will no doubt have learnt much from transactions in which he has himself been engaged, and of which he could give first-hand evidence. But he will also have learned much from many other sources, including much of which he could give no first-hand evidence. Text books, journals, reports of options and other dealings, and information obtained from his professional brethren and others, some related to particular transactions and some more general and indefinite, will all have contributed their share. Doubtless much, or most, of this will be accurate, though some will not; and even what is accurate so far as it goes may be incomplete, in that nothing may have been said of some special element which affects values. Nevertheless, the opinion that the expert expresses is none the worse because it is in part derived from the matters of which he could give no direct evidence. Even if some of the extraneous information which he acquires in this way is inaccurate or incomplete, the errors and omissions will often tend to cancel each other out; and the valuer, after all, is an expert in this field, so that the less reliable the knowledge that he has about the details of some reported transaction, the more his experience will tell him that he should be ready to make some discount from the weight that he gives it in contributing to his overall sense of values. Some aberrant transactions may stand so far out of line that he will give them little or no weight. No question of giving hearsay evidence arises in such cases; the witness states his opinion from his general experience.
[35] As he then was.
[36] English Exporters (London) Ltd v Eldonwall Ltd (1973) 1 Ch 415.
[37] Dr Rosemary Pattenden, Expert Opinion Evidence Based on Hearsay (1982) Crim LR 5.
[38] (1973) 1 Ch 415, 420.
The latter portion of this passage applies directly to the circumstances of this case. Mr Myers was very experienced in the valuation of real estate in Palm Cove. He had undertaken more than 200 valuations in that area over more than 15 years. Utilising his training and experience, he had observed market trends and movements in Palm Cove over a significant period. It is clear from his evidence that he applied that general knowledge and experience to conclude that the transactions which were put to him by counsel for the Clacks were 'aberrant' or in his word 'outliers' and should not be included amongst the comparable sales upon which he relied for the purpose of assessing the value of the apartment acquired by the Murrays. As Megarry J observed:[39]
No question of giving hearsay evidence arises in such cases; the witness states his opinion from his general experience.
[39] (1973) 1 Ch 415, 421.
The fact that Mr Myers' conclusion that the transactions he described as 'outliers' was also drawn from information which he gleaned from files in the office does not detract from the applicability of the observations made by Megarry J to the circumstances of this case. To the contrary, it reinforces its aptness, given the observations made in the passage above to the various possible sources of extraneous information which will contribute to the developed expertise of a valuer.
The principles applicable to the second category of case - the category later termed 'specific hearsay' by Dr Pattenden, were expressed by Megarry J in the following terms:[40]
… details of comparable transactions upon which a valuer intends to rely in his evidence must, if they are to be put before the court, be confined to those details which have been, or will be, proved by admissible evidence, given either by the valuer himself or some other way.
[40] (1973) 1 Ch 415, 422.
Megarry J drew support for these principles from the decision of the Full Court of the Supreme Court of New South Wales in Wright v The Municipal Council of Sydney.[41] Particular reliance was placed upon the following passage from the judgment of Sly J:[42]
An expert in land values can in my opinion give evidence that he has experience of sales in the district, and also that he has kept in touch with sales not made by himself in the district, to show that he is competent to give evidence as to value in the particular case. He can in my opinion give direct evidence of sales of other lands comparable to support his valuation of the land in question, provided he gives proper legal evidence of such sales, or such evidence has already been given.
[41] Wright v The Municipal Council of Sydney (1916) 16 SR (NSW) 348.
[42] Wright v The Municipal Council of Sydney [359].
The essence of Mr Myers' evidence in relation to the transactions which were put to him by counsel for the Clacks was to the effect that he was not satisfied that the circumstances in which those sales were negotiated was such as to make them comparable to an arms-length sale between fully informed parties. He came to this conclusion because the purchasers were not resident in North Queensland and because the prices were well above the range which he considered to be applicable. This was a conclusion at which he arrived drawing upon his expertise and experience of sales in Palm Cove. Further, and significantly, it was a conclusion to the effect that transactions would be excluded from consideration, rather than included.
Megarry J summarised the principles applicable in the following terms:[43]
… A valuer giving expert evidence-in-chief (or in re-examination):
(a)may express the opinions that he has formed as to values even though substantial contributions to the formation of those opinions have been made by matters of which he has no first-hand knowledge;
(b)may give evidence as to the details of any transactions within his personal knowledge, in order to establish them as matters of fact; and
(c)may express his opinion as to the significance of any transactions which are or will be proved by admissible evidence (whether or not given by him) in relation to the valuation of which he is concerned; but
(d)may not give hearsay evidence stating the details of any transactions not within his personal knowledge in order to establish them as matters of fact.
[43] (1973) 1 Ch 415, 423.

Pownall v Conlan Management Pty Ltd

The reasons given by Megarry J in English Exporters were cited with approval by the Full Court of this court in Pownall v Conlan Management Pty Ltd. Ipp J, with whom Malcolm CJ agreed, specifically relied upon the reasons of Megarry J for the proposition that:[44]
Information obtained by a valuer from others, relating to particular transactions, forms part of his general experience, knowledge and expertise upon which he can draw 'to formulate his opinion and to express working truths' … Hearsay information of this kind may be used by a valuer, for example, to give a general exposition of the subject, to assess market trends, or to determine whether a particular transaction is aberrant or consistent with overall market conditions: see English Exporters (London) Ltd v Eldonwall Ltd (at 421). Hearsay evidence of this character (termed 'non-specific hearsay' by Pattenden …) is to be contrasted with hearsay evidence of particular comparable transactions that are used to infer the value of the property that is directly in issue (termed 'specific hearsay' by Pattenden …). Hearsay information of the latter kind, which is not otherwise proved by direct evidence, cannot be used by the valuer, unless otherwise proved by direct evidence.
[44] Pownall v Conlan Management Pty Ltd [374].
We reiterate that in this case Mr Myers has drawn upon a number of sources of 'non-specific hearsay', including the information he derived from files maintained in the office in which he works, in order to conclude that the transactions that were put to him by counsel for the Clacks were 'aberrant' or not consistent with overall market conditions, with the result that they would not be taken into account for the purposes of assessing the value of the apartment in question. This approach is entirely consistent with authority.
For the sake of completeness, mention should be made of Dasreef Pty Ltd v Hawchar,[45] upon which counsel for the Clacks placed reliance. While that case reaffirmed a number of rules relating to the admissibility of expert evidence, including the rule described by the plurality as 'the basis rule' or by Heydon J as the 'proof of assumption rule',[46] no member of the court turned their attention to the issue raised by this ground of appeal or to the distinction between what has come to be described as 'non-specific hearsay' on the one hand, and 'specific hearsay' on the other. Accordingly, the decision provides no support for the Clacks' argument.
[45] Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21.
[46] It is of interest to note that Heydon J cited Pownall v Conlan Management Pty Ltd as authority for the proposition that the rule applies in Western Australia.

Disposition

Mr Myers relied upon his general experience with respect to transactions for the sale of apartments in Palm Cove, which was very extensive (non‑specific hearsay) and upon five transactions in particular which he considered to be comparable (specific hearsay). The five transactions upon which Mr Myers relied for the formation of his opinion as to the value of the apartment acquired by the Murrays at the time they contracted to acquire it were all proven by direct evidence. Pursuant to the legal principles which we have enunciated, Mr Myers was entitled to rely, and did rely, upon his general experience to exclude other transactions from consideration on the basis that they were not comparable - in his words 'outliers', or in the words of Megarry J 'aberrant'.
Counsel for the Clacks was, of course, entitled to cross‑examine Mr Myers in relation to his choice of comparable sales. Counsel was entitled to put, as he did, both to Mr Myers and to the court that his opinion of value should be diminished because of his failure to take into account other transactions which were, in truth, comparable. However, that line of cross‑examination goes to the weight of Mr Myers' opinion, not to its admissibility, given that the five particular transactions upon which he relied had been proven by direct evidence.
The trial judge was correct to so hold. Further, given that Mr Myers did not accept that the transactions which were put to him by counsel for the Clacks were indeed comparable, and explained the reasons for that view, the extent to which that line of cross‑examination would diminish the weight to be given to Mr Myers' evidence would depend upon the extent to which his explanation for the exclusion of those transactions was plausible or implausible and, perhaps ultimately, upon whether the party relying upon those transactions for the purpose of impugning his evidence established that they were, in fact, comparable sales.

In the present case, the reasons given by Mr Myers for not including the transactions within the comparable sales which he took into account were plausible and were accepted by the trial judge. No attempt was made by the Clacks to establish, by evidence, that the transactions were in fact comparable, so as to undermine the plausibility of the reasons given by Mr Myers for excluding them from consideration and thereby undermining the weight of his evidence.

Conclusion

The proposition which underpins the first ground of appeal is directly contrary to authority in this and other jurisdictions. The ground must be dismissed. It follows that the appeal must be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MV
ASSOCIATE TO THE HONOURABLE CHIEF JUSTICE MARTIN
19 JULY 2018