Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2]
[2016] WASC 257
•17 AUGUST 2016
COAL HUB PTY LTD -v- NSL CONSOLIDATED LTD [No 2] [2016] WASC 257
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 257 | |
| 17/08/2016 | |||
| Case No: | CIV:1202/2015 | 5 & 10 AUGUST 2016 | |
| Coram: | BEECH J | 10/08/16 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Rulings made | ||
| B | |||
| PDF Version |
| Parties: | COAL HUB PTY LTD NSL CONSOLIDATED LTD |
Catchwords: | Evidence Expert evidence Whether expert sufficiently articulates reasoning to make report admissible Section 79C Evidence Act 1906 (WA) Whether interests of justice require qualified person be called to give evidence |
Legislation: | Evidence Act 1906 (WA), s 79C |
Case References: | Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 2] [2007] WASC 244; (2007) 35 WAR 394 Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 Donohoe v Director of Public Prosecutions (WA) [2011] WASCA 239 McKay v Commissioner of Main Roads [No 3] [2010] WASC 232 Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 5] [2015] FCA 571 Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NSL CONSOLIDATED LTD
Defendant
Catchwords:
Evidence - Expert evidence - Whether expert sufficiently articulates reasoning to make report admissible - Section 79C Evidence Act 1906 (WA) - Whether interests of justice require qualified person be called to give evidence
Legislation:
Evidence Act 1906 (WA), s 79C
Result:
Rulings made
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett & Mr D Banda
Defendant : Mr J Garas
Solicitors:
Plaintiff : Bennett + Co
Defendant : Cardinal Litigation + Dispute Resolution
Case(s) referred to in judgment(s):
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 2] [2007] WASC 244; (2007) 35 WAR 394
Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588
Donohoe v Director of Public Prosecutions (WA) [2011] WASCA 239
McKay v Commissioner of Main Roads [No 3] [2010] WASC 232
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 5] [2015] FCA 571
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
- BEECH J:
Introduction
1 These reasons relate to two groups of objections to aspects of the evidence of the plaintiff's expert, Mr Biggs. The first group relates to objections that various aspects of Mr Biggs' report do not articulate reasoning sufficiently to make his opinions admissible. The second relates to documents, including ASX announcements, proposed to be tendered by the plaintiff to underpin Mr Biggs' report.
2 On 10 August 2016, broadly speaking, I upheld the defendant's objections, saying that written reasons would be published later. These are my reasons.
Background
3 Mr Biggs' evidence relates to the damages claimed by the plaintiff (Coal Hub) in its action for breach of contract against NSL Consolidated Ltd (NSL). The relevant agreement was between NSL and Birmanie Nominees Pty Ltd. Coal Hub is, or claims to be, Birmanie's assignee. Under the agreement NSL acquired certain tenements in the Eromanga Basin, which I will refer to as the NSL Tenements.
4 Coal Hub's case is that, under the agreement, NSL was obliged to spend at least $500,000 on drilling the NSL Tenements and it failed to do so. Coal Hub claims damages representing sums payable by NSL under the agreement as part of the purchase price, or the loss of the chance to have earned those sums. The sums were payable upon the establishment of a Joint Ore Reserves Committee (JORC) Inferred Resource of at least 500 million tonnes, and a JORC Indicated Resource of at least 250,000 million tonnes, across all or any of the NSL Tenements.
5 The thrust of Mr Biggs' evidence is that, given what has been announced by various other public companies, including their identification of various JORC resources, in relation to tenements close to the NSL Tenements, it is probable that a drilling programme by NSL would have produced an outcome triggering payment obligations under the agreement.
6 I begin by outlining Mr Bigg's report and the relevant objections to it.
Mr Biggs' report
7 Mr Biggs provides an outline of regional geology in the Eromanga Basin1 and makes some observations about local geology.2 He says that recent exploration to the south of Blackall has shown that the Winton formation hosts four coal intervals separated by between several metres to several tens of metres of non-coal sedimentary rocks, with the lowest coal interval non-conformable with the upper three sequences. Each coal interval contains variably between five and 12 seams, each usually 0.3 to 1.2 m thick, interbedded with inferior coal and other material.
8 On page 16 of Mr Biggs' report, there is an outline of the results of recent investigations in the Eromanga Basin. Mr Biggs says as follows. During four years of exploration, East Energy Resources, Coal Bank Ltd, International Coal (now known as Velpic) and Carabella Resources Ltd have located very large resources in a major new thermal coal basin and significant resource growth is expected over the next ten years. Mr Biggs says the deposits so far delineated have a number of characteristics, which he identifies. There is an objection to this outline (objection 4) on a number of grounds, including 'hearsay', 'underlying facts not proven', and 'source not identified'. That objection turns on whether and on what conditions the ASX announcements relied on by Coal Hub are admitted.
9 On page 17, in Table 2, Mr Biggs sets out what he says are recent Eromanga Basin resource estimates. These estimates are objected to (objection 6) on grounds including 'facts not proved'. This objection will turn on the result of the objections to the admission of the ASX announcements.
10 From page 18, Mr Biggs explains the process of developing a JORC resource estimate. He refers to the need to pass the reasonable prospects test in the JORC Code. He says there is a checklist dealing with reasonable prospects in Appendix 5. At page 24, he says he used it 'during this study'. There is no explanation as to how he has used it.
11 Mr Biggs says step 1 of the estimation process is to collect available background data. Step 2 he terms 'gross in situ (inventory) coal'. This step appears to involve analysis of information unearthed or interpreted during step 1, and its collation into a relational data base to enable seam correlation.
12 Mr Biggs says that in Figure 7 on page 20 he outlines some of the historical exploration information available for the area in and around the NSL Tenements.
13 There are objections in relation to Figure 7 (objections 8 and 9). Figure 7 involves the pictorial collation of historical exploration bore holes. These objections are on grounds of 'hearsay', 'unproven facts' and 'source not identified'. Again, they will turn on whether and on what basis the ASX announcements and other documents are admitted.
14 Mr Biggs says the third step of the estimation process is 'seam characterisation', in which target coal measures are geophysically logged to determine seam correlation, seam thickness, seam depth and other matters.
15 Step 4 is 'JORC prerequisites'. Mr Biggs says further exploration drilling or seismic surveys are often required to prove up target resources for 2012 JORC Code classifications. He says a common methodology is:
(a) only cored or geophysically logged bore holes are included;
(b) bore holes are drilled within 0 to 3 kms of tenure areas;
(c) an underlying structural mask of all holes is to be determined;
(d) for Inferred Resources, constrained 'points of observation' bore holes are drilled using a distance that varies per project and is determined by the Competent Person;
(e) contoured seam thickness using selected modelling algorithm techniques at about 0.3 m; and
(f) based on available quality holes or from a default, wet in situ relative density must be determined and justified.
16 Step 5 is headed 'JORC Assumptions'. Mr Biggs says the 'generalised process and assumptions' are:
(1) national parks excluded;
(2) town centres and lakes, dams excluded;
(3) seam thickness greater than 0.3 m;
(4) only cored or geophysically logged bore holes from which a laboratory or estimated ash is available are used as points of observation;
(5) points of observation for each confidence class are to be constrained to bore holes nominated distances apart as determined by the Competent Person, and a guide in that respect is appended as Appendix 7 (to which there is an objection, objection 11);
(6) coal quality averages or assumptions for in situ wet density of 1.3 g per cm3;
(7) resource risks evaluated; and
(8) assessment of whether different geological domains are present and their use justified.
17 Mr Biggs says this stage often has the ability to highlight critical shortcomings of the coal deposit.
18 Mr Biggs' outline of the process to be adopted in developing a JORC resource estimate is generalised in nature. His report says little or nothing to explain how he has notionally applied that process to the NSL Tenements, most notably in relation to step 5.
19 Mr Biggs says that Figure 8 on page 22 of his report is a compilation of all the recent known exploration targets and JORC resources in the study area, showing geological structures and trends. There is an objection to this statement (objection 12) and to Figure 8 (objection 13). Figure 8 is a pictorial representation and compilation of information about other tenements surrounding the NSL Tenements, including 'known … JORC resources in those tenements'. In relation to the NSL Tenements, a note to Figure 8 says '[p]roviding that the depositional conditions were similar to the ones that formed the resource at the East Energy tenements, a significant resource is expected to be discovered in the NSL Tenements, as they are both situated west of the main Anticline, at comparable distances and with a similar surface geology'. The significance of the NSL Tenements being west of the main Anticline is not explained. The objection to that note is based on a lack of articulated reasoning.
20 The process of developing a JORC resource estimate includes a requirement that the Competent Person must consider that there are 'reasonable prospects for eventual economic extraction' of the relevant material. Mr Biggs says that the reasonable prospects test is a vital step in the estimation process.3 He says that it can be the source of greatest variance between two or more resource estimates of the same deposit in 'these lesser known basins'.4
21 Mr Biggs says that the conditions and timeframe within which economic extraction is envisaged must be disclosed and discussed by the estimator in their supporting documentation. Further, he says the reasonable prospects test is inherently subjective, based on the estimator's experience and judgment. Assumptions made in the assessment process should be clearly identified. Among the relevant factors are the critical coal quality attributes, as these determine the potential utilisation of the coal, determining its value, and the physical attributes of the deposit, which affect future mining and costs. Further aspects of the assessment process and what should be involved in it are also outlined.
22 Mr Biggs asserts that reasonable prospects have been documented by the Competent Persons in each of the JORC statements listed in Table 2.5
23 There is an objection (objection 14) in relation to this assertion, again turning primarily on whether and on what basis the ASX announcements are admitted.
24 Mr Biggs appends a reasonable prospects checklist in Appendix 5, saying that it was applied during this study. There is an objection (objection 15) that this is a conclusion with no articulated reasoning. As I have indicated, I cannot identify any reasoning for it.
25 On page 26, under the heading of 'Resource Calculations', Mr Biggs sets out the following opinions, which are of fundamental importance to Coal Hub's case:
(1) In light of the earlier parts of his report, and having again considered the available data for the NSL Tenements, Mr Biggs concludes that, had NSL continued with its proposed coal exploration, 'there is a very high confidence' that it would have provided sufficient geological data to model any coal deposits found and report coal resources to the JORC standard (regardless of whether the 2004 or 2012 edition of the JORC Code was used).
(2) Based on results from adjacent and nearby tenure, exhibiting similar geology, it is estimated by Mr Biggs that Inferred Resources in the range of 0.8 to 1.2 billion tonnes would not be unreasonable in at least one of the NSL Tenements.
(3) If drilling had taken place, a reasonable comparison of the scale of coal tonnage present in the NSL Tenements can be found in the adjacent tenure held by International Coal who, during 2011/2012, converted a 2004 target estimate (mid-range value of 0.8 billion tonnes) into a 2012 JORC Code Inferred Resource of 1.3 billion tonnes.
26 Objections 18, 19 and 20 apply to these conclusions, based on a lack of an identified basis and a lack of reasoning.
27 Similar conclusions are asserted on page 29, where Mr Biggs says that 'there is a very high confidence' that exploration in accordance with NSL's ASX announcements would have provided sufficient geological data to model any coal deposits found and report Inferred and Indicated Coal Resources to the JORC standard. Objections 25 and 26 are made to these passages based on a lack of reasoning.
28 On page 27, Mr Biggs outlines a 'suitable exploration drilling programme' that he constructed that he says 'could have been undertaken' by NSL to provide enough geological data to achieve the threshold tonnages required by the agreement. This assertion about the data that the programme would have provided is objected to based on a lack of reasoning (objection 22).
29 Mr Biggs says the programme would consist of 20 bore holes based entirely in EPC 2337, and that the drilling density required is a bore hole every 3.2 km for Inferred Resources and every 1.2 km for Indicated Resources.
30 The joint expert memorandum indicates that Mr Biggs now accepts that spacing closer than 3.2 km would be necessary; he agreed that an initial drill spacing of between 650 m and 1.35 km would probably be required.
31 In his report, Mr Biggs says that drilling costs have fallen considerably since December 2012, when the coal boom collapsed. There is objection to his evidence about that topic (objections 23A and 23B).6
32 The whole of the executive summary on pages 2 and 3 of the report is also objected to (objection 1). This summary includes the following:
(1) From 2008 to the end of 2012, a lot of exploration took place in geographical zones trending south south-west from Blackall. The NSL Tenements lie in these 'regional trends'.
(2) The coal seams of interest lie towards the base of the Cretaceous aged Winton formation in the Eromanga Basin. That unit is laterally very extensive with coal seams continuing for hundreds of kilometres throughout western Queensland.
(3) Exploration has provided considerable geological and coal quality data to feed coal deposit modelling and resource estimation efforts that have ultimately led to several junior coal exploration companies declaring significant coal resources under the JORC Code. This was done by ASX announcements or reporting on the websites of privately held companies.
(4) The NSL Tenements remain 'highly prospective' for coal of the same magnitude of tonnage and quality to that published by other explorers.
(5) From June 2011 to the present there were changes in the JORC Code.
(6) Regardless of which edition of the JORC Code is invoked, insufficient data exists today to calculate more than an exploration target across the NSL Tenements. If drilling had taken place, a reasonable comparison of the scale of coal tonnage that would have been established can be found in the adjacent tenure, EPC 2197, held by International Coal.
(7) NSL could have devised a similar drilling programme to those used by the other Eromanga Basin explorers. Such a programme would have achieved an Inferred Resource exceeding 500 million tonnes and an Indicated Resource exceeding 250 million tonnes in at least one, if not across all, of the NSL Tenements, 'with a high degree of confidence'.
(8) Mr Biggs has constructed a suitable drilling programme that could have been undertaken by NSL to provide enough geological data to achieve the threshold tonnages required by the agreement.
33 Paragraphs (6) and (7) are subject to objection 1 on grounds including a lack of articulated reasoning.
34 In the conclusion to his report,7 Mr Biggs says that 'assessment to support these conclusions is contained in Appendices 1 to 8'.
35 Perhaps somewhat unhelpfully, it is in the appendices that the specific questions in the expert brief are directly addressed.
36 There is an explanation of the steps and time required to undertake a drilling programme sufficient to produce data to meet JORC requirements at Item 15.2 of Appendix 2.
37 In Item 15.3, dealing with the estimated costs of a drilling programme, Mr Biggs says that East Energy spent just over $1 million drilling 47 bore holes, 21 core and 26 open holes, on EPC 1399 and was able to establish 1.5 million tonnes of Inferred Resources. He says that previous exploration of a similar size had already taken place on EPC 1399. However, he also says that, given the current downturn and the fact that NSL's requirement under the agreement is to reach 500 million tonnes, he is confident that a drilling programme could be executed for less than $450,000.
38 Objection 27 to the last sentence of that item is on the ground that there is no sufficiently articulated reasoning. The objection to other parts of that item turns on whether and on what basis the ASX announcements are admitted.
39 At Item 15.6, Mr Biggs says that East Energy has announced 3.4 billion tonnes of Inferred Resources for the Blackall project, where the geological setting is 'similar' to the NSL Tenements, and the 'structural conditions comparable'. Further, he says that, given the location and size of the NSL Tenements, 'it is expected, with confidence', that they would have proven to be the host of a resource exceeding 500 million tonnes, reported under the 2012 edition of the JORC Code, if NSL had undertaken exploration.
40 Objection 28 is that this item is hearsay and that the facts are not proved. Again, that objection turns on the admissibility of the ASX announcements. Objection 29 to this item is that there is no sufficiently articulated reasoning.
41 The reasoning as stated is limited to an assertion that the geological setting is 'similar' and that structural conditions are 'comparable', with no elucidation of those matters. Based on this assertion, Mr Biggs says that it is likely that 'given their location and size' the NSL Tenements would contain a resource exceeding 500 million tonnes.
42 In Item 16.7 of Appendix 3, Mr Biggs says that the information from the Blackall project suggests that the coal in the NSL Tenements will be sub-bituminous, with inherent moistures ranging from 15% to 17%. Average raw coal ash is expected to be between 16% to 30% and average raw gross specific energy ranges from 3,729 kcal/kg to 4,678 kcal/kg. There is an objection (objection 30) to this item on the grounds of hearsay and that the relevant facts are not proved. Again, the plaintiff relies on ASX announcements and other similar documents in relation to this item.
43 Items 16.11 and 16.12 refer to results and resource announcements by East Energy. Again, there are objections to these items (objections 31 and 32) turning on whether and on what basis the ASX announcements are admitted.
44 Item 17.4 responds to a request for an opinion as to whether publicly available information can indicate the likelihood of establishing an Inferred Resource or Indicated Resource under the JORC Code on all or any of the NSL Tenements. Mr Biggs says as follows:
As previously mentioned, sufficient publicly-available information exists to indicate that both an Inferred and Indicated Resource can be established on the [NSL Tenements] providing [sic] sufficient exploration is carried out. Sources used were [East Energy's, Coal Bank's and International Coal's] ASX announcements and GIS data from Q-Spatial website of Qld government ...
45 Objection 33 to this item is on various grounds, including that Mr Biggs' reasoning is not exposed.
46 Item 17.5 responds to a request for an opinion in relation to the geological formation likely to be on any or all of the NSL Tenements. Mr Biggs says:
Nearby exploration and publicly available data suggests that the shallow coal resources would be hosted within the Cretaceous Winton and Mackunda Formations and in a number of unnamed coal seams.
47 There is a hearsay objection to this item (objection 34).
48 In Item 17.6.1, Mr Biggs says (again) that it is highly likely that an Inferred Mineral Resource under the 2012 edition of the JORC Code can be established on the NSL Tenements if sufficient exploration occurs. He says that reasonable prospects can be demonstrated here and have been by other Competent Persons in relation to nearby deposits.
49 There is an objection (objection 35) to these passages, including on the basis that there is no articulated reasoning. I am unable to identify any reasoned assessment or explanation of the reasonable prospects test as applied to the NSL Tenements. Mr Biggs evidently relies, perhaps very substantially, on the fact that reasonable prospects were established for nearby tenements. He again refers to Appendix 5, but its application to the NSL Tenements, and the reasoning leading to his conclusion, are not articulated anywhere.
50 Similar conclusions are asserted in Item 17.6.2 and 17.6.3 without any additional reasoning. The same objections are taken (objections 36 and 37).
51 In Item 17.6.4, Mr Biggs says there is a high probability that, if the exploration budget was $500,000 and no more, the 500 million tonne Inferred Resource target would have been reached. The lack of any additional reasoning is the subject of objection 38.
52 In Item 17.7.1 to 17.7.4, Mr Biggs responds to questions relating to the likelihood of an Indicated Resource being established on the NSL Tenements. He says there is 'an increased likelihood' that, if NSL had undertaken drilling, an Indicated Coal Resource would have been established. He says an anticipated tonnage cannot be approximated with confidence, but a rule of thumb applied by practitioners is that the likely magnitude of an Indicated Resource is 30% to 40% of the Inferred Resource category. Nonetheless, Mr Biggs says there is 'a high expectation and confidence' derived from neighbouring deposits that, had NSL undertaken exploration, an Indicated Resource greater than 250 million tonnes would have been established with expenditure of no more than $500,000.
53 Objections 39 - 42 are on grounds that include the lack of articulated reasoning in these parts of the report.
54 I begin with the objections made on the ground of lack of articulated reasoning.
Is Mr Biggs' reasoning sufficiently articulated?
55 I apply the outline of principles regarding the admissibility of expert evidence set out in McKay v Commissioner of Main Roads [No 3].8 In summary:
(1) an expert opinion must be in a field of specialised knowledge in which, or in the relevant part of which, the witness demonstrates that by reason of specialised training, study or experience, he or she has become an expert;
(2) the expert must state the facts or assumptions on which their opinion is based;
(3) the facts on which the opinion is based must be proved by admissible evidence; and
(4) an expert must sufficiently reveal their reasoning, based upon their expertise, from assumptions to conclusions or inferences.
56 Expert evidence must explain how the expert's special knowledge applies to the facts and matters assumed to produce the opinion. The process of reasoning that leads to the expert's conclusions must be stated or revealed in a way that enables those conclusions to be tested and a judgment made about the reliability of them.9 This must be done in chief, and not left for the cross-examiner to discover.10
57 In my opinion, in critical respects, Mr Biggs' report does not state his reasoning in a manner or to an extent that sufficiently permits scrutiny by the court of his reasoning and opinions.
58 I accept, as is emphasised by Coal Hub,11 that the subject matter of Mr Biggs' opinion necessarily involves the drawing of inferences by him, and a degree of speculation, since it involves postulating the likely results of exploration of the NSL Tenements which, by definition, has not occurred. While that feature of the topic of Mr Biggs' evidence must be borne in mind in assessing whether his reasoning is sufficiently articulated, it does not remove the necessity for sufficient articulation to enable some scrutiny of his opinions.
59 Coal Hub points to the fact that Mr Biggs' report sets out the steps involved in developing a JORC resource estimate.12 However, Mr Biggs does not explain or identify how he notionally applied those steps in relation to the NSL Tenements. This lack of reasoning is particularly significant in relation to step 5.
60 Mr Biggs says in his report that step 5 involves consideration of whether there are 'reasonable prospects for eventual economic extraction'.13 Both the 2004 (cl 19) and 2012 (cl 20) editions of the JORC Code define 'Mineral Resource' in a way that has reasonable prospects for eventual economic extraction as an element. 'Inferred Mineral Resource' and 'Indicated Mineral Resource' are two of the three categories of Mineral Resource (the third being 'Measured').
61 Mr Biggs expresses the view that reasonable prospects can be demonstrated in relation to the NSL Tenements.14 While in his report Mr Biggs outlines some of the general considerations to be applied in the assessment of reasonable prospects, he says nothing as to how those considerations might be applied to the NSL Tenements. Insofar as he says, on page 24, that he has applied the checklist in Appendix 5, again, there is no reasoning to show how the generalised considerations in that document have been taken into account.
62 Coal Hub submits that, when his report is read as a whole, Mr Biggs' reasoning is sufficiently articulated. It says that his opinion is drawn from his discussion of regional and local geology, the similarities of geology between the NSL Tenements and neighbouring tenements and the historical information as to the results of exploration, and the announced resources, on neighbouring tenements.15
63 In my view, Mr Biggs' reasoning is articulated at an impermissibly high level of generality in these respects. There is insufficient articulation of the reasoning process connecting what he says is known about regional and local geology and the broadly asserted similar geology of the NSL Tenements to his inferences from the exploration results and resources announced on other tenements as to the likelihood of Inferred and Indicated Resources being established on the NSL Tenements.
64 Coal Hub submits that Mr Biggs has formed his opinions on the basis of his knowledge of the geology of the Eromanga Basin and his review of exploration activities there, as well as information and resource statements issued by companies conducting exploration activities in the Eromanga Basin.16 I accept that this is so. However, in my view Mr Biggs has not sufficiently articulated his reasoning process.
65 Coal Hub submits that to the extent that the defendant wishes to test Mr Biggs' opinions it can do so in cross-examination.17 However, the reasoning of an expert must be articulated in chief.18
66 For these reasons, I upheld the following objections by NSL on the ground of the absence of sufficiently articulated reasoning:
(1) Objections 18 to 20, to the opinions expressed on page 26 of the report.
(2) Objections 25 and 26, to the corresponding parts of the conclusions on page 25 of the report.
(3) Objection 1, to the corresponding part of paragraphs 6 and 7 of the executive summary.
(4) Objection 13, to the substantially similar note to Figure 8.
(5) Objection 33, relating to Item 17.4.
(6) Objection 22, to the assertion on page 27 about the data that the proposed drilling programme would have provided.
(7) Objection 15, to the assertion that the reasonable prospects test was applied.
(8) Objection 35, to Item 17.6.1, regarding the reasonable prospects test.
(9) Objection 27, to Item 15.3 on page 40.
(10) Objection 29, to the second paragraph of Item 15.6.
(11) Objections 36 to 38, relating to Items 17.6.2, 17.6.3 and 17.6.4.
(12) Objections 39 to 42, to various sub-items within Item 17.7.
67 I turn to NSL's objections to the tender by Coal Hub of the ASX announcements and other documents said to be relied on by Mr Biggs.
The admissibility of the ASX announcements
68 When these issues were first heard on 5 August 2016, the focus was on the objections to Mr Biggs' report. Coal Hub's answer to many of the objections was the tender of various ASX announcements by other companies. Those announcements were not then before the court. The matter was adjourned to 10 August 2016. The documents said to be relied on by Mr Biggs, including the ASX announcements, were identified in a voluminous bundle provided to the defendant and the court on 8 August 2016. It is not clear that all of these documents were relied on in Mr Biggs' report. Further, Coal Hub did not identify the particular statements in each document upon which it relied.
69 In the circumstances, it was neither feasible nor appropriate to resolve the question of the admissibility of all of the documents in the bundle. Rather, I gave rulings in relation to particular ASX announcements to identify the approach that is to be taken more generally.
70 Coal Hub proposes to rely upon a number of announcements by other companies that are, or include, resource statements for those other companies' tenements. There are many examples of these announcements, including at tab 16, 24, 27, 38 and 43 of the bundle. I have examined the announcements in detail. Each said that the relevant company had established an Inferred or Indicated Resource (or both) of stated quantities, and that a report had been prepared in accordance with the JORC Code by a Competent Person. As the plaintiff's supplementary submissions highlight, the announcements also contain detail of how the resource figures have been arrived at and make explicit the assumptions and analysis upon which calculations have been made.
71 I accept, as Coal Hub submits,19 that two classes of statements are made in the announcements. The first class is matters of fact such as the location of, and other details relating to, drilling and the results of drilling. The second class is matters of opinion, including the reports said to comply with the JORC Code and opinions as to the establishment or estimation of any Inferred or Indicated Resource.
72 Coal Hub contends that the announcements (or, more correctly, the statements in the announcements) are admissible on three bases:
(1) under s 79C(2a) of the Evidence Act 1906 (WA) as business records;
(2) under s 79C(1) and (2) of the Act, and the court should order that it is not necessary that any relevant qualified person give evidence; or
(3) alternatively, as information within Mr Biggs' field of expertise not requiring strict proof.
73 Section 79C of the Act provides as follows:
79C Documentary evidence, admissibility of
(1) Subject to subsection (2), in any proceedings where direct oral evidence of a fact or opinion would be admissible, any statement in a document and tending to establish the fact or opinion shall, on production of the document, be admissible as evidence of that fact or opinion if the statement -
(a) was made by a qualified person; or
(b) directly or indirectly reproduces or is derived from one or other or both of the following —
(i) information in one or more statements, each made by a qualified person;
(ii) information from one or more devices designed for, and used for the purpose of, recording, measuring, counting or identifying information, not being information based on a statement made by any person.
(a) he is dead; or
(b) he is unfit by reason of his bodily or mental condition to attend or give evidence as a witness; or
(c) he is out of the State and it is not reasonably practicable to secure his attendance; or
(d) all reasonable efforts to identify or find him have been made without success; or
(e) no party to the proceedings who would have the right to cross-examine him requires him to be called as a witness; or
(f) having regard to the time which has elapsed since he made the statement and to all the circumstances, he cannot reasonably be expected to have any recollection of the matters dealt with in the statement; or
(g) having regard to all the circumstances of the case, undue delay, inconvenience or expense would be caused by calling him as a witness; or
(h) he refuses to give evidence.
(2a) Notwithstanding subsections (1) and (2), in any proceedings where direct oral evidence of a fact or opinion would be admissible, any statement in a document and tending to establish the fact or opinion shall, on production of the document, be admissible as evidence of that fact or opinion if -
(a) the statement is, or directly or indirectly reproduces, or is derived from, a business record; and
(b) the court is satisfied that the business record is a genuine business record.
(2b) Where a statement referred to in subsection (2a) is made by a qualified person that person shall not be called as a witness unless the court orders otherwise.
(3) This section makes a statement admissible notwithstanding -
(a) the rules against hearsay; or
(b) the rules against secondary evidence of the contents of a document; or
(c) that the person who made the statement or the person who made a statement from which the information in the statement is reproduced or derived is a witness in the proceedings, whether or not he gives evidence consistent or inconsistent with the statement; or
(d) that the statement is in such a form that it would not be admissible if given as oral evidence,
but does not make admissible a statement which is otherwise inadmissible.
(4) Notwithstanding subsections (1), (2) and (2a), in any criminal proceedings a statement in a document which was made in the course of or for the purpose of -
(a) the investigation of facts constituting or being constituents of the alleged offence being dealt with in the proceedings; or
(b) an investigation which led to the discovery of facts constituting or being constituents of the alleged offence; or
(c) the preparation of a defence to a charge for any offence; or
(d) the preparation of the case of the prosecution in respect of any offence,
shall not be rendered admissible as evidence by this section.
(5) For the purposes of this section a court may -
(a) for the purpose of deciding whether or not a statement is admissible as evidence, draw any reasonable inference from the form of contents of the document in which the statement is contained, or from any other circumstances;
(b) in deciding whether or not a person is fit to attend or give evidence as a witness, act on a certificate purporting to be the certificate of a registered medical practitioner.
(6) For the purposes of this section a court may, in its discretion, reject a statement notwithstanding that the requirements of this section are satisfied with respect thereto, if the court is of the opinion that the probative value of the statement is outweighed by the consideration that its admission or the determination of its admissibility -
(a) may necessitate undue consumption of time; or
(b) may create undue prejudice, confuse the issues, or in proceedings with a jury mislead the jury.
business record means a book of account or other document prepared or used in the ordinary course of a business for the purpose of recording any matter relating to the business;
qualified person, in relation to a statement, means a person who -
(a) had, at the time of making of the statement, or may reasonably be supposed to have had at that time, personal knowledge of the matters dealt with by the statement; or
(b) where the statement is not admissible in evidence unless made by an expert on the subject of the statement, was at the time of making of the statement such an expert.
statement includes any representation of fact or opinion whether made in words or otherwise.
75 Section 79D makes provision as to the approach to be taken by the court in estimating the weight to be attached to a statement admitted under s 79C.
76 There are three conditions for admissibility under s 79C(1) and (2).20
77 First, direct oral evidence of the statement must be admissible.
78 Secondly, the statement must have been made by a qualified person, or directly or indirectly reproduce or be derived from: information in one or more statements, each made by a qualified person; or from information from one or more devices designed and used for the purpose of recording, measuring, counting or identifying information that is not based on a statement made by any person.
79 That condition permits second hand hearsay; in other words, a statement made by a qualified person recorded in a document made by a third party.21
80 Thirdly, when a statement is made by a qualified person or reproduces or is derived from information in a statement made by a qualified person, the qualified person must be called as a witness unless they fall within the exceptions in s 79C(2).
81 In relation to both classes, identified in [71] above, of statements in the announcements, the requirements of s 79C(1) are satisfied. The statements were made by a qualified person or directly or indirectly reproduce, or are derived from, information in one or more statements made by a qualified person. In the case of statements in the second class, the qualified person is the Competent Person referred to in the announcements.
82 I am satisfied that, in relation to the first class of statements, the general requirement under s 79C(2) that the qualified person be called as a witness should be dispensed with.
83 However, I am not satisfied that this requirement should be dispensed with in relation to the second class of statements. When Mr Biggs' report is examined in detail, it is clear that his thinking is critically founded on what he draws from announcements by other explorers about the presence of Inferred and Indicated Resources in various tonnages. What he draws from those announcements includes the Competent Persons' assessments of reasonable prospects of eventual economic extraction. Insofar as Mr Biggs exposes his reasoning regarding the likely results of exploration of the NSL Tenements, and the prospect that exploration would have resulted in the establishment of an Inferred or Indicated Mineral Resource, he evidently relies very heavily on the announcements reporting various Mineral Resources on nearby tenements, and his statement that the coal deposits on these tenements passed the reasonable prospects test. It is clear from the experts' joint memorandum that the defendant's expert, Mr Arnott, strongly disputes whether the deposits on nearby tenements met the reasonable prospects test, and whether those reporting Mineral Resources on those tenements adhered to the standards of the JORC Code.22
84 Given the central significance to Mr Biggs' reasoning of the second class of statements made in the announcements about Inferred and Indicated Resources and other matters of opinion, and given the issues between Mr Biggs and Mr Arnott, it seems to me that the interests of justice require that the relevant Competent Persons be called as witnesses as a condition of the admission of the second class of statements.
85 There is no doubt that requiring the attendance of the Competent Persons will be inconvenient and expensive, and will result in delay. At the time these issues were heard it was common ground that, if the Competent Persons had to be called, the trial listed to commence a week after the resolution of these objections would be unable to proceed. While those matters weighed heavily in the exercise of discretion, in the end, for the reasons I have given, I was satisfied that the interests of justice required that the Competent Persons be called to give evidence.
86 It is not necessary to decide whether the statements in the announcements are admissible under the business records limb of s 79C, s 79C(2a). If the statements are admissible under s 79C(2a), I reach the same conclusion. Under s 79C(2b), an order should be made that a qualified person be called as a witness if the court considers that to be in the interests of justice.23 For the reasons I have given, I am of that opinion.
87 Coal Hub also submits that 'strict proof' of the matters said by Mr Biggs to be derived from the announcements should be dispensed with on the basis that the announcements are sources of information within his field of expertise.24 Given the significance of these matters to Mr Biggs' report, and given the issues between Mr Biggs and Mr Arnott, the statements in the announcements cannot be admitted on that basis.
88 For these reasons, I upheld the defendant's objections to statements in the ASX announcements which have the character of an expert or other opinion, including any report or statement as to the establishment of an Inferred or Indicated Mineral Resource, or as to the reasonable prospects of economic extraction, unless the Competent Person making that statement is called to give evidence.
89 The result of that ruling is that, on this ground, at least the following objections to Mr Biggs' report are upheld: objections 1, 4, 6, 12 - 14, 27, 28, 31 - 32, 35 and 36. The lack of articulated reasoning means that, while it would appear that objections 18 - 20, 25, 26, 33, 37 and 38 are also upheld on this ground, that cannot be said with certainty.
1 Page 14.
2 Page 16.
3 Page 23.
4 Page 23.
5 Page 24.
6 Page 27.
7 Page 29.
8McKay v Commissioner of Main Roads [No 3] [2010] WASC 232 [3] - [7].
9Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, 390; Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 [93].
10Dasreef [91].
11 ts 92, 95, 98.
12 See pages 18 - 21.
13 Page 23.
14 Report Appendix 3, Item 17.6.1.
15 Plaintiff's supplementary submissions dated 8 August 2016 [4] - [5]; ts 92, 95.
16 Plaintiff's supplementary submissions [6].
17 Plaintiff's supplementary submissions [8].
18Dasreef [91].
19 ts 93.
20Donohoe v Director of Public Prosecutions (WA) [2011] WASCA 239 [112] - [115].
21Donohoe [114].
22 Pages 3 to 4 of the joint memorandum; see also page 5.
23Donohoe [122].
24 Plaintiff's submissions dated 11 August 2016 [35] - [39] referring to Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 2] [2007] WASC 244; (2007) 35 WAR 394 and Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 5] [2015] FCA 571.
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