Coal Hub Pty Ltd v NSL Consolidated Ltd [No 3]
[2017] WASC 144
•26 MAY 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: COAL HUB PTY LTD -v- NSL CONSOLIDATED LTD [No 3] [2017] WASC 144
CORAM: BANKS-SMITH J
HEARD: 24 MAY 2017
DELIVERED : 25 MAY 2017
PUBLISHED : 26 MAY 2017
FILE NO/S: CIV 1202 of 2015
BETWEEN: COAL HUB PTY LTD
Plaintiff
AND
NSL CONSOLIDATED LTD
Defendant
Catchwords:
Evidence - Expert evidence - Whether late supplementary expert evidence should be excluded - Prejudice - Whether reasons in report sufficiently articulated - Whether ruling should be made during trial
Legislation:
Nil
Result:
Rulings made
Objections upheld
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):
Bond Media Ltd v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82
Coal Hub Pty Ltd v NSL Consolidated Ltd [2016] WASC 203
Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2] [2016] WASC 257
Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Morris v Danoz Directions Pty Ltd (in liq) (No 2) [2010] FCA 836
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183
RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152
Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 234 FCR 549
BANKS-SMITH J:
Background
This is a dispute about whether the defendant breached a contractual obligation to drill and then failed to try to establish Joint Ore Reserves Committee (JORC) inferred or indicated resources (coal) present on certain tenements to stated threshold levels. If those threshold JORC inferred or indicated resources had been established, the defendant was obliged to make payments to the plaintiff.
The prospect of establishing the threshold inferred or indicated resources is central to the dispute.
I am asked to rule on evidence objections in response to a formal application made by the defendant on 24 May 2017, being day five of a trial listed for seven days.
History of objections to the reports of Mr Biggs
On 9 September 2016, the plaintiff filed an expert report of a geologist, Mr Biggs. Mr Biggs had previously provided an expert report filed 2 March 2016 and a supplementary report filed 1 August 2016.
The March 2016 report was the subject of objections which were addressed by Beech J at a hearing in August 2016. His Honour upheld many of the objections.[1] As a result of Beech J's decision, the trial, then scheduled for September 2016 was vacated. The trial was rescheduled and commenced on 18 May 2017.
[1] Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2] [2016] WASC 257.
Useful background is set out in the reasons of Beech J and also in the reasons of Le Miere J in determining a privilege dispute in this matter.[2] Taking into account the urgency with which this application must be dealt, I do not propose to repeat background matters in detail.
[2] Coal Hub Pty Ltd v NSL Consolidated Ltd [2016] WASC 203.
As is apparent from Beech J's reasons, one of the main issues with Mr Biggs' 2 March 2016 report was that he sought to rely upon published statements of third party corporate tenement holders which set out information as to their JORC inferred or indicated resources.
The assessment of JORC inferred or indicated resources is a matter of opinion of a person qualified to be a Competent Person and is properly the subject of expert evidence. By the 2 March 2016 report, the plaintiff sought to rely upon s 79C of the Evidence Act 1906 (WA) as to the truth of the contents of the statements, including as to the JORC inferred or indicated resources.
In summary, Beech J held that certain factual matters (category 1) could be admitted under s 79C but that matters of opinion (category 2) would not be admitted unless the Competent Person was called as a witness.
His Honour also upheld many objections on the basis that Mr Biggs' reasoning with respect to certain statements was not sufficiently articulated.
The current report and objections
On 9 September 2016, the plaintiff filed a further report of Mr Biggs (Report).
On 6 February 2017, the defendant filed a schedule of objections to the Report. The plaintiff did not respond to the schedule of objections before trial.
On day two of the trial, I heard submissions as to the objections to the Report. Many of those objections were on the basis that Mr Biggs' reasoning with respect to certain statements of opinion in the Report was not sufficiently articulated.
On day three of the trial, the plaintiff filed a written schedule responding to the defendant's 6 February 2017 schedule. Part of that schedule referred to a new document, Annexure A. Annexure A was provided with the schedule. It comprised two supplementary tables to be read as part of the Report, one referring to 'NSL Tenures Potential Inferred Resources' (Table 6a) and the other to 'NSL Tenures Potential Indicated Resources' (Table 6b). The defendant's counsel, Mr Garas, said he would consider Annexure A overnight.
On day four of the trial, Mr Garas raised significant difficulties said to arise from Table 6a and Table 6b. He submitted that the tables suggested that the potential inferred and indicated resources as set out in those tables were calculated in a manner that had not previously been disclosed in the Report. That basis was different to the basis upon which potential inferred and indicated resources had apparently been assessed in the Report.
The suggestion was that Tables 6a and 6b had been prepared in response to the objection submissions made on day two and were calculated or reproduced retrospectively so that the numbers matched (or were close to) those included in the Report.
As can perhaps be inferred, significant trial time in this matter has been spent dealing with objections. Mr Garas suggested that one way of resolving the issues as to Tables 6a and 6b was to conduct a voir dire with Mr Biggs and Mr Arnott (the defendant's expert) present so that Mr Garas could ask Mr Biggs about the preparation of Tables 6a and 6b and he could then consider whether objections to the admission of those tables or other parts of the Report would be pressed. That appeared to be a sensible manner by which to attempt to progress the issues and a voir dire is not uncommon in such circumstances. See, for example, Dasreef Pty Ltd v Hawchar.[3]
[3] Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 [18].
A voir dire was scheduled for the following day (day five).
On the morning of day five, a revised version of Tables 6a and 6b was handed up in court by Mr Bennett.
At the end of the voir dire, Mr Garas sought a ruling as to the admission of Tables 6a and 6b, and as to objections to certain paragraphs in the Report.
Preliminary point - determination of the objections - weight or admissibility
I interpose at this point to note that during day two Mr Bennett submitted that in accordance with Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd[4] and Morris v Danoz Directions Pty Ltd (No 2),[5] I should admit Mr Biggs' evidence even where the objection is that a process of reasoning has not been disclosed and there are concerns about its value. In particular, Mr Bennett referred to the discussion in Red Bull[6] of Heydon JA's examination of the principles in Makita (Aust) Pty Ltd v Sprowles:[7]
The use of the phrase 'strictly speaking' in the last sentence should not be overlooked. It may well be correct to say that such evidence is not strictly admissible unless it is shown to have all of the qualities discussed by Heydon JA. However many of those qualities involve questions of degree, requiring the exercise of judgment. For this reason it would be very rare indeed for a court at first instance to reach a decision as to whether tendered expert evidence satisfied all of his Honour's requirements before receiving it as evidence in the proceedings. More commonly, once the witness's claim to expertise is made out and the relevance and admissibility of opinion evidence demonstrated, such evidence is received. The various qualities described by Heydon JA are then assessed in the course of determining the weight to be given to the evidence. There will be cases in which it would be technically correct to rule, at the end of the trial, that the evidence in question was not admissible because it lacked one or other of those qualities, but there would be little utility in so doing. It would probably lead to further difficulties in the appellate process.
[4] Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 234 FCR 549 (Red Bull).
[5] Morris v Danoz Directions Pty Ltd (in liq) (No 2) [2010] FCA 836.
[6] Red Bull [87].
[7] Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705.
Red Bull concerned admissibility under the Evidence Act1995 (Cth), but more to the point, it predates the High Court's decision in Dasreef Pty Ltd v Hawchar in which it is made clear that the question of adequacy of reasoning goes to admissibility, not weight.
On day three, I told the parties that I considered that I was bound to deal with the objection as to reasons and so as to admissibility during the trial.[8]
[8] See Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 [96].
Turning to the subject evidence
General
It is not possible in the time available to provide a thorough explanation of the different steps involved in upgrading an assessment of coal on a tenement from inventory coal (the roughest estimate) through to exploration tonnage and then (potentially) to an inferred resource and then an indicated resource. However, it is not in issue that once exploration tonnage is assessed, there will not be an upgrade to an inferred resource unless a Competent Person assesses matters such as drilling and geological records for the site and the so‑called reasonable prospects test. The so‑called JORC prerequisites as explained by Mr Biggs are set out in Beech J's reasons at [15] ‑ [16] and the same summary appears in virtually the same terms in the Report.
The methodology in the Report
The defendant's complaints relate primarily to the following parts of the Report.
Part 7.5 reads as follows:
7.5Likely extent of coal on the EPC's based on reported results and geology.
68.NSL tenements lie along the regional strike of the Winton Formation where drilling has taken place to the north, south, and east. Although insufficient drilling has taken place within the tenure boundaries, given that the coal seams within the lower Winton Formation are relatively continuous, there is sufficient evidence to allow conservative extrapolation into the unknown parts of the tenures. (see Figure 9, which is a historical coal exploration hole to the south of EPC2337).
69.Given the size and preliminary nature of the estimates a conservative cumulative thickness of coal >0.3m thick was estimated from the nearby borehole intersections across all the NSL tenures.
70.Coal tonnage was estimated by the following formula and based on criteria discussed in detail in section 10.3:
Cumulative thickness of coal (m) x tenure area (m3) x average raw coal density (kg/m3) = tonnage (Mt) (Equation 1)
71.The tonnage thus calculated represents an Inventory Coal estimate, which was down-rated by applying an unexpected geological loss factor (-ve 30%), applied mainly to account for seam splitting and thinning over large distances between boreholes. As required by the 2004 JORC Code this is reported as range of tonnages called an Exploration Tonnage.
72.The large variations in the Exploration Target reported by Biggs and others (2011a, b) reflect the sparseness of existing data and expected seam splitting and thinning known to occur in the Winton Formation.
73.Based upon the above the expert has a very high expectation that a proportion of the Exploration Target estimate, with the addition of new drilling data, will convert through to JORC Resources.
A figure is then inserted (figure 9) that pictorially represents a borehole drill result (Historical Borehole Pingine C2) that shows coal intersections.
Part 10.3 (as referred to in par 70) is headed 'How an inferred mineral resource is established under JORC 2004'. Section 10.3.2 reads as follows:
10.3.2Step 2: Gross Insitu (Inventory) Coal
85.Borehole collars and seam picks unearthed or interpreted by during Stage 1 are usually collated to a relational database (or similar) and later transferred to the selected mine planning system to enable seam correlation. Some minimum criteria were used for Inventory Coal (Coal Guidelines Committee 2014) calculation:
•Seams > 0.3m in thickness;
•Not intruded;
•<60% ash (air-dried basis);
•Boreholes with coals were included within 5‑10km of tenure areas to generate the model;
•No limit to masks, except the tenure boundary.
In the final section headed 'Opinion and Findings', the following appears:
132.Regardless which of the JORC Codes are invoked (refer to Table 5), insufficient data exists today to calculate more than an Exploration Target across the four NSL Consolidated tenures. The quantum of the resource remains unknown as drilling and other exploration activities were not carried out, however, based on results from adjacent and nearby tenure, exhibiting similar geology, it is estimated by this author that Inferred Resources in the range 0.8-1.2Bt would be likely in at least one of NSL's four tenures (Table 6).
There is then the following table:
Table 6 NSL Resource Inferred Resource Preliminary Estimates (Mt)
EPC# Low Range High Range Mid-Point 2198 100 500 300 2336 200 900 550 2337 400 1200 800 2338 300 700 500 1900 3600 2150
The EPC references are to the four Exploration Coal Permits for the relevant tenements.
Paragraphs 136 and 138 follow from Table 6 and (relevantly) are as follows:
136.In light of the estimate the probability, given the proposed exploration drilling program, of establishing an inferred coal resource of 500 million tonnes is estimated by the author to be >95%.
138.As is shown by the relative error in resource tonnage estimation figure 11, the distinction between an Inferred Coal Resource and an Indicated Mineral Resource is the level of confidence achieved by obtaining more precise data. Again, however, having regard to the Inferred Resource preliminary estimate the probability, given the proposed exploration drilling program of establishing an Indicated Coal Resources of 250 Mt is estimated by the author to be >90%.
The final relevant paragraph is in the conclusion:
145.The quantum of the resource remains unknown, and cannot be publically stated, as drilling and other exploration activities were not carried out, however, based on results from adjacent and nearby tenure, exhibiting similar geology, it is estimated by this author that expected Inferred resources in the range 0.8-1.2Bt would not be unreasonable across NSL's four tenures.
Those parts of the Report indicate, the defendant submits, that Mr Biggs' methodology for the purpose of the Report was to look at drilling results on sites surrounding the tenements and extrapolate those into the tenure areas, determine the calculation of thickness of those seams and then do a calculation in accordance with the equation at par 70 (Equation) to ascertain coal tonnages for the four tenements. Then, as a Competent Person, he would take into account the considerations stipulated under JORC in order to come up with the inferred resource figures in Table 6.
The primary difficulty alluded to by the defendant on day two was that cumulative thickness is clearly a component of the Equation but Mr Biggs has not disclosed anywhere in the Report the value of that component as used in the Equation. Accordingly, it is not known how he calculated the coal tonnages that inferentially must underlie the figures in Table 6. Nor has he disclosed his calculations. It is not possible to discern how the figures in Table 6 are calculated. Why the figures in Table 6 do not correlate with the figures in pars 132 and 145 is unexplained. How the particular figures in pars 132 and 145 have been calculated is unexplained.
Mr Garas suggested on day two that the difficulties would potentially be ameliorated if Mr Biggs would provide the calculations from his use of the Equation in par 70 of the Report (ts 305, 385).
Mr Bennett responded to the submission by first referring to par 68 of the Report. He said that Mr Biggs says although there has been no drilling on the tenure sites, there is sufficient evidence to allow an extrapolation of drilling results and he refers to figure 9. Then as to par 69, Mr Bennett says Mr Biggs does not need to give his calculations. He says Mr Biggs has given his methodology and he has given a basis for it and that he discusses it in more detail in Part 10.3 (ts 304).
Mr Bennett said Mr Biggs calculated cumulative thickness from borehole intersections looking at all the boreholes across all of the defendant's tenements, 'so I don't know what else he can say…there's no uncertainty. What they want is his calculation … they know the basis' (ts 305). As there were no relevant boreholes on the defendant's tenements, I assume Mr Bennett intended to refer to boreholes outside the tenements.
In my view, the clear tenor of the paragraphs as reinforced by Mr Bennett's submission is that the methodology employed by Mr Biggs was to calculate cumulative thickness by reference to borehole results in surrounding tenements such as that in figure 9. From figure 9, one can discern a section thickness. In that manner, Mr Biggs discerned a cumulative thickness just to the south of one of the tenements (where the figure 9 borehole is situated) and that cumulative thickness was then applied across the whole area of the tenures in accordance with the Equation at par 70. That is how the inventory coal tonnages were calculated (see par 71). The inventory coal figure was then reduced by a loss factor of 30% to provide the exploration tonnage (par 71).
The cumulative thickness as calculated by Mr Biggs, as used in the Equation and as extrapolated across the area of the tenements is unknown. Part 10.3 does not provide any calculation. It does provide some information as to seams which were considered and the area within which boreholes were considered. It refers to consistency with 2014 Guidelines. It is consistent with pars 68 ‑ 73 but does not add to it in terms of providing source data or calculations.
There is some information relevant to cumulative thickness contained within the Report. For example, the defendant is able to look at figure 9 and then reference an annexure at Part 18.2 of the Report which sets out a list of borehole drilling results. Relevantly, there is information for PC2 which appears to correlate with figure 9, and states a thickness of 6.66 m.
That appears to be, interpreting the diagram, the thickness of the section which contains coal and not necessarily the thickness of the coal within the section. Similar drilling results are provided for a list of boreholes. It is not clear which of those results (apart from, presumably, PC2) were used by Mr Biggs in assessing the number to be used for cumulative thickness in the Equation.
There are also two diagrams (Appendix 15) that indicate coal thickness and depth to first coal contours based on water bore contour points using colour coding. The colour coding suggests that the coal thickness for the defendant's tenement areas is in the range of 0 ‑ 3 m, and the depth was at 250 ‑ 350 m. There is no indication as to how such information has been utilised by Mr Biggs.
Paragraph 29 of the Report also refers to thicknesses of particular seams in the Winton formation but the use made of those particular thicknesses is not made clear.
In short, allowing for the fact that one can understand at a general level Mr Biggs' stated methodology in Part 7.5, it is not possible to discern from anything set out in the Report the cumulative thickness figure he utilises. Nor is it possible to replicate his calculations when that information is absent.
The results of his calculations provide the coal tonnages which are then adjusted by Mr Biggs to take into account matters relevant to reporting the inferred resource and so feed into Table 6. Again, calculations showing the adjustment to figures for the purpose of inclusion in Table 6 are not provided.
Despite the figures set out in Table 6, Mr Biggs opines that inferred resources in the range of 0.8 ‑ 1.2 Bt would be likely: see pars 132 and 145.
None of the calculations for those steps have been provided. The defendant objects to Table 6, pars 132, 136, 138 and 145 on the basis, primarily, of a lack of sufficiently articulated reasoning.
The introduction of Tables 6a and 6b
On day two and after hearing the submissions summarised above, the matter was adjourned so I could consider the objections. Three different forms of Tables 6a and 6b were then provided to the defendant over the next three days, the latter two also being provided to the court. All were marked for identification and considered on the voir dire.
I have not set out the tables in full as it is not necessary for the purpose of these reasons. I have, however, extracted parts of each version of Table 6a in the Schedule below, so as to show some of the changes in calculations.
The new tables were said to answer the objections to (relevantly) pars 132, 136, 138, 145 and Table 6.
The starting points in Tables 6a and 6b are published exploration targets for the defendant's tenements. There is no issue that those targets (which were apparently prepared for the defendant by Mr Biggs in July 2011) were included in public announcements by the defendant including in July 2011. Those targets were calculated taking into account certain stated cumulative thicknesses. The defendant has no knowledge as to how the thicknesses were calculated.
The defendant's submission is that the plaintiff's expert evidence has never proceeded on the basis that those published exploration targets were the starting point for calculations for Table 6. The Report simply does not say that. Accordingly, the calculations that underlie those exploration targets have not been called for or disclosed by Mr Biggs during the expert report preparation or conferral process, nor analysed by the defendant.
It is clear on the face of the iterations of the tables that questions arise.
On the voir dire, Mr Biggs was asked to explain the provenance of Tables 6a and 6b and the differences between the versions. He said that the calculations were his own and were the same as those done for the purpose of Table 6.
He explained one difference between reduction factors applied between versions as him changing his mind between versions.[9] He explained other errors as mistakes in transposing his written notes.[10]
[9] ts 468.
[10] ts 462 ‑ 463, 482.
Put simply, the figures in Table 6a cannot on their face be the source for the Table 6 figures. For example, of the figures in the final three columns of the third iteration, only one of twelve numbers align (the potential inferred 2012 JORC Code low range for EPC 2338 of 300 matches the figure of 300 for the ECP 2338 low range in Table 6). The totals do not align. When this was drawn to Mr Biggs' attention, he said that the figures in Table 6 must be wrong. Mr Biggs was unable to explain where the figures of 0.8 ‑ 1.2 Bt (see pars 132 and 145) were sourced or why they differed from Table 6 and Table 6a.
Mr Biggs said that he had modelled the information that was included in the July 2011 report using a MineScape software programme and that he still had the data available to him but not the modelling.[11]
[11] ts 517 ‑ 518.
The objection to the tender of Tables 6a and 6b
Mr Garas objects to the tender of Tables 6a and 6b on the basis that they clearly do not explain the figures in Table 6 but in fact conflict with them; that there has never been any suggestion in the Report that there was reliance on the original published exploration targets as the basis for the opinion reflected in Table 6 or pars 132 and 145; that the expert evidence in the Report being met by the defendant in this case was that Mr Biggs had carried out calculations for the purpose of the Report in accordance with the methodology explained in pars 69 ‑ 71; that there is no explicit statement anywhere in the Report that the thickness calculations in some way emerged from the exploration targets; that the other references to thickness (eg Appendix 15, par 29) would have no role if the starting point was always the exploration targets; that the defendant is not now in a position to examine the underlying data and modelling that apparently informed the July 2011 exploration targets; and that thickness is potentially vital in terms of its impact on calculations. Mr Garas said the inability to address those matters and the new basis upon which it is said the Table 6 figures were calculated comprises the 'gravest of prejudices' for the defendant.
The plaintiff submits that the exploration targets as referred to in the July 2011 announcement have always been disclosed and known by the defendant. The plaintiff seeks to rely upon the inclusion of the statements in published ASX announcements as admissions. Although I was not at the time specifically addressing the published exploration targets, I did indicate earlier in the proceedings (in response to a submission from Mr Bennett) that statements in the defendant's own ASX announcements might be considered admissions by the defendant as a party to the litigation.
In summary, where a party by words or conduct discloses an intention to affirm or acknowledge a statement of fact or opinion by a third party, that statement is admissible in evidence against the party notwithstanding that that adoption be of something of which the party has no knowledge.
The authorities for that proposition are RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd;[12] Lustre Hosiery Ltd v York;[13] Bond Media Ltd v John Fairfax Group Pty Ltd.[14]
[12] RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 32 NSWLR 152.
[13] Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134.
[14] Bond Media Ltd v John Fairfax Group Pty Ltd (1988) 16 NSWLR 82.
However, the following extract from Lustre Hosiery is important:[15]
But, although the meaning of his words or conduct may depend upon the state of his knowledge, once that meaning appears and an intention is disclosed to assert or acknowledge the state of facts, its admissibility in evidence as an admission is independent of the party's actual knowledge of the true facts. When admitted in evidence, however, its probative force must be determined by reference to the circumstances in which it is made and may depend altogether upon the party's source of knowledge. If it appears that he had no knowledge, or that, although he had some means of knowledge, he had formed no certain or considered belief and indicated nothing amounting to a personal judgment or conclusion of his own, the probative force of the admission may be so small that a jury ought not to be allowed to act upon it alone, or in preference to opposing evidence.
[15] Lustre Hosiery (143 ‑ 144).
I consider the better view is that the inclusion of the exploration targets in the announcements comprises an admission by the defendant. However, I hasten to add that taking into account the centrality of these issues to the proceedings, the mere admission of such statements in the ASX announcements may well be of little probative force. There is no personal knowledge or judgment on the part of the directors as to the assessment of exploration tonnages and self‑evidently both parties have called expert evidence to deal with such issues in this case.
In any event, that there are such admissions does not of itself affect the question of the basis upon which Mr Biggs' expert evidence proceeded. The question is what was his reasoning and methodology as disclosed to the defendant: on the face of the Report, Mr Biggs did not commence with those exploration targets - or at least he did not disclose that he did so or make it apparent to the defendant in any manner.
Mr Bennett also submits that the magnitude of difference in the figures for Table 6 matters very little because the court does not need to find with any precision the amount of (for example) a potential inferred resource provided the threshold amount is met. That may well be so and I am conscious of the nature of the lost opportunity case pleaded by the plaintiff and the authorities to which Mr Bennett has referred in that regard. However, the first point is that Mr Biggs has given his opinion as to certain matters, including the specific figures included in Table 6, and the defendant is entitled to test and understand how those figures have been derived. The second point is that the manner in which thickness feeds into the formula for assessing the various potential inferred and indicated resources may in fact have a significant impact on the issue of damages. I also note that the defendant is not seeking to have the whole of the Report ruled inadmissible.
Mr Bennett contends there is no prejudice: that Mr Garas has not asked for an adjournment, that he should not be given the luxury of leave to file any further report and that he clearly was across all of the issues without requiring further advice from his expert.
Having carefully considered those submissions, I uphold the objection to the tender of Tables 6a and 6b.
I accept the defendant's submissions that Table 6a (and its notes) discloses a manner of calculating the figures in Table 6 that has not previously been disclosed and contrasts with the methodology summarised in the Report. If the start point for Mr Biggs' calculation was the published exploration tonnages it would have been an obvious and simple thing to state. It may well have obviated the need to include other evidence as to thicknesses which has been included in the Report albeit for reasons not fully explained. I have formed this view regardless of the fact that Table 6a does not in any event support the figures in Table 6. However, the lack of correlation is a significant factor.
Second, the late provision of Tables 6a and 6b must be viewed in the context of the history of this matter. The additional expert evidence has been provided late, and during the trial. This trial has already been vacated once because of difficulties with the plaintiff's expert evidence. The defendant informed the plaintiff of its objections to the Report some three months ago. The trial will not be completed in its allocated time if the evidence is admitted: the defendant cannot properly consider Tables 6a and 6b and the data and modelling that underlies it when the trial is due to finish in two days and the defendant is still to call its witnesses. I consider the defendant will be unfairly prejudiced by the admission of the new evidence at this very late stage.
The remaining objections
It is then necessary to deal with the objections to Table 6 and pars 132, 136, 138 and 145. The primary objection is that the statements are unsubstantiated conclusion, hearsay, the reasons are not articulated and there is impermissible reliance on the opinion of others. The objection as to impermissible reliance on the opinion of others was based primarily on an assumption that Mr Biggs had relied on JORC inferred resources announced by third parties where he was not the Competent Person. Mr Biggs has denied that he relied on that information (that is, he says he relied only on category 1 information, to use the taxonomy referred to in Beech J's reasons).
However the principle objection that reasons are not adequately articulated remains.
It is necessary to consider the principles.
Reasons not sufficiently articulated - law
In Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2], Beech J set out the principles regarding the admissibility of expert evidence. For ease of reference I will repeat them:[16]
I apply the outline of principles regarding the admissibility of expert evidence set out in McKay v Commissioner of Main Roads [No 3]. 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.
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. This must be done in chief, and not left for the cross-examiner to discover.
[16] Coal Hub Pty Ltd v NSL Consolidated Ltd [No 2] [55] ‑ [56] (footnotes omitted).
As was made clear by the High Court in Dasreef Pty Ltd v Hawchar, in order to assess the reliability of an expert's evidence, their impressiveness and cogency of reasoning are relevant and the process of reasoning must be disclosed:[17]
Function of the statement of reasoning rule. The rule protects cross‑examiners by enabling them to go straight to the heart of any difference between the parties without the delay of preliminary reconnoitring. It also aids the court in a non-jury trial, because at the end of the trial it is the duty of the court to give reasons for its conclusions. And it aids jurors, because at the end of the trial they have the duty of assessing the rational force of expert evidence. If there is not some exposition of the expert's reasoning it will be impossible for the court to compose a judgment stating, and for the jurors to assemble, reasons for accepting or rejecting or qualifying the expert's conclusion.
'The process of inference that leads to the [expert's] conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them.'
As Lord Cooper, the Lord President, said in Davie v Magistrates of Edinburgh:
'The value of [expert opinion] evidence depends … above all upon the extent to which [the expert's] evidence carries conviction …
[T]he defenders went so far as to maintain that we were bound to accept the conclusions of [an expert witness]. This view I must firmly reject as contrary to the principles in accordance with which expert opinion evidence is admitted … [The] duty [of expert witnesses] is to furnish the Judge or jury with the necessary scientific criteria for testing the accuracy of their conclusions, so as to enable the Judge or jury to form their own independent judgment by the application of these criteria to the facts proved in evidence … [T]he bare ipse dixit of a scientist, however eminent, upon the issue in controversy, will normally carry little weight, for it cannot be tested by cross-examination nor independently appraised, and the parties have invoked the decision of a judicial tribunal and not an oracular pronouncement by an expert.'
It is sometimes said that these words deal with weight only, not admissibility. But this is contradicted by the Lord President's use of the word 'admitted'.
...
... Admissibility does not depend on the reasoning being accepted as correct; that is a matter for consideration at the end of trial. But admissibility does depend on reasoning being stated.
[17] Dasreef Pty Ltd v Hawchar [93] ‑ [94], [129] (footnotes omitted).
Determination as to reasons not sufficiently articulated
In my view, Mr Biggs does not state his reasoning in a manner or to an extent that sufficiently permits scrutiny by the court of his reasoning and opinions insofar as Table 6 is comprised and insofar as the figure of 0.8 ‑ 1.2 Bt is comprised. There is no exposure of the calculation of the thickness that was utilised by Mr Biggs in the Equation. There is no information that permits me to test and evaluate the steps by which his opinion has been reached. It is not apparent how his expertise has been used to come to the opinions set out by way of those particular numbers.
I do not dispute that at a high level he has set out the steps he has taken. He says that he uses drilling reports from surrounding tenements but there is no certainty as to which reports were relied upon, no analysis disclosed as to why some of the reports were (presumably) considered comparable, why some may have been considered superior or inferior, or otherwise how the figure used in the Equation was settled upon by Mr Biggs. Whilst it may be possible for the defendant to collate publically known and admissible information from the various documents referred to by Mr Biggs, that does not assist the defendant in ascertaining how those figures have been assessed as useful, or disregarded as not useful, or relied upon.
I accept that there is room for different views when it comes to an assessment by a Competent Person of the matters relevant to assessing JORC inferred or indicated resources.
I also accept 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 has not occurred. As Beech J noted, 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.
The lack of articulation of analysis or reasoning, other than at a high level, as to how Mr Biggs moves from the exploration tonnage (par 71) to the figures in Table 6 leaves the defendant unable to properly test the evidence.
The lack of reasoning is further highlighted by the reference in the conclusion without explanation to the different figure from that in Table 6 of 0.8 ‑ 1.2 Bt.
No sufficient reasoning was deployed to show why that particular range of figures has been settled upon.
It is unfair to expect the defendant to elucidate Mr Biggs' reasoning process in the course of cross‑examination and then to challenge that process without the opportunity to reflect on it.
Mr Bennett says that there is a disclosure of the reasoning. It is true that it is apparent that Mr Biggs says he has formed his opinions on the basis of his knowledge of the geology of the area and his review of exploration activities as well as public information issued by companies conducting exploration in that area. It is also apparent (as dealt with above) that Mr Biggs' reasoning involved utilising coal thickness and area and assumes such results for across the area of the tenements. It is also true that Mr Biggs notes matters relevant to establishing an inferred resource and provides examples of some of the risk factors, but the base from which he works remains unclear and the manner of application of reduction factors is not sufficiently exposed.
In that sense, there is a disclosure of reasoning but it is at a high level. Mr Bennett says that Dasreef Pty Ltd v Hawchar does not require that Mr Biggs provide 'reasons for reasons'. However, in my view the reasons must descend into a level of detail that discloses the analysis and calculations sufficiently to enable the defendant to test the opinions provided. Mr Biggs' reasoning insofar as it relates to pars 132 (the words from 'however'), 136, 138 (second sentence) and 145 (from 'however') and Table 6 is articulated at an impermissibly high level of generality.
In my view there is a failure to articulate reasoning such that those parts of the Report are inadmissible.
A final note
During the voir dire, Mr Biggs made certain concessions and requested that changes be made to his Report. Mr Bennett urged that I amend the Report in one respect (to change the Table 6 figures) but not in response to other changes requested by Mr Biggs (for example, to strike through the reference to 0.8 ‑ 1.2 Bt). Where Mr Bennett opposed amendment, he relied on the principle that an admission in a voir dire cannot be the subject of cross‑examination, referring to Cross on Evidence (10th ed) [11060].
In light of my reasons, I do not need to determine this issue. In any event, the issues with the Report are not resolved by simply striking out numbers in Table 6 and substituting new ones.
The evidence on the voir dire is inadmissible for the purpose of the trial going forward and any issues will be dealt with if and when they arise.
Schedule
First iteration - 22 May 2017 (provided to defendant)
| EPC # | Exploration Target 2012 | Exploration Target 2012 | Exploration Target 2012 | Reduction factor | Potential Inferred 2012 | Potential Inferred 2012 | Potential Inferred 2012 |
| Low Range | High Range | Mid-Point | % | Low Range | High Range | Mid-point | |
| 2198 | 140 | 280 | 210 | 30 | 100 | 500 | 300 |
| 2336 | 300 | 840 | 570 | 30 | 200 | 900 | 550 |
| 2337 | 2400 | 5100 | 3750 | 85 | 400 | 1200 | 800 |
| 2338 | 1200 | 4400 | 2820 | 75 | 300 | 700 | 500 |
| 3350 | 10660 | 7350 | 1000 | 3300 | 2150 |
Second iteration - 22 May 2017 (first version provided to Court)
| EPC # | Exploration Target 2012 | Exploration Target 2012 | Exploration Target 2012 | Reduction factor | Potential Inferred 2012 | Potential Inferred 2012 | Potential Inferred 2012 |
| Low Range | High Range | Mid-Point | % | Low Range | High Range | Mid-point | |
| 2198 | 120 | 240 | 180 | 30 | 84 | 168 | 126 |
| 2336 | 300 | 840 | 570 | 30 | 200 | 900 | 550 |
| 2337 | 2400 | 5100 | 3750 | 85 | 400 | 1200 | 800 |
| 2338 | 1200 | 4440 | 2820 | 75 | 300 | 700 | 500 |
| 3350 | 10660 | 7350 | 984 | 2968 | 1976 |
Final iteration - 23 May 2017 (second version provided to Court)
| EPC # | Exploration Target 2012 | Exploration Target 2012 | Exploration Target 2012 | Reduction factor | Potential Inferred 2012 | Potential Inferred 2012 | Potential Inferred 2012 |
| Low Range | High Range | Mid-Point | % | Low Range | High Range | Mid-point | |
| 2198 | 300 | 360 | 330 | 30 | 210 | 252 | 231 |
| 2336 | 300 | 840 | 570 | 30 | 210 | 588 | 399 |
| 2337 | 2400 | 5100 | 3750 | 85 | 360 | 765 | 562.5 |
| 2338 | 1200 | 4440 | 2820 | 75 | 300 | 1110 | 705 |
| 4200 | 10740 | 7470 | 1080 | 2715 | 1897.5 |
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