Commonwealth Development Bank of Australia Pty Ltd v Cassegrain

[2002] NSWSC 980

CITATION:	Commonwealth Development Bank of Australia Pty Limited & Anor v Claude George Rene Cassegrain; Gerald Cassegrain & Co Pty Limited & Ors v Commonwealth Development Bank of Australia Pty Limited & Ors; [2002] NSWSC 980
FILE NUMBER(S):	SC 50062/00; 50072/00
HEARING DATE(S):	10/10/02
JUDGMENT DATE:	10 October 2002
PARTIES :	Commonwealth Development Bank of Australia Pty Limited (Plaintiff (50062/00) Defendant (50072/00) Claude George Rene Cassegrain (Defendant 50062/00) Gerald Cassegrain & Co. Pty Limited (Plaintiff) (50072/00) Murray Smith and Scott Kershaw (3rd Defendants (50072/00)
JUDGMENT OF:	Einstein J

COUNSEL :	RW Cameron, ARR Vincent (Defendant 50062/00, Plaintiff 50072/00) AG Bell, DA McLure (Plaintiff 50062/00, Defendant 50072/00) DL Williams (Murray Smith & Scott Kershaw, 3rd Defendants 50072/00)
SOLICITORS:	MC Griffith & Co (Defendant 50062/00, Plaintiff 50072/00) L E Taylor Solicitor (Plaintiff 50062/00, Defendant 50072/00) Corrs Chambers Westgarth (3rd Defendants 50072/00)
CATCHWORDS:	Evidence - Expert evidence - Expert witness code of conduct - Admissibility of purported expert report - Expert failed to acknowledge that he would be bound by the Expert Witness Code of Conduct in Schedule K of the Supreme Court Rules pursuant to Part 36 rule 13C(2) - Witness not aware of existence of Code of Conduct prior to preparation of expert statement - Whether 'otherwise order' permitting evidence should be made - Supreme Court Rules Part 36 Rule 13C(2) - Schedule K
LEGISLATION CITED:	Evidence Act 1995 (NSW)
CASES CITED:	Barak Pty Ltd v WTH Pty Ltd Trading As Avis Australia [2002] NSWSC 649 Clough v Tameside Glossop Health Authority [1998] 2 All ER 971 Makita Australia Pty Ltd v Sprowles (2001) 52 NSWLR 705 National Justice Compania Naviera SA v Prudential Assurance Co Ltd ("The Ikarian Reefer") [1993] 2 Lloyd's Rep 68
DECISION:	The application for an order is rejected.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Thursday 10 October 2002 ex tempore
Revised 24 October 2002

50072/00 GERALD CASSEGRAIN & CO PTY LIMITED & ORS v COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LIMITED & ORS

50062/00 COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LIMITED & ANOR v CLAUDE GEORGE RENE CASSEGRAIN & CO PTY LIMITED & ORS

JUDGMENT - on admissibility of evidence.

1 The Cassegrain parties seek to read a statement of evidence by Mr Colin George Fermanis made on 4 July 2000. An objection has been taken to the reading of so much of this statement as is put forward on the basis that Mr Fermanis is qualified by s 79 of the Evidence Act by reason of his training, study and experience to be shown to have acquired specialised knowledge on the basis wholly or partly of which to be in a position to express opinions. The Cassegrain parties seek to qualify Mr Fermanis as a s 79 expert in order to read the final two sentences of paragraph 6 of his statement, and the final two paragraphs of the affidavit.

“Many loans approved by CDB would not be approved by other lending institutions. The clients loan was in that category .” [para 6].

“For the reasons aforesaid…I believe that a potential funder would need between 6 to 12 months to refinance the Cassegrain Facilities with CDB and CBA.

In the light of my experience as a banker, my opinion is that the banks standing in the position of CDB and CBA would normally give to a client in a position similar to the client, between 6-12 months notice of any intention to require their facilities to be fully repaid. The banker would have to appreciate and give due weight to the difficulties the client would face in successfully obtaining the refinancing.” [Paragraph 13]

2 The action which has been taken by the banks against whom the statement is sought to be read is based upon the fact that Mr Fermanis has not at any time signed an acknowledgment in the form of the Expert Witness Code Of Conduct in Schedule K which form of acknowledgment is required to be included in an expert's report pursuant to Part 36 rule 13 C (2) of the Supreme Court Rules. Rule 13C provides:

“(1) For the purposes of this rule and rule 13CA:

"expert witness" means an expert engaged for the purpose of:

(a) providing a report as to his or her opinion for use as evidence in proceedings or proposed proceedings; or

(b) giving opinion evidence in proceedings or proposed proceedings;

"the code" means the expert witness code of conduct in Schedule K.

(2) Unless the Court otherwise orders:


(a) at or as soon as practicable after the engagement of an expert as a witness, whether to give oral evidence or to provide a report for use as evidence, the person engaging the expert shall provide the expert with a copy of the code;

(b) unless an expert witness's report contains an acknowledgment by the expert witness that he or she has read the code and agrees to be bound by it:

(i) service of the report by the party who engaged the expert witness shall not be valid service for the purposes of the rules or of any order or practice note; and

(ii) the report shall not be admitted into evidence;
(c) oral evidence shall not be received from an expert witness unless:

(i) he or she has acknowledged in writing, whether in a report relating to the proposed evidence or otherwise in relation to the proceedings, that he or she has read the code and agrees to be bound by it; and

(ii) a copy of the acknowledgment has been served on all parties affected by the evidence.

(3) If an expert witness furnishes to the engaging party a supplementary report, including any report indicating that the expert witness has changed his or her opinion on a material matter expressed in an earlier report by the expert witness:


(a) the engaging party must forthwith serve the supplementary report on all parties on whom the engaging party has served the earlier report; and

(b) the earlier report must not be used in the proceedings by the engaging party, or by any party in the same interest as the engaging party on the question to which the earlier report relates, unless paragraph (a) is complied with.

(4) This rule shall not apply to an expert engaged before this rule commences.”

3 Schedule K referred to in Part 36 rule 13 C is in the following terms:

“EXPERT WITNESS CODE OF CONDUCT

Application of code

1. This code of conduct applies to any expert engaged to:

(a) provide a report as to his or her opinion for use as evidence in proceedings or proposed proceedings; or
(b) give opinion evidence in proceedings or proposed proceedings.


General Duty to the Court

2. An expert witness has an overriding duty to assist the Court impartially on matters relevant to the expert's area of expertise.

3. An expert witness's paramount duty is to the Court and not to the person retaining the expert.

4. An expert witness is not an advocate for a party.

The Form of Expert Reports

5. A report by an expert witness must (in the body of the report or in an annexure) specify:


(a) the person's qualifications as an expert;

(b) the facts, matters and assumptions on which the opinions in the report are based (a letter of instructions may be annexed);

(c) reasons for each opinion expressed;

(d) if applicable - that a particular question or issue falls outside his or her field of expertise;

(e) any literature or other materials utilised in support of the opinions; and

(f) any examinations, tests or other investigations on which he or she has relied and identify, and give details of the qualifications of, the person who carried them out.


6. If an expert witness who prepares a report believes that it may be incomplete or inaccurate without some qualification, that qualification must be stated in the report.

7. If an expert witness considers that his or her opinion is not a concluded opinion because of insufficient research or insufficient data or for any other reason, this must be stated when the opinion is expressed.

8. An expert witness who, after communicating an opinion to the party engaging him or her (or that party's legal representative), changes his or her opinion on a material matter shall forthwith provide the engaging party (or that party's legal representative) with a supplementary report to that effect which shall contain such of the information referred to in 5 (b), (c), (d), (e) and (f) as is appropriate.

9. Where an expert witness is appointed by the Court, the preceding paragraph applies as if the Court were the engaging party.

Experts' Conference

10. An expert witness must abide by any direction of the Court to:


(a) confer with any other expert witness;

(b) endeavour to reach agreement on material matters or expert opinion; and

(c) provide the Court with a joint report specifying matters agreed and matters not agreed and the reasons for any non-agreement.

11. An expert witness must exercise his or her independent, professional judgment in relation to such a conference and joint report, and must not act on any instruction or request to withhold or avoid agreement.”

4 The position taken by the banks has been to submit that the report should not be admitted into evidence and that service of the report is not to be valid service for the purposes of the Rules or of any orders for the reason that Part 36 rule 13 (C) (2) (b) so provides unless the Court otherwise orders.

5 The Cassegrain parties have sought leave on the voir dire to call Mr Fermanis to put certain matters to him and to ask him certain questions on the basis that the adjudication will take into account that questioning. His evidence was:

“Q. What’s your occupation?
A. Investment banker.


Q. I want to show you a document which is a copy of schedule K from the Supreme Court Rules (shown). Were you shown a copy of that at 1.30pm today?
A. Yes.

Q. Were you aware of its existence before today?
A. No.

Q. Assuming for the moment that you were called upon to give some expert evidence about your expertise as a banker and financier, on 4 July 2000 I think you swore a statement of evidence for the purposes of these proceedings; do you remember that?
A. Yes.

Q. And I think you have got a copy of that as well with you?
A. Yes (produced).

Q. Specifically could I draw your attention to paragraph 6 on page 3, to the last two sentences there beginning with, “Many loans” and ending with “That category”?
A. Yes.

Q. Paragraphs 12 and 13?
A. Yeah.

Q. For the purposes of the opinions expressed in those portions, do you believe that your report is incomplete or inaccurate in any way?
A. No.

Q. Are the opinions expressed in there your concluded opinions?
A. Yes.

Q. Having regard to the duty set forth in paragraphs 2, 3 and 4 of that Code, do you abide by each of those three paragraphs?
A. Yes.

Cameron: Q. So that in summary the opinions expressed in your summary are your concluded opinions and you adhere to them, and they are based upon your expertise as a banker, bank financier, is that the case?
A. Yes”

6 The Court has been referred to a recent decision of Barrett J in Barak Pty Ltd v WTH Pty Ltd Trading As Avis Australia [2002] NSWSC 649 in which a similar type of problem, with a material difference as it seems to me, arose. The plaintiff there had filed and served an affidavit of Mr Byrnes, a consulting architect and planner, to which he had annexed a report which did not contain an acknowledgment that he had read the Code of Conduct in Schedule K to the Supreme Court Rules and agreed to be bound by it. The oral evidence given before Barrett J by Mr Byrnes was to the following effect:

“Q. Are you aware of the requirements of the Experts’ Code of Conduct that is laid down in the rules of this Court?
A. Yes, I am.

Q. I think they are set out in schedule K. Have you read schedule K?
A. Yes, I have.

Q. Were you aware of schedule K prior to swearing your affidavit?
A. Yes, I was.

Q. In approaching the material that is set out in your affidavit, did you comply with schedule K to the best of your ability?
A. I did.”

And later:

“Q. I asked you some questions about the expert’s code and in particular schedule K --
A. Yes.

Q. - - to the rules of this Court, and did you agree to be bound by the code and schedule K?
A. Absolutely, yes.”

7 The judgment then includes the following:

“There have thus been unequivocal statements by Mr Burns under oath acknowledging that he had read the code in schedule K and agreed to be bound by it. I am satisfied that that position may be taken to relate back to the time when he prepared the report.

In those circumstances the intent of the rule of ensuring that only reports by experts who have proceeded in accordance with stated norms of conduct should be relied upon can be seen to be satisfied and it is appropriate that the Court make an order under the opening words of part 36 rule 13 C (2) displacing the operation of paragraph B, that is an order that service of the report annexed to Mr Burns affidavit was valid service and that the report is admitted into evidence. I so order".

8 As is plain from the evidence given by Mr Fermanis, a material difference between the position of Mr Burns before Barrett J in Barak and the position of Mr Fermanis in relation to these proceedings, is that Mr Fermanis, prior to 1.30pm today, had not been aware of the existence of schedule K.

9 To my mind, considerable significance attaches to enforcing strict compliance in the expert witness provisions now found in part 36 rule 13C. Questions of the significance of the opinions of experts have been mooted over a very extended period of time and the schedule K and part 36 rule 13 C (1) Expert Witness Code Of Conduct was promulgated with the clear intent that only reports by experts who have proceeded in accordance with the stated norms of conduct, should be relied upon and may be admitted into evidence. The significance of the Code Of Conduct emerges clearly from the whole of the Code as well as from the ‘general duty to the court’ section of schedule K as well as from the stipulations as to the form of expert’s reports.

10 In the recent decision of Hayden JA in Makita Australia Pty Ltd v Sprowles, (2001) 52 NSWLR 705 a number of significant statements are made in relation to the basal principles which underpin the admission of expert evidence. Importantly Hayden JA set out at paragraph 79, the following passage from National Justice Companions Naviera SA v Prudential Insurance Co Ltd ("The Ikarian Reefer") [1993] 2 Lloyd's Rep 68 at 81-82, a decision of Crestwell J by way of a list of duties and responsibilities of expert witnesses in civil cases:

"1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation ... .

2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise ... . An expert witness in the High Court should never assume the role of an advocate.

3. An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion.

4. An expert witness should make it clear when a particular question or issue falls outside his expertise.

5. If an expert's opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one ... . In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report ... .

6. If, after exchange of reports, an expert witness changes his view on a material matter having read the other side's expert's report or for any other reason, such change of view should be communicated (through legal representatives) to the other side without delay and when appropriate to the Court.

7. Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must be provided to the opposite party at the same time as the exchange of reports ... ."

While some of these matters have an ethical dimension, taken together they point to the need for the trier of fact to be fully informed of the reasoning process deployed in arriving at the expert's opinions. Cresswell J's list has been influential both in causing rules of court to be devised in this and other jurisdictions to control expert evidence and in later judicial pronouncements. Thus in Clough v Tameside and Glossop Health Authority [1998] 2 All ER 971 at 977 Bracewell J said:

"It is only by proper and full disclosure to all parties, that an expert's opinion can be tested in court: in order to ascertain whether all appropriate information was supplied and how the expert dealt with it. It is not for one party to keep their cards face down on the table so that the other party does not know the full extent of information supplied."

This implies that not only must the appropriate information be supplied, but that the expert must reveal the whole of the manner in which it was dealt with in arriving at the formation of the expert's conclusions. “

11 Mr Cameron has submitted that the evidence given by Mr Fermanis should satisfy the Court that an otherwise order under part 36 rule 13 C (2) should be made. In my view no such order should be made. In my view the problems which confront the opposing party when such an otherwise order is sought, clearly include, importantly, the fact that an expert not having committed to the Code Of Conduct at or as soon as practicable after his or her engagement in circumstances such as the present, will have committed to a particular form of opinion. Whilst the party applying for an otherwise order may submit that there is no difficulty in the putative experts adopting schedule K in an ex post facto fashion, it seems to me that this is a course which the Court should strain against in so far as the proper administration of justice is concerned and in terms of fundamental fairness. For those reasons it seems to me that the application for an ‘otherwise order’ should be refused.

12 During the course of submissions taken on this matter the question of s 135 of the Evidence Act and its possible relevance as a parameter in terms of the application was raised. Whilst it is strictly unnecessary to take the provisions of s 135 into account in the proper exercise of the Court's discretion here, which is to refuse to make the otherwise orders, I note that s 135 does permit the Court to refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party or cause or result in undue waste of time.

13 It does seem to me that if the otherwise order were to have been made, there was likely a high prospect that the court would, relying on s135(a), have refused to admit the evidence put forward as s79 evidence, the reasons being that, the expert having been untutored by the provisions of Schedule K, the party against whom the expert's report is sought to be pressed, in the absence of Schedule K, should not be placed in a position in which a report has come forward which may very well have been in a different form, had the expert at the time of signing the report signed to and been aware of Schedule K.

14 For one thing, the form of the report may well have been quite different. For another thing, the report may have been qualified. In the interests of justice in complex commercial litigation before the Supreme Court of New South Wales, where the provisions of the Part 36 Rule 13C and Schedule K regime have been in place for some time, the court should not, without exceptional cause, permit an otherwise order to be made.

15 Naturally, every case in terms of the proper exercise of the discretion would have to be determined upon its own facts, matters and circumstances.

16 It may also be that, had the otherwise order been made, the discretion to exclude the evidence based on s135(c) would have been invoked for the reason that an exercise of endeavouring to identify assumptions and travelling through transparency of reasoning processes, including qualifications, would have had to be embarked upon.

17 For all those reasons, the application for an otherwise order is rejected.

I certify that paragraphs 1 - 17
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Thursday 10 October 2002
ex tempore and revised 24 October 2002

___________________
Susan Piggott
Associate

24 October 2002

Last Modified: 10/31/2002