Finance & Guarantee Company Pty Ltd v Auswild (Expert Evidence Ruling)
[2019] VSC 665
•3 October 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2014 00071
| FINANCE & GUARANTEE COMPANY PTY LTD (ACN 000 032 548) and others | Plaintiffs |
| v | |
| JAMES RONALD AUSWILD and others | Defendants |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF RULING: | 3 October 2019 |
CASE MAY BE CITED AS: | Finance & Guarantee Company Pty Ltd v Auswild (Expert Evidence Ruling) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 665 |
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EXPERT EVIDENCE – Objection to admissibility of expert report and joint report on the grounds of a lack of independence – Obligation to disclose earlier retainers considered – Extensive communications between lawyers and expert – Complex claims alleging breaches requiring consideration of incomplete historical accounting records – Whether lack of independence affects admissibility under s 79 the Evidence Act 2008 (Vic) – Loss of independence not established – Expert report and joint report admissible.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S M Anderson QC with Mr A J Bailey and Mr N C M Walter | Macpherson + Kelly Lawyers Pty Ltd |
| For the First Defendant | Mr A T Strahan QC with Mr E J Batrouney and Ms X Teo | Lander & Rogers |
| For the Second to Fifth Defendants | Mr J C Kelly SC with Mr S V Shepherd | Pikes & Verekers Lawyers |
HIS HONOUR:
The plaintiffs object to the admissibility of:
(a) the expert report of Mr Brian Silvia of BRI Ferrier dated 31 August 2018 (‘Silvia Report’); and
(b) the joint report of experts dated 19 November 2018 (‘Joint Report’) to the extent that:
(i) Mr Silvia’s opinions are contained in it; and
(ii) Mr Silvia’s opinions influenced Ms Hennessy’s and Mr Stone’s opinions.
On behalf of the plaintiffs it is submitted that the Court ought to exclude the Silvia Report and the Joint Report under s 29 of the Civil Procedure Act 2010 (Vic) (‘Civil Procedure Act’), alternatively under s 135 of the Evidence Act 2008 (Vic) (‘Evidence Act’).
Section 29(1) of the Civil Procedure Act relevantly provides:
If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
…
(f) any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.
Section 135 of the Evidence Act provides:
The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might—
(a) be unfairly prejudicial to a party; or
(b) be misleading or confusing; or
(c) cause or result in undue waste of time;
...
The parties’ submissions on admissibility were made as part of final submissions and I reserved my ruling until judgment. This ruling should be read in the context of the reasons for judgment given this day.[1]
[1][2019] VSC 664.
Background to the dispute
After the Second World War, Sir James Auswild (‘Sir James’) and his younger brother Ronald Auswild (‘RWA’) established very successful businesses principally in the motor industry, under the name of Preston Motors; and had substantial investments in properties.
The businesses and assets were held in a network of companies (‘Preston Motors Group’) in which Sir James held a controlling interest of 52.186% and RWA held 47.814%.
On 29 May 1985, Sir James died. In summary, he left his estate including his controlling interest in the Preston Motor Group to his wife and two daughters.
As the executor of Sir James’ estate, RWA held Sir James’ shares on trust until they were transferred to Sir James’ daughters, Geraldine Bergmuller and Margaret Parker between 4 December 2003 and 6 November 2006. Margaret Parker died on 25 August 2000.
The claims substantially relate to the period in which RWA held Sir James’ shares from 1985 to 2006. During this time, RWA and his son James Auswild (‘JRA’) were directors of the companies in the Preston Motors Group.
The gravamen of the plaintiffs’ claims against the defendants during this period is that JRA and RWA preferred the interests of their branch of the family over those of Sir James’ branch. Broadly speaking, they were said to have done so by entering transactions which benefited joint venture companies only partially owned by the Auswild families; and by purchasing assets and making payments which benefited members of JRA and RWA’s branch of the family. The specific claims are as follows:
Carlisle Loan
(a) JRA and RWA caused Fintee Investments (Canberra) Pty Ltd (‘Fintee’) and/or Finance & Guarantee Company Pty Ltd (‘F&G’), entities within the Preston Motors Group co-owned by Sir James’ and RWA’s families, to borrow the sum of at least $7,800,000 from General Motors Acceptance Corporation (‘GMAC’) and on-lend the sum of $8,228,447.72 to Carlisle Investments Pty Ltd (‘Carlisle’), a joint venture entity only partially owned by the Auswilds, which sum was not repaid.
Debt Management Agreement
(b)JRA and RWA caused F&G to enter into a Debt Management Agreement (‘DMA’) under which F&G became a guarantor for the following joint venture entities only partially owned by the Auswild families:
(i)Carlisle;
(ii)Beron Investments Pty Ltd;
(iii)Calabar Pty Ltd;
(iv)Rossfield House Pty Ltd; and
(v)Telasava Pty Ltd,
(together ‘the Webb/Auswild Group’).
(c)Alternatively, if it was appropriate for F&G to enter the DMA because it had already previously guaranteed Carlisle’s liabilities to GMAC pursuant to:
(i) a deed dated 27 September 1985;
(ii) a cross-guarantee dated 25 October 1989; and
(iii) a Deed of Acknowledgement of Indebtedness dated 10 December 1990;
JRA breached his fiduciary duties to F&G by causing it to enter into those deeds in the first place.
Purchase of Seascape Apartments breach
(d)Between August and October 1994, JRA and RWA caused Preston Motors to purchase 22 apartments at 53 Bay Street, Tweed Heads, New South Wales (known as the Seascape Apartments) and 18 car parking spaces for a total consideration of $8,062,000 from the Webb/Auswild Group.
The Telasava and Rossfield loans breaches
(e)JRA caused Preston Motors to loan the following sums to joint venture entities in the Webb/Auswild Group:
(i) $2.9 million to Telasava on or about 17 August 1993;
(ii) $3,748,048 to Telasava between 8 June 1994 and 30 June 1994;
(iii) $5.1 million to Rossfield on or about 8 June 1994.
Transfer of Sutton Farm breach
(f)On or about 26 October 1994, JRA and RWA caused Auswild Securities Pty Ltd to transfer the Sutton Farm property to Joan Auswild, being RWA’s wife and JRA’s mother, for no consideration.
Purchase of Regency Units for Baronja
(g)JRA caused Preston Motors or F&G to pay $944,363.98 towards the purchase of unit 1702 and car park 161 at the Hyde Park Regency at 281-283 Elizabeth Street, Sydney on behalf of Baronja Investments Pty Ltd, a company in which JRA had an interest.
Purchase of Beresford Units
(h)In about the period from February 1991 to June 1991, JRA caused F&G to pay:
(i)$222,289 for 6,000 E Group ordinary shares in Esplanade Properties Pty Ltd which entitled his brother Raymond Auswild to have exclusive possession of Unit 5, 1A Beresford Road, Rose Bay; and
(ii)$259,670 for 8,000 G Group ordinary shares in Esplanade Properties Pty Ltd which entitled JRA to have exclusive possession of Unit 7, 1A Beresford Road, Rose Bay.
Payment of wages to defendants breach
(i)JRA and RWA caused F&G, Preston Motors, Commonwealth Motors Pty Ltd and Preston Motors (Holdings) Pty Ltd to pay wages to:
(i)Barbara Auswild, RWA’s daughter and JRA’s sister, for the period 1987 to July 2000;
(ii)Keith Kearns, RWA’s brother-in law and JRA’s uncle, for the period 1988 to 2006;
(iii)Raymond Auswild, RWA’s son and JRA’s brother, for the period 1985 to 2002.
Chronology of expert evidence
The chronology of expert evidence led at the trial is as follows:
(a) Mr Owain Stone of KordaMentha Forensic was engaged by the plaintiffs and prepared a report dated 12 June 2018.
(b) Ms Siobhan Hennessy of PwC Australia was engaged by the first defendant and prepared a report dated 27 August 2018 and a supplementary report dated 31 October 2018.
(c) Mr Brian Silvia of BRI Ferrier was engaged by the second to fifth defendants and prepared a report dated 31 August 2018.
(d) The plaintiffs were directed to file and serve any expert report in reply by 8 October 2018 but did not do so.
(e) Mr Stone, Ms Hennessy and Mr Silvia conferred, as directed by the Court, and produced the Joint Report dated 19 November 2018.
(f) On 21 February 2019 the plaintiffs informed the Court that Mr Stone was not to be called.
(g) On 26 and 27 February 2019 Ms Hennessy gave evidence and her report was tendered.
(h) On 27 and 28 February 2019 Mr Silvia gave evidence. His report was objected to and marked for identification.
(i) On 28 February 2019 the Joint Report and the report of Mr Stone were admitted into evidence without objection and the plaintiffs elected not to cross-examine Mr Stone.
The plaintiffs contend as follows:
(a) The Silvia Report is entirely inadmissible on the basis of Mr Silvia’s:
(iii) repeated and egregious contraventions of his obligations of independence;
(iv) misleading conduct; and
(v) failure to disclose the basis of his opinion.
(b) Alternatively, if the evidence is not excluded, then it should be afforded little to no weight.
(c) The Court should only accept Mr Stone’s report and not his content in the Joint Report, which it should be inferred was influenced by Ms Hennessy’s and Mr Silvia’s opinions.
Did Mr Silvia contravene his independence obligation?
The plaintiffs rely on the following matters.
By letter dated 25 June 2013 to Mr Silvia, Pikes & Verekers Lawyers (‘PV Lawyers’), solicitors for the second to fifth defendants, retained Mr Silvia for a preliminary conference with JRA’s son and Graham Hamilton, who was a director of various companies within the Preston Motors Group and the nominee of Barbara Auswild and JRA. The letter enclosed a document entitled ‘Observation’, a report by Michael Smith of ShineWing Corporate Advisory Pty Ltd (‘ShineWing’) and correspondence associated with that report (‘the ShineWing Report’). The letter stated that the position of Barbara Auswild and JRA was that the purpose of the ShineWing Report was ‘to intimidate Barbara Auswild and James Auswild Snr [JRA] with a view to persuading them to exit the Preston Motor Group or to otherwise agree to a substantial transfer of shares so as to dilute materially in favour of the protagonists their present 47.814% interest in the Preston Motor Group’. The purpose of the conference proposed on 3 July 2013 was said to be to provide Mr Silvia ‘with greater detail as to the matters in issue’.[2]
[2]Mr Silvia gave evidence that he had been unable to find the document ‘Observation’ and that he did not have reference to it during the preparation of the report in this proceeding.
On 3 July 2013 there was a meeting between Mr Silvia, Mr Hamilton and a solicitor from PV Lawyers. Mr Silvia said it was a very preliminary meeting for the purpose of instructing him to review the ShineWing Report.
By letter dated 3 July 2013 to Mr Silvia, PV Lawyers enclosed a list of the plaintiffs and a report of BDO Kendalls dated 4 September 2008 (relating to loan transactions from GMAC and PT Ltd to Preston Motors, F&G and Fintee) (‘the Po Mar report’).
On 12 August 2013 Mr Silvia and an employee of BRI Ferrier, Mr Rojo, had a meeting with Mr Tassell and Mr Green, solicitors at PV Lawyers. Mr Silvia said that he had requested Mr Rojo to produce a list of the documents that he would need to undertake the review of the ShineWing Report.
By letter dated 19 August 2013 to Mr Silvia, Mr Green of PV Lawyers provided a letter from ShineWing dated 25 June 2013 referenced ‘Preston Motors – assessment of quantum report’.
In substance, Mr Silvia’s evidence was that the above communications related to a request to undertake a review of the ShineWing Report but, after the documents required for the review were not provided, the review did not proceed.
By letter dated 8 July 2014 to Mr Silvia, Mr Green of PV Lawyers confirmed that BRI Ferrier had been retained as an independent expert to provide an opinion on the ShineWing Report. Mr Silvia was asked to attend the offices of an accountant, Mark Taylor, to review books and records and answer questions with respect to loan accounts and other matters.
Mr Silvia gave evidence that he attended at Mr Taylor’s office, but the records that he saw were not relevant to the task that he had been given. He said that ‘[t]he whole exercise was a waste of time’. He said that, with respect to both of the above exercises, no action was taken because the necessary material was never provided; and that is why he did not consider it relevant to disclose in his expert report prepared for this proceeding.
By letter dated 19 August 2015 to Mr Andrew Cummins of BRI Ferrier, Mr Tassell of PV Lawyers requested a review of documentation provided for the purpose of discussing the following questions in conference:
1,In respect of the form of the accounts, do they follow any particular practise or accounting standard common or accepted by chartered accountants during the period in which they were prepared? In particular we draw your attention to:
(a)the aggregate statement of assets and liabilities of the Auswild family as a whole,
(b)the comparative statement of assets and liabilities pages for individuals and trusts,
(c)the reconciliation statement of assets and liabilities with net profit as per income tax returns for individuals (the reconciliations),
2,What inferences or conclusions. if any, can be drawn from the reconciliations for individuals with respect to:
(a)the source of their income,
(b)whether that source can be identified as derived from the assets listed for the individuals, for example:
(i)bank accounts, entities within the particular assets and liabilities statements,
(ii)shareholdings in companies.
(c)what benefits individuals received other than income.
Mr Silvia said that he would have seen that letter. He was asked to express a view as to what he might have understood about comparative statements of assets and liabilities for family members. He did not prepare any such report and did not think it was a relevant matter to disclose his involvement.
On 23 February 2016 there was a conference attended by Mr Silvia and Mr Cummins of BRI Ferrier, Mr Tassell of PV Lawyers and Mr Shepherd of counsel. The notes record a reference to the letter of 19 August 2015. Mr Silvia recorded that there was a discussion concerning the financial annual statements of family members and a document, which was a form of reconciliation of movement of assets and liabilities.
By letter dated 14 June 2018 to Mr Silvia, Mr Tassell of PV Lawyers enclosed Mr Stone’s report dated 12 June 2018.
On 25 June 2018 there was a meeting attended by Mr Silvia, Mr Tassell and Mr Green of PV Lawyers, Mr Kelly SC and Mr Shepherd of counsel. The note is largely indecipherable but appears to state:
(i) ‘Purposes
1. Final response to KM [KordaMentha]
2. We given tasks’ (p 1)
(ii) ‘But we now want to rely on the DMA as a positive’ (p 2)
Mr Silvia said he was unable to remember the detail of the discussions throughout the DMA. It was submitted by counsel for the plaintiffs that Mr Silvia was participating as a team member together with solicitors and counsel.
On 26 June 2018 there was a meeting between Mr Silvia, Robyn Karam of BRI Ferrier and Mr Shepherd of counsel. Mr Silvia’s evidence was that he thought they discussed the KordaMentha report.
On 27 June 2018 Mr Silvia was given a ‘USB’ stick containing documents.
On 28 June 2018 there was a meeting between Mr Silvia and Ms Karam of BRI Ferrier, Mr Tassell of PV Lawyers and Mr Shepherd of counsel. Mr Silvia gave evidence that the purpose of the meeting would have been ‘preliminary work following on from the receipt of initial documents’.
By email exchange on 6 July 2018 between Ms Karam and PV Lawyers, Ms Karam was provided with documents she requested, including the Po Mar report.
On 11 July 2018 there was a meeting between Mr Shepherd of counsel and Ms Karam. The notes appear to record Mr Shepherd explaining aspects of the client’s case, including:
Our thesis is F+G was on the hook much earlier and would have been negligent not to give the guarantee.
oAs@ 1990 F&G on hook as guarantor
oIt was also party to the 1981 Deed (Carlisle, Calabar, Alkana and Fintee, as borrowers)
…
Our thesis is that by 1990 F&G was a shot duck. It had a $200m liability due to the deed of indebtedness (6 months after Carlisle loan).
The notes also record the following exchange between Mr Shepherd and Ms Karam:
SVS:
•This was the biggest debt in Southern hemisphere for GMAC. It got so big that it was transferred because it would have wiped out GMACA.
•The mere fact F&G appeared as a party we say is of no consequence. We say at that time Carlisle was insolvent
RK:
•I think that theory is open and Stone stops just short of saying that (same thing) in his report.
On 17 July 2018 Ms Karam is given further financial documents.
On 27 July 2018 there was a meeting attended by Mr Silvia and Ms Karam of BRI Ferrier, Ms Jennifer Hold of PV Lawyers and Mr Shepherd of counsel. There are approximately 46 pages of handwritten notes, and counsel for the plaintiffs refers to the first comment, which is attributed to Ms Karam, that appears to be:
“Going through questions put to KordaMentha – wages, etc. some ... in areas are helpful ... outlines of response ...”._ _
On behalf of the plaintiffs it is asserted that in fact the note records:
“Going through questions to put to KordaMentha – wages, etc. some ... in areas are helpful ... outlines of response ...”.[3]
This interpretation suggests preparation of cross examination for use by counsel in relation to the KordaMentha report. In my opinion, the actual note suggests that the attendees were considering the questions that were put to KordaMentha.
[3]Emphasis added.
By letter dated 9 August 2018 to Mr Silvia, PV Lawyers confirmed that the KordaMentha report had been enclosed in their letter of 14 June 2018 and requested responses to Mr Stone’s opinions and asked questions with respect to the Carlisle loan, the DMA, the Debt Reduction Agreement and the Seascape Apartments.
On behalf of the plaintiffs it was submitted as follows:
The documents and Mr Silvia’s oral evidence makes it clear that he has been retained since 2013 and has been deeply involved in the assessment of the defences relied on by the defendants in this case; in understanding the defendants’ case theory and in preparation for trial. He has had numerous meetings with solicitors, potential witnesses and with the second – fifth defendants’ counsel. He participated in six meetings with various persons including solicitors and counsel to discuss the KordaMentha report before he was retained to give an opinion.
Based on a review of the documents produced under subpoena alone, Mr Silvia and his staff exchanged a total of 348 email communications with PV Lawyers, including:
(a)221 emails between 2013 and 9 August 2018 (the date Mr Silvia was purportedly first retained to produce the Silvia Report);
(b)30 emails between 10 August and 31 August 2018 (the period during which Mr Silvia was purportedly preparing the Silvia Report); and
(c)97 emails between 1 September 2018 to the present (the period during which the parties were preparing for then conducting the trial).
This level of collaboration is staggering when one considers the importance of an expert witness maintaining their independence.
Consideration
The obligations of expert witnesses in this Court are set out in Form 44A–Expert Witness Code of Conduct (‘Code’), which relevantly provides as follows:
General Duties to the Court
2.An expert witness is not an advocate for a party and has a paramount duty, overriding any duty to the party to the proceedings or other person retaining the expert witness, to assist the Court impartially on matters relevant to the area of expertise of the witness.
Content of Report
3.Every report prepared by an expert witness for use in Court shall clearly state the opinion or opinions of the expert and shall state, specify or provide—
…
(d)the assumptions and material facts on which each opinion expressed in the report is based (a letter of instructions may be annexed);
(e)the reasons for and any literature or other materials utilised in support of each such opinion;
…
(h)to the extent to which any opinion which the expert has expressed involves the acceptance of another person's opinion, the identification of that other person and opinion expressed by that other person;
…
I reject the plaintiffs’ submission that Mr Silvia failed to assist the Court impartially as required by the Code – for the following reasons:
(1)A reading of his report demonstrates that all assumptions are set out in the body of the report; and the material relied upon by him in reaching his opinions are set out in Annexure 3.
(2)Although Mr Silvia was vigorously cross-examined, it was not put to Mr Silvia that any specified part of his report:
(i)could not be justified on the basis of the assumptions or material disclosed; or
(ii)must have been based on other sources provided to him in communications with PV Lawyers or otherwise.
There is no obligation to disclose matters on which the opinion expressed in a report is not based. In fact, confidential oral or written communications between the lawyer acting for a client and an expert made for the dominant purpose of the client being provided with professional legal services relating to an anticipated or pending proceeding involving the client are privileged.[4]
[4]Evidence Act 2008 (Vic), s 119.
Communications between lawyers, clients and experts are not prohibited and the expert is not required to disclose such communications unless the communications form a basis of an opinion ultimately expressed in the expert report. The appropriateness of such communications is helpfully recognised in the Practitioner’s Guide to Briefing Experts (‘Guide’) which, under the topic of ‘Communication with the Expert’, states:
Sending a letter of instruction is never the totality of the communication between an expert and the lawyer briefing them. Amongst other things, it will typically be appropriate:
1.To discuss the questions that will be included in the letter of instruction (ideally before the letter is finalised and sent);
2.For the expert to obtain clarifications or further instructions during the course of their retainer;
3.For the expert and lawyer to discuss the expert’s preliminary views before they prepare a draft report (since there is risk in leaving that discussion until later); and
4.For the lawyer to discuss the expert’s draft report with them, and assist them in finalising that report.
While such communication is essential to the preparation of a useful expert’s report, it also needs to be carefully managed. In particular, careless communications could come out in discovery, and be used against the expert and the parties involved in the litigation.[5]
The Guide also notes, for the assistance of the instructing lawyer, that ‘an expert will often express preliminary views before the issues in dispute have been narrowed and prior to detailed information being provided’.[6]
[5]Law Society of New South Wales Young Lawyers, The Practitioner’s Guide to Briefing Experts (1st ed, 2017) 19.
[6]Ibid 20.
In a complicated case such as this, prior to the completion of the letter of instruction, I would have thought it unusual if detailed discussions had not occurred about the material that could be made available to the expert, the material the expert required and the questions that the expert might be capable of addressing. There is no evidence that there were communications between the lawyers and Mr Silvia other than for the purpose of identifying material questions and the provision of necessary material. Neither is it inappropriate for a lawyer to identify a proposition or ‘thesis’ and ask the expert whether, for example, the relevant records support such a proposition or thesis.
What is critical is that the expert approaches consideration of the questions impartially; and there is no attempt by the lawyer to influence the expert’s opinion. As Brooking J said in Phosphate Co-operative Co v Shears (No 3):
It is impossible to lay down specific rules dealing with communications between the expert, on the one hand, and the company and those representing it, on the other: everything depends on the circumstances. The guiding principle must be that care should be taken to avoid any communication which may undermine, or appear to undermine, the independence of the expert.[7]
His Honour also helpfully stated:
The greatest circumspection is required in relation to this matter of making representations to an independent expert, not by way of correcting some error of fact, but by way of influencing his judgment on the established facts.[8]
I would respectfully add that representations to an independent expert can include not only the correction of errors of fact but also the formulation of appropriate questions and the identification of necessary material.
[7][1989] VR 665, 683 (Phosphate Co-operative).
[8]Ibid 681.
The evidence relied on by the plaintiffs does not reveal that communications were for other than these proper purposes. There is no doubt, as the Guide states, that communications need to be ‘carefully managed’ but, as Brooking J states, ‘[e]verything depends on the circumstances’.[9] For example:
(a)Expert medical practitioners will usually receive a letter of instruction from a lawyer and then directly communicate and examine the injured plaintiff for the purpose of answering the questions put by the lawyers. An experienced forensic medical expert will need no assistance in the drafting of the expert report.
(b)A handwriting expert will usually require to be provided with nothing more than a written instruction and the handwriting samples for comparison.
(c)An expert in an area, who has no forensic experience, will frequently require legal assistance with the final draft of the report to ensure that it is ultimately presented in admissible form. Plainly, great care must be shown by the lawyers to ensure that such assistance does not extend to ‘moulding’ the opinion. However, it is neither appropriate nor conducive to an efficient trial of a proceeding for an expert, unaware of the rules of evidence, to put forward a report that does not properly identify the basis for his or her opinion or is otherwise in an inadmissible form.
[9]Ibid 683.
In this case, there were numerous communications between Mr Silvia and his assistants and PV Lawyers. It is understandable that the plaintiffs were concerned about whether Mr Silvia had become an advocate for the second to fifth defendants. This underscores the importance of ‘carefully managing’ communications between the lawyers and the expert. Certainly, significant time can be lost at trial by investigating an expert’s independence. However, as I have already found, the communications relied on by the plaintiffs do not demonstrate that Mr Silvia’s independence was affected or that he was provided with undisclosed material on which his expert opinion was based.
I have read the numerous emails and communications in question. They principally relate to the provision of information, and disclose no evidence of an attempt to influence Mr Silvia or undermine his independence.
It may well be that the number of communications should have been ‘better managed’, in the sense of being reduced in number; but I have no basis to find any impropriety by PV Lawyers, counsel or Mr Silvia.
This case involved business records dating back decades. The courtbook, which consisted mainly of such records, filled 32,426 pages. Presumably the business records examined, but not included as relevant records in the courtbook, would have been numerous. The records were patchy; and substantial work would have been required to piece together the records to obtain a coherent picture of the relevant business dealings over the many years. Such a task would be expected to involve substantial work by the solicitors and accountants, and require communication and indeed collaboration between those persons. This co-operation does not of itself lead to an inference that Mr Silvia was other than independent. As is common in these complex cases, much of the work involved in compiling the relevant records was undertaken by an employee (in this case Ms Karam) assisting Mr Silvia.
I do not find any evidence of a partisan attitude adopted by Mr Silvia in the completion of his report. The lack of such partiality is demonstrated by the fact that all the experts agreed in substance on all material questions. On my analysis of the records, they did so correctly.
The proposition that Mr Stone was influenced by Mr Silvia, or his opinions, should be rejected. As his curriculum vitae confirms, Mr Stone manages the KordaMentha forensic accounting team and is one of the most experienced forensic accountants in Australia. Over 30 years, he has given evidence in this and other superior courts in Australia and overseas on numerous occasions. The plaintiffs did not seek to call or even cross-examine Mr Stone, from which I infer that Mr Stone’s evidence would not have assisted the plaintiffs’ submission in this respect. The plaintiffs did not attempt to establish that any changes in Mr Stone’s opinions between his initial report and the Joint Report were not justified on the evidence.
It was submitted on behalf of the plaintiffs that Mr Silvia had become part of the team representing the second to fifth defendants. Counsel for the plaintiffs referred to Mr Silvia as a ‘dirty expert’. This is a colloquial expression not intended to be pejorative, but rather refers to an expert engaged to:
(a) advocate for the client’s interests,
(b) be involved in strategic decisions as to how independent experts should be briefed; and
(c) generally inform lawyers on technical matters.
The advantage of a ‘dirty expert’ is that lawyers do not need to ‘carefully manage’ communications and can provide material that could be seen to influence the expert’s opinion.
However, an independent expert can be utilised for the purpose of providing technical information to the lawyers to assist them in better understanding technical aspects of the case including, for example, in the preparation of cross-examination. An expert will frequently be in court during the evidence of another party’s expert, specifically for the purpose of assisting the cross-examiner. Such assistance in the preparation of a party’s case does not render the expert no longer independent. Plainly, care must be taken; but I repeat Brooking J’s observation that ‘[e]verything depends on the circumstances’.[10]
[10]Ibid.
Did Mr Silvia engage in misleading conduct?
The plaintiffs submitted that Mr Silvia’s misleading conduct and contraventions of his overarching obligations consisted of the following:
(a) His failure to disclose his earlier retainers by PV Lawyers.
(b)His failure to disclose his meetings and communications with the defendants and their lawyers.
(c)His declaration that ‘no matters of significance, which I regard as relevant have, to my knowledge, been withheld from the Court.’
(d)Failure to comply with paragraph 3(d) of the Code.
(e)His evidence under cross-examination that he did not make the above disclosures because he did not believe them to be relevant.
For the reasons I have already given, unless the earlier retainers and communications constituted matters upon which his opinions as expressed in his report were based, Mr Silvia was not required to disclose them under the Code or otherwise. On that same premise, I accept his evidence that he believed them to be irrelevant.
Did Mr Silvia fail to disclose the basis of his opinion?
For reasons set out above, I find that Mr Silvia did not fail to disclose the basis of his opinion.
On behalf of the plaintiffs, it was submitted that Mr Silvia conceded that he did not disclose in his report all documents to which he had regard. Counsel for the plaintiffs point to the following evidence:
Anderson QC: And but for the issue of the subpoenas, the two subpoenas in December to your firm and you, none of these documents would have come to light, would they, showing your involvement prior to the date of your retainer on 9 August 2018. That’s correct, isn’t it?
Silvia: Yes.
As a reading of the question demonstrates, Mr Silvia was not conceding that he had regard to the communications not referred to in his expert report. Rather, he was conceding that he did not disclose such documents. He stated that he believed that he did not disclose them because he was not obliged to do so. I agree and, in such circumstances, he was probably not entitled to do so because of the plaintiffs’ privilege.
Does the loss of independence result in inadmissibility?
The plaintiffs submitted that Mr Silva’s alleged loss of independence, as a result of his failure to identify information material to the expressed opinion, was a ground to exclude his expert evidence. They relied on the decision of Austin J in ASIC v Rich.[11]
[11](2005) 190 FLR 242, 300 [242], 324–5 [348]–[349].
However, as was submitted by counsel for the second to fifth defendants, this decision was reversed on appeal in ASIC v Rich where Spigelman CJ (with whom Giles and Ipp JJA agreed) stated:
The issue for a trial judge is whether the opinion expressed to be based on the facts proved or assumed is correct. In determining this issue, the judge will have regard, among other things, to the reasoning process (based on those facts) used by the expert. The mere fact that the expert’s opinion is based on facts that are assumed (and not proved) at the time the expert gives evidence is no reason to exclude the evidence at that stage. The assumed facts may be proved later by other evidence. The fact that the opinion was initially formed or later reinforced by reference to other facts, not said by the expert in his evidence to be proved or assumed, is irrelevant to the question of admissibility. Once the opinion is capable of being based on the proved facts, it is admissible. The fact that the expert’s opinion was at one time — or even still is — reinforced by undisclosed facts and reasoning processes is irrelevant to the admissibility of the opinion (although these matters may go to weight).[12]
[12](2005) 218 ALR 764, 794 [136].
In Rush v Nationwide News Pty Ltd (No 5),[13] Wigney J admitted evidence of friends of the plaintiff notwithstanding submissions that the witnesses ‘were necessarily incapable of being impartial’[14] and had utilised unidentified information.[15] His Honour identified the requirements of admissibility under s 79 of the Evidence Act as being that:
(a) the witness has specialised knowledge derived from training, study, or experience; and
(b) the opinion expressed by the witness is wholly or substantially based on that specialised knowledge.[16]
[13][2018] FCA 1622 (‘Rush’).
[14]Ibid [8].
[15]Ibid [9].
[16]Ibid [32].
His Honour noted that the section imposed no requirement for the evidence to be independent or impartial[17] and concluded the relevant principles had been properly summarised by Dodds-Streeton J in Ananda Marga Pracaraka Samagha Ltd v Tomar (No 4):
In my opinion, relevant authority establishes that while (as reflected by the Federal Court Practice Note and like curial protocols) objectivity and independence are sought of expert witnesses, such qualities are not preconditions of competence, even in the case of expert witnesses. The sanction for failure to fulfil the obligations imposed by relevant authority and curial protocols is not the exclusion of the expert’s evidence, but rather, the significant risk that it will fail to persuade.[18]
Wigney J concluded:
In other words, an actual or perceived lack of independence, impartiality or objectivity of an expert witness goes to weight, not admissibility.[19]
[17]Ibid.
[18]Ibid [35], quoting Ananda Marga Pracaraka Samagha Ltd v Tomar(No 4) (2012) 202 FCR 564, 570 [35].
[19]Rush [2018] FCA 1622 [36].
There may be cases where it would be appropriate for a court to exclude expert evidence under s 29 of the Civil Procedure Act or s 135 of the Evidence Act. For the reasons set out above, this is not such a case.
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