Harris Scarfe Ltd (Receivers & Managers Appointed) (in Liq) v Ernst & Young (No 6) - [2006] SASC 148

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
HARRIS SCARFE LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQ) & ORS v ERNST & YOUNG & ORS (No 6)
[2006] SASC 148
Reasons for Decision of The Honourable Justice Bleby
19 May 2006
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - OTHER MATTERS ARISING BEFORE TRIAL
Application by first defendants for plaintiffs to produce copies of expert reports and documents associated with preparation of expert reports, in accordance with Supreme Court Rules 38.01 and 38.01A - Expert reports prepared for litigation involving directors conduct and operation of large retail organisation - Definition of "expert report" in light of purpose of Rule 38 and Practice Direction 46A - Whether obligation to produce draft expert reports prepared for oral or written discussion with party or legal advisers - Disclosure required under Rule 38.01 even where draft report includes tentative view of expert - No requirement to disclose unpublished drafts prepared in the process of forming expert opinion - Draft reports the subject of discussion not excluded from production - Application granted.
Supreme Court Rules 1987 (SA) r 38.01, r 38.01A, r 58A, referred to.
Kenneally v Pouras (2003) 87 SASR 346; Mitchell Contractors Pty Ltd v Townsville-Thuringowa Water Supply Joint Board [2005] 1 Qd R 373, applied.
Amos v National Australia Bank Ltd [2001] QSC 31, distinguished.
Interchase Corporation Ltd (In Liquidation) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141, discussed.
Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 113; Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 168; Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 255; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"Expert report"

HARRIS SCARFE LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQ) & ORS v ERNST & YOUNG & ORS (No 6)
[2006] SASC 148

BLEBY J: The plaintiffs in this action claim damages for negligence, breach of contractual duty of care and misleading conduct in breach of s 56 of the Fair Trading Act 1987 (SA). They allege that at all material times from the year ending 31 July 1996 the head of accounting of the first three plaintiffs provided in the company’s accounts and financial records an overstatement of assets (primarily inventory and plant), and an understatement of liabilities (primarily creditors and accrued expenses of their provisions) and expenses, with a consequential overstatement of profits and net assets.
Ernst & Young (“the first defendants”) were auditors of the Harris Scarfe Group for the financial year ending 31 July 1996 and a half yearly review and audit of the group for the financial year ending 31 July 1997. Coopers & Lybrand and their successors in business, PricewaterhouseCoopers (“the second defendants”) conducted the half yearly reviews and audits of Harris Scarfe for the financial years ending 31 July 1998 and 31 July 1999. The plaintiffs allege breaches of duty by the defendants in relation to the audits and reviews conducted by them between 1996 and 1999. They allege that those breaches caused the directors of the plaintiffs to hold certain mistaken beliefs as to the state of the Harris Scarfe accounts, that those mistaken beliefs in turn caused the directors to continue to trade all aspects of Harris Scarfe’s business as they had previously done in ignorance of the true financial position of the companies, and that Australia and New Zealand Banking Group Ltd, as a result of its mistaken beliefs, continued to afford financial accommodation and made further lending to the Harris Scarfe Group.
In their original Statement of Claim and in the first amended Statement of Claim the plaintiffs pleaded that if the auditors had carried out their audit activities properly, the directors of the Harris Scarfe Group would have continued to trade but in a different manner in order to accommodate the true financial situation if it had been known. They pleaded their loss as being represented by the difference between the net asset surplus of each plaintiff as shown in the accounts and the net asset deficiency in fact. At that stage no particulars could be given.
After a strongly contested hearing and appeal[1] the plaintiffs were given leave to file a further amended Statement of Claim. This time, rather than plead a case based on continued trading of the Harris Scarfe Group, the plaintiffs pleaded that, had the directors known the true position at the end of each of the relevant accounting periods, a controller would have been appointed and the companies wound up. By way of losses they claimed the amount of the deterioration in the Group’s asset position from the date when the true position ought to have been revealed until the time when it was in fact revealed, a controller was appointed and the assets realised.
[1] See Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 113; Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 168; Harris Scarfe Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors v Ernst & Young & Ors [2005] SASC 255.
Besides denying liability, the first defendants, by their amended defence, assert that if the directors had known the true position the plaintiffs would still have continued to trade and would not have suffered the losses as claimed by the plaintiffs. In respect of their later period of audit, the second defendants do not assert that the plaintiffs would have continued to trade.
Much of the preparation of the case to date and interlocutory procedures have been directed towards or have depended upon the provision of reports of a multitude of experts, including opinions as to what the directors would reasonably have done if they had known the true situation at the particular time. It is not difficult to infer that the plaintiffs’ experts hold the view that a controller would have been appointed and the assets realised at any time if and when the true position had been revealed. On the other hand, the experts retained by the first defendants would appear to assert that the plaintiffs would have continued trading. It can also be inferred from the early versions of the Statement of Claim that that was a view at one time held by those advising the plaintiffs. It is not surprising, therefore, that the first defendants would pursue with some vigour the production of all documents which might reveal the opinions of the plaintiffs’ experts at various times, and that that is a matter of less concern to the second defendants.
The requirement of the Rules and of Practice Directions
In many respects r 38 of the Supreme Court Rules removes the privilege from production on the ground of legal professional privilege attaching at common law to experts’ reports and documents and instructions associated with their preparation.
Rule 38.01 relevantly provides:
(1)Within twenty-eight days after the time limited by the Rules for making discovery in the action each party in an action shall deliver to all other parties a full copy of every expert report in the party’s possession or power relating to any matter in issue in the action.
(2)Where a party has complied with subrule (1) and further expert reports then come into the possession or power of the party, that party shall immediately deliver to all other parties a full copy of such further expert reports.
Certain exceptions to the obligation contained in those subrules are provided for in the Rules. They are not material to this action. The Rule then continues:
(6)     For the purposes of Rule 38.01 “expert report”:
(a)     means a written report which contains or includes the opinion of any expert (which expression includes any of the persons described in subrule (6) (b) hereof) on any matter in issue in the action, and includes a report in which the expert comments upon the report or reports of any other expert; and
(b)     includes a report from any medical practitioner, dentist, psychologist, physiotherapist, chiropodist, chiropractor or any other person who has examined, treated or tested any party to the action or otherwise offered any professional opinion in connection with any injury or illness in issue in the action.
(7)Other than with the leave of the Court, no party is to adduce expert evidence at a trial unless:
(i)    prior to preparing the expert report the expert has been provided with a copy of the current practice direction issued by the Registrar entitled “Guidelines for Expert Witnesses in Proceedings in the Supreme Court of South Australia”;
(ii)     the expert includes an acknowledgement at the commencement of the expert report that he or she has been provided with and has read the copy practice direction referred to in (i) prior to preparing the expert report; and
(iii)     the following matters are set out in the report or reports delivered or disclosed in accordance with this Rule, or in particulars delivered in accordance with subrule (8):
(a)     the substance of that expert’s evidence;
(b)     the qualifications of the expert; and
(c)particulars identifying the material upon which the expert bases his or her expert opinion.
(8)     When the substance of the expert’s evidence or any of the other matters referred to in subrule (7) is or are not fully set out in the report or reports delivered or disclosed under this Rule, particulars in writing (which may be furnished by letter from a party or the solicitor for that party) setting out those matters, or which when read together with any report or reports which have previously been disclosed, adequately canvass those matters, shall be delivered to all parties no later than the date upon which the report, or if more than one report, the last report, must be delivered pursuant to this Rule.
Rule 38.01A was inserted in the Rules in April 2000. It provides as follows:
(1)Rule 38.01A applies only to actions in which the pleadings have closed on or after 3 June 2000 and to such other actions as the Court directs.
(2)Any report of an expert obtained by a party and which is to be delivered under Rule 38.01 is to:
(a)     set out with reasonable particularity all of the qualifications of the expert which are relied upon to qualify him or her to give the report;
(b)     set out separately each of the factual findings or assumptions upon which the opinions are based;
(c)     set out separately from the factual findings or assumptions each of the opinions which the expert expresses; and
(d)     comply with any Practice Direction published about the contents and form of reports from experts.
(3)Any subsequent report of an expert need only refer to a previous report from that expert and where any part of the contents of the previous report are not to be altered they should not be repeated in the subsequent report.
(4)Upon a request to that effect by another party a party must in relation to an expert’s report delivered under Rule 38.01:
(a)     provide to the other party a list of all documents which have been referred to, or prepared by or at the direction of, the expert in the course of preparing the report;
(b)     provide to the other party copies of any of the documents referred to in a list supplied under (a);
(c)     disclose to the other party details of any fee, disbursement or benefit received, or receivable, by the expert, or any one on his or her behalf, for the preparation of the report and for services provided, or to be provided, by the expert, or by anyone on his or her behalf, in connection with the expert giving expert evidence for the party in the action;
(d)     provide a list of all conversations in which the expert has taken part with any party, any legal representative of a party or any other expert consulted in relation to the matter relevant to the opinions expressed in the report stating when and with whom each such conversation occurred and the topics discussed;
(e)     provide copies of all notes made by or on behalf of the party, or by or on behalf of the expert, concerning any of the conversations referred to in a list provided under (d).
(5)Unless the trial Judge otherwise allows expert evidence-in-chief at the trial is to be given only by tendering reports from the expert which comply with the Rules and the expert swearing that the reports are correct.
Rule 38.02 provides for the consequences of non‑compliance with r 38.01.
It will be seen that both Rules 38.01 and 38.01A refer to the need to comply with Practice Directions. Practice Direction 46 applies generally to r 38. Practice Direction 46A applies to all actions in which the pleadings have closed on or after 3 June 2000. It incorporates the requirements of Practice Direction 46 and provides that the guidelines provided in it must be complied with for an expert to comply with r 38.01A(2)(d). The Practice Direction relevantly provides:
4.     General duty to the Court:
4.1     An expert witness has an overriding duty to assist the Court on matters relevant to the expert’s area of expertise.
4.2     An expert witness is not an advocate for a party.
4.3     An expert witness’s paramount duty is to the Court and not to the person retaining the expert.
5.     The form of the expert report:
5.1     An expert’s written report will set out with reasonable particularity all of the qualifications of the expert which are relied upon to qualify the expert to give the report.
5.2     It will set out separately all of the factual findings or assumptions upon which any opinion is based.
5.3     The report will give particulars identifying the material upon which the expert bases his or her expert opinion.
5.4     If any tests or experiments are relied upon by the expert in compiling the report, the report should contain details of the qualifications of the person who carried out any such tests or experiments.
5.5     Where an expert’s report refers to photographs, plans, calculations, analyses, measurements, survey reports or other extrinsic matter, these must be provided to the opposite party at the same time as the delivery of the report.
5.6     The report should set out separately from the factual findings or assumptions each of the opinions which the expert expresses.
5.7     The expert should give reasons for each opinion.
5.8     If an expert opinion is not fully researched because the expert considers that insufficient data is available - or for any other reason, this must be stated with an indication that the opinion is no more than a provisional one. Where an expert witness who has prepared a report believes that it may be incomplete or inaccurate without some qualification, that qualification must be stated in the report.
5.9     The expert should make it clear when a particular question or issue falls outside his or her field of expertise.
5.10   The expert’s report will contain an acknowledgement at the commencement of the expert’s report that the expert has been provided with this practice direction prior to preparing the expert’s report and that the expert has read it and understood it.
5.11   At the end of the report the expert should declare that (the expert) has made all the inquiries which “(the expert) believes are desirable and appropriate and that no matters of significance which (the expert) regards as relevant have, to (the expert’s) knowledge, been withheld from the Court.”
6.    The further obligations of an expert and the party retaining the expert:
6.1     If, after exchange of reports or at any other stage, an expert witness changes his or her view on a material matter, having read another expert’s report or for any other reason, the change of view should be communicated in writing (through legal representatives) without delay to each party to whom the expert witness’s report has been provided and, when appropriate, to the Court.
6.2     The party who has retained the expert will, if requested by a party to whom an expert’s report has been delivered, deliver to that party:
6.2.1a list of all documents which have been referred to, or prepared by or at the direction of the expert in the course of preparing the report.
6.2.2copies of any documents in the list delivered pursuant to 6.2.1.
6.2.3details of any fee, disbursement or benefit received, or receivable, by the expert or anyone on his or her behalf, for the preparation of the report and for services provided, or to be provided, by the expert or by any one on his or her behalf in connection with the expert giving evidence for the party in the action;
6.2.4a list of all conversations in which the expert has taken part with any party, any legal representative of a party or any other expert consulted in relation to the matter relevant to the opinions expressed in the report stating when and with whom each such conversation occurred and the topics discussed;
6.2.5copies of all notes made by or on behalf of the party or by or on behalf of the expert concerning any of the conversations referred to in a list provided under the previous obligation.
The previous order
On 15 February 2006 I made an order by consent of all parties in the following terms:
1.On or before 21 February 2006 and thereafter within 7 days of the delivery of any further reports each party produce for inspection by the other parties in respect of each expert report delivered by the party in these proceedings:
1.1     All documents which:
1.1.1have been provided to the expert by the party or its agents; or
1.1.2have been obtained by the expert and relied upon by the expert in forming his/her opinion or in writing his/her report; or
1.1.3   are referred to in the expert’s reports;
1.2     All working papers or other documents (in both hardcopy and electronic form) prepared by or at the direction of the expert in the course of preparing the report;
1.3     Tables of data in electronic form in respect of which hard copy tables form annexures to the expert report.
1.4     All correspondence between a party (including its agents and legal representatives) and the expert.
1.5     All notes made by or on behalf of any party of all conversations in which the expert has taken part with:
1.5.1any party;
1.5.2any party’s legal representative; and
1.5.3any other expert;
in relation to matters relevant to the opinions expressed in the expert’s report; and
1.6     All notes made by or on behalf of the expert of conversations had with:
1.6.1 any party;
1.6.2 any party’s legal representative; and
1.6.3 any other expert;
in relation to matters relevant to the opinions expressed in the expert’s report.
2.Upon any party making a request for copies of any of the documents referred to in paragraph 1 the party who produced for inspection provide copies within 72 hours of the request.
Further provision was made in the order relating to provision of lists of documents and production for inspection.
A dispute has arisen between the plaintiffs and the first defendants as to the application of para.1.2 of that order, and particularly whether it includes drafts of expert reports.
The first defendants’ application
In order to resolve the dispute the first defendants seek an order in the following terms:
2.That … each party produce for inspection by the other parties in respect of each expert report delivered by the party in these proceedings all documents and correspondence (including draft reports) (“the documents”):
2.1     exchanged between the expert and a party (including its agents and legal representatives) or any other expert engaged in connection with the proceedings;
2.2     provided by the expert to a party (including its agents and legal representatives) or any other expert engaged in connection with the proceedings; and
2.3     provided to the expert by a party (including its agents and legal representatives) or any other expert engaged in connection with the proceedings;
2.4     disclosed by the expert to a party (including its agents and legal representatives) or any other expert engaged in connection with the proceedings;
2.5     disclosed to the expert by a party (including its agents and legal representatives) or any other expert engaged in connection with the proceedings;
regardless whether the documents have been electronically overwritten or hard copies destroyed.
3.That for the purpose of this order, the word “documents” has the meaning described in Rule 5, Supreme Court Rules 1987.

The definition of “document” in r 5 is sufficiently wide to include data stored on a disk, tape, computer or similar device.
The order made by consent on 15 February 2006 would appear to be in elaboration of but nevertheless consistent with the obligation imposed by r 38.01 and r 38.01A of the Supreme Court Rules. In resolving the current dispute I would not be prepared to go further than what those Rules require. The application must therefore be judged against the requirement of those Rules. The question is not whether the documents in question are privileged from production on the ground of legal professional privilege but whether they come within the obligation of disclosure provided for in the relevant Rules.
While the application in its terms would apply to all three parties in the action, the second defendants have made no submissions in relation to the application and the plaintiffs have not sought any further orders against any of the defendants. The affidavit material on which the application is based relates only to an alleged non‑disclosure and failure to produce by the plaintiffs to the first defendants. Any order, if made, as a result of this application will therefore only affect the obligation of the plaintiff to the first defendants.
The intent and purpose of the Rules
The history of r 38.01 and judicial comments on the purpose of that Rule were referred to by Gray J in Kenneally v Pouras.[2] I will not repeat what is there set out. It is evident from that history, the content of r 38.01, the Practice Direction which accompanied it, the subsequent enactment of r 38.01A and Practice Direction 46A and their content that the Rule and Practice Directions have a number of purposes. One is to ensure full and effective disclosure of an expert’s opinion and of the material on which it is based well before trial. Another is to emphasise that experts are not engaged for the purpose of moulding their opinion to suit the needs of the client, but that they are there to assist the Court and to provide an independent opinion based solely on the proper exercise of their professional or other expertise. Another is to ensure that where an expert has changed or qualified his or her opinion, that change or qualification is made known to all interested parties. Yet another is to ensure transparency between experts and those instructing them so that where a client or their solicitors may have made some suggestion or questioned the opinion, resulting in some change or qualification, that change or qualification and the reason for it is revealed. Another purpose of the Rule was to effect a change of culture among some groups of experts and those instructing them who perceived the function of the expert to be to act solely in the interests of and for the benefit of the client in forming and moulding their opinion.
[2] (2003) 87 SASR 346; [2003] SASC 394.
It was for those reasons that, not only were experts then required to state the factual basis and assumptions on which their opinions were based, thereby reflecting their instructions, but that they and their instructors were thenceforth required to list and supply copies of all documents referred to or prepared by or at the direction of the expert in the course of preparing the report and to list conversations in which the expert had taken part with any party, with the legal representative of the party or with any other expert consulted. They were also required to disclose the topics discussed and to provide copies of notes of any such conversations. Among other things, the Rule was designed to expose the type of change to or formulation of an expert’s opinion exposed in the course of cross‑examination in Universal Music Australia Pty Ltd v Sharman License Holdings Ltd.[3]
[3] (2005) 220 ALR 1 at 57.
True it is that the expert is required to list in his or her report the factual findings and assumptions on which the opinion is based and to attach to their report or to summarise the instructions given, the relevant facts and assumptions, documents and other materials that the expert has considered. However, the Rule also requires that these and any other notes and documents reflected in them must be produced. The Rule and the Practice Direction and the transparency required by them do not rely solely on the integrity of the expert in stating or referring to those matters in the report or in an attachment.
These detailed requirements, when enacted, had the effect of requiring the production of much more information than had previously been the case. As Mr Whitington QC, counsel for the plaintiffs, pointed out, the most recent and far reaching of the requirements, contained in r 38.01A and Practice Direction 46A were enacted at the same time as r 58A, restricting the range of documents required to be discovered to those “directly relevant to any issue arising on the pleadings”.[4] However, I reject Mr Whitington’s argument to the effect that that principle was to be reflected in the extent of the information required to be disclosed in connection with experts’ reports. Although enacted at the same time, the relevant Rules were enacted to meet quite different needs.
[4] Rule 58A.03 Supreme Court Rules.
It is against the background that I have described and the evident purpose of r 38 that the requirements of the Rule must be construed.
It also follows that, if the Rule is complied with, the grounds of successfully challenging an expert’s opinion may, in some cases, be expanded. In others, where the expert has maintained true independence and integrity in forming the opinion, the wider requirements of disclosure may well reinforce the strength of the opinion, even where that has resulted in some change of or qualification to the original opinion.
The definition of “expert report”
It is not surprising, in a case of this complexity requiring expert opinions on the conduct of retail stores, on the course that directors of a large retail organisation might properly take in certain postulated circumstances and on substantial matters of accounting and audit practice, that experts will prepare a number of drafts of the whole or sections of their reports. It is also not surprising, when the essential thrust of the plaintiffs’ claims for damages has changed away from that for which the first defendants now contend, that the first defendants will be anxious to ascertain whether there exists in draft form any earlier opinions that might support their case or throw doubt on the opinions which support the plaintiffs’ present claims. It is therefore not surprising that much of the argument before me concentrated on the obligation to produce draft reports.
The definition of “expert report” in r 38.01 has, as its primary meaning, a “written report”. To be a report it must be something other than what the expert has written for his own edification or as part of the process of forming his opinion. Any professional accustomed to writing opinions will often prepare or amend or discard drafts before being satisfied with the version to be produced for the client’s consumption. Drafts of that nature are not reports. They report to no‑one. In the sense in which “report” is used in r 38.01, it means an account prepared for the benefit of others, not merely for the benefit of the author.
However, where a report is prepared for discussion as representing the author’s then present or even tentative view, and is made available to the client for discussion, even though it may not necessarily be intended as the final report, it is still a report. If it is in writing it is a written report. If it contains or includes the opinion of the expert it is required to be delivered to other parties in accordance with the requirements of r 38.01. It follows that draft opinions exchanged or provided as contemplated by the first defendants’ application must be produced.
I am fortified in this view by a consideration of several decisions of the Supreme Court of Queensland. In Interchase Corporation Ltd (In Liquidation) v Grosvenor Hill (Queensland) Pty Ltd (No 1)[5] the relevant rule of the Queensland Supreme Court Rules provided that a document “consisting of a statement or report of an expert is not privileged from disclosure”. Among the documents in dispute were drafts of various parts of a retrospective valuation prepared by an expert valuer. In relation to those drafts Pincus JA did not need to decide whether privilege was removed by virtue of the drafts being a “statement or report” of an expert. His decision[6] was that they were not privileged because “there is no suggestion that any of them has been communicated to, or was prepared for the purposes of communication to a legal adviser”.
[5] [1999] 1 Qd R 141.
[6] Ibid at 153.
Of the relevant documents Thomas J said:[7]
Quite simply none of those documents or classes of documents appears to be a statement or a report. The documents relate to the eventual report, but go no further than this. They therefore fail to fall within the rule.
[7] Ibid at 159.
Thomas J therefore held that the question of privilege was to be determined according to the application of the common law, and, like Pincus JA held that they were not the subject of privilege.
de Jersey J (as he then was) agreed with Pincus JA and Thomas J.
Given the observations of Pincus JA that there was no suggestion that any of the drafts had been communicated to or was prepared for the purpose of communication to a legal adviser, but, by inference, were merely drafts prepared for the internal use of the expert, that case does not assist in the resolution of this one. It is, nevertheless, consistent with the view I take as to unpublished drafts of an expert’s report. In some cases such drafts may be discoverable if they fall within the requirement of r 58A.03, but that is a different question.
In Amos v National Australia Bank Ltd[8] application was made for entry of a consent judgment based on a settlement agreement entered into between the parties to the litigation. The application was opposed by the plaintiff. Under the agreement the plaintiff’s liability for some of the costs of the defendant had been referred to an assessor appointed under the agreement. The plaintiff objected to the inclusion of costs of experts retained by the defendant to prepare reports and make calculations based on certain scenarios raised upon the plaintiff’s pleadings. The reports were never finalised because of the settlement. It was contended that the assessor was wrong in making any allowance in respect of costs incurred by the defendant in commencing to have their statements or reports prepared in anticipation of trial on the basis that the defendant could not rely on those reports. In the course of his judgment Ambrose J said:[9]
In my view, on the material, the various reports, calculations etc had been made as a consequence of discussions between the Bank and its accountants and other expert's (sic) upon forged handwriting, but no completed reports had ever been prepared and indeed none was ever made. The notations, drafts, statements, etc had obviously been prepared for the purpose of litigation and the communication of them to the Bank was privileged, albeit that had the reports ever been completed and become expert reports, they would have lost that privilege under the rules. In this respect I would adopt with respect the observations of Thomas J in Interchase Corp Ltd (in liq) v Grosvenor Hill (Queensland) Pty Ltd 1999 1 Qd R 141 at p162 and those of Pincus JA at p153.
[8] [2001] QSC 31.
[9] Ibid at [20].
That passage suggests that draft reports, even though produced to the defendant, were not “a statement or report” of an expert which had lost its privilege under the relevant Queensland Rule. However, it was not necessary for the decision and in that respect has not been followed in the subsequent Queensland case to which reference is about to be made.
In Mitchell Contractors Pty Ltd v Townsville-Thuringowa Water Supply Joint Board[10] the dispute over disclosure concerned draft reports of two experts whose final reports had been disclosed in accordance with the Queensland Rule. Of the judgments in Interchase Corporation Ltd (In Liquidation) v Grosvenor Hill (Queensland) Pty Ltd (No 1)[11] Douglas J observed, with respect, correctly, that Pincus JA “did not deal with the issue of whether a draft report which was prepared for the purpose of discussion with the defendant’s solicitors and counsel was a statement or report of an expert for the purposes of” the relevant Queensland Rule. He noted that Thomas J would not have characterised the draft reports as a “statement or a report”. Nevertheless, he continued, in relation to the issue before him:[12]
In my view the answer to the question may be sought by asking whether a draft statement or report by an expert is nonetheless his statement or report even though it might not be his final view. If an expert has prepared a draft report it is still his report or statement, no doubt normally reflecting his state of mind at the time he wrote it. The fact that, after consultation with lawyers in an action, he may prepare a further report or amend the draft does not prevent the draft from meeting the description in the rules. Such a document seems to me to be different from the working papers and valuations of other properties referred to by Thomas J in Interchase. That was the approach adopted by Derrington J in Natwest Markets Australia Pty Ltd v Colliers Jardines (Qld) Pty Ltd (No 3141 of 1996; 22 April 1998, unreported).
[10] [2005] 1 Qd R 373.
[11] [1999] 1 Qd R 141.
[12] Ibid at 376-377.
Douglas J considered[13] that the decision of Ambrose J in Amos v National Australia Bank Ltd[14] was distinguishable. He said:
Ambrose J referred to the documents he was considering as “the various reports, calculations … made as a consequence of discussions between the Bank and its accountants and other experts upon forged handwriting, but no completed reports had ever been prepared and indeed none was ever made. The notations, drafts, statements etc had obviously been prepared for the purpose of litigation and the communication of them to the Bank was privileged, albeit that had the reports ever been completed and become expert reports, they would have lost that privilege under the rules”. The issue arose there in the context of an argument about costs, not whether the documents should have been disclosed. It is difficult to say on the evidence referred to in his Honour’s decision whether the draft statements or reports in that case ever amounted to a statement or report of an expert in the terms of the rule.
[13] Ibid at 377.
[14] [2001] QSC 31.
I respectfully agree with that distinction and adopt the reasoning of Douglas J in this case. That is consistent with and reinforces my view of the definition of “expert report” in r 38.01(6).
Contrary to an argument put by Mr Whitington QC, I do not consider the obligation to disclose such drafts will necessarily prolong the hearing of cases by extension of the cross‑examination of experts based on earlier drafts of their opinions. Any differences may well be convincingly explained by the experts and may, indeed, reinforce the opinion contained in the final report. If, on the other hand, it is apparent that the expert has compromised his or her integrity by acceding to a suggestion of a third party favourable to the expert’s client, then such compromise should properly be exposed. The disclosure of a draft which has that effect may well shorten the cross-examination which otherwise might be necessary in order to reveal the existence of the draft report in the first place.
Rule 38.01A
If I am wrong about my interpretation of the definition of “expert report” in r 38.01, I consider that a draft report which has been provided to the client or its advisers or to a third party for comment and as a result of which a final report has been prepared falls within the provision of r 38.01A(4)(a) as being a document which has been referred to, or prepared by or at the direction of, the expert in the course of preparing the report.
It is not sufficient that the production of the draft is withheld because it was not actually provided by the expert to the client or its legal advisers. It is sufficient that it was referred to by the expert in the course of preparing the report, perhaps in conference with the client’s legal advisers.[15]
[15] Rule 38.01A(4)(a).
It is no answer that the draft may not be in the power or possession of the party commissioning the report, but only in the power or possession of the expert. A condition of the expert giving the report, which must be made known to and acknowledged by the expert[16] is that such material may be required to be produced. The consequences of non-compliance are set out in Practice Direction 46A para.8.
[16] Rule 38.01(7).
The terms of an order
Having reached the conclusion that draft reports of the type I have described are encompassed by r 38.01 and r 38.01A, I remain concerned at the breadth of the order proposed, at least as indicated by paras.2.4 and 2.5 of the application.
The expert may, in the course of casual conversation with the instructing solicitor, disclose that he has prepared a number of drafts before settling on the one then being discussed. Those earlier drafts, if part of his own unpublished process of forming the opinion then being discussed, are not required to be produced. Some restriction is needed on those paragraphs. Rather than drafts or other documents “disclosed”, I consider that the object and purpose of the Rule will be served if the content of the documents concerned has been the subject of discussion, whether in writing or orally, with a party or the party’s advisers or another expert. The order I make will reflect that view.
Technical feasibility
It is suggested that some drafts of the type considered by the order proposed may never have been reduced to paper copy, may have remained in electronic form and may have subsequently been overwritten. There is evidence before me which suggests that, in most computer systems, such drafts can still be recovered and reproduced, if necessary, in hard copy form. On that basis, I see no reason, at this stage, to qualify the orders proposed. However, if such requirement in a particular case were to produce undue hardship or difficulty in recovering the material, an application can be made under either r 38.02(3) or r 3.04(a) for relief from the requirement to comply with the Rule. Such an order would not, however, relieve a party from disclosing the prior existence of the draft or of any conversations in relation to it.[17]
[17] Rule 38.01A(4)(d).
Conclusion
It follows that the first defendants’ application must be granted, albeit with some modification to the opening words and to paras.2.4 and 2.5 of the application in the manner I have described.