McKay v Commissioner of Main Roads [No 6] - [2010] WASC 274

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: McKAY -v- COMMISSIONER OF MAIN ROADS [No 6] [2010] WASC 274

CORAM: BEECH J

HEARD: 31 AUGUST 2010

DELIVERED : 1 SEPTEMBER 2010

PUBLISHED : 15 OCTOBER 2010

FILE NO/S: CIV 1558 of 2007

BETWEEN: RODERICK DOUGLAS McKAY
KATHLEEN GLENYS McKAY
Plaintiffs
AND
COMMISSIONER OF MAIN ROADS
First Defendant
WESTERN AUSTRALIAN PLANNING COMMISSION
Second Defendant

Catchwords:

Practice and procedure - Expert evidence - Report exchanged very late in trial - Whether leave should be granted to rely on report - Whether proposed evidence within expertise of witness

Legislation:

Nil

Result:

Leave to rely on report refused

Category: B

Representation:

Counsel:

Plaintiffs:     Mr M J McCusker QC & Mr T Houweling
First Defendant             :     Mr K M Pettit SC & Ms F B Seaward
Second Defendant         :     Mr K M Pettit SC & Ms F B Seaward

Solicitors:

Plaintiffs:     Cornerstone Legal
First Defendant             :     State Solicitor for Western Australia
Second Defendant         :     State Solicitor for Western Australia

Case(s) referred to in judgment(s):

AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Attorney General of Botswana v Aussie Diamonds Pty Ltd [2009] WASC 301
McKay v Commissioner of Main Roads [2009] WASC 353

BEECH J:
(These reasons are an edited version of reasons delivered in an unpublished format on 1 September 2010.)

Introduction

Mr Haratsis has prepared numerous reports for the purposes of this litigation. The first was in August 2008; several more were prepared in 2009.
Mr Haratsis has prepared a further report dated 20 August 2010 entitled 'Responsive Report ‑ Population'. The defendants object to a number of parts of that report. Some of those objections have already been determined in the course of argument on 31 August 2010.
The objection the subject of this decision is to pars 17 to 20 on page 132 and to pages 134 to 151 of the report (adopting the parties’ convention of referring to the page numbers of the volume in which the report is contained).

The evidence objected to

Paragraphs 17 to 20 appear to be in the nature of a summary of the substantive section (pt 2) of the report at pages 134 to 151. That part of the report is concerned with 'Market Conditions at the Time of Taking'.
The first paragraph on page 134 is in the following terms:
2.Market Conditions at the Time of Taking
Within the Peel Region at 2006, the market was expecting the economy to continue to grow strongly. Analysis and review of key economic indicators before the time of taking illustrate a significantly expanding Peel Region economy. On this basis, MacroPlan [ie Mr Haratsis] consider that the market place would have based decisions on the current economic cycle rather than the historical trends over the period 1996 to 2006. For this reason, MacroPlan has adopted a population projection scenario higher than other projections which were based on demographic factors (e.g. migration patterns) from a non‑representative period (i.e. 1996 to 2006). In this regard, we consider population growth of an additional 29,000 to 36,000 in the Peel Region between 2006 and 2016 would have been factored in by the market place.
At pt 2.1 is a table prepared by Mr Haratsis. He describes it as a summary of what he terms the 'signals' available to the marketplace at the time of taking regarding the future demand for residential land within the Peel region. The table sets out a number of indicators, namely: building approvals, migration, unemployment, employment, media reports, development activity, prices, environment and population. For each indicator the table describes some statistics (under the heading 'Movement at Time of Taking') and then sets out what is said to be the 'Signal to the Marketplace'.
Parts 2.1.1 to 2.1.9 deal with these 'indicators', setting out some statistics in tables and graphs and making some observations in corresponding text.
A number of the stated sources for the table in pt 2.1 are documents that were not available at the date of taking in July 2006.
That is true for many of the tables and figures shown in the following pages. There is a post‑taking objection arising from that.
In addition to the first paragraph on page 134, set out above, there are other passages in the report where Mr Haratsis expresses an opinion about what would have been expected, or what the market would have thought. For example, in the last paragraph on page 145 he says that it 'could be expected that with known future developments this cycle would become more sustainable than previous cycles and therefore last for an extended period of time'. See also page 146. Similarly, on page 148, under the heading of 'Environment', Mr Haratsis states that the high level of environmental constraints caused the yield for a number of sites to be partially reduced. This he said 'had a flow‑on effect of leading to increased speculation in the Peel region as it was seen that additional land would need to be rezoned to "compensate" for the loss of developable land due to the environmental constraints'.
In pt 2.2 on pages 150 to 151, Mr Haratsis sets out what he describes as the 'Key Findings':
2.2Key Findings
Understanding the local market and its positioning within the broader economic cycles is a critical input to understanding what the market places view was before the time of taking. In this regard, key findings from the economic analysis include:
·The Peel Region economy has expanded significantly, given its growing construction and property industry.
·Residential building activity had increased significantly over the period 2001/02 to 2006/06.
·Unemployment had fallen to 5%, on the back of sustained employment growth in the region.
·Tourism visitor nights were the highest since 2000, increasing demand for dwelling construction and retail facilities.
·In terms of the property cycle, the view was the Peel Region would continue on its upward trend due to significant major projects in the region that would support employment and income growth, both critical to housing demand.
·Rapidly decreasing population with increased inward migration.
·Common knowledge of market conditions in the Peel Region due to widespread media coverage.
·Increased market activity with increasing numbers of property transactions and forecast lot release.
·Rapidly increasing residential land sales indicating a shortage of available supply.
·High levels of environmental constraints, suggesting additional land would need to be rezoned to compensate for the reduction in identified land stocks.
·Population figures indicating that higher population forecasts would be achieved, resulting in sustained population growth in the Peel Region in the next 10 to 20 years.
The results of the market research indicate that based on the data and information available, the market place considered that the Peel Region economy was likely to expand considerably and at the same time enter a prolonged period of economic.
The market view that prevailed prior to the time of taking confirms the strong demand for development in the region. Furthermore, with the majority of people who move to the Peel Region working locally, the Peel Deviation cannot be considered a major driver for population growth in the area. Which in turn indicates that demand for the subject site to be developed will not be driven by the provision of the Highway, but local market conditions.
On 31 August 2010, Mr Haratsis provided a further supplementary report setting out his experience, as he termed it, 'in relation to the demand and supply of residential land and also in relation to the demographic analysis' (23A/232). I will say more about this when I deal with the question of expertise.

Grounds of objection

The defendants object to this evidence on three grounds:
(1)the lateness of its provision;
(2)lack of expertise; and
(3)the substantial reliance on post‑taking information.
I will consider these issues in turn. In the end, I take all of them into account in reaching my decision.

Lateness

The timing of the provision of this material needs to be viewed in the context of the long history of this action. I will not outline that history in any detail. After the trial was adjourned in November 2009, further expert evidence was programmed in December 2009, to be exchanged in 2010. Adjustments were made to the timetable by consent. Ultimately, the plaintiffs provided further expert evidence towards the end of March, the defendants' evidence in response in late May, and the plaintiffs' further expert evidence in reply in June 2010.
There has been conferral among experts within various disciplines, including the valuers, who conferred in 2009 and again in July 2010.
The plaintiffs need leave to rely upon Mr Haratsis' evidence filed and served after this, on 20 or 23 August 2010.
In exercising the discretion whether to grant leave and determining where the interests of justice lie, the considerations explained in AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 are to be taken into account. See [89] ‑ [103] and [111] ‑ [112]. That discussion is of valuable assistance in relation to a question of leave to adduce further evidence. See, for example, Attorney General of Botswana v Aussie Diamonds Pty Ltd [2009] WASC 301 [80].
In this case, considerations relevant to the proper exercise of the discretion include the extent of the delay in the context of the trial as a whole, the reasons (if any) for the delay in provision of the report, the potential consequences of the late provision of the report for the further conduct of the trial, and considerations of possible prejudice to either party.
I begin with the question of what, if any, reasons there are for the delay in the provision of this part of the proposed evidence. Mr Haratsis' report of 20 August 2010 states that it is prepared in response to the defendants' proposed evidence of Mr Moran, in his report of 24 May 2010, and of Mr Saunders, in his witness statement of 12 August 2010. Senior counsel for the plaintiffs submits that that was so, and explained the delay, particularly with reference to the report of Mr Saunders. For the reasons that follow, I do not accept that submission.
Mr Saunders is the Geospatial Analysis Manager at the Department of Planning. Mr Saunders' statement relates to the Western Australian Planning Commission (WAPC) and department information available to the WAPC at relevant times regarding the supply of land. He also refers to an historic rate of consumption for the Shire of Murray.
This part of Mr Haratsis' proposed evidence does not relate to those topics. Rather, as senior counsel for the plaintiffs submits, the evidence is about market perception and market conditions at the date of taking (ts 5028). Thus, as counsel for the plaintiff submits, Mr Haratsis' evidence goes to the view that might be taken by the hypothetical purchaser on the question of demand (ts 5030). Plainly, the level of demand in the area at the time of taking has always been an issue. That is not a matter that became relevant because of Mr Saunders' evidence. To the extent that it was sought to be part of the plaintiffs' case, it was always available to the plaintiffs to put forward evidence on the question of demand.
Thus, it seems to me that there is no satisfactory explanation for why this part of Mr Haratsis' evidence was not exchanged earlier, in accordance with the directions for exchange of expert evidence.
That brings me to the question of how the receipt of the proposed evidence might affect the progress of the trial, and the questions of prejudice to the parties.
The defendants submit that if the material on pages 134 to 151 is admitted, the material will have to be put to the valuers for their consideration and comment. In circumstances where the current program envisages the valuers commencing within about a week of when this objection was argued, and given the stage the trial has reached, that has the potential to disrupt the ongoing progress of the trial.
Senior counsel for the plaintiffs submits that it is not necessary that these opinions and material be put to valuers, although, he submits, some of it might be. The primary forensic purpose is, counsel submits, to assist the court to appreciate that there is more to determining what price a hypothetical purchaser might pay than simply having regard to statistics of population and of urban zoned land. Consequently, it may be part of the material to be taken into account together with the valuers' evidence, rather than necessarily having to be put to the valuers (ts 5040-5042, 5044).
I accept, as senior counsel for the plaintiffs submits, that the proposed evidence is not valuation evidence as such. Nevertheless, it relates to a matter addressed by the valuers and in issue between them.
To my mind, the question of the level of demand in the area and market perception at the time is very closely wrapped up with, and an element of, the valuation evidence. The valuers express opinions about the state of the market at the date of taking. Senior counsel for the plaintiffs accepted that that was so. He submitted that they did so based on only certain statistics, whereas Mr Haratsis' proposed evidence was to the effect that a broader inquiry was appropriate (ts 5044). That submission seems to me to indicate reasons why this proposed material would, if admitted, need to be put to the valuers for their comment. It would not seem to me to be conducive to the interests of justice for this material to be received and then, to any significant extent, assessed by the court without having been commented on by the valuers.
Consequently, in my opinion, admission of the material would mean that it would need to be put to the valuers. It is difficult to anticipate just how much time that process would involve, but I have no confidence that it could be dealt with without significant disruption to the trial process.
On prejudice, the plaintiffs point to their inability to rely on the opinions of Mr Haratsis, whom they say is a very experienced adviser to large and sophisticated developers (ts 5049). I will return to the question of his expertise. However, even assuming that, it seems to me that the plaintiffs have had ample opportunity to put on such evidence from Mr Haratsis at an earlier stage, should they have wished to do so.
The defendants point to the disruption to the trial. Further, to the extent that Mr Haratsis' evidence is recognised as involving relevant expertise, outside the realm of valuation, the defendants would not have had an opportunity to consult with any such expert themselves.
On the ground of lateness alone I would be inclined against the grant of leave to rely on the evidence. That is reinforced by consideration of the other two grounds of objection.

Expertise

The plaintiffs point to what is said in Mr Haratsis' proposed supplementary report of 31 August 2010 as establishing his expertise for the purpose of this proposed evidence.
From the supplementary report of 31 August 2010 it may be accepted, for present purposes, that Mr Haratsis is experienced in advising large developers on aspects of possible land acquisitions under their contemplation. This advice and analysis is also provided to banks in the same context. He describes his advice as being based on supply and demand analysis and population growth analysis. In the report of 31 August 2010 he sets out a number of elements that may be involved in such analysis.
I refer to the summary I gave in McKay v Commissioner of Main Roads [2009] WASC 353 [3] ‑ [5]:
The test for the admissibility of expert evidence was stated by King CJ in R v Bonython (1984) 38 SASR 45, 46 - 47. This passage has been cited in many cases, including in Mallard v The Queen [2003] WASCA 296; (2003) 28 WAR 1 [253]. King CJ said that there were two questions.
The first is whether the subject matter of the opinion falls within the class of subjects upon which expert testimony is permissible. This first question may be divided into two parts: (a) whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area; and (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court. The second question is whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court.
I also refer to what was said by Gaudron and Gummow JJ in Osland v The Queen [1998] HCA 75; (1998) 197 CLR 316 [53] and cited in Mallard [242] as follows:
Expert evidence is admissible with respect to a relevant matter about which ordinary persons are '[not] able to form a sound judgment… without the assistance of [those] possessing special knowledge or experience in the area and which is the subject of a body of knowledge or experience which is sufficiently organised or recognised as a reliable body of knowledge or experience'.
In Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Heydon JA said that:
If evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of 'specialised knowledge'; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert… [85].
This objection relates to the second requirement identified by Heydon JA and the second question articulated by King CJ.
I am not persuaded that the opinions expressed by Mr Haratsis in this part of his proposed evidence are in a field of specialised knowledge in which, by reason of his experience, he has become an expert. His supplementary report of 31 August 2010 states that he is experienced in conducting analysis and giving advice to developers who are participants in markets. That is, to my mind, to be distinguished from specialised knowledge as to what the market perceived or how the market would be likely to view matters, at a particular time. It is those market perceptions and expectations to which this evidence is primarily directed.
I refer to the passages in the 20 August 2010 report which I have set out or referred to earlier. The proposed evidence is not to the effect, 'This is the advice I (or a competent advisor) would have given.' Rather, it is, 'This is how the market saw things.' For example, in the table at pt 2.1 it does not state what Mr Haratsis thinks the signal means, and would have so advised a client. Rather, he says in effect, 'This is what the market would think the signal means'.
Mr Haratsis has given advice to specific participants in the (broad) market for broadacre undeveloped land during various periods in relation to land at various locations in Western Australia and elsewhere in Australia. He has also given other advice mentioned in his supplementary report of 31 August 2010. In my view, that experience does not qualify him to express the opinions he expresses about market perceptions and expectations in July 2006 in the Ravenswood, Murray and Peel areas.
As an additional point, the last sentence in the first paragraph of page 134 is inadmissible because there is no stated basis for the figures of the additional 29,000 to 36,000 people from 2006 to 2016 that Mr Haratsis says would have been factored in by the marketplace.

Post-taking

A number of the tables and figures in this part of Mr Haratsis' report are based on statistics published after the date of taking. The plaintiffs concede that therefore, they were not available at the time to the hypothetical purchaser. Nevertheless, senior counsel for the plaintiffs submits that those statistics reflect trends that would, to some extent at least, have been apparent to the hypothetical purchaser as at the date of taking (ts 5044 ‑ 5046).
Given the decision I have reached, it is not necessary to determine this objection. I am inclined to think that the objection would have been substantially upheld. To the extent the objection was upheld, it would be necessary to identify how the parts of the evidence struck out affected the remainder of this part of Mr Haratsis’ evidence.
If and to the extent that the plaintiffs' submission in response to this objection were accepted, it would require a close analysis of each of the various features and sets of statistics highlighted by Mr Haratsis. Each would have to be considered separately to determine the extent to which, if at all, material reported in the subsequently published statistics revealed matters that were or would have been apparent to a hypothetical purchaser at the relevant time.
Consequently, the use of post‑taking statistics is liable to mean that detailed attention would need to be given to these matters in any consideration of this evidence by the valuers, or in any consideration of it by the court. Given the stage of proceedings and time at which this material is produced, that is an additional factor militating against the grant of leave to rely upon the evidence.

Conclusion

Taking into account all of these matters, I am not persuaded that I should grant leave to the plaintiffs to rely on this evidence. Further, had I been persuaded to permit the evidence, substantial portions of it would have been struck out on grounds that it was outside of Mr Haratsis' expertise. Further, some substantial portions of it may also have been struck out as irrelevant on the ground that they relate to material not known or knowable at the time of taking.