Ringrow Pty Ltd v BP Australia Ltd - [2003] FCA 933

FEDERAL COURT OF AUSTRALIA
Ringrow Pty Ltd v BP Australia Ltd [2003] FCA 933
EVIDENCE – admissibility of document – valuer’s report – expert opinion – maker of the opinion not called to give evidence – whether valuation is a business record – whether part of the records of the relevant business – whether evidence admissible as an ‘opinion’
Evidence Act 1995 (Cth) s 59, 59(2), 69, 69(1)(a)(i), 69(1)(a)(ii), 69(1)(b), 69(2)(a), 69 (3), 69(5), 78, 78(a), 79, 111, 135, 135(a), 135(b), 183
Karmot Auto Spares Pty Ltd v Dominelli Ford(Hurstville) Pty Ltd(1992) 35 FCR 560 referred to
Morley v National Insurance Co [1967] VR 566 cited
Prentice v Cummins [2002] FCA 1172 referred to
Quick v Stoland (1998) 87 FCR 371 cited
Supetina Pty Ltd v Lombok Pty Ltd (1984) 5 FCR 439 referred to
Cross on Evidence (6^th Australian Ed)
RINGROW PTY LTD v BP AUSTRALIA LTD
N 278 OF 2003
ULTIMATE FUEL PTY LTD v BP AUSTRALIA LTD
N 279 OF 2003
NADER-ONE v BP AUSTRALIA LTD
N 280 OF 2003
HELY J
4 SEPTEMBER 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 278 OF 2003

BETWEEN:

RINGROW PTY LTD
APPLICANT

AND:

BP AUSTRALIA LTD
RESPONDENT

N 279 OF 2003

BETWEEN:

ULTIMATE FUEL PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

N 280 OF 2003

BETWEEN:

NADER-ONE PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

JUDGE:

HELY J

DATE OF ORDER:

4 SEPTEMBER 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The tender of documents 89 and 94 in the applicants’ bundle of primary documents (Exhibit A) be rejected.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 278 OF 2003

BETWEEN:

RINGROW PTY LTD APPLICANT

AND:

BP AUSTRALIA LTD
RESPONDENT

N 279 OF 2003

BETWEEN:

ULTIMATE FUEL PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

N 280 OF 2003

BETWEEN:

NADER-ONE PTY LTD

APPLICANT

AND:

BP AUSTRALIA LTD

RESPONDENT

JUDGE:

HELY J

DATE:

4 SEPTEMBER 2003

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The applicants tender documents 89 and 94 in the applicants’ bundle of primary documents (Exhibit A). The tender is objected to by Mr Walton SC, counsel for the respondent. The documents are valuations of the service station known as “BP Lansvale” prepared by Max Henderson and Barry Coad of David Nelson & Partners Pty Ltd on the instructions of St George Bank Ltd. The date of the first valuation report is 12 November 2001; the date of the second is 13 September 2002.
The first report values the service station as at 2 November 2001 at $1,800,000. The second report values the service station as at 3 September 2002 at $2,400,000. Both in form, and as a matter of substance, the second valuation is an update of the first which takes into account improvements made to the service station after the first report.
Each report states that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] FCA 933
Decision Date: 4 SEPTEMBER 2003

CaseChat Overview and Summary

Ringrow Pty Ltd and BP Australia Ltd were involved in a legal dispute concerning the valuation of a service station business. The case was heard by the court, which had to decide whether to admit certain valuation reports into evidence. The applicants argued that the reports were relevant to the issue of whether the leasehold value of goodwill was included in the valuation of the service station. However, the court found that the probative value of the reports was slight, as they did not squarely address the issue on which they were tendered. The court also found that the reports were misleading and confusing, as they did not provide sufficient detail to support the figures used in the valuation. As a result, the court exercised its discretion under section 135 of the Evidence Act to exclude the reports from evidence. The court rejected the tender of the reports, finding that they did not meet the requirements for admissibility.

Orders

Orders of the court

1. The tender of documents 89 and 94 in the applicants’ bundle of primary documents (Exhibit A) be rejected.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Section 135 provides:‘PART 3.11 – DISCRETIONS TO EXCLUDE EVIDENCE135 General discretion to exclude evidenceThe 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 valuation reports are tendered on an issue which is central to these proceedings. The applicants’ solicitor gave evidence that he issued a subpoena for Mr Coad to give evidence, but after discussing the matter of the subpoena with Mr Coad, decided not to serve it. The probative value of the valuation reports is slight. They do not squarely address the issue on which they are tendered. Originally Mr Holmes sought to justify their reception upon the basis that because the valuation was conducted on a ‘going concern’ basis, it must include a component for goodwill. That was said to be implicit in the valuation when read as a whole. Later he referred to the leasehold value of the goodwill and submitted that it is of relevance to the issue as to whether cl 2.5 of the Option Deed gave rise to a forfeiture of a valuable proprietary right. How and why that is so does not emerge from the valuation reports. The opinions expressed as to the leasehold value of goodwill as a check on the other methods employed to value the freehold are critically dependent on the estimates of sales, profit and expenses set forth in the report. It is apparent that those estimates do not reflect actual historical figures. For example, the Trading Statement for the year ended 30 June 2002 shows fuel sales of $7,131,622, whereas the figure adopted was $8,400,000. The report does not disguise the fact that the historical figures have not been adopted because the service station underwent considerable alterations in the year ended 30 June 2002, which were not completed until the end of that year. But the report does not contain any precise statement, for example, as to how the $7,131,622 translates into an assumed figure of $8,400,000. The report states that a number of assumptions are required for valuation purposes. They include;-‘This is a budgeted trading for our check method of valuation only having regard to the limited information and trading figures provided’.-‘In assessing our estimated gross profit, we have had regard to other service station outlets with supply agreements and associated gross profit margins as a result of being a freehold operation. Expenses have been based on the figures and other similar turnover outlets analysed by this office.’There is no specific identification of the information external to BP Lansvale which the valuers relied upon. Whilst inability to cross-examine ordinarily goes to weight, rather than to admissibility, in my view each of pars [a], [b] and [c] of s 135 would be enlivened if the valuation reports were admitted into evidence. That is principally because the reports do not squarely address the issue raised in these proceedings and because one is left to infer or deduce from a report prepared for a different purpose whether the report has anything to say about whether or not valuable goodwill attached to the service station business at a relevant date, and if so for what reasons. Whether the figure adopted for the leasehold value of goodwill is germane to that question depends upon assertion from the bar table, rather than demonstration by a reasoning process contained in the valuation report.

Decision

Reasons for decision

HELY J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: HELY J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 278 OF 2003

BETWEEN:	RINGROW PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT
N 279 OF 2003
BETWEEN:	ULTIMATE FUEL PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT
N 280 OF 2003
BETWEEN:	NADER-ONE PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	4 SEPTEMBER 2003
WHERE MADE:	SYDNEY

BETWEEN:	RINGROW PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT
N 279 OF 2003
BETWEEN:	ULTIMATE FUEL PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT
N 280 OF 2003
BETWEEN:	NADER-ONE PTY LTD APPLICANT
AND:	BP AUSTRALIA LTD RESPONDENT

JUDGE:	HELY J
DATE:	4 SEPTEMBER 2003
PLACE:	SYDNEY