Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

No. 8035 of 2006

IN THE MATTER of the Land Acquisition and Compensation Act1986 (Vic)

and

IN THE MATTER of section 80 of the Land Acquisition and Compensation Act 1986 (Vic) whereby the Secretary to the Department of Business and Innovation refers a disputed claim for determination by the Supreme Court of Victoria

BETWEEN:

THE SECRETARY TO THE DEPARTMENT OF BUSINESS AND INNOVATION

Applicant

v

MURDESK INVESTMENTS PTY LTD (ACN 007 108 812)

Respondent

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 and 18 October 2011
DATE OF RULING:	15 November 2011
CASE MAY BE CITED AS:	Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd
MEDIUM NEUTRAL CITATION:	[2011] VSC 581

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PRACTICE AND PROCEDURE – Application – Admissibility of evidence – Compulsory land acquisition – Application to exclude expert valuation evidence – Independence and impartiality of expert witnesses – Whether an expert witness has become an advocate for their client – Expert Witness Code of Conduct – Evidence Act 2008 (Vic) ss 79, 135 – Civil Procedure Act 2010 (Vic) Parts 2.3 and 2.4 – Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 44 – Dasreef Pty Ltd v Hawchar (2011) 277 ALR 611 - Phosphate Cooperative Co of Australia Pty Ltd v Shears [1989] VR 665 – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr J Delany SC Mr P Chiappi	Victorian Government Solicitor
For the Respondent	Mr M Stirling	Richmond & Bennison

HER HONOUR:

Introduction

In this proceeding, the Court is asked to determine the amount of compensation to which the respondent, Murdesk Investments Pty Ltd, is entitled as a result of the compulsory acquisition of the subject land by the applicant on 28 October 2005. The Land Acquisition and Compensation Act 1986 (Vic) (the ‘LAC Act’) requires that in assessing compensation, regard be had, among other things, to the market value of the interest in land that is acquired on the date of the acquisition.[1] The market value of the subject land on 28 October 2005 is therefore critical to the determination that the Court must make.
[1]Land Acquisition and Compensation Act1986 (Vic) s 41(1)(a).

Murdesk seeks to rely upon the expert evidence as to the market value of the subject land given by three certified valuers: Mr Mark Holland of Opteon Property Advisors, Mr Mark Murray of O’Brien’s Valuers and Property Consultants, and Mr John Wallace, previously of Wallace Commercial Pty Ltd and now consulting in his own right.

The Secretary has challenged the admissibility of all of Murdesk’s expert valuation evidence on the grounds that it is not admissible under s 79(1) of the Evidence Act 2008 (Vic), in the case of Messrs Murray and Holland, because the opinions expressed by them as to the value of the subject land are not wholly or substantially based on their specialised knowledge and, in the case of Mr Wallace, because he does not set out the basis or path of reasoning by which his opinion as to the value of the land was reached.

Alternatively, if the expert evidence is admissible under s 79(1) of the Evidence Act, the Secretary submits that it ought to be excluded by reason of alleged breaches of the overarching obligations described in Part 2.4 of the Civil Procedure Act 2010 (Vic), having regard to the requirements of O 44 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (the ‘Rules’) and the Expert Witness Code of Conduct.[2]
[2]Supreme Court (General Civil Procedure) Rules 2005 (Vic) Form 44A (the ‘Code’).

The Secretary further submits that the evidence in question ought to be excluded in the exercise of the Court’s discretion under s 135 of the Evidence Act.

For the reasons that follow, I have concluded that the expert evidence of each of Murdesk’s valuers is admissible, and that the Court should not exclude or refuse to admit the evidence as a matter of discretion. The matters raised by the Secretary are matters that potentially go to the weight to be given to the evidence.

The evidence

Each of Murdesk’s valuation witnesses was instructed to provide an independent expert valuation report to assess the compensation payable as a consequence of the acquisition of the subject land. Each was provided with the Expert Witness Code of Conduct and the text of the overarching obligations described in the Civil Procedure Act. Each has confirmed that he has read and understood the Expert Witness Code of Conduct and the overarching obligations and that he agrees to be bound by them.

In his affidavit sworn on 11 July 2011, to which he exhibits his expert valuation report dated 7 July 2011, Mr Holland deposes to having been first instructed by Murdesk’s then solicitors, Best Hooper, in March 2007. He received further instructions from Murdesk’s subsequent solicitors, Norton Rose, on 24 May 2010 and on 22 November 2010, and further confirmation of his instructions from Murdesk’s current solicitors, Richmond & Bennison, on 1 July 2011.

In his affidavit sworn 11 July 2011, to which he exhibits his expert valuation report dated 11 July 2011, Mr Murray deposes that he was first instructed by Murdesk’s then solicitors, Best Hooper, to prepare a valuation report in September 2006. He received further instructions from Murdesk’s solicitors, Norton Rose, in May 2010 and from Murdesk’s current solicitors, Richmond & Bennison, on 4 July 2011.

In his affidavit sworn 11 July 2011, to which he exhibits his expert report dated 11 July 2011, Mr Wallace deposes that he was first instructed by Murdesk’s then solicitors, Norton Rose, on 24 March 2011. He received further instructions from Norton Rose on 8 April 2011 and, by letter dated 1 July 2011, further confirmation of his instructions from Murdesk’s current solicitors, Richmond & Bennison.

It appears, therefore, that Mr Murray was first retained to provide a valuation report in respect of the subject land in September 2006, Mr Holland in March 2007 and Mr Wallace in March 2011. However, Mr Holland and Mr Wallace each depose to having previously provided advice to Murdesk in the context of an earlier acquisition of part of Murdesk’s land for the purpose of the Craigieburn Bypass.[3]
[3]Mr Murray also deposed to having given advice to Murdesk for this purpose. He gave evidence that the statement to that effect in his affidavit was an error.

The affidavit of each witness describes the documents to which he had regard in preparing his expert report. These include, in each case, reports provided by experts in other relevant fields and evidence prepared by the principal of Murdesk, Mr Mervyn Dickey. Each valuation witness has made a declaration in accordance with r 44.03(2)(h) of the Rules and the Expert Witness Code that he has made all enquiries he believes are desirable and appropriate and that no matters of significance that he regards as relevant have been withheld from the Court.

The expert report prepared by Mr Holland contains a ‘before and after’ assessment of the value of the subject land at the relevant date, principally using the comparable sales methodology. Mr Holland concluded that a value equivalent to $60/m² for the subject land was both reasonable and supportable on the evidence. He also carried out a hypothetical subdivisional analysis having regard to notional ‘super lots’, which resulted in an in globo value in the order of $55 to $60/m². On this basis, he states his opinion that the subject land had a market value of $33 million at the relevant date.

Mr Murray also carried out a ‘before and after’ assessment based upon a comparable sales analysis. He settled on a rate per hectare of $550,000 ($55/m²) for the subject land at the relevant date, resulting in a market value of $30.33 million.

For his part, Mr Wallace assessed what the subject land would have realised if offered to a broadly selected range of corporations for sale by expression of interest. Having regard to the likelihood that the purchaser of the subject land would have been a developer and to the fact that as at the relevant date the subject land could have been subdivided, and was ripe for subdivision, Mr Wallace prepared a hypothetical subdivisional analysis based on the sale of lots in 3 stages. He described this analysis as a ‘capacity’ analysis.

Mr Wallace’s analysis showed an underlying in globo land value in the order of $40.2 million. He concluded that the development opportunity of the land was highly profitable, showing a likely return on the land factor of not less than $30 million. Mr Wallace therefore assessed the market value of the subject land as at the relevant date at $30 million.

Is the evidence admissible under s 79(1)?

Section 79(1) of the Evidence Act creates an exception to the rule prohibiting the admission of opinion evidence by providing that:

(1) If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.

In Dasreef Pty Ltd v Hawchar,[4] the High Court of Australia held that to be admissible under s 79(1), evidence that was otherwise inadmissible as opinion evidence must satisfy two criteria: the first is that the witness who gives the evidence must have specialised knowledge based on the person’s training, study or experience; the second is that the opinion expressed by the witness “is wholly or substantially based on that knowledge”.[5] Relevantly, the High Court said that for the witness to proffer an admissible opinion, it would be necessary for the party tendering the evidence to demonstrate that the opinion which the witness expressed (in that case, about the plaintiff’s likely exposure to silicon dust) was wholly or substantially based on the witness’s specialised knowledge based on his training, study or experience.[6] As the demonstration of that matter could come only from the witness, s 79 required the opinion to be presented in a form which made it possible to answer the question as to whether the opinion was wholly or substantially based on the witness’s specialised knowledge.[7]
[4](2011) 277 ALR 611; [2011] HCA 21 (‘Dasreef’).
[5]Ibid 620 [32].
[6]Ibid 621 [35].
[7]Ibid 621 [36], referring to HG v R (1999) 197 CLR 414, 427 [39].

The submissions

In the case of Messrs Murray and Wallace, the Secretary points to logical flaws or a want of demonstrated reasoning in their reports, which he contends makes it impossible for the Court to be satisfied that the opinions they express are wholly or substantially based on their specialised knowledge. In the case of Messrs Murray and Holland, the Secretary puts forward evidence obtained on discovery and by subpoena to seek to show that the opinions expressed by them were unduly influenced by others and submits that, as a result, the Court cannot be satisfied that the opinions they express are wholly or substantially based on their specialised knowledge.

In particular, the Secretary submits that Mr Holland’s opinion as to the market value of the subject land is not substantially based on his specialist knowledge because his opinion is the product of an undisclosed process of collaboration with Mr Dickey and Mr Dickey’s advisers.

This, so it is said, is demonstrated by the fact that in January 2006, Mr Holland produced written advice that a value in excess of $40/m² might be ‘sustainable’ for the subject land. However, in April 2006, Mr Holland provided to Murdesk a Certificate of Valuation for the subject land based on a value of $50/m². Then, in 2011, in the expert report that is before the Court, Mr Holland had given the land a market value based on $60/m². The Secretary submits that there is no proper basis for this increase and that it reflects the collaborative exercise undertaken with Mr Dickey to maximise the value of the land. He refers to evidence showing that there was a lengthy ‘course of dealing’ between Mr Holland and Mr Dickey and that Mr Holland prepared his expert report in close collaboration with Mr Dickey - among other things, by providing drafts of his report to Mr Dickey for his consideration, comment and approval.

According to the Secretary, this process of collaboration went far beyond the provision of information by Mr Dickey for consideration by Mr Holland. The Secretary contends that Mr Holland became, in effect, an advocate for Murdesk and that as a result, the Court could not be satisfied that Mr Holland’s opinion as to the value of the subject land was ‘wholly or substantially’ based on his specialised knowledge as a valuer.

The Secretary also submits that, because of the course of dealing that it has identified, Mr Holland has not complied with the requirements of clauses 1 and 2 of the Expert Witness Code of Conduct to assist the Court impartially and not to act as an advocate for a party.

As to Mr Murray, the Secretary submits that Mr Murray’s opinion as to the value of the subject land cannot be wholly or substantially based on his specialised knowledge because his opinion that the land value was $55/m² is incompatible with other opinions expressed about the relative values of industrial land in the outer west. Mr Murray’s per hectare rate was almost double the sales evidence in the outer west, which he stated was higher value land than land in the area of the subject land.

Further, the Secretary contends that Mr Murray’s final report was amended in a concentrated flurry of activity between 7 and 11 July 2011 in what the Secretary describes as ”a belated attempt to support the $550,000 per hectare figure.” The Secretary submits that the changes that were made during this period to support the value of $550,000 per hectare are ‘unsubstantiated’ and ‘unsustainable’.

The Secretary also makes reference to a course of dealing between Mr Murray and Mr Dickey (and/or Mr Dickey’s legal advisers), although this dealing is not detailed as it is for Mr Holland. Reference is made to Mr Murray receiving a copy of Mr Dickey’s ‘aspirational’ claim in December 2006 and to the identification by his legal advisers of the ‘two main sales’ to be used for comparative purposes in conference on 29 March 2011. The Secretary submits that it is “very difficult, if not impossible, to properly know and test how the conference shaped Mr Murray’s opinions” and that the Court could not be satisfied that Mr Murray’s opinion that the subject land was worth $550,000 per hectare at the relevant date was substantially based on Mr Murray’s specialised knowledge as a valuer.

As to Mr Wallace, the Secretary complains that Mr Wallace’s expert report contains no discussion of the basis for his opinion that the market value of the subject land at the relevant date was $30 million. The capability analysis undertaken by Mr Wallace threw up an underlying land value of $40.2 million and he gave no reason for fixing on a market value of $30 million for the land. This, so it is said, amounted to a failure to state the reasoning by which the conclusion as to value flowed from the facts proved or assumed, and breached what Heydon J in Dasreef described as the ‘statement of reasoning’ rule.[8] As a result, the Court could not be satisfied that the opinion that the market value of the land was $30 million was wholly or substantially based on Mr Wallace’s specialised knowledge.
[8]Ibid, 637-639 [91]-[94], 649 [128]-[130].

Murdesk submits that, in the case of each of Mr Holland, Mr Murray and Mr Wallace, the relevant specialist knowledge, qualifications and experience has been established and has clearly been utilised to produce the reports relied upon. Each expert has prepared a report which sets out an appropriate valuation methodology, together with an explanation of the relevant evidence or material that has been relied upon by the expert to arrive at a conclusion or opinion as to the value of the subject land.

Murdesk contends that in the case of Mr Murray and Mr Holland, the opinions contained in the reports are their own independent views, or at least substantially so, rather than the product of a team approach or a response to the urgings of Mr Dickey: each of them gave direct evidence that the opinions contained in their reports were the product of their own independent work and each of them expressly rejected the proposition that the opinions were the work of others.

Murdesk submits that in the case of Mr Wallace, the process of reasoning by which he arrived at the figure of $30 million is adequately exposed in his report by reference to an allowance for contingencies or variables. Mr Wallace noted that an ‘expressions of interest’ marketing program would have exceeded the sum of $30 million and that, in adopting that amount, he had taken into account and allowed for the occurrence of contingencies, in particular the possibility that a purchaser might allow for the cost of meeting a permit condition imposing an offset requirement, having regard to any loss of native vegetation.

Admissibility - analysis

There was no challenge to the qualifications or expertise of any of the valuers. It was accepted that each of them has specialised knowledge based on his training, study or experience to give an opinion as to the market value of the subject land at the relevant date. This is to be contrasted with the position in Dasreef, where the expert did not have the specialised knowledge to give the opinion upon which the trial judge relied.

Furthermore, each of the valuers produced a detailed expert report that followed the usual form for expert reports of this kind and contained evidence and analysis to support the value arrived at. Each of the expert reports explained why a particular valuation methodology had been adopted. Messrs Murray and Holland, having adopted a comparable sales methodology, identified sales that they considered to be comparable, analysed those sales by reference to their knowledge of market conditions and by reference to expert planning and engineering opinion. Mr Wallace carried out a hypothetical subdivision analysis based on assumptions that he exposed and which he considered to be reasonable. Each of them engaged in a checking process using the alternative methodology.[9] Generally speaking, the expert reports set out the facts and assumptions upon which conclusions were based and analysed the evidence relevant to the formation of the expert opinion. Taken at face value, the expert reports are unexceptional and unobjectionable.
[9]Mr Murray’s hypothetical subdivisional analysis was not included in his report.

Having regard to the Secretary’s submissions, however, it is necessary to consider the position of the experts individually.

Mr Murray

In his report dated 11 July 2011, Mr Murray stated that he had adopted the direct comparison method, gave a description of the subject land, referred to comparable sales and concluded that the subject land had a value at the relevant date in the range of $500,000 to $600,000 per hectare. He ultimately adopted $550,000 per hectare as his final opinion. In so doing, he formed a view as to what was the highest and best use of the subject land, what the relevant or comparable sales were and how the subject land compared to those sales.

However, the Secretary submits that Mr Murray’s opinion that the subject land had a value at the relevant date of $550,000 per hectare is inconsistent with three other propositions in his expert report, namely:

(a)The outer west is a strong area heavily committed as to both rezoned and unzoned future development holdings;
(b)The outer northern industrial/future employment area of Epping, Epping North and Craigieburn achieved consistently lower value rates than the alternative employment areas of outer western Melbourne; and

(c)The majority of outer western growth area sales reflect rates concentrated between $225,000 per hectare and $300,000 per hectare.

According to the Secretary, these propositions are inimical to a valuation of the subject land at $550,000 per hectare. As a result, so it is contended, the Court should infer that Mr Murray’s opinion as to the value of the land was not based on his specialised knowledge as a valuer.

The Secretary also points to changes that were made to that part of Mr Murray’s expert report entitled ‘Valuation Rationale’ shortly before the report was finalised, which the Secretary contends show Mr Murray to have been trying to support a value for which there was in fact no reasonable justification. Significantly, these included increasing the value of the subject land from $500,000 per hectare to $550,000 per hectare, with the consequence that Mr Murray’s ‘before’ assessment rose from $27,590,000 to $30,350,000. Additional text was included explaining the per hectare rate adopted by reference to a particular sale in the immediate area and to a particular sale in the western industrial area. The new text, as the Secretary points out, contains errors: in particular, Mr Murray refers to available sales in the surrounding area of ‘outer northern Melbourne’ reflecting a range between $250,000 per hectare and $965,000 per hectare. The latter figure was a late replacement for the figure of $500,000. Mr Murray clarified in cross-examination that it was derived from a sale in the western industrial area rather than a sale in outer northern Melbourne.

Counsel for Murdesk submitted that the arguments advanced by the Secretary in relation to Mr Murray’s evidence amounted to a contention that because the Court should not accept the opinion of Mr Murray as to the value of the subject land, it should not accept that Mr Murray held such an opinion.

There is force to this submission. The three propositions with which the opinion is said to be inconsistent are general propositions that do not exclude the possibility that the subject land had the value for which Mr Murray contends. A concentration of values within a particular range does not exclude the possibility of values falling outside that range. Indeed, the reference to ‘concentration’ presupposes that some values will fall outside the range. The fact that Mr Murray conceded in cross-examination that his statement as to the concentration of values in the western area could not stand with the market value of the subject land exceeding $300,000 per hectare[10] is not, in my view, determinative of whether his opinion as to value was based on his specialised knowledge. It is a matter that goes to the cogency of his evidence, and therefore to the weight that should be given to it.
[10]Transcript 523.

Nor, in my view, does an untidy explanation as to how a value was reached deprive the opinion of its character as expert opinion. The Court does not have to be satisfied that the explanation exhibits impeccable logic or intellectual rigour. Evidence may lack cogency and therefore credibility. However, that does not make it inadmissible.

The Secretary also raised, but relatively faintly, the argument that Mr Murray engaged in a course of dealing with Mr Dickey and Murdesk’s advisers which raised doubt as to whether his opinion as to the value of the land was wholly or substantially based on his specialised knowledge.

Mr Murray was cross-examined about the provision of drafts of his report to Murdesk’s advisers and about the changes that were made to the ‘Valuation Rationale’ in his report just before finalisation. It was put to Mr Murray that the opinions expressed in his report were not his own. He responded that the report was ‘all his’. In so far as he had provided drafts of parts of his report for comment, he said that he welcomed comment on how he presented his report, but that all opinions and numbers were his own. He stated that throughout the process of preparing his report, he was not ‘leaned upon’ to put any specific value on the land. When it was put to him that he might have been influenced by Mr Dickey and his lawyers to delete unfavourable sales in an early draft of his report, Mr Murray explained that he did not include those sales because he considered the land in question to be inferior to the subject land and to have been sold in a different market from the market that he was concerned with.

Mr Murray did forward parts of his sales analysis to Murdesk’s legal advisers for comment. He also attended a number of conferences with legal advisers and met separately with Mr Dickey on at least one occasion. One conference with counsel, in particular, generated copious notes recording discussions about planning policy, the value of the adjoining ‘Haberfield’ land, sewerage issues and, significantly, comparable sales. It is difficult to know who said what based on the notes. The Secretary submits that the notes are sufficient to cast doubt on the opinions expressed by Mr Murray being his own opinions.

The opinions contained in Mr Murray’s report are presented as his own opinions, and they are provided in a report that, in both form and content, generally conforms to the requirements for an expert report.[11] Moreover, because of the complaint made by the Secretary, Mr Murray gave direct evidence that the opinions in his report were entirely his own and that he was not ‘leaned on’ by Mr Dickey or Murdesk’s advisers. In these circumstances, for Mr Murray’s expert evidence to be rendered inadmissible on the ground that it was not based wholly or substantially on his specialised knowledge, the evidence of what took place at conferences with legal advisers or in meetings with Mr Dickey would have to positively persuade the Court that the opinions expressed in Mr Murray’s expert report were not his own genuinely held opinions but, in effect, the opinions of others. Given the limited evidence of Mr Murray’s interactions with Mr Dickey and Murdesk’s advisers, I could not be so persuaded.
[11]See paragraph 32 below.

In my view, therefore, Mr Murray’s expert evidence is admissible as opinion evidence substantially based on his specialised knowledge as a valuer under s 79(1) of the Evidence Act.

Mr Wallace

The admissibility of Mr Wallace’s expert evidence is challenged on the ground that his expert report contains no calculations supporting his valuation of $30 million. Having found that the underlying in globo land value was $40.02 million, he gave no reason for fixing upon a land value of $30 million rather than, say, $20 million or $10 million. According to the Secretary, this offends the ‘statement of reasoning’ rule, with the consequence that the Court cannot be satisfied that the opinion given as to the value of the land is the product of Mr Wallace’s specialised knowledge for the purposes of s 79(1) of the Evidence Act.

Murdesk submits that the statement of reasoning rule and the requirements of s 79(1) have been complied with, because Mr Wallace’s report has adequately exposed his process of reasoning: first, he assessed value on a hypothetical subdivision analysis of $40.2 million; secondly, he allowed a discount in the order of 25% (rounded) to account for contingencies, having particular regard to the possibility that a purchaser might allow for the cost of meeting a permit condition imposing an offset requirement for the loss of native vegetation.

In his evidence, Mr Wallace explained that he had decided to carry out a capability analysis to reflect the reasoning likely to be adopted by a developer of standing in the industry, having regard to the opportunities and the known planning and engineering constraints affecting the subject land. On the basis of this analysis, he had arrived at what he described as an ‘indicative value’ for the land, which would be subject to different variables adopted by different developers.

Mr Wallace agreed that he had not set out in his report any calculation showing how the $30 million figure for the land value was derived. However, he referred generally to the variables that might be taken into account by a range of purchasers relating to timing, staging, costing, yield, form of development, equity, borrowings, interest rate, level of sales and profit and risk allowance. He spoke of ‘playing with’ variables, such as doubling the interest rate and dropping the rate of sales but maintaining the level of value so as to “come back from 40 back to 34”. He said there were other things that could be done to come back to $30 million. He continued:

So I’ve looked at the range of variables and it doesn’t mean that you go and tick one off as you go and therefore include every one. The adjustment of one means that it eliminates another variable because of the activity that you’ve created in the adjustments that you’ve made. [12]

[12]Transcript 1503.

When asked whether he had ‘rounded off’ the amount he said:

That’s right, yep. And that’s all you can do. Because what you’re trying to do is to give expression to the Spencer case definition of the prudent and well informed purchaser and the prudent and well informed vendor. .. . What they could have done instead of having the benefit of all that information and the benefit of the schedule of price offers on Haberfield, done their own homework and come up with a fully independent assessment of market value in a less forensic, critical, diminishing way. [13]

[13]Transcript 1505.

In Mr Wallace’s view, his ‘capability analysis’ showed how profitable “these things [development opportunities] can be in the right hands, and with a mix of assumptions.”[14] He said that his analysis expressed the attributes of the property and was well supported by the costings that had been provided. He said:

I think people would be confident that it was reasonable, and there would be prospective purchasers that could pay more rather than lose the opportunity of buying such a property. It’s almost ready to go, it’s the last man standing in the precinct.[15]

[14]Transcript 1186.

[15]Transcript 1186.

Mr Wallace confirmed in his oral evidence that he considered his assumptions in relation to the rate and level of sales and the prices that he adopted to be realistic having regard to the timeframe of the development. He had looked forward and had adopted figures that he regarded as reasonable and achievable.[16]
[16]Transcript 1503.

It is plain that Mr Wallace approached the valuation task quite differently from the other valuers. In essence, he stated how he believed a range of experienced, well regarded and well advised developers would evaluate the prospects of the subject land to decide what they might be prepared to pay for it. Different developers would have different constraints and time horizons, with the result that the application of the variables would differ from developer to developer. Thus, when answering a question about what would have led a hypothetical purchaser to expect an increase in lot prices (as reflected in the assumptions in Mr Wallace’s hypothetical subdivision analysis), Mr Wallace said:

I would expect the purchasers, the prospective purchasers, to look at the total package offered to him as the expressions of interest and supported by the information attached within my report and for them to make a judgment themselves. The capability analysis that I’ve carried out adopting those figures could well mean that they won’t adopt those figures and they will adopt lesser figures. It they do that and the variables are there, there’s ten million for them to play with, if they want to.[17]

[17]Transcript 1373.

It seems to me that Mr Wallace’s application of the hypothetical development methodology is somewhat unorthodox. In effect, he invites the Court to value the land based on what a developer who is excited by the land and recognises its potential might be prepared to pay for it in an ‘expression of interest’ campaign orchestrated by a well advised vendor who is under no pressure to sell. The $10 million margin is what Mr Wallace considers - on the basis of his long experience advising property developers - is needed to allow for variables (or contingencies) that will come into play in a variety of combinations and permutations. This figure is necessarily rubbery and is not susceptible to ‘calculation’ in the strict sense. However, Mr Wallace has provided an explanation for it. It follows that he has provided an explanation for the $30 million dollar figure as well.

In my view, whether or not one accepts Mr Wallace’s methodology, it does call for the application of specialised knowledge in the field of land valuation. His opinion is based on his ‘feel’ for the way in which property developers assess development opportunities. His approach and his opinion as to the market value of the subject land may be vulnerable to criticism for not being sufficiently rigorous or for being vague and uncertain. However, that is a matter that goes to its weight rather than to its admissibility.

Mr Wallace’s evidence was also criticised because in determining gross realisations for the purposes of his hypothetical development methodology, he used amounts per square metre that the Secretary contends were not justified by the sales that Mr Wallace purported to rely upon. The Secretary submits that Mr Wallace did not identify how he moved from the sales he put forward to the rates he adopted. In the absence of an explanation or demonstration as to how the adopted rates were derived from the actual rates, the contention that the analysis provides a value of $40.2 million was just assertion, and did not involve the application of skill or experience.

I do not accept that Mr Wallace has provided no explanation as to how he moved from the lot sales to which he refers to the rates that he adopts to reach his gross realisation figure. In cross-examination, Mr Wallace made it clear that the figures he used were not the then current market rates, but what he anticipated rates might be some time in the future. When it was put to him that this involved as departure from the conventional position that realisation prices were to be calculated at current market levels measured by sale prices of comparable building allotments and that he had used a projection or estimation of lot sale prices, he said bluntly, “Well, that’s what you do”.[18] He explained that the lot prices he used to establish gross realisations were based on the hypothetical purchaser’s consideration of market conditions and things relevant to the development of the property “some nine to 12 months beyond the relevant date”.[19] Accordingly, while he did not set out in his report the evidence that the hypothetical purchaser would have looked to to justify the higher lot prices, the ‘reasoning’, as Mr Wallace said, was there.[20]
[18]Transcript 1370.
[19]Transcript 1372-3.
[20]Transcript 1371.

Mr Wallace’s explanation as to how he derived his gross realisation figure based on lot sales ranging between $185 and $200/m² may or may not be a good one, and it may or may not expose Mr Wallace’s evidence to criticism. However, it remains the case that he has provided an explanation for his approach.

In the circumstances, I am satisfied that Mr Wallace’s opinion as to the value of the land was substantially based on his specialised knowledge in the fields of land valuation and property development. Mr Wallace’s expert report is admissible under s 79(1) of the Evidence Act.

Mr Holland

The challenge to the admissibility of Mr Holland’s evidence is largely based on what the Secretary describes as a lengthy ‘course of dealing’ between him and Mr Dickey resulting, so the Secretary contends, in Mr Holland’s stated opinion as to the market value of the land not reflecting his specialised knowledge at all. Rather, it is said to reflect a process of collaboration between Mr Holland and Mr Dickey and their mutual desire to ‘talk up’ the value of the land.

The Secretary put before the Court evidence of significant dealings between Mr Holland and Mr Dickey prior to the finalisation of Mr Holland’s report in July this year. Two volumes of documents were tendered in evidence that trace the pattern of those dealings.[21] The documents reveal exchanges of views and information by Mr Holland and Mr Dickey well before the date upon which Mr Holland received instructions to prepare his valuation report.[22] These interactions continued and intensified in the period leading up to the production of Mr Holland’s expert report.
[21]Derived from discovery and a subpoena addressed to Mr Holland.
[22]This is unsurprising, as Mr Holland was involved on behalf of Murdesk in the earlier proceeding in relation to the Craigieburn Bypass acquisition.

The ‘course of dealing’ to which the Secretary refers is comprised principally of the following:

(a) On 25 January 2006, Mr Holland wrote to Murdesk’s then solicitors, Best Hooper, referring to conferences with barristers and meetings and correspondence with Mr Dickey and Coomes Consulting. Mr Holland expressed the view that, on the basis of a comparison with neighbouring land, the Secretary’s then offer of approximately $25.57/m² seemed ‘grossly inadequate’. Based on his knowledge of recent purchases of rural land suitable for rezoning in the western suburbs at close to $30/m², he believed a value in excess of $40/m² ‘may be sustainable’, but he was unable to commit to a figure at that time.

(b) On 5 April 2006, Mr Holland met with Mr Dickey. Mr Holland’s record of the meeting refers to a claim of $500,000 per hectare for Melbourne Wholesale Markets (‘MWM’) and the need for a Certificate of Valuation for $27.57 million.

(c) On 7 April 2006, Mr Dickey wrote to Mr Holland to say that Murdesk’s claim was lodged in February 2006 at a ‘director’s valuation’ of $500,000 per hectare. Mr Dickey asked whether Mr Holland could provide a Certificate of Valuation at that rate “without spending a lot of time on it”.

(d) Mr Holland duly provided a Certificate of Valuation for the subject land in the amount of $27.57 million on the basis that it was a preliminary estimate for purposes of a claim at $50/m².

(e) On 11 December 2006, Mr Holland recorded a discussion with Mr Dickey in which he noted, “Said argue $50/m² min → $27.50 million”.

(f) On 15 May 2007, Mr Holland had a discussion with Mr Dickey in which Mr Dickey said he wanted to lodge a claim “based on values around $31.70 m ($575,000 per hectare)” and asked Mr Holland whether he thought this was justifiable. Mr Holland responded that he could not say categorically until he saw the planning advice and information that services would be available. Mr Dickey assured him these would be favourable. Mr Holland’s view was that, subject to the land being zoned to permit employment generating uses “at RD of 10/06 [sic] and servicing not being in issue”, $50-60/m² did not seem unrealistic, given growth in region (population and business) and accessibility from the freeway.

(g) On 28 April 2008, Mr Holland emailed Mr Dickey, referring to a ‘catch up’ the previous week to discuss issues surrounding the basis of the claim. The email recaps on Mr Holland’s suggestions ‘and what further inputs we think may be helpful for our arguments about the superior value of your site’. The material was to support Mr Holland’s argument that it was appropriate to look elsewhere in Melbourne for land values which demonstrated the value of land zoned for employment-generating purposes, as such land was substantially more valuable than industrial land. Mr Holland offered to meet with Mr Dickey’s consultants to discuss the relevance/importance of these matters.

(h) On 19 May 2008, Mr Holland sent Mr Dickey an email in response to a request for a commentary on key sales in support of a claim figure. This refers to the Demar sale (135 O’Herns Road) at $48.73/m² and the Hewitt sale (25 Cooper Street) at $48.74/m². According to Mr Holland, these sales suggested a value of a minimum of $50/m² on the assumption that the land was zoned and fully serviceable at the relevant date. Mr Holland emphasised that it was essential to have the planning and servicing advice before he could commit to figures. However, he expressed the hope that the commentary helped Mr Dickey’s ‘comfort levels’.

(i) On 17 March 2009, Mr Holland wrote to Murdesk’s solicitors suggesting a meeting to brief him on the planning rationale. That meeting apparently took place a month later.

(j) On 14 May 2009, Mr Dickey urged his solicitors to ‘keep feeding Mark’ and to give the valuers all the support that they needed. In the meantime, Mr Holland continued to ask for details of staged ‘super lot’ plans and costs from Coomes Consulting.

(k) On 23 July 2009, Mr Dickey wrote to Murdesk’s counsel about what he described as ‘the next step in the process looking at the general position to see what we actually need our consulting and valuation team to do’. This letter (the ‘strategy letter’) set out how Mr Dickey thought the case ought to be presented and what the evidence needed to cover and emphasise. The strategy letter was provided to Mr Holland and he annotated it.

The strategy letter set out Mr Dickey’s views, among other things, on ‘Valuation and Comparable Sales’. In this section, Mr Dickey commented, ”… we need to concentrate on a super lot plan and englobo sales to maximise our claim value … We should certainly be looking at the value of the best sites around Melbourne and applying a small discount to them.” He emphasised that development sites in the north, west and east need to be differentiated. He wrote, ”We reject any notion that sites in the west have the same value as ours. They do not.”

Mr Dickey expressed the view that the sale of 135 O’Herns Road should be ‘our prime focus’. He also referred to the neighbouring Haberfield land and to the sales of 300-310 Cooper Street, and proceeded to look at each in turn, indicating the bases upon which upward adjustments should be made for the subject land.

In the strategy letter, Mr Dickey included a section entitled ‘Affidavit content: CPG, Valuation, Murdesk’ in which he referred to the need for there to be ’a strength thread running through our evidence’ in nominated areas. These included the importance of the Epping Bulge and the land within it, the pro-active and supportive local council, the positive planning situation, the absence of sewerage issues, the large premium that the Cooper St/Freeway corner would attract, the advantage of the Hume Highway frontage and so on.

Mr Dickey again expressed the view that the chief comparable sale was 135 O’Herns Road, with value added for location, sewerage and sequencing.

Under a further heading ‘Valuation’, Mr Dickey advocated a focus on ‘value items’, including the Epping Bulge as an important new development area, the corner location, the freeway exposure, the fact that the site was the last development site after Haberfield, and that it was ‘clean’. He set out again what he considered to be the prime comparables and the need to ‘ram home’ that the MWM was not the best and highest use for the site. He referred to the ‘exponential’ and ‘rapidly rising’ land prices.

(l) On 3 August 2009, Mr Dickey prepared a memorandum for a meeting between him, counsel and Mr Holland concerning the progress of the case generally. The memorandum contains the observation that, ‘We will need lots of ammunition to defend our claim, both with our main comparables and other properties. … We already have some priceless material in the MWM discovered documents’.

(m) On 20 August 2009, Mr Holland sent an email to Mr Dickey with the subject ‘MWM - valuation strategy’ concerning the meeting the previous day, listing a series of issues ‘for your input and guidance’. There followed a series of questions and observations in relation to the provision of information for the purposes of the valuation.

(n) On 14 April 2010, Mr Holland sent to Murdesk’s counsel schedules of sales in the west and in the south-east that he had prepared.

(o) On 27 April 2010, Mr Holland emailed Mr Dickey and Murdesk’s counsel in relation to the planning evidence. Mr Holland said:

We need discussion about the planning and servicing in the context of competition for finished lots. The Demar sale helps our cause, but the arguments about servicing etc need to be headed off at the pass!! I would not suggest instructing other valuer until we can give them the facts about servicing competition – remove that element of doubt, and emphasise the benefit of the comprehensive development zone for employment generating uses.

(p) On 11 May 2010, Mr Holland attended a conference with counsel for Murdesk. Notes taken by Mr Holland’s assistant refer, among other things, to destroying ‘old drafts of other consultant’s reports’ and to the removal of notes in sales evidence schedules.

(q) On 20 May 2010, Mr Holland emailed counsel for Murdesk attaching a draft of the approach he was wishing to pursue, which demonstrated a need for input from the engineers in relation to a variety of matters. Mr Holland wrote:

You will see from my analysis, this detail is critical to argue up from these sales. You will also see why I think it is necessary to glean support from elsewhere – including sale 23 which I have not yet included in the discussion (draft). I think you will agree this is too important not to get absolutely right and CPG [the engineers] assistance will be vital to achieving this.

(r) On 25 May 2010, Mr Holland sent a signed copy of a draft report to Murdesk valuing the land at $27.5 million.

(s) However, on 31 May 2010, Mr Holland emailed Murdesk’s solicitors asking when the engineers would be responding to his requests for information and querying when he needed to provide a draft report. He said this (presumably the information outstanding from the engineers) would be important to help support his argument for a value equivalent of $50/m². He said he was happy to submit his draft earlier than later to ensure appropriate discussion about the basis of his assessment, ‘particularly in light of the claim figure of $33.0 million, equivalent to nearly $60 psm’.

(t) On 22 June 2010 Mr Holland prepared a further draft report valuing the subject land at $27.6 million. This draft refers to an appreciable lift in land prices around Cooper Street due to scarcity, and comments on the Haberfield land having large areas used for extractive industry. He states that he proposes to make an upward adjustment for the notional fill required for the Haberfield land.

(u) On 29 June 2010, Mr Dickey provided some comments on Mr Holland’s draft report which were in turn provided to Mr Holland. Mr Dickey emphasised that the subject land was no ordinary land holding. He told Holland that the subject land was ‘outstanding’ and ‘irreplaceable’.

(v) On 29 September 2010, Mr Holland emailed to Mr Dickey and counsel for Murdesk an analysis of industrial sales in the Metrolink estate (25 Cooper Street) noting that ‘when we next meet we can discuss how we may use this data and any refinements to the presentation format’.

(w) On 7 October 2010, Mr Holland met with Mr Dickey and the owner of the neighbouring land, Mr Scanlon. Mr Holland sent Mr Dickey an email in relation to this meeting in which he included the following comment:

At the relevant date your’s and Haberfield’s were the only lands available on Cooper Street. Major institutions did not put in tenders for Haberfield because of the notice of intention to acquire … The scarcity of suitable land in Cooper Street is supported by the fact that MWM selected it as a preferred site strategically (not because it was cheap). The scarcity factor should be reflected in the value described in Cooper Street.

(x) On 19 and 20 October 2010, there was an exchange of emails between Mr Holland and Mr Dickey concerning a spreadsheet analysis of the value of the subject land by reference to the settlement amount arising from the compulsory acquisition of the Haberfield land. In this analysis, Mr Holland included in the cost of the Haberfield land an amount of $15 million for ‘civil works’. This added a significant cost to the Haberfield land for the purposes of comparison. The $15 million figure was apparently provided to Mr Holland by Mr Dickey based on a letter that had been discovered from Major Projects Victoria to the relevant Minister.

Mr Holland arrived at an equivalent value for the subject land of $34.2 million, based on an upward adjustment of 10% for its corner location. In his covering email, Mr Holland stated:

Merv, you can fiddle with the figures in the spreadsheet to reflect changes in civil works and actual useable areas resulting from works on the Haberfield site and also your own land.
This is a very different exercise to the one you were expressing – of adding $15.00 m to reflect the premium the authority can afford to pay for your land.
I think the correct approach is to determine the value of your land, and then, if you wish, argue that they could pay a premium to secure your site because they were saving $15.00 m in expenditure on Haberfield’s land.

Mr Dickey responded in some detail, arguing that the subject land would attract a higher premium than 10%. He said it had to be ‘20% plus’.

Mr Holland responded the following day to say he had redone his spreadsheet to reflect the things Mr Dickey had mentioned, although he thought 20% was too much above ‘notionally good land values’. He also queried the amount for civil works.

(y) On 20 October 2010, Mr Holland emailed counsel for Murdesk to say that he was trying to get Mr Dickey to think carefully about his contention of value based on the Haberfield settlement. Mr Holland observed that “[m]uch hangs on the $15 million which seems a huge cost to me.”

(z) On 2 November 2010, Mr Holland carried out two further analyses of the Haberfield settlement, adjusting the subject land for its corner location by 10% in the one instance and 20% in the other. The inclusion of the cost of $15 million for civil works remained in both analyses.

(aa) In December 2010, a series of emails passed between Mr Holland and Mr Dickey in relation to a lot sales analysis, including lot sales in the Metrolink estate. Mr Holland also provided to Mr Dickey and counsel a series of graphs showing land value profiles for their consideration.

(ab) On 8 December 2010, Mr Holland emailed to Mr Dickey ‘sales trend analyses’. Mr Holland wrote:

Can you call me to discuss what else you were looking for with respect to our analyses if this does not cover what you sought?

(ac) On 25 February 2011, Mr Holland sent a further draft of his report to Murdesk’s solicitors, again valuing the subject land at $27.6 million.

(ad) On 7 April 2011, Mr Holland emailed Mr Dickey revised sections of his report. Mr Holland explained that he sought to encapsulate in the briefest way a compelling case to look beyond the Cooper Street sales and to the broader metropolitan area for guidance and said, “I would be grateful for your feedback when you have a moment”.

(ae) On 8 April 2011, Mr Holland emailed Murdesk’s then solicitors seeking staged development costs for the ‘super lot’ plan. He observed that by providing access to the stages/parcels and the minimum level of services/infrastructure to enable the sale of the lots over time, he considered that an ‘optimum level of value’ for the land could be demonstrated.

(af) On 5 May 2011, Mr Holland emailed Mr Dickey thanking him for dinner the previous evening and observing that Mr Dickey would see from Mr Holland’s draft report that fill costs, compacting and timing of placement was critical to his basis of assessment – especially if he was to have a clearly demonstrable basis for an increase above $50/m². Mr Holland asked for ‘further feedback’ as he continued to refine the final document.

(ag) On 17 June 2011, Mr Holland emailed to Mr Dickey and counsel his revised draft valuation report dated 4 May 2011 (again, valuing the land at $27.6 million). The covering email noted that the report was forwarded in the expectation it would be provided to Mr Dickey for review and be ready for Mr Holland to finalise upon his return from overseas.

(ah) On 6 July 2011, Mr Holland emailed to Mr Dickey and counsel a spreadsheet of calculations, setting out necessary adjustments in respect of comparable sales in the area. This appears to be a version of Appendix G to the final report, which adjusts four comparable sales in the north by reference to factors such as time, fill, exposure and road frontage. Mr Holland asked Mr Dickey to call him so they could go through the document.

(ai) The following day, on 7 July 2011, Mr Holland emailed to Mr Dickey and counsel his ‘super lot’ assessment. He said:

It is very sensitive to gross lot realisation assumptions so we will need to discuss the merit of its inclusion, but I think it is a less risky approach than a full development feasibility.

(aj) On the same day, Mr Holland emailed to Mr Dickey and counsel part 1 of his expert witness statement ‘for discussion’ and, at the end of that day, the final draft of his report.

This history shows that Mr Holland had relatively frequent contact with Mr Dickey, particularly following the strategy letter in 2009, throughout 2010 and while he was in the process of finalising his report in 2011. Many of the interactions were benign, in that they involved requests for and the provision of information. There was nothing unusual or untoward in Mr Dickey furnishing Mr Holland with information that might be useful for his valuation. To the extent that some of the communications involved Mr Dickey explaining what he saw to be the advantages of the subject land and describing his plans for it, that too is innocuous. Communications of both kinds are an incident of the valuation process and do not in themselves compromise the independence of the valuer.

However, the communications between Mr Dickey and Mr Holland went further than this. Mr Holland repeatedly referred parts of his draft report to Mr Dickey for Mr Dickey’s ‘input and guidance’ and for ‘feedback’ (and ‘further feedback’). In the period during which he was finalising his report, Mr Holland’s revisions were sent systematically to Mr Dickey for his ‘review’.

Moreover, some of the language used by Mr Holland in his dealings with Mr Dickey is suggestive of a collaboration, as the Secretary says, to maximise the value attributed to the land. References to ‘our cause’, to ‘heading off [opposing arguments] at the pass’, to achieving an ‘optimum level of value’ and so on, suggest that Mr Holland saw his task as one of advancing the interests of Murdesk in the compensation proceedings. Mr Dickey, for his part, appears to have regarded Mr Holland as member of his ‘team’ rather than as an impartial and independent expert whose principle obligation was to the Court. Among other things, he wrote of providing the experts with ‘ammunition’ to defend ‘our’ claim. Mr Holland responded in kind by referring to his task as the ‘arguing up’ of value and, among other things, the need to find a demonstrable basis for an increase in the per square metre value of the land over the values of the surrounding land.

The documents obtained by the Secretary and put to Mr Holland therefore raise a real question as to whether, in his dealings with Mr Dickey, Mr Holland compromised the impartiality that must be the hallmark of an expert witness.

The question of impartiality is closely related but not identical to the question as to whether the opinions expressed by an expert are wholly or substantially based on the expert’s specialised knowledge based on his training, study or experience. In my view, however, given the nature of the valuation task and the different ways in which it can be approached, it might be possible to produce an opinion based substantially on specialised knowledge from a partisan perspective. That is, it might be possible for an expert to apply his or her specialised knowledge for the purpose of advocating for a party.

The admissibility of Mr Holland’s evidence depends on whether the opinions expressed by him in his expert report were generated wholly or substantially by the application of his specialised knowledge. Having regard to the form and content of his expert report,[23] to the nature of the opinions that he expresses, and to his qualifications to express opinions of that kind, for the Court to conclude that Mr Holland’s opinions were not substantially the product of his specialised knowledge would involve the Court finding, in effect, that his opinions were not genuinely held, and that they were fabricated or distorted to accord with the wishes of the client.
[23]See paragraph 32 below.

Mr Holland’s report does not evince an air of fabrication or distortion. It contains an analysis of the evidence to which he refers and explains the approach that has been adopted and the conclusions that he has drawn from the evidence. Again, Mr Holland’s approach may or may not be the approach that the Court should prefer and it may or may not accept his conclusions. Mr Holland’s report is nonetheless cogent, reveals a factual and intellectual basis for his opinions and plainly reflects the application of valuation expertise. In the witness box, Mr Holland presented as a sincere and truthful witness who was at pains to explain to the Court how he had arrived at his opinions. Like Mr Murray, he confirmed that the opinions expressed were his own.

According to the Secretary, however, the influence of Mr Dickey can be tested against the way in which Mr Holland used information provided by Mr Dickey relating to the expressions of interest process for the adjoining Haberfield land. Mr Holland queried, but then appears to have accepted, information provided by Mr Dickey that the cost to fill the Haberfield land would be in the order of $15 million.[24] In fact, the $15 million figure was not for fill, but for works to enable the construction of the peculiarly large shed proposed for the Melbourne Wholesale Markets. Mr Holland’s acceptance of Mr Dickey’s advice that the $15 million was the cost of fill resulted, so the Secretary says, in Mr Holland making an error in his expert report.
[24]This was apparently based on a letter that Mr Dickey had obtained through the discovery process from a senior bureaucrat in the Department of Infrastructure to the relevant Minister describing the costs to the government of developing the Haberfield land for the Melbourne Wholesale Markets.

The Secretary also contends that Mr Holland was influenced by Mr Dickey and/or Mr Dickey’s legal advisers in relation to:

(a)the treatment of the cost of fill for 300 and 310 Cooper Street, which were used as comparable sales evidence;
(b)the inclusion of lot sales evidence in his report; and
(c) the inclusion of graphs to illustrate rising land prices.

It is contended that, as a result of collaboration with Mr Dickey and his advisers, Mr Holland used the higher of two figures provided by the engineering expert for the cost of fill, did not include the lot sales evidence discussed in his expert report and omitted to use a particular graph that he had prepared and circulated which showed values for the subject land at the relevant time at around $40/m².

It may well be that Mr Holland was misled by Mr Dickey about the nature of the civil works that were contemplated for the Haberfield land by the State government and as to the extent of the holes left on that land as a result of quarrying. It may be, as a consequence, that the part of Mr Holland’s evidence that relies on his analysis of the value of the Haberfield land does not stand up to scrutiny. It may also be that where there was a choice of rates or values to be used as inputs in Mr Holland’s analysis, Mr Holland chose the rates or values that were most favourable to Murdesk. Such matters might found an argument that the Court should not prefer his evidence. The same applies to his choice of graphs. However, it does not follow that the opinions Mr Holland has expressed as to the value of the subject land are not substantially his own opinions based on his expertise as a valuer. The choice of evidence and the form of analysis used to arrive at a value will usually depend, in and of itself, on the exercise of the specialised knowledge and skill of the valuer.

I have had regard to the approach taken by Mr Holland in his final report compared to the approach advanced by Mr Dickey in the strategy letter. I am satisfied that Mr Holland has not followed the template put forward by Mr Dickey. Although Mr Holland makes reference to the advantages of the land in the context of the Epping Bulge and the supportive local council, and stresses the benefits of its ‘gateway’ location and exposure to the Hume Freeway, his emphasis on the possibilities generated by the Comprehensive Development Zone, on the potential for the land to be developed for more sophisticated uses than are ordinarily permitted in an industrial zone and on the consequent need to find comparable sales in other parts of Melbourne, is not a reflection of the strategy articulated by Mr Dickey. Indeed, one senses in some of the discovered materials Mr Holland’s frustration that he was having difficulty explaining his point of view to Mr Dickey and the other experts, to enable them to provide him with the information that he needed to develop his argument in relation to the highest and best value of the land.

Mr Holland’s expert report deals with matters on which he is qualified to give an expert opinion and which require the application of specialised knowledge. I am satisfied that Mr Holland’s opinion as to the value of the land was his own and that it was substantially based on his specialised knowledge in the field of land valuation.

In my view, Mr Holland’s expert report is admissible under s 79(1) of the Evidence Act.

Should the Court exclude or refuse to admit the evidence?

The applicant submits that even if the evidence of the opinions of Messrs Holland, Murray and Wallace is admissible under s 79(1) of the Evidence Act, the Court should refuse to admit it under s 135 of the Evidence Act. Alternatively, the Court should exclude evidence by order made under s 29 of the Civil Procedure Act.

In either case, it is a matter for the discretion of the Court.

Section 135 of the Evidence Act confers on the Court a general discretion to refuse to admit evidence if the probative value of the evidence 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.

In this case, the applicant submits that it has been unfairly prejudiced by the non-disclosure of earlier dealings between the valuers and Mr Dickey and, in particular, the non-disclosure by Mr Holland and Mr Wallace of certificates of valuation provided to Murdesk in respect of the subject land before either of them was formally retained to provide an expert valuation report for the purposes of this proceeding.

More importantly, the Secretary relies on breaches of the overarching obligations by the valuers as expert witnesses to call for the Court to exercise its powers under s 29 of the Civil Procedure Act. Section 29 enables the Court to make any order it considers appropriate in the interests of justice where, on the balance of probabilities, a person has contravened an overarching obligation. The particular overarching obligations upon which the Secretary relies are the paramount duty in s 16 to further the administration of justice in relation to a civil proceeding in which the person is involved, and the overarching obligation in s 21 not to engage in conduct which is misleading or deceptive or likely to mislead or deceive.

In this respect, the Secretary refers to the obligations contained in the Expert Witness Code of Conduct made under O 44 of the Rules. Relevantly, the Code provides:

1. A person engaged as an expert witness has an overriding duty to assist the Court impartially on matters relevant to the area of expertise of the witness.

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

Clause 3 of the Code requires every report prepared by an expert witness for the use of the Court to specify, among other matters -
(d) the facts, matters and assumptions on which each opinion expressed in the report is based (a letter of instructions may be annexed);
(e) (i) the reasons for,
(ii) any literature or other materials utilised in support of,
(iii) a summary of—
each such opinion;
….
(g) any examinations, tests or other investigations on which the expert has relied, identifying the person who carried them out and that person's qualifications;
(h) a declaration 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 knowledge of the expert, been withheld from the Court;[25]
[25]This largely reflects r 44.03(2).
It is submitted that each of Mr Holland, Mr Murray and Mr Wallace breached the paramount duty to the Court to further the administration of justice and failed to satisfy the overarching obligation not to engage in conduct that is misleading or deceptive. It is submitted that Mr Holland, in particular, has not satisfied the overriding duty to assist the Court impartially and not to become an advocate for a party.

The contraventions of the overarching obligation not to mislead or deceive are submitted to be as follows:

(a)Mr Holland and Mr Wallace failed to disclose earlier certificates of valuation and valuation reports;
(b)Mr Holland, Mr Murray and Mr Wallace failed to disclose the meetings, communications and other exchanges that they had with Mr Dickey and/or his advisers;
(c)The declaration provided by each witness that no matter of significance which the witness regarded as relevant had to the knowledge of the witness been withheld from the Court pursuant to clause 3(h) of the Expert Witness Code of Conduct was misleading; and
(d)Mr Holland, Mr Murray and Mr Wallace failed to comply with clauses 3(d), (e) and (g) of the Expert Witness Code of Conduct in that they did not disclose all of the facts, matters and assumptions upon which its opinion expressed in their reports were based or the reasons for each such opinion or all investigations upon which they had relied.

In the case of Mr Holland and Mr Wallace, the Secretary’s complaint hinges on the fact that each of them previously provided to Murdesk a certificate of valuation for the subject land. In the case of Mr Holland, a certificate was given in April 2006 upon request by Mr Dickey. In the case of Mr Wallace, a draft tax invoice dated 15 February 2006 referred to a certificate of valuation for the amount of $22 million having been issued. That invoice was withdrawn and another invoice was issued the following day that made no reference to a certificate of valuation. The Secretary submits that, because of the nature of the changes that were made to the invoice, the Court should infer that it was withdrawn and re-issued upon instruction by Mr Dickey in order to conceal the fact that a certificate of valuation had been provided with which he disagreed or was dissatisfied.

It is the Secretary’s contention that the failure to disclose the existence of the certificates of valuation (and any accompanying valuation reports) constituted a breach of the requirements in the Code to specify facts, matters and investigations on which the expert relied and rendered misleading the declaration under clause 3(h) that all matters of significance had been disclosed to the Court. This, so it is said, constituted a breach of s 21 of the Civil Procedure Act.

I am not persuaded that Mr Holland and Mr Wallace were required by the Code to disclose in their expert reports that they had previously provided certificates of valuation (and possibly also a valuation report) for the land as at the relevant date. Nor do I consider that they have misled the Court in declaring that no matters of significance that they regarded as relevant had been withheld from the Court. In my view, the existence of earlier valuations does not necessarily fall within the matters that are required to stated, specified or provided in an expert report by reason of clauses 3(d), (e) and (g) of the Code. Those paragraphs require disclosure of the matters on which the current certificates of valuation and expert opinions are based. The experts were not required to refer to the earlier valuations unless the earlier valuations were matters upon which the current opinions were based or formed part of investigations upon which the experts relied in reaching their current opinions.

Likewise, the declaration in clause 3(h) of the Code did not necessarily require disclosure of the earlier valuations. The declaration applies to only such matters of significance as the expert regards as relevant. In this case, it appears that neither Mr Holland nor Mr Wallace considered the earlier valuations to be relevant to be disclosed in their expert reports. There are a variety of reasons why this might be so, for example, because the earlier valuation was carried out on the basis of different information and assumptions from the current valuation.

That is not to say that the earlier valuations would not be relevant to the question that the Court has to determine in this case. The earlier certificates of valuation were discoverable (along with any accompanying valuation reports) and could be used to challenge the credibility of present valuation - as has already occurred in this proceeding.

I have considered the submission that Mr Wallace’s expert opinion ought not to be admitted if there was an attempt to conceal the existence of the earlier certificate by re-issuing the invoice in which it is mentioned. The revised invoice suggests that Mr Wallace provided only preliminary advice of an unspecified nature, whereas the original invoice showed him to have provided concluded advice as to the value of the subject land. Having regard to the changes that were made to the invoice, it seems likely that the invoice was re-issued in order to remove any reference to a certificate of valuation or, indeed, to Mr Wallace having given any definitive advice in 2006 as to the value of the land.

Mr Wallace volunteered in his evidence in chief that he was asked to advise Mr Dickey on the implications for the value of the subject land of the aborted expressions of interest campaign for the Haberfield land. He said that Mr Dickey was unhappy with the advice that he gave. It is open to infer that Mr Dickey was also unhappy with the certificate of valuation that was issued, that he asked for it to be withdrawn and that Mr Wallace obliged him.

In my view, however, the Court ought not to exclude Mr Wallace’s current valuation report and his opinion as to the value of the land for this reason. Both invoices were produced to the Court. Mr Wallace endeavoured to explain the basis upon which the earlier valuation certificate was provided and why changes were made to the invoice. His evidence on this matter was tested and the answers that he gave were forthright.

The existence of an earlier certificate of valuation for a lower amount has the potential to undermine the credibility or reliability of the later certificate and valuation report. Whether the difference between the two valuations and the reason for removing the reference to the certificate of valuation from the invoice has been satisfactorily explained will be a matter for the Court when weighing up the valuation evidence generally.

While the Court would be assisted by the earlier valuation certificate and report (if a report exists) in order to better understand the significance (if any) of the earlier valuation, I draw no inferences from the fact that neither the certificate of valuation nor any valuation report has been produced in response to the subpoena. Mr Wallace has explained his unsuccessful attempts to locate these documents through his former firm, and I am satisfied that he has done what he could to obtain them.

In the circumstances, I do not consider that Mr Holland’s or Mr Wallace’s evidence ought to be excluded because of the non-disclosure of the earlier valuation certificates (or reports).

As to the disclosure of dealings with Mr Dickey and/or Murdesk’s advisers, the Code required the expert reports set out the facts, matters and assumptions on which the opinions expressed in the report were based, the reasons for each opinion and any examinations, tests or other investigations on which the expert relied. I am not persuaded that Mr Holland and Mr Murray were required by the Code to disclose every detail of their dealings Murdesk’s advisers. However, information or instructions relevant to the formation of their expert opinions - such as the strategy letter, the details about the Haberfield land provided by Mr Dickey, the information about the Northpoint development provided by Mr Scanlon and so on - ought to have been set out in the expert reports. Reference should have been made to meetings and conferences that took place with the client and with other experts. Insofar as these meetings and conferences resulted in the provision of instructions or information on which the expert relied in forming his opinions, that too ought to have been stated or specified.

I accept the Secretary’s submission that Mr Holland and Mr Murray did not adequately disclose in their reports their dealings with Mr Dickey and Murdesk’s advisers. However, material exposing those dealings has been produced to the Secretary through the usual processes available to parties in civil litigation. The experts have given evidence about their dealings with Mr Dickey and/or his advisers, and their expert evidence has been tested by reference to that evidence and to the discovered/subpoenaed material. The Secretary has had the opportunity to properly test the expert evidence adduced by Murdesk by reference to these dealings with the client and its advisers and has not, in my view, been prejudiced by the non-disclosure.

Accordingly, the Court will not exercise its discretion to exclude the expert opinions on that basis. The expert opinions that have been challenged are probative and potentially of assistance to the Court, and the Secretary has not been prejudiced by any want of disclosure in the expert reports.

Finally, it is necessary to consider the submission that the evidence of Messrs Murray and Holland ought to be excluded because they were not impartial as required by clause 1 of the Expert Witness Code of Conduct and became advocates for Murdesk in breach of clause 2.

The question of independence and whether expert opinions were genuinely held was considered by Brooking J in Phosphate Cooperative Co of Australia Pty Ltd v Shears,[26] in which his Honour refused to approve a company scheme supported by an independent expert’s report as to the value of the company because he was not satisfied that the expert opinion was genuinely held. Justice Brooking emphasised that the guiding principle for expert reports is for care to be taken to avoid any communication which may undermine, or appear to undermine, the independence of the expert. In the case before him, the report was produced under the supervision of the company and its advisers and owed much to their exertions. His Honour held that it did not represent the genuine independent opinion of its authors.
[26][1989] VR 665 (‘Pivot’).

Justice Brooking described the history leading to the production of the final report in some detail. He concluded that what took place was quite unacceptable.[27] The unacceptable process commenced with informal approaches to the expert before the expert was engaged on behalf of the company. The expert began preparing a draft report without any proper written proposal on which to comment. He was exposed to discussions relating to strategy to dislodge a takeover suitor and, as a result, there was a danger that through being privy to that kind of discussion, the expert might come to be regarded, and to regard himself, as part of a ‘team’. Moreover, the expert disclosed to his prospective client his probable general approach in evaluating the scheme, and his Honour held that also to be undesirable.[28]
[27]Ibid 680.
[28]Ibid.

The evidence before his Honour was that a number of draft reports were prepared which were discussed with and reviewed by the company’s representatives and its corporate and legal advisers, who commented on and suggested alterations to the contents of the drafts, many of which were incorporated in the final report. A report, prepared as a report not a draft, was substantially rewritten after consultation with the company’s representatives and its corporate and legal advisers.

Justice Brooking was particularly concerned by the last of these actions. His Honour said that it was bad enough to do what was done when the expert accommodated the client by repeatedly settling draft reports in consultation with the client and its advisers. It made matters worse to then tacitly agree to the suppression of a supposedly final report and its replacement by a different document.[29]
[29]Ibid 683.

Having regard to these matters, his Honour expressed himself to be not satisfied that the approach adopted in the report was the result of an exercise of judgment by the expert uninfluenced by pressure brought to bear by or on behalf of the client. Indeed, he said he was affirmatively satisfied that pressure exerted by or on behalf of the client did affect what was in the report significantly.[30]
[30]Ibid 684.

There are similarities between the circumstances in Pivot and those in the present case. Mr Holland repeatedly provided drafts of his reports and/or proposed sections of his reports to Mr Dickey for review. Mr Murray provided draft schedules of sales to Murdesk’s lawyers. Although there was no evidence of ‘vetting’ the witnesses prior to retaining them to ensure that their approach accorded with the interests of Murdesk, two of the three expert valuers retained by Murdesk had previously provided it with valuations for the land and had been involved in earlier proceedings on its behalf. Mr Holland, in particular, was a known commodity and had a reasonably longstanding relationship with Mr Dickey which, from the tone of their communications, verged on a friendship. Moreover, having regard to the approach taken by Mr Dickey in the strategy letter, which was communicated at least to Mr Holland, the experts were encouraged to see themselves as part of a team that was put together to rebuff the case that would be mounted by the Secretary and to ensure that the compensation awarded reflected the unique qualities of the land.

However, there is no evidence that the witnesses agreed – tacitly or otherwise – to the suppression of a supposedly final report and its replacement by a different document. Although Mr Holland provided a signed copy of a report in 2010, he gave evidence that his signature was automatically generated, and that the report was not intended to be a final report.

Furthermore, the evidence that changes were made to drafts of Mr Murray’s or Mr Holland’s expert reports as a result of review by Mr Dickey or Murdesk’s lawyers was limited. For the reasons I have previously stated, it was not sufficient to persuade me that the opinions expressed in the reports were not based on the specialised knowledge of the experts. In this case, Mr Dickey’s involvement in the formation of expert opinion, while in many respects concerning, did not amount to the kind of interference that was evident in Pivot.

As to the involvement of Murdesk’s legal advisers in the preparation of the reports generally, counsel for Murdesk relied on the judgment of Callinan J in Boland v Yates[31] for the proposition that legal advisers have a proper role to perform in advising or suggesting, not only which legal principles apply, but also that a different form of expression might appropriately or more accurately state the propositions that the expert seeks to advance, and which particular method of valuation might be more likely to appeal to a tribunal or a court.[32] Not surprisingly, however, his Honour cautioned against attempting to invite the expert to distort or misstate facts or give other than honest opinions.
[31](1999) 167 ALR 575, 651; [1999] HCA 64.
[32]Ibid [279].

In this case, there was no evidence of the legal representatives attempting to invite the expert to distort or misstate facts or give other than honest opinions. Nor was there evidence that the legal representatives suggested a particular method of valuation might be more likely to appeal to the Court. Although the legal representatives made suggestions as to form and style, even to the extent of redrafting parts of one of the reports, this does not amount to the kind of conduct that Callinan J cautioned against.

As a result, the Court will not exercise its discretion to exclude or not to admit the opinion evidence of Murdesk’s valuers pursuant to s 135 of the Evidence Act or s 29 of the Civil Procedure Act. The evidence is admissible, and the issues that have been raised by the Secretary can be dealt with as matters of weight.

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Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd [2011] VSC 581

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Bamco v Contek [2019] VCC 327

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2

Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd (No 2) [2012] VSC 586

Bamco v Contek [2019] VCC 327

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[2011] VSC 581

15 November 2011