Sural SpA & Anor v Downer EDI Rail Pty Limited
[2007] NSWSC 1164
•16 October 2007
CITATION: Sural SpA & Anor v Downer EDI Rail Pty Limited [2007] NSWSC 1164 HEARING DATE(S): 8/10/07, 9/10/07, 11/10/07, 12/10/07, 15/10/07, 16/10/07 JURISDICTION: Equity Division
Technology and Construction ListJUDGMENT OF: Einstein J EX TEMPORE JUDGMENT DATE: 16 October 2007 DECISION: Rulings on admissibility of expert's report. CATCHWORDS: Evidence - Expert evidence - Evidence Act 1995, s.79 - Admissibility - Need to identify assumptions - transparency of reasoning processes LEGISLATION CITED: Evidence Act 1995 CASES CITED: Australian Securities & Investment Commission v Rich (2005) 218 ALR 764
HG v The Queen (1999) 197 CLR 414PARTIES: Sural SpA (First Plaintiff)
Sural CA (Second Plaintiff)
Downer EDI Rail Pty Limited (Defendant)FILE NUMBER(S): SC 55058/04 COUNSEL: Mr W F Lally QC, Mr J P Slattery (Plaintiffs)
Mr M J Leeming SC, Mr M A Jones (Defendant)SOLICITORS: Clayton Utz (Plaintiffs)
Corrs Chambers Westgarth (Defendant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST
EINSTEIN J
Tuesday, 16 October 2007 ex tempore
Revised Wednesday 17 October 2007
55058/04 - Sural SpA & Anor v Downer EDI Rail Pty Limited
JUDGMENT
The challenge to the admissibility of the report of Mr Masters
1 The Sural parties have objected to the admissibility of the evidence given by Mr Masters, who is called by Downer to give expert evidence.
The specialised knowledge
2 The report of Mr Masters sets out his training study and experience in considerable detail: cf paragraphs 2.1-2.6 from Mr Masters report on pages 1 and 2.
3 Plainly he has acquired considerable specialised knowledge equipping him with an entitlement to express opinions [wholly or substantially based upon that specialised knowledge] in relation to:
i. tendering for transmission line projects;
ii. the management of all aspects of transmission line projects from the time of planning approval of such lines, t
iii. the issuing of tenders;
iii. the negotiating and awarding of contracts for transmission line projects;
v. the calculations and performing of the checks which he claims to have carried out as described in his report.iv. the supervision and management of construction contracts through to the commissioning of transmission lines;
4 Equally clearly Mr Masters has not been asked to perform the conventional role of an accountant, albeit that the work set out in his report involves his having performed an audit check of the amounts attributed to "Additional Materials", "Miscellaneous costs" and "Replacement Conductor" - being the types of tasks which are clearly established as falling within his contract administration expertise.
5 I reject the contention of the Sural parties that there is no evidence that Mr Masters has any experience in preparing tender estimates for the stringing or any other phase of the project for the construction of a power transmission line.
6 As Downer has contended, Mr Masters’ expertise for present purposes is seen to have been acquired by dint of his vast experience in tendering for jobs comparable to the subject transmission line project and in relation to contract administration. In this regard the distinction drawn by the Sural parties as between his academic qualifications as an electrical engineer, as opposed to that of a civil engineer, is not of substance when one considers the tasks on which Mr Masters opines. It must be recalled that all that is necessary is that the opinions expressed be based wholly or substantially on the specialised knowledge which has been demonstrated.
The approach taken by the expert
7 It is clear from the report that Mr Masters considered two independent methodologies which are apparently to be put forward by Downer as alternate methods of assessing the real cost of delay to it by having had to use the allegedly defective drums:
ii. the second is based upon an extrapolation of costs, taking into account the difference in run-out times for the wooden drums and the Olex steel drums used at the end of the Project.
i. the first is based upon comparing Downer's actual costs to the tender costs after making allowances for non-drum problems;
8 Each of these methodologies is carefully described in the report: as to the first in 9.1-9.6 and as to the second in 12.1-12.22.
9 In 8.2 he gives evidence as to what documents he saw, said to support the methodologies said to have been used by Downer to quantify its loss and damage. He purports in his report to explain and to consider the methods used by Downer to calculate its loss and damage.
10 In 10.19 he purports to give evidence that he is satisfied that the $2,717,701 amount claimed by Downer, fairly represents the loss and damage. I will return to the phrase “fairly represents” shortly.
11 In 11 he deals with the Olex trial of the comparative run-out rates achieved using the Olex conductor as opposed to the Sural conductor; the support apparently given by the trial to the Downer methodology and claims to having suffered substantial additional costs on the project.
12 In 13.4 he gives evidence that he performed particular checks. I will return in a moment to the subject of what checks he performed or did not perform.
The essential attack
13 The real burden of the attack upon admissibility is the proposition that the evidence should be excluded because it is said that the expert's opinion cannot be admissible if only based on facts that are assumed and not yet proved at all during the proceedings and/or by the time when the expert gives evidence. To my mind this does not cater for the obvious situation in complex litigation where assumed facts may be proven later by other evidence.
14 Australian Securities & Investment Commission v Rich (2005) 218 ALR 764, a recent decision by the New South Wales Court of Appeal, is authority for precisely this proposition. The holding was that the issue for a trial judge is whether the opinion expressed to be based on the facts proved or assumed is correct. The holding was that it was necessary, in order that a finding upon this issue be given, for the judge to have regard to a number of matters, including the reasoning process based on those facts which had been used by the expert. Importantly the holding was that (at 794):
"The fact that the opinion was initially formed or later reinforced by reference to other facts, not said by the expert in his evidence to be proved or assumed, is irrelevant to the question of admissibility. Once the opinion is capable of being based on the proved facts, it is admissible . T he fact that the expert's opinion was at one time-or even still is-reinforced by undisclosed facts and reasoning processes is irrelevant to the admissibility of the opinion (although these matters may go to weight)." [emphasis added]
15 In short, a failure to comply even with what was described in ASIC as the “asserted factual basis” approach goes only to weight, not admissibility.
16 As is apparent it was necessary for the Court of Appeal to deal with the "true factual basis" approach as against the "asserted factual basis" approach.
17 The holding was that the trial judge had approached the admissibility issue on the incorrect basis that expert evidence was not admissible unless it was true, as a matter of historical fact, that:
ii. the opinion so expressed had been arrived at by the process of reasoning set out in the report (and no other process).
i. the opinion so expressed was based on the facts set out in the report (and no other facts); and
18 The holding was that the trial judge had erred by holding that it was insufficient (in admissibility terms) for an expert to identify the facts and reasoning process which the expert asserted to be an adequate basis for his opinion.
19 The burden of the decision is that it is not necessary for the expert to reveal the actual historical basis on which his or her opinion was in fact formed.
20 At this point the defendant’s case is not yet closed. Depending upon the evidence adduced by the defendant it may be that it fails to prove that the methodologies which it contends it carried out were in fact carried out, so that the Court is left in the dark as to the calculations as real world events. In this scenario the expert opinions of Mr Masters may be of little or no weight at all.
The expression “fair and reasonable”
21 I reject the proposition that it cannot be said that Mr Masters has any specialised knowledge entitling him to give an opinion in terms of claim costs on transmission line projects and contract administration. However, his opinion expressed in terms of use of the words “fair and reasonable” cannot be allowed in the absence of transparency of reasoning processes: the ruling on use of these words is reserved to abide such additional evidence as may be adduced from him intended to explain the integers intended to be covered by use of that phrase.
22 During submissions Downer has drawn attention to evidence given by Mr Barona, who was the contracts manager responsible for the tender and who has explained in detail how he went about preparing the original tender and specifically, the part attributable to the stringing activities. He has also dealt with a tender estimate adjustment to take into account the altered scope of work (in so far as it relates to stringing costs). Mr Masters is said to have used Mr Barona’s figures in his assessment. In his report he makes clear that he has analysed particular tender spreadsheets and satisfied himself that the revised tender costs as recorded by Mr Barona, do reflect the changes to the scope of work. In this regard this is an opinion well within the specialised knowledge of Mr Masters and hence compliant with the dictate of section 79 of the Evidence Act 1995.
23 In terms of the details of the run-out of the conductor treated with by Mr Masters, Downer simply puts forward this material as an aide memoir to the DVD material in evidence or soon to be added to in evidence.
Assumptions
24 A general area where Sural's submissions have substance concerns the absolute need that the sections of the report which are to be admitted into evidence as assumptions be noted as such by a section 136 limiting order: cf HG v The Queen (1999) 197 CLR 414 at 427 (per Gleeson CJ). Downer will require to identify the assumptions and to accept such a limiting order before the report can be allowed into evidence.
Identifying the types of checks carried out
25 It will also be necessary to reserve a ruling on paragraph 13.4 of Mr Masters' report pending his being given an opportunity to identify the types of checks which he apparently performed.
The way forward
26 In those circumstances the Court will treat with such further approaches as the Downer parties may seek to adopt in order to treat with those matters where judgment is presently reserved and costs of the application will be reserved.
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