Wu v Statewide Developments Pty Ltd

[2009] NSWSC 587

CITATION:	Wu v Statewide Developments Pty Ltd [2009] NSWSC 587
HEARING DATE(S):	26 May 2009
JURISDICTION:	Equity Division Duty Judge List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	26 May 2009
DECISION:	Plaintiff (and also defendant) may obtain separate expert report - reserve for later consideration whether leave will be granted to adduce report – reserve for trial judge whether plaintiff should regardless of outcome, pay extra costs incurred by both sides as a result of additional experts.
CATCHWORDS:	EVIDENCE - Expert evidence – single expert – application for leave to obtain report – where single expert evidence already obtained under UCPR r 31.37 - where issue on which evidence sought is central - relevant considerations
LEGISLATION CITED:	(NSW) Conveyancing Act 1919, s 52 (NSW) Uniform Civil Procedure Rules 2005, r 31.37, r 31.44
CATEGORY:	Procedural and other rulings
CASES CITED:	Cosgrove v Pattison [2001] CP Rep 68, [2000] All ER (D) 2007 Daniels v Walker [2000] 1 WLR 1382 Tomko v Tomko [2007] NSWSC 1486 Wu v Statewide Developments Pty Ltd [2009] NSWSC
PARTIES:	Da Hui Wu (first plaintiff) Jing Jing Li (second plaintiff) Statewide Developments Pty Ltd (defendant)
FILE NUMBER(S):	SC 2631/07
COUNSEL:	Mr S Brennan (plaintiffs) Mr J Stoljar SC (defendant)
SOLICITORS:	Gregory J Goold (plaintiffs) Mallesons Stephen Jaques (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

BRERETON J

Tuesday 26 May 2009

2631/07 Da Hui Wu & Anor v Statewide Developments Pty Limited

JUDGMENT (ex tempore)

1 HIS HONOUR: By their Statement of Claim, the plaintiffs assert that they have validly rescinded a contract made between them as purchasers and the defendant Statewide Developments Pty Limited as vendor of apartment 304, Building G, 10-16 Marquet Street, Rhodes, which was at the date of the contract an unregistered plan, on the ground that a restriction on use had been registered on the Certificate of Title of each strata unit in the building, including the unit the subject of the contract, which detrimentally affected the property to a substantial extent. That detrimental effect was particularised as being that the restriction required the owners to comply with its terms, and that its existence on the Certificate of Title of the common property adversely affected the market value of the unit.

2 Although claims are also made for breach of contract and misleading and deceptive conduct, the substance of the claim is one for the return of the deposit. It is an essential part of that claim to establish that the restriction detrimentally affected the property to a substantial extent. To the extent that relief is sought for misleading and deceptive conduct, or under (NSW) Conveyancing Act 1919, s 52 it would also be relevant to show that the restriction had a substantial detrimental effect on the property the subject of the contract. I, therefore, accept that the question of substantial detrimental affectation is a central issue in the case, and that the impact of the restriction on the value of the unit is therefore also a central issue.

3 The background to the present application is set out in my judgment of 27 February 2009 [Wu v Statewide Developments Pty Ltd [2009] NSWSC 120]. In short, on 28 March 2008, on the application of the plaintiffs and over Statewide’s opposition, Hamilton J made an order for a single expert valuer to report on a number of questions pursuant to r 31.37, the gravamen of which was to ascertain the value of the unit in the absence of the relevant restriction, and its value as affected by that restriction.

4 The valuer commissioned pursuant to those orders, Mr Hepworth, gave a report on 23 October 2008. In that report, Mr Hepworth had said:

At the outset I must advise that there are potential purchasers who upon learning of the restriction of use would simply not proceed with a purchase at any price.

However, I have reached the conclusion that whilst a small percentage of hypothetical purchasers would adopt this position, the available empirical evidence does not indicate that the wider market downgrades the property to any discernable degree on this account.

5 The plaintiffs’ solicitors sought to have him revisit his opinion, and in the course of correspondence with them, Mr Hepworth recorded that it had been put to him that approximately 99 of the plan buyers refused to complete their contracts because of the restrictive covenant, as well as that Mr Touma had offered information and opinion in support of his position. He asserted that he had reached his own conclusions of matters put to him by Mr Touma, but that he may have reached a significantly different conclusion as to diminution in the value of the units had he been aware of the large number of purchasers who refused to complete their contracts because of the restricted covenant. He concluded:

The original valuation does not serve the purposes of both parties whilst a serious doubt now exists as to my basic assumption. Therefore, I am willing to review the original valuation so long as I receive the joint instruction of the parties and agreement to my proposed fee arrangements.

6 As a result of the orders made on 27 February 2009, interrogatories were administered and answered, and Mr Hepworth was asked supplementary questions by each party. He has now answered those questions. In substance, the effect of his answers is that, having now been apprised of the fact that, there being 62 “off the plan” contracts in the development, the purchasers under 13 of them have commenced legal proceedings to have their terminations declared valid, does not change the opinions expressed in his original report. He expresses views that the information provided in the answers to interrogatories was suitable empirical evidence for the purpose of assessing the likelihood of a buyer being prepared to buy the subject property, and for estimating any reduction in value caused by the restrictive covenant. He says that he had made supplementary inquiries of (unspecified) agents in the market as to the effect of the restrictive covenant as to value and saleability of the unit; the detail of these inquiries was not disclosed. In answer to the question:

Having been provided with additional information about the relevant property development, do you adhere to your answers to questions 1 to 5 asking in the original request for your report?

7 He replied that he had not been asked to address question 1, and continued:

It is true that I have made comment in my report which goes someway to answering. If asked I would have also answered that it is my preconceived expectation that the restriction would have weighed somewhat heavily on purchasers given the particular ethnic demographic of the market, but that my research had indicated the reality did not match the expectation. My answers to the other four questions remain as originally reported.

8 It seems to me there is at least arguably some tension between that statement and the extract from his original report set out above.

9 He was also asked by the defendants whether, having been provided with the answers to interrogatories, any of the information in them could affect the conclusions in his report in the absence of further information. He answered that the further information contained in the answers “could have” affected the conclusions in his report, but did not.

10 By their present application, the plaintiffs seek an order pursuant to UCPR, r 31.44, granting them leave to rely upon evidence of an expert valuer in addition to that of the parties’ single expert.

11 The approach to be adopted to applications under this rule has been considered in England and in this Court. In Daniels v Walker [2000] 1 WLR 1382, Lord Woolf MR, with whom Latham J agreed, said (at 1387):

Where a party sensibly agrees to a joint report and the report is obtained as a result of joint instructions in the manner which I have indicated, the fact that a party has agreed to adopt that course does not prevent that party being allowed facilities to obtain a report from another expert or, if appropriate, to rely on the evidence of another expert.

In a substantial case such as this, the correct approach is to regard the instruction of an expert jointly by the parties as the first step in obtaining expert evidence on a particular issue. It is to be hoped that in the majority of cases it will not only be the first step but the last step. If, having obtained a joint expert’s report, a party, for reasons which are not fanciful, wishes to obtain further information before making a decision as to whether or not there is a particular part (or indeed the whole) of the expert’s report which he or she may wish to challenge, then they should, subject to the discretion of the court, be permitted to obtain that evidence.

In the majority of cases, the sensible approach will not be to ask the court straight away to allow the dissatisfied party to call a second expert. In many cases it would be wrong to make a decision until one is in a position to consider the situation in the round. You cannot make generalisations, but in a case where there is a modest sum involved a court may take a more rigorous approach. It may be said in a case where there is a modest amount involved that it would be disproportionate to obtain a second report in any circumstances. At most what should be allowed is merely to put a question to the expert who has already prepared a report.

...

In a case where there is a substantial sum involved, one starts, as I have indicated, from the position that, wherever possible, a joint report is obtained. If there is disagreement on that report, then there would be an issue as to whether to ask questions or whether to get your own expert’s report. If questions do not resolve the matter and a party, or both parties, obtain their own expert’s reports, then that will result in a decision having to be reached as to what evidence should be called. That decision should not be taken until there has been a meeting between the experts involved. It may be that agreement could then be reached; it may be that agreement is reached as a result of asking the appropriate questions. It is only as a last resort that you accept that it is necessary for oral evidence to be given by the experts before the court. The cross-examination of expert witnesses at the hearing, even in a substantial case, can be very expensive.

The great advantage of adopting the course of instructing a joint expert at the outset is that in the majority of cases it will have the effect of narrowing the issues. The fact that additional experts may have to be involved is regrettable, but in the majority of cases the expert issues will already have been reduced. Even if you have the unfortunate result that there are three different views as to the right outcome on a particular issue, the expense which will be incurred as a result of that is justified by the prospect of it being avoided in the majority of cases.

12 In Cosgrove v Pattison [2001] CP Rep 68, [2000] All ER (D) 2007, Neuberger J in the Chancery Division referred to the passages that I have set out above in Daniels v Walker, and continued:

In my judgment although it would be wrong to pretend that this is an exhaustive list, the factors to be taken into account when considering an application to permit a further expert to be called are these. First, the nature of the issue or issues; secondly, the number of issues between the parties; thirdly, the reason the new expert is wanted; fourthly, the amount at stake and, if it is not purely money, the nature of the issues at stake and their importance; fifthly, the effect of permitting one party to call further expert evidence on the conduct of the trial; sixthly, the delay, if any, in making the application; seventhly, any delay that the instructing and calling of the new expert will cause; eighthly, any other special features of the case; and, finally, and in a sense all embracing, the overall justice to the parties in the context to the litigation.

13 His Honour then proceeded to examine various of those factors in the interest of the case. So far as the reasons for wanting a new expert were concerned, his Honour rejected as insufficient the proposition that the expert was biased or that the applicant had any good reason to suspect bias as “wholly insufficient of themselves to persuade me the learned judge was wrong”. But his Honour continued:

The more substantial reason, to my mind, is that the appellants have got a report from the new expert which calls into question some of the conclusions reached by Mr Courtnage. As Miss Caroline Hutton, who appears on behalf of the respondents argues, it cannot be enough for a person who wants to call a new expert, simply to say: ‘I have a report from another expert and it is inconsistent with the agreed expert’s conclusion’. Otherwise, anyone who had the money and the inclination to instruct another expert would always have the right to call him. Having said that, it does seem to me that if a new expert can be found who has a contrary view to the joint expert that is a reason for permitting the new expert to be called. It is certainly not a sufficient reason in every case, but if there are grounds for thinking that the joint expert may be wrong, because another expert takes a different view, that is certainly a factor which is to be borne in mind ...

14 His Honour then considered other relevant factors, ultimately returning to the appellant’s concerns about bias and adding:

As I have said, I consider those factors to be wholly insufficient to justify the appellants being entitled to call an expert. As additional factors, they provide a little assistance to the appellants, but it would have to be a pretty knife edge case indeed before they were decisive.

15 Finally, his Honour said:

Standing back and looking at the justice between the parties, I ask myself two questions, do not represent a decisive test but they may be of some help. First, if the appellants are not entitled to call Mr McIntosh and they lose the case, will they have an understandable sense of grievance judged objectively? To my mind they would an understandable if not an overwhelming, feeling. Secondly, if the appellants are entitled to call Mr McIntosh and won, would the respondents have an understandable sense of grievance, judged objectively? I think it is inevitable that they would have a sense of grievance, because that is in the nature of litigation. But I do not think that to most people it would be a particularly understandable sense of grievance. In all the circumstances, it seems to me that this is an appeal which should be allowed, but allowed only on terms.

16 In Tomko v Tomko [2007] NSWSC 1486 I said, at [9]:

The court should be relatively ready to grant leave to adduce evidence from a separate expert, lest trial by single expert otherwise become substituted for trial by judge. Where some arguable basis is shown for challenging the report of a single expert, the court should be disposed to grant such leave.

17 These cases establish, at least as guidelines, the following:

· An order for a single expert is a first step, not necessarily the last word on the topic. While the magnitude of the case will influence the court’s willingness to permit further reports, having regard to considerations of proportionality, the process was not intended to substitute trial by expert for trial by court.

· It will be a significant factor in favour of permitting further exert evidence if the existence of a competing respective expert opinion can be shown.

· It will be a significant factor in favour of permitting further expert evidence if otherwise the party affected would have a legitimate sense of grievance that it had not be permitted to advance its case at trial.

18 A number of matters have been urged in the present case as supporting a grant of leave. First, it is said that the report of Mr Hepworth suffers from a lack of transparency of facts and assumptions that found the conclusion. It is true that he does not nominate those agents in the market whom he consulted. However, it is not incumbent on an expert to state every single source consulted or every single reference book to which resort has been made to support a report. It is also suggested that there is an “inadequate use of sales data”. I do not think that has been established. Mr Hepworth refers to a significant number of sales in forming his opinion that there had been a negative impact on the value of the unit to the extent of about $10,000. Next, it is put that Mr Hepworth has apparently closed his mind to the issue at stake. In circumstances where he indicated a willingness to reconsider the matter and, indeed, drew attention to the possibility that his report may be of no assistance if he did not have the correct facts originally before him, I am quite unpersuaded that this complaint has been made out. It has been put that the plaintiffs have an ongoing concern as to Mr Hepworth’s independence, having regard to the conversation that he had with Mr Touma. At the highest, this could only be slightly influential, in the type of knife edge situation to which Neuberger J referred in the judgment set out above. This is all the more so since really the only evidence that the plaintiff has any such grievance or feeling is given not by the plaintiff personally but asserted by his solicitor or argued by his counsel. Such a case might have been more persuasive if the plaintiff deigned to give some evidence of his own views in that respect. Nor am I satisfied that this is a case where the nature and complexity of the issues are such that multiple valuations are warranted.

19 However, the plaintiffs have put into evidence, on the present application, another valuation of the subject unit, by Mr Healy, as at approximately the same date of valuation as Mr Hepworth’s, of the subject unit which suggests that the restriction might have had a negative impact on value of 10 percent, or some $60,000. That might well be enough to establish that the detrimental effect was “substantial”. It demonstrates, at least, that there may well be expert opinion available which attributes greater significance to the restriction and its impact on the market value of the subject unit than that of Mr Hepworth. It is true that Mr Healy’s report is probably less rigorous in its analysis of sales evidence than Mr Hepworth’s, but it is significant in demonstrating that the plaintiffs are likely to be able to obtain reputable support and expert opinion contrary to Mr Hepworth’s if they wish to advance this case on a central issue at the trial.

20 I ask the same two questions as Neuberger J. If leave is not granted, the plaintiff will think that this case has been decided by an expert, who arguably came to an initial conclusion uninformed by all the relevant factual issues and cannot now be shifted from that view, notwithstanding that there is available expert opinion which would lead potentially to a different result. The defendant could have no justifiable sense of grievance if both parties were permitted, if they wished, to adduce their own expert evidence. It is true that this case is not a large one; the sum at stake is about $88,000, and to that extent, what Lord Woolf said as to a more robust approach being taken in cases where only a modest amount is involved is not without force. But in this case the issue is a central one, and in my view the plaintiffs would have a legitimate sense of grievance if that central issue were, in effect, decided by a single expert, when there was evidence that a competing expert view is likely to be available.

21 It is no answer to this that the single expert could be cross-examined at the trial. Even if the cross-examination were such as to destroy Mr Hepworth’s evidence, that would leave the Court and the plaintiff without critical evidence on a critical question. Indeed, it would be very much to the defendant’s advantage that in a case where the plaintiff bears the onus of proving that the restriction had a substantial adverse effect, the choice might be between an expert who gave evidence to the effect that the adverse effect was not substantial, or (if that witness’ testimony were destroyed successfully by cross-examination), there would be no evidence on the topic at all, so that the plaintiff would still fail.

22 Both parties made submissions about the delay which has been involved in the proceedings to this point as a result of the application for a single expert. First, it seems to me that an initial application for a single expert was an appropriate course. Hamilton J agreed. Lord Woolf explained why initially seeking a single expert is an appropriate course, and does not preclude a party who seeks it or participates in seeking it from subsequently seeking a separate expert report. Secondly, a significant part of the delay to date has been, as the plaintiffs submitted, occasioned by the defendant’s opposition to applications on which the plaintiffs have ultimately succeeded – including the application before Hamilton J for a single expert, the application that I decided in February, and today’s application. On the other hand, part of the delay has also been occasioned by the inappropriate manner in which the plaintiffs first sought to challenge Mr Hepworth’s report. I do not consider that such delay as there has been on the part of the plaintiffs disqualifies them from at this stage seeking a separate expert. No prejudice to the defendant from that course has been articulated.

23 Accordingly, it seems to me that the justice of the case is that the plaintiff should have leave to obtain a report from a separate expert. However, consistent with the approach of Lord Woolf in Daniels v Walker it seems to me that the appropriate course is to permit the plaintiff (and the defendant, if so advised) to obtain and serve a separate expert’s report. Consideration can then be given to a conference of experts, and the ultimate question of whether leave is granted to adduce competing evidence at the trial can be addressed once it is seen just what remains in issue.

24 I direct that each party may by 8 July 2009 serve the report of an expert valuer addressing the questions on which the party’s single expert was asked to opine. I adjourn the proceedings to 10 July 2009 at 9.30am before me for further directions.

25 So far as the question of costs is concerned, the course adopted by Neuberger J has something to commend itself. His Honour recorded that, because the respondent opposed the application to call the new expert and because it might turn out that the new expert would be a waste of money irrespective of the outcome of the case, the Court should specifically consider at the end of the case whether, even if the appellants won, they should nonetheless pay the extra costs incurred by both sides as a result of the additional expert (or, if the respondents chose to call their expert, two additional experts). Subject to that reservation, it seems to me that the defendant must pay the plaintiffs’ costs of the present application.

26 Accordingly, my order is that the defendant pay the plaintiffs’ costs of the motion. I reserve for consideration of the trial judge the question whether, regardless of the outcome, the plaintiffs should pay the extra costs incurred by both sides as a result of any additional experts.

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