BETWEEN : WRIGHT PROSPECTING PTY LIMITED (ACN 69 008 676 417)

HANCOCK PROSPECTING PTY LIMITED (ACN 69 008 676 417)

Practice and procedure - Admissibility of evidence critical of reliability of expert witness - Judgment in other proceedings - Whether collateral evidence - Whether hearsay

1 MURRAY J: Yesterday I heard argument in relation to the admissibility of a portion of the judgment of Wilcox J in the Federal Court in Montague Mining Pty Ltd v Gore [1999] FCA 1528. The matter arises in this way: there is a contest raised by the defence generally in relation to the expertise of Mr Cole who was called for the plaintiff and who was the author of his principal report which was admitted in evidence as exhibit LA. The report is dated 30 March 2007.

2 In that document, in the ordinary way, Mr Cole includes his curriculum vitae. He details his education and areas of experience and under the heading Specialist Capabilities appears the statement 'demonstrated ability and reputation for preparation of sound reports'. Specifically in relation to the subject matter of the judgment in Montague, in Appendix 3 to his report, detailing what is described as litigation support involvement, Mr Cole in par 24 refers to the valuation and presentation of evidence in that case.

3 As I say, those matters are dealt with as part of his claim of expertise, an assertion which it is clear from the way in which his cross-examination was conducted, is at a number of levels challenged on behalf of the defendant. The point of interest for present purposes is that Mr Cole asserts that he has demonstrated his experience, including sound reporting skills. This would find its place within the general assertion of expertise, not only in relation to the particular subject matter of his opinion, but as a reliable, independent and balanced witness and reporter.

4 When cross-examined in relation to such matters, among other places at 2047 of the transcript, Mr Cole was asked this question:

What do you say is your reputation that gives authority to statements that are contained in [your two reports]?---A reputation of someone who has been involved in mineral project and mining company valuation matters since 1968 and a reputation of someone who has been called upon from time to time to make professional presentations on valuation, valuation methodology and someone who has been called upon by different clients to prepare reports where an expert report was called for.

The use of the word 'reputation' in that context seems to me to have a meaning which is perhaps a little different from the ordinary meaning that might be given to the word.

5 It comes, I think, as counsel have discussed it with me, from the use of the word in the VALMIN Code, a document which is before me in evidence. The Code governs the provision of what it describes in par 11 as 'independent expert reports' concerning the assessment or valuation of mineral or petroleum assets or securities. The expert needs to be a person who may be described as competent within the meaning of the Code. In par 18 there is a definition of that word. It means:

... having relevant education, qualifications, experience, professional expertise and holding appropriate licences (where required) so as to have a reputation that gives authority to statements made in relation to particular matters.

As I understand it, what both Mr Cole and counsel were referring to was Mr Cole's challenged assertion of demonstrated independent professional expertise, including the capacity to present balanced and reliable independent reports and provide evidence of the same quality.

6 In Montague, the judgment of Wilcox J discusses Mr Cole's involvement in that case in a particular context. The valuation he presented is said at [59] of the judgment to be based upon exploration expenditure incurred in relation to the particular tenements in question. It appears that attention during the running of the trial had been called to a Part B Statement relating to a company called Resolute Resources Ltd, of which it seems Mr Cole was the author, at least in the sense that he signed the Statement with an affirmation as to his capability to assess the value of Resolute's assets. A portion of the Statement in relation to the discussion of those assets is quoted at [60] of the judgment in these terms:

The exploration properties discussed above are generally at a very early stage of exploration and therefore the past exploration method of valuation is not appropriate for assessing the value of these properties. We have used the joint venture terms methods where applicable. Otherwise we have adopted a yardstick method based on the budgeted exploration expenditure for the following year. (My emphasis)

7 Then there is a recitation of Mr Cole's evidence when cross-examined about that statement. Mr Cole expressed the view that he did not think the correct choice of words had been used in the passage quoted from the Statement and he said this:

They have never been pointed out to me before. It was checked by others. I took responsibility for it. It appears a mistake was made.

When pressed as to what the mistake was, Mr Cole said to Wilcox J:

The point being put to me is that the words, 'the past exploration expenditure method of valuation is not appropriate,' is inconsistent with the views I have expressed elsewhere and in the present proceedings.

He was then asked whether he accepted that the Part B Statement was one that he took responsibility for and he said he agreed with that. The judge asked him:

You are now saying that although you did that, what's written there is wrong?---Yes.

What is it that you would wish to say was wrong?---That the past exploration expenditure method of valuation is not appropriate.

So you think it is appropriate?---Yes.

Even though the properties are at a very early stage of exploration?---Yes.

8 In [61] his Honour expressed a conclusion about that. He commenced by observing that Mr Cole was aware of the purpose of the Resolute Part B Statement and that it required the utmost care. In the Statement Mr Cole stressed the detailed consideration he had given to the matters with which the statement dealt. His Honour continued -

Yet he claimed in evidence in this case that he held an opinion to the exact opposite of that expressed in the quoted passage. A mistake was made, presumably by others. This is nonsense, as can be seen from the second sentence in the quoted passage. The joint venture method was used because the past exploration method was inappropriate. The word 'not' in the first sentence was not a typographical error. Mr Cole stands revealed as a person unworthy of belief.

9 It is that material which it is sought to adduce in evidence. A number of cases were relied upon. In the first place, I should say that the reference to the decision of the High Court in Melbourne v R [1999] HCA 32; (1999) 198 CLR 1 is not, I think, of great assistance because it seems to me that in drawing the distinction between evidence about character and evidence of reputation, it is doing so in the context of a defamation matter and there I think the word 'reputation' is one which carries what I would describe as the ordinary meaning of the word, as being generally what is known of a person in the community, whereas I think it is a more specialised reference to the word "reputation" which appears in the judgment and in the VALMIN Code. But however that be, two other cases were referred to.

10 I mention the decision of the Court of Appeal in Roberts v Western Australia (2005) 29 WAR 445; [2005] WASCA 37. What the case demonstrates, when regard is had to the facts, is of some assistance in these circumstances. Apparently the appellant in that case, Mrs Roberts, had been convicted of a series of counts of forging and uttering cheques. The case turned upon her authority to sign them, or her honest and reasonable belief that she was authorised by her husband to act as she did.

11 In the course of the trial, it appeared that the appellant and her husband had previously been involved in Family Court proceedings following the dissolution of their marriage. As the headnote observes:

During those proceedings findings were made regarding the appellant's belief in her entitlement to use her husband's money as she did. Specifically, the Family Court held that the appellant was not only authorised to sign cheques, but also that her husband was aware of occasions where the appellant had altered the amounts payable.

12 There were a number of grounds of appeal, but in relation to the particular ground which was concerned with the admissibility of that evidence which the trial judge had refused to admit, the case is instructive. McLure and Jenkins JJ dealt with the matter specifically and held that the trial judge had not erred in refusing to admit the findings made by the Family Court, importantly as evidence of their truth; in other words, to establish the fact of authority in the circumstances which I have outlined.

13 It seems to me that it serves as a reminder that the view expressed by Wilcox J, particularly that Mr Cole was a person unworthy of belief, of itself has no evidentiary value for me and could not be admissible as evidence of the truth of that observation. It could not be a piece of evidence therefore upon which I might rely in assessing the weight and reliability of the evidence given by Mr Cole. The judgment about those matters remains a matter for me upon the basis of the evidence before me, but in relation to the evidence as to Mr Cole's conduct and what occurred in Montague as it is set out in the judgment, the question is a little more difficult, it seems to me.

14 Counsel addressed me in relation to the question, often a vexed question, of the admissibility of evidence in relation to issues collateral to those which are raised in the case. The classic demonstration of a collateral issue is normally that it is an issue in relation to credit alone and does not otherwise relate to any substantive issue in the case. I was referred to the classic statement of the rule at common law, which is what applies to me, in Piddington v Bennett and Wood Pty Ltd [1940] HCA 2; (1940) 63 CLR 533 and it is convenient, although his Honour dissented in the final outcome in Piddington, to quote Latham CJ at 545, where his Honour said:

Any witness may be cross-examined for the purpose of discrediting him. But if questions affect only the credit of a witness and are not relevant to the matters actually in issue in the case, the witness's answers cannot be contradicted by other evidence except in certain exceptional cases. Exceptions to the rule at common law are that after cross-examination of his opponent's witnesses a party may give evidence to show that they are notorious liars, or have given their testimony from a corrupt or other wrong motive, or that they have previously made statements inconsistent with their evidence. A statutory exemption allows proof of convictions where such convictions have been denied by a witness. It is argued that the evidence of the bank manager does not fall within any of these exceptions and that therefore it was inadmissible.

15 The facts are instructive, I think. It was an action for negligence which arose out of an accident which had occurred in a street. One of the plaintiff's witnesses said that he had seen it and he gave evidence about it. When he was cross-examined he said that the reason he was in the street and saw the accident was that he had been on an errand for another person at a bank which was only a block or two away from where the accident was. The bank manager was called by the defendant and he said that there had not been any operation of the account of the person for whom the witness said that he was acting on the day of the accident.

16 The evidence of the bank manager was said to be inadmissible because it went merely to the credit of the witness, or the supposed witness, to the negligent accident and to no other issue in the case. It was not a matter which went to establish, of itself, whether the witness might have been an eyewitness of the events in question.

17 More recently, the matter of the collateral evidence rule has been looked at on a large number of occasions by courts all around the country. Locally perhaps one of the most notorious examples is that which is reported in the recent decision of the High Court in Nicholls & Coates v R (2005) 219 CLR 196; [2005] HCA 1. Different views were expressed. An important body of evidence in that case was given by a person who had been dealt with for his part in a conspiracy to murder the deceased woman. He gave evidence of the part that the accused persons had played and it was important evidence against them.

18 He was cross-examined on the basis that while in prison he had told another person that neither of the two male accused persons who were supposed to have been present and participated in killing the accused had been there. He denied that he had said that and it was sought to adduce evidence from the person to whom the witness was said to have made that statement. The trial judge refused to admit the evidence and in the end, for varying reasons in the High Court, that decision was upheld.

19 In the course of his judgment, which on this point in the final outcome was a dissenting judgment, the court splitting 4:3, McHugh J at 215 [37] and following, discussed the way in which the issue of collateral evidence may fall to be dealt with. I do not pause to deal with that in detail, but his Honour made the important point that, of course, when one is concerned with the admissibility of evidence, one is concerned with its relevance to prove a fact in issue or a fact relevant to the finding of a fact in issue. It is against that background that, except in exceptional circumstances, as they are put, evidence in relation to a purely collateral issue such as the credit of the witness is not generally admitted.

20 McHugh J observed that the rationale for the rule was the pragmatic one that the court should keep itself focused upon the issues that are raised in the case and it is detrimental to the interests of justice for the court to be distracted into trying other issues or matters which are truly collateral to the issues in the case. There is an indication in his Honour's judgment, and in some of the other judgments in the case, that the law in this respect is moving to allow trial judges more latitude to have regard to the interests of justice in the particular case before them when considering the extent to which the collateral evidence rule should be relaxed in a given case.

21 At 223 [56] of his Honour's judgment he takes the view that the collateral evidence rule should be seen as a case management rule not confined by categories. His Honour would have taken the view, which in my submission goes beyond other members of the court, that evidence disproving a witness's denials concerning matters of credibility should be regarded as generally admissible if the witness's credit is inextricably involved with a fact in issue, subject to the situation where the time, inconvenience or expense of admitting the evidence would be unduly disproportionate to its probative force, in which case the collateral evidence rule would not be required to be relaxed. At 220 [51] his Honour cited English authority and discussed the more flexible approach taken in the courts of that country.

22 The more conventional view of the majority on this point is that at 284 [248] and following, in the joint judgment of Hayne and Heydon JJ. In particular, at 298 - 300 [285] - [289] their Honours discuss what might be said of the true nature of the rule, and at 297 [284] they speak of the difficult questions which may arise surrounding the need for the evidence to be admissible of itself and not to be relied upon for its hearsay content. That, I think, is an important reminder of the circumstances in which the decision needs to be made.

23 In relation to the generally accepted exceptions, those concerned with demonstrated bias, or a particular interest in the case, or the corruption or improper motives of the witness, none of those seem to me to apply here. This matter must be approached, I think, upon the basis of consideration whether there are, in the particular circumstances of the case, as Mr Rushton advanced to me, reasons which would establish that it would be unjust to allow Mr Cole's evidence to go into the melting pot of decision-making as to its reliability without the court having the capacity to consider the material portion of the judgment in Montague.

24 The matter I think may be finally summarised and dealt with in this way. I have already said that in my view Wilcox J's expression of a view, or his opinion or conclusion, about the reliability of the testimony of Mr Cole in that case is not admissible as evidence of a fact upon which I might rely in any way in making a decision about the reliability of Mr Cole's evidence before me. I have said that in my view the facts of Mr Cole's behaviour would not, if this was regarded as being dealt with under the collateral evidence rule, be a matter which could fall within any of the exceptions to the recognised application of that rule. I think the important question in this case is whether the evidence of Mr Cole's involvement in that case, his reporting and his evidence in Montague, is evidence which relates to a fact in issue in this case or is evidence which relates to the findings of facts in issue in this case.

25 The fact in issue would be the value of the Rhodes Ridge interest upon which Mr Cole made his report. It seems to me that it is artificial to regard the decision about the reliability of his evidence upon that matter as other than inextricably linked to the decision about that value which lies before me. At least it is a part of the body of evidence which will inform that decision as it is finally made. So the matter of Mr Cole's expertise in the wider sense to which I referred in opening these remarks is, it seems to me, a matter of fact which is inextricably linked with the resolution of the substantive issue to which I have referred. It is not truly collateral.

26 Even so, the evidence of what was said about his behaviour in Montague, if I may put it generally in those terms, will not be admissible if it is to be relied upon for its hearsay content. I think having regard to what was said by McHugh J in Nicholls, particularly at 230 - 231 [77] - [83], and the discussion there, that is not what is being sought to be done. The direct evidence upon which it is sought to rely is the evidence within the reasons in Montague of what Mr Cole communicated to Wilcox J, both in the report and in his evidence before the court. It matters not where the rights and wrongs of that really lay, it seems to me, or what the proper method of valuation was or should have been in that case. The evidence which is presently admissible is what was said by Mr Cole and the way in which he dealt with the issue of the proper method of valuation in the report as compared to his evidence in that case, as recorded in the judgment.

27 To my mind, as I say, that bears such a relationship with the facts in issue in this case that that evidence is admissible, but not, I hasten to add, the judgment about what occurred in that case by Wilcox J. To be precise about it, it seems to me that, subject to that caveat, the material which ought to be admitted in evidence is that which appears in [59] - [61] inclusive of the judgment of Wilcox J in Montague.