ACN 117 641 004 Pty Ltd (in liq) v S&P Global, Inc

2.1 The exercise of discretion under s 192A of the Evidence Act

1. Section 192A of the Act provides as follows: 192A Advance rulings and findings Where a question arises in any proceedings, being a question about: (a) the admissibility or use of evidence proposed to be adduced; or (b) the operation of a provision of this Act or another law in relation to evidence proposed to be adduced; or (c) the giving of leave, permission or direction under section 192; the court may, if it considers it to be appropriate to do so, give a ruling or make a finding in relation to the question before the evidence is adduced in the proceedings.
2. As is evident from its text, s 192A "permits but, does not compel, advance rulings on the admissibility of evidence": Re Whitebox Trading Ltd [2017] FCA 324 at [21] (Gleeson J), citing Bailey v Director-General, Department of Natural Resources [2013] NSWSC 515 at [55] (Garling J).
3. Whether the Court should make advance rulings under s 192A of the Evidence Act is a discretionary case management decision to be made in accordance with the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in dispute: NA & J Investments Pty Ltd v Minister Administering Water Management Act 2000 [2012] NSWLEC 120 at [40] (Biscoe J); Davaria v 7-Eleven Stores Pty Ltd (No 9) [2021] FCA 473 at [9] (Middleton J); Gondarra v Minister for Families, Housing, Community Services and Indigenous Affairs [2012] FCA 185; (2012) 127 ALD 288 at [25] (Kenny J); Lambert Leasing Inc v QBE Insurance Australia Ltd [2012] NSWSC 953 at [11]-[12] (Stevenson J). This requires that "some good reason" be advanced in order that the Court exercise jurisdiction under s 192A of the Act, although this does not necessarily have to be "special circumstances" or circumstances "out of the ordinary": Lambert at [11]; McNickle v Huntsman Chemical Co Australia Pty Ltd (Expert Evidence) [2021] FCA 370 at [28] (Lee J); The Owners - Strata Plan No 90189 v Parkview Constructions Pty Ltd [2022] NSWSC 1382 at [41] (Rees J).
4. Where the objection to evidence is pressed on the ground of relevance, there are practical and other difficulties that may arise. Rees J adverted to these difficulties in Parkview at [43]: Particular difficulties may be encountered where the objection to the admissibility of the evidence is on the grounds of relevance. As Kenny J observed in Gondarra v Minister for Families, Housing, Community Services and Indigenous Affairs [2012] FCA 185; (2012) 127 ALD 288, the Court may refuse to make such a ruling where the Court cannot, in advance of trial, determine whether the evidence is inadmissible as irrelevant as the position may be nuanced and an advanced ruling may result in an error and consequent unfairness; "Much will depend on the way the case unfolds at trial": at [23]-[29], [41]. Likewise, in Davaria v 7-Eleven Stores Pty Ltd (No 9) [2021] FCA 473, Middleton J refused to make an advance ruling where the objection was on the grounds of relevance, being "a concept that relates to the interrelationship of all the material that is before the Court - without the benefit, even, of all the evidence that may be adduced in the proceedings": at [5].
5. Her Honour's reasoning reflects the fact that the threshold test for relevance is "very broad" given that evidence is relevant if it "could (not would) rationally affect (not determine) directly or indirectly the assessment of the probability of the fact in issue": Australian Securities and Investments Commission (ASIC) v Cassimatis (No 5) [2016] FCA 612; (2016) 343 ALR 358 at [6] (Edelman J). Particular items of evidence may of themselves not be relevant or may be "weak" but taken together with other evidence may make the combination of those parts, or the totality of the evidence, relevant and probative: see eg Festa v The Queen [2001] HCA 72; (2001) 208 CLR 593 at [14] (Gleeson CJ); Evans v The Queen [2007] HCA 59; (2007) 235 CLR 521 at [177] (Heydon J); Franklin v Regina [2021] NSWCCA 260 at [66]-[71] (McCallum JA, Beech-Jones and Hamill JJ).
6. In Davaria, Middleton J reasoned at [4] that in the Court's exercise of discretion it is "…important to consider the factual circumstances before the Court, the nature of the proceedings and, more importantly, the questions that the Court is being asked to decide in advance of the trial." His Honour declined to make advance rulings for the following reasons at [5]-[6]: This is not a situation where we are dealing with an isolated question of principle, or even just a few affidavits that have come before the Court to determine whether they will be rejected or accepted at trial. This is a situation which, basically, involves the Court taking a great deal of time at this stage of the proceeding (being 13 weeks' from trial and before the completion of the applicants' lay evidence), to deal with relevance - a concept that relates to the interrelationship of all the material that is before the Court - without the benefit, even, of all the evidence that may be adduced in the proceedings. It may well be that the time of the trial will be reduced if the Court, now, undertakes this exercise. However, the same amount of time will be taken by the Court, and, probably, the legal representatives, if the exercise is undertaken before then. Having regard to the volume of objections to lay evidence, I expect it would take at least a week, either in open Court or in Chambers, to go through all of the affidavit material that is relevant to this application.
7. Although his Honour's observations there related to lay evidence, they apply with equal force to advance rulings sought in respect of expert evidence as pressed in the present case.
8. As the substance of Middleton J's reasons make clear, the question as to whether to exercise the discretion under s 192A of the Evidence Act is informed by case management considerations. This "directs attention" to the overarching purpose stated in s 37M of the FCA Act of facilitating the just resolution of the dispute as quickly, inexpensively and efficiently as possible: Davaria at [8] citing Australian Securities and Investments Commission, re Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCA 324 at [21] (Gleeson J); B&K Holdings (Qld) Pty Ltd v Garmin Australasia Pty Ltd [2019] FCA 64; (2019) 134 ACSR 404 at [75] (Derrington J).

2.2 Admissibility of expert evidence

1. What follows here by way of principle may be regarded as trite, but merits recitation.
2. The starting position is that the application of the "opinion rule" means that evidence of an opinion is not admissible to "prove the existence of a fact about the existence of which the opinion was expressed": s 76(1) of the Evidence Act. An opinion is an inference drawn from observed and communicable data: Honeysett v The Queen [2014] HCA 29; (2014) 253 CLR 122 at [21] (French CJ, Kiefel, Bell, Gageler and Keane JJ). Section 79(1) operates as an exception to the opinion rule if "a person has specialised knowledge based on the person's training, study or experience" and the "opinion of that person that is wholly or substantially based on that knowledge."
3. In order to be admissible, the evidence must be relevant. This directs attention to why the party tendering the evidence says it is relevant and, more particularly, to the finding which the tendering party will ask the tribunal of fact to make: Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [31] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).
4. It has been reasoned that the three rules that applied to the admissibility of expert evidence at common law have not been affected by the introduction of s 79 of the Evidence Act and remain relevant to its construction and application: see Dasreef at [64]-[130] (Heydon J). In Herron v HarperCollins Publishers Australia Pty Ltd [2022] FCAFC 68; (2022) 292 FCR 336 at [500], Lee J observed that: By reference to the judgment of Heydon J in Dasreef, John Dixon J in Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) (No 3) [2012] VSC 99 (at [98]) identified three "factual basis rules" which apply under s 79, being: (1) are the facts and assumptions on which the expert's opinion is founded disclosed (assumption identification rule)? (2) is there evidence admitted, or to be admitted before the end of the tendering party's case, capable of proving matters sufficiently similar to the assumptions made by the expert to render the opinion of value (proof of assumptions rule)? and (3) is there a statement of reasoning showing how the facts and assumptions relate to the opinion stated to reveal that that opinion is based on the expert's specialised knowledge (statement of reasoning rule)?
5. Each of these rules relate to the admissibility of the evidence. However, it has been observed that the rigid application of the three rules calls for a "counsel of perfection" that may affect the "smooth running of trials": see Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 234 FCR 549 at [7] (Branson J); cf Dasreef at [118] (Heydon J). In Herron at [515], Lee J adverted to the practical tension that can arise as follows: As is well known, in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 234 FCR 549; 55 IPR 354; [2002] FCAFC 157 (Red Bull) (at [7]), Branson J described the approach of requiring compliance with, in effect, the assumption identification rule, the proof of assumptions rule and the statement of reasoning rule as a "counsel of perfection". Weinberg and Dowsett JJ observed in the same case (at [87]) that such compliance issues can involve questions of degree, and it "would be very rare indeed for a court at first instance to reach a decision as to whether tendered expert evidence satisfied all of [Heydon JA's requirements as set out in Makita] before receiving it as evidence in the proceedings". In short, consistently with these observations, it is sometimes suggested that the requirements reflected in the "factual basis rules" go much more to weight than to admissibility. There is no need to enter upon this well-trod territory. But if what can be described as the Red Bull or less "strict" view prevails as to admissibility, the probative value of the evidence cannot simply be put to one side when it comes to the question of discretionary exclusion under s 135 of the Evidence Act. (Square brackets in original.)
6. The inflexible application of the "factual basis rules" (especially the proof of assumption rule) may present practical difficulties depending on the circumstances of the case. That is because proof of an assumption may depend not only upon the admissibility of other evidence, but also upon whether the trier of fact accepts that the other evidence establishes the assumptions made by the expert. In many cases, the question of whether an assumption is established will not be known until after the close of evidence, or the close of the trial. In Dasreef, Heydon J at [83] (by reference to the reasoning in Ramsay v Watson (1961) 108 CLR 642; [1963] ALR 134; [1961] HCA 65) observed that there were innumerable possibilities that may arise, stating: Procedural possibilities. A second important aspect of Ramsay is the High Court's refusal to enunciate any absolute rule about the precise impact of an absence of primary evidence on the admissibility of expert evidence based on it. "Each case depends on its own facts". There are innumerable ways in which there may be a disconformity between the facts assumed by the expert as the basis for the opinion, and the facts eventually accepted by the trier of fact. If the party tendering the expert opinion has called primary evidence which, if accepted, would correspond substantially with the factual basis assumed, but the trier of fact rejects the primary evidence, in whole or in part, the question is not one of admissibility, but only of weight. That is because questions of admissibility generally ought not to arise once the evidence is closed: by the time it is closed, all evidence that is to be considered by the trier of fact will have been admitted, and any other evidence tendered will have been rejected. "Parties should know, before addresses are taken, the final state of the evidence, whether the trial be by judge and jury or judge alone". Rulings on admissibility must thus generally be made before the evidence closes. But that is only a minimum position. The superior practice requires rulings about the admissibility of the evidence tendered by one party to be made before that party's case is closed, so as to allow the opposing party, if the defendant, the opportunity to consider whether to make a no case submission, and to allow all opposing parties to consider whether evidence should be called and, if so, what. The traditional position is even more desirable: subject to the judge's entitlement to take a little time to consider difficult objections, "a party is entitled to have questions of admissibility determined as they arise". Only in that way can the opposing party know whether and how to cross-examine the tendering party's witnesses, and what documents to tender through them. (Citations omitted and emphasis added.)
7. It will be evident from the emphasised part of the passage above that at least one way that trial judges may deal with questions of admissibility in the face of, as yet, unproved assumptions is to proceed on the basis that the primary evidence which has been or is to be called which, if accepted, will correspond with the matters assumed by the expert. This also accords with what Heydon J stated in Dasreef at [102]: Is an opinion tendered under s 79 inadmissible unless there was evidence, admitted or to be admitted before the end of the tendering party's case, capable of proving matters sufficiently similar to the assumptions to render the opinion of value? The correct answer is in the affirmative. (Emphasis added.)
8. These principles are to be borne in mind when dealing with advance rulings sought in respect of the admissibility of expert evidence where the trier of fact is not fully apprised of all of the evidence to be adduced at trial, as in the present case. That is not to say that questions of admissibility are to be delayed. The desirability of addressing questions of admissibility as soon as possible was also addressed by the plurality in Dasreef. At [19]-[20], their Honours stated: As a general rule, trial judges confronted with an objection to admissibility of evidence should rule upon that objection as soon as possible. Often the ruling can and should be given immediately after the objection has been made and argued. If, for some pressing reason, that cannot be done, the ruling should ordinarily be given before the party who tenders the disputed evidence closes its case. That party will then know whether it must try to mend its hand, and opposite parties will know the evidence they must answer. It is only for very good reason that a trial judge should defer ruling on the admissibility of evidence until judgment. This was not such a case. Yet the primary judge did defer ruling on the disputed evidence in this matter until judgment. And because that is what the primary judge did, the evidence of Dr Basden was used for purposes for which it was not admissible and for which it may be doubted that Mr Hawchar had sought to tender it.
9. As is apparent from these passages, although it is desirable to deal with objections to expert evidence as soon as possible, that desirability must give way to the expedient in each case.
10. None of the above considerations are intended to derogate from the "statement of reasoning rule". This rule is a necessary condition to the admissibility of expert evidence. An expert opinion must be presented in a way that makes it possible for a court to determine that it is wholly or substantially based on specialised knowledge: HG v The Queen [1999] HCA 2; (1999) 197 CLR 414 at [39], [41]-[44] (Gleeson CJ).

3.1 The tort of deceit

1. It is uncontroversial that the Vale Applicants and the Basis Applicants both allege that S&P engaged in fraudulent conduct. The primary (though not only) cause of action advanced in each proceeding is the tort of deceit. The elements of the tort of deceit were most recently enunciated in Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 by Gummow, Kirby and Crennan JJ as follows at [114]: The modern tort of deceit will be established where a plaintiff can show five elements: first, that the defendant made a false representation (Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483 per Bowen LJ); secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not (Derry v Peek (1889) 14 App Cas 337 at 374 per Lord Herschell); thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff (Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 at 211 per Viscount Maugham); fourthly, that the plaintiff acted in reliance on the false representation (Redgrave v Hurd (1881) 20 Ch D 1 at 21 per Jessel MR; Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483 per Bowen LJ; Arnison v Smith (1889) 41 Ch D 348 at 369 per Lord Halsbury LC); and fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation (Pasley v Freeman (1789) 3 TR 51 at 56 [100 ER 450 at 453] per Buller J; at 64 [457] per Lord Kenyon CJ; Smith v Chadwick (1884) 9 App Cas 187 at 196 per Lord Blackburn; Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 at 211 per Viscount Maugham. That "damage" is the gist of the action reflects the development of deceit as an action on the case.). Generally, the elements of the tort have been found to exist in cases which concern pecuniary loss flowing from a false inducement and the need to satisfy each element has always been strictly enforced, because fraud is such a serious allegation. (Footnotes included as in-text citations.)
2. The first element of the tort focuses upon the falsity of the alleged representation. The second element focuses upon the knowledge of the representor as to the falsity of the statement. It was common ground between the parties that knowledge for the purpose of the second element may be established on the basis of reckless indifference or an absence of all reasonable foundation as to the belief upon which the representation is based. The latter proposition finds support in the following statement of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at 369: … I desire to say distinctly that when a false statement has been made the questions whether there were reasonable grounds for believing it, and what were the means of knowledge in the possession of the person making it, are most weighty matters for consideration. The ground upon which an alleged belief was founded is a most important test of its reality. I can conceive many cases where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really entertained, and that the representation was a fraudulent one. (Emphasis added.)
3. Whilst S&P did not cavil with these statements of principle for the purpose of the applications before me, it emphasised that the focal point of the second element was the subjective state of mind of the representor: eg by relying upon John McGrath Motors (Canberra) Pty Ltd v Applebee [1964] HCA 1; (1964) 110 CLR 656 at 659-660 (Kitto, Taylor and Owen JJ).
4. As to the third element of the tort of deceit, it appeared to be common ground between the parties that the applicants are required to establish that S&P intended that the false representation be relied upon by them. S&P contended that this means that the applicants will have to establish that (a) the representor(s) held no honest belief in the "truth of the representation in the sense in which the representor intended the representation to be understood" (emphasis in original) and (b) that the true state of affairs "must have been inconsistent (at the time of the representation) with the meaning actually conveyed to the representee by the representation". In the way that this contention was advanced by S&P, there was a duality to the third element in the sense that S&P's position is that the intention of the representor as to what is to be conveyed must coincide with the way that it is understood by the representee. The applicants did not appear to dispute this to be the case, or at least they did not do so for the purpose of the arguments before me.
5. There was no dispute between the parties as to the fourth and fifth elements of the tort, but an impasse emerged as to the pleaded facts relevant to reliance and the counterfactual cases that have been pleaded (especially in the Basis Proceeding).

3.2 The Vale Proceeding

1. It is not necessary for present purposes to set out in detail the Vale Applicants' pleadings and particulars, which are lengthy and complex. At a rudimentary level, the Vale Applicants' case is that by assigning AAA and AA ratings to collateralised debt obligations (CDO) and constant proportion debt obligations (CPDO), S&P made representations to potential investors in those products that it had independently and reasonably formed the opinion that those products were of the highest credit quality. It is alleged that these representations were false because the statistical ratings models used to assign those ratings were based on assumptions and modelling errors, including those that were unreasonable, irrational and influenced by "business considerations". There are six modelling errors that are alleged in this regard. It is alleged that S&P had knowledge of the six modelling errors, including various facts relating to them, such that it had knowledge of the falsity of the representations or was recklessly indifferent to their truth. The Vale Applicants assert that S&P intended that the representations would be relied upon by investors, including the Vale Applicants. As part of its case as to S&P's knowledge of the falsity of the representations, or its reckless indifference as to their truth, the Vale Applicants rely upon the knowledge of specified employees of S&P (described as the "Key Employees") who were each said to have been involved in determining S&P's ratings methodology and criteria as applicable to CDOs and CPDOs.
2. The preceding paragraph is intended to be no more than a crude summary of the matters pleaded in the Vale Applicants' Further Amended Statement of Claim filed on 9 August 2023 (FASOC) in so far as they are relevant to the resolution of the present application. The FASOC contains particulars of the relevant assertions as to the six alleged errors, the basis upon which they are said to have led or contributed to the falsity of the representations, as well as the facts, matters and circumstances upon which it is said that these matters were within the knowledge of the Key Employees and S&P. The Vale Applicants' case is further supported by a lengthy document entitled "Applicant's consolidated particulars of knowledge" (Vale Applicants' Consolidated Particulars of Knowledge) that was filed on 23 April 2024 and subsequently served.
3. The particulars that have been provided by the Vale Applicants make it plain that their evidentiary case involves an extensive documentary tender. It is accepted by the parties to the Vale Proceeding that considerable time will be occupied at trial (during opening submissions, oral testimonies and closing submissions) working through this mass of documents. It is further accepted by the parties that the contents of these documents refer to highly specialised concepts, data and quantitative modelling. I apprehend from the parties' submissions that there is a likelihood that the content of some of these documents will be difficult to readily digest without the assistance of the parties' Counsel and the witnesses to be called at trial.
4. In addition to the documentary tender, the Vale Applicants seek to rely upon expert evidence to prove various aspects of their case. To this end, the Vale Applicants have retained Dr Gregory and Professor Schlögl, both of whom have been separately asked to express opinions about the same 22 questions. In general terms, these two experts have been asked to describe the quantitative models used by S&P being CDO Evaluator 2.4.3, CDO Evaluator 3 (CDOE 3) and CPDO Evaluator. These experts have then been asked to express opinions that related to the six alleged modelling errors pleaded in the FASOC. In respect of each such alleged error, Dr Gregory and Professor Schlögl have been asked:
5. whether in various respects the assumptions, inputs and data alleged to have been used by S&P was (depending on the particular type of error alleged) "rational and reasonable", had any "other reasonable or rational basis or justification", was "inconsistent" with other (available) data, was "otherwise unreasonable or irrational for any other reason", or "understated" the relevant risks;
6. if they agree that these relevant errors or state of affairs existed, whether those matters would have been "obvious to an expert in quantitative analytics and structured finance with experience in credit risk modelling" of CDO or CPDO portfolios.
7. Dr Gregory and Professor Schlögl have also each been asked further questions about the impact of S&P's models on the ratings that were issued by it and, again, whether those matters would have been "obvious to an expert in quantitative analytics and structured finance with experience in credit risk modelling of" CDO or CPDO portfolios (including whether the relevant models "lacked reasonable grounds") and, if so, what the ratings would have been if "reasonable or rational assumptions" were used in the models.
8. In addition, Dr Gregory has been asked the following further questions:
9. Did the phrases "extremely strong" or "very strong", when used in the context of a credit rating for CDOs, have an accepted or well recognised meaning among users of S&P's credit ratings in the period from 2005 to 2007? If so, what was it?
10. Based on your experience at the time, how were S&P's ratings of CDOs and CPDOs commonly used by recipients of those ratings in the period from 2004 until 2007? In answering this question, and to the extent you have relevant expertise or experience, please separately address the position of: a. arrangers; b. issuers; c. investors; and d. potential investors.
11. In your experience, was it common for arrangers or issuers to use CDOE or CPDO Evaluator to structure CDOs? If so, how?
12. Describe the competitive landscape for ratings agencies engaged in the business of rating CDOs and CPDOs in the period from 2004 to 2007.
13. Mr Adelson has been asked 3 questions, the first two of which resemble the first and final additional questions asked of Dr Gregory, and a further question about whether S&P's methodology for assigning ratings included any calibration or assessment of the model results.
14. S&P advanced its arguments by reference to broad categories or topics of objection so as to facilitate the Court making a determination that could then be applied by the parties in more specific ways by agreement or, failing which, further determination. To this end, during oral submissions, S&P helpfully focussed attention upon the primary arguments that would require resolution and, in doing so, made use of selected examples in respect of which my determinations could be made. In substance, S&P contended that:
15. in many respects, the questions asked of the Vale Applicants' experts were not relevant because they did no more than, in substance, ask the experts to express their views about, or to otherwise summarise, documents (the First Argument);
16. the specific questions asked of the Vale Applicants' experts, and the opinions the experts have expressed, do not accord with the pleaded case (the Second Argument);
17. the questions which invite Dr Gregory and Professor Schlögl to express opinions about what was "obvious" to an expert in quantitative analytics and structured finance, and the opinions that those experts have expressed, were not relevant to the pleaded case and, in any event, were unsupported by their respective expertise (the Third Argument);
18. the questions seeking Dr Gregory and Mr Adelson to express opinions about the recognised meanings of ratings in the industry, and as to the competitive landscape of the industry, were irrelevant to the deceit case, and the opinions that they have expressed about these matters did not conform with the pleaded case (the Fourth Argument);
19. more generally, the experts did not have "specialised knowledge" so as to express the opinions they had set out in their respective reports (the Fifth Argument);
20. various parts of the respective expert reports did not disclose adequate, or any, reasoning to support the conclusion or reasoning that was connected to the specialised knowledge of the experts (the Sixth Argument); and
21. in the alternative, the Vale Applicants should not be permitted to rely on expert evidence from both:
    1. Dr Gregory and Professor Schlögl; and
    2. Dr Gregory and Mr Adelson, in circumstances where the experts were asked to respond to overlapping questions and where there is said to be a substantive overlap in expertise (the Seventh Argument).
22. I will deal with each argument in turn.

3.2.1 The First Argument

1. S&P submitted that many of the questions asked of Dr Gregory and Professor Schlögl did no more than invite them to describe the contents of documents (such as S&P's relevant models) and otherwise trawl through various other documents to express views about what they mean. It was submitted that these are matters of fact to be determined by the Court, and not matters for expert opinion.
2. For example, S&P contended that the question of how "S&P's models worked is a question of fact which is answered by primary evidence, both documentary (principally the technical and criteria documents published by S&P detailing how the models worked) and lay (from S&P's witnesses detailing the workings of the model in the course of addressing the modelling choices that were made in the CDOE 3 update)". S&P accepted that if the expert evidence did no more than translate obscure jargon, it would have had no objection to the evidence. However, it was submitted that both Dr Gregory and Professor Schlögl had gone much further than this and had engaged in an impermissible "trawl" of the documents and interpretation of these documents. It was contended that these experts had provided "second-hand commentary on S&P's published documents from persons without first-hand knowledge of the facts asserted" and that they "introduce unreasoned normative propositions or opinions which are argumentative and controversial". It was further submitted that to the extent that these opinions "depart from the description of the models in S&P's documents, and venture into argument as to what [the experts] think the models are or should be doing, that evidence is irrelevant". By way of example, S&P pointed to particular instances where each of these two experts expressed opinions by reading particular documents and then asserting what they believe the CDOE model should have done. S&P submitted that the published document on which, for example, Professor Schlögl based his answer "says no such thing" and therefore that evidence, and evidence of that type, is irrelevant because it is "premised on a false assumption of what the model is doing and how S&P understood it to operate (as noted above, in a deceit claim, it is the representor's understanding that is relevant)".
3. The Vale Applicants rejected the criticisms made by S&P. They contended that "[r]ead in isolation, and unassisted by expert evidence, it is almost impossible to understand (without experience in quantitative finance or statistics) the significance of these documents". The Vale Applicants further submitted that it would not be possible for the Court to understand the opinions expressed by the experts without them having the benefit of opening their case to explain in detail the significance of various documents, including those that had been considered by the experts.
4. Whilst it is axiomatic that all findings of fact are matters for the Court to determine, I do not agree with the premise of S&P's contention that an expert's description or interpretation of documents, or an expert's interpolation of various documents read together, is irrelevant in the rational assessment as to the probability of the existence of a fact in issue. Much will depend on the relevant fact in issue, the particular document in question and what the experts say about them. That is not to say that an expert's opinion is conclusive as to the finding of fact to be made, but that it could, together with other evidence including the primary documents, rationally affect (directly or indirectly) the assessment of the probability of the existence of that fact. Taking the example of S&P's models, the experts' respective descriptions of them, including, in particular, the concepts to which they relate or refer, could rationally affect the findings to be made as to the operation of those models and their inputs. In a similar matter, Rares J observed that he had been assisted by expert evidence in this regard: see Wingecarribee Shire Council & Ors v Lehman Brothers Australia Ltd (ACN 066 797 760) (in Liq) [2012] FCA 1028; (2012) 301 ALR 1 at [313] (Rares J).
5. Further, in a matter involving the unpacking and identification of alleged errors in quantitative models, in my view it is entirely unsurprising that the experts have sought to review and interpret documents as a step along the way in expressing the opinions that they do. Each expert's review and interpretation of documents is in a sense an assumption that they are the correct interpretations of the content of those documents or that they have fairly (and not selectively) reviewed the totality of the documents. If those assumptions are not borne out, including because it is not established that the documents mean what the experts say, the opinions in this respect will be either inadmissible or of no probative value: see Dasreef at [83] citing Ramsay and [102]. There is considerable force in S&P's contention that, if an expert has done no more than selectively and incorrectly interpreted documents, the resulting opinion expressed by the expert is likely to be inadmissible.
6. The question before me raises an issue as to the appropriate time at which the Court can efficiently and fairly attend to the resolution of these questions. Whilst it would, of course, be open for me now to test each assumption by examining each and every document to determine whether the respective expert's interpretations of them are correct and to ascertain whether they have cherry-picked documents so as to rule on whether their opinions are admissible or have any probative value, I do not consider this to be an appropriate exercise of my discretion under s 192A of the Evidence Act. I accept the Vale Applicants' submissions that I should defer making any determination about this issue until trial. This will allow the Vale Applicants to address me in detailed opening submissions as to the key relevant documents which I am informed will take course over many days. This will also enable to be better understand whether the primary evidence which has been or is to be called by the Vale Applicants will correspond with the matters assumed by the experts (including their review and interpretation of the relevant documents): Dasreef at [102].
7. It is to be expected that, having now been notified about at least some (if not all) of the documents which S&P contends that the respective experts have selectively picked, or incorrectly interpreted, the Vale Applicants will focus their attention on addressing these issues in opening submissions or in some other way if I am asked again to rule on this matter at trial. For these reasons, I decline to rule on this category of objection advanced by S&P at this stage. It will be matter for S&P whether they wish to press this ground of objection at trial and, if so, whether they do so in a more selective way. And, it will also be a matter for the parties to consider (but in my discretion to determine) the appropriate time at which during the trial the objections should be ruled upon.

3.2.2 The Second Argument

1. S&P submitted that in various respects that the questions asked of Dr Gregory and Professor Schlögl did not accord with the errors alleged in the FASOC and, therefore, the opinions expressed by them strayed beyond the pleaded case.
2. By way of example, S&P submitted that in relation to alleged errors pertaining to "correlation assumptions", Professor Schlögl's answers to whether S&P's "intersector correlation assumption" was inconsistent with S&P's measurements of historic default data, involved a combination of:
3. a simple comparison of the 5% assumption with other figures appearing in various emails and studies through which he is said to have "trawled";
4. discounting or dismissing studies supportive of 5% on the basis of the unpleaded criticisms; and
5. assertions that S&P should have used an "intersector correlation assumption" of at least 26% based on the document he had apparently reviewed and was not relied upon by the Vale Applicants in relation to the correlation "error" in the particulars of fraud against any of the key individuals alleged to have had a dishonest intent and was contrary, in any event, with the pleaded case (at FASOC [216.2]).
6. During the course of oral submissions, S&P drew my attention to the fact that, in their respective reports, Dr Gregory and Professor Schlögl had identified a wider suite of information and historical data sets than that which the Vale Applicants have relied upon in FASOC. S&P contended that, having identified this further data, the experts proceeded to carry out "extra exercises designed to show that … that wider suite of information ought to be disregarded for one reason or another" so as to "overcome what their reading of the documents has revealed, and in doing that they [went] beyond what has been pleaded, because what has been pleaded is simply a disconformity between some measurements and what was used". Furthermore, and relatedly, S&P submitted that certain of Professor Schlögl's opinions were "inextricably mixed up with his reading and commentary of internal S&P emails and documents", which, it was contended, presented a problem of the kind in Clark v Ryan [1960] HCA42; (1960) 103 CLR 486 where an expert "is sent on a roving exercise in the materials to work out which bits they like and which bits they don't like, which they're going to comment on and which they're not going to comment on".
7. Taking up this example, the Vale Applicants submitted that the opinions expressed by Professor Schlögl were within the ambit of the pleaded case at FASOC [216]. It was submitted that "the pleaded case is that the studies performed supported inter-sector assumptions of around 6 to 7.5% and that intra-sector assumptions of around 18%. Those figures represent approximately the average of the multiple studies performed, and the documents relied on to prove S&P's knowledge of that fact…". The Vale Applicants further submitted that in many respects S&P had taken a narrow view of its pleaded case, but in any event it was premature to make rulings on the admissibility of the expert evidence on these grounds at this stage and before they had the opportunity to open their case to explain their case by reference to the large documentary material that is to be tendered.
8. Using the "correlation assumption error" as an example, it is apparent to me that there is a live dispute between the parties in the Vale Proceeding as to the pleaded allegations and their ambit. S&P contends that the questions posed, and the opinions expressed, are beyond the pleaded case. The Vale Applicants dispute this. It is apparent that this one example is symptomatic of a broader dispute between the parties as to the scope of the pleaded case. The difficulty that this raises in the context of an application under s 192A of the Evidence Act is that in making any rulings about the admissibility of the expert evidence, I will have to resolve pleading disputes. This is a necessary collateral consequence of making rulings under s 192A at this stage.
9. In the exercise of my discretion, in a case of the complexity as the present one, I am not persuaded that I should make rulings as to the admissibility of expert reports that require me to resolve pleading disputes. In my view, the pleading disputes, if they are to remain, should be addressed after I have received the benefit of the parties' written and oral opening submissions on these particular points. In so concluding, it is my expectation that the Vale Applicants will carefully consider each of S&P's complaints in this regard and only seek to tender those opinions that are in line with their pleaded case and, to the extent that they do not accord with the pleaded cases, that this will be attended to by way of amendment subject to the consent of the parties or by an application for leave to do so.

3.2.3 The Third Argument

1. S&P's next contention was that the questions seeking Dr Gregory and Professor Schlögl to express opinions about what was "obvious" to an expert in quantitative analytics and structured finance were not relevant to the pleaded case or the tort of deceit. S&P's argument focussed upon the fact that the gist of the tort of deceit rests upon the subjective state of mind of the representor and, specifically, the representor's knowledge or reckless indifference as to the falsity of the alleged representation. S&P submitted that an expert's opinion about what was "obvious" to that expert was not relevant to the subjective state of mind held by the representor. In this regard, S&P pointed out that the Vale Applicants' pleaded case had identified the particular employees of S&P, being the Key Employees, who were said to have had knowledge of the falsity of the various representations that are pleaded and that the basis for that knowledge had been particularised in detail in the FASOC and further particularised in the Vale Applicants' Consolidated Particulars of Knowledge.
2. The Vale Applicants accepted that the relevant facts in issue relate to the subjective state of mind of S&P, including the Key Employees. However, they submitted that expert evidence about the matters that would have been "obvious" to an expert in quantitative analytics and structured finance would provide objective evidence from which to infer such a subjective state of mind.
3. The starting point for the admissibility of expert evidence does depend on the purpose for which the relevant opinions are to be adduced: Dasreef at [31]. Here, the purpose for which the expert evidence is sought to be adduced is to establish a fact, being what was obvious to an expert in quantitative analytics and structured finance, as a basis from which to infer what was known to those employees of S&P who worked on the relevant models with expertise in quantitative analytics and structured finance. The purpose of the evidence is therefore not to of itself directly establish the state of mind of the relevant employees, but to use the opinions of the experts as one integer of an inferential case as to state of mind. At this stage, I am prepared to accept that the expression of such opinions are relevant in the sense that they could rationally affect directly or indirectly the assessment of the probability of the fact in issue being that, if matters were obvious to persons with expertise in quantitative modelling and structured finance, this could be a fact from which an inference could be drawn, together with other facts, about either the actual knowledge of a person working in that field or the absence of reasonable foundation for the views held by such a person. Whether the opinions should be accepted and, if so, whether they give rise to the inference together with other facts is a different matter.
4. S&P next contended that even if such evidence was relevant, neither Dr Gregory nor Professor Schlögl had demonstrated specialised industry knowledge to express opinions about what was obvious to an expert in quantitative analytics and structured finance. In support of this contention, S&P drew parallels with the types of experts who in professional negligence cases are considered to have sufficient specialised knowledge to express opinions about the professional standards, competence and the like. S&P submitted that generally in order to opine about such matters, the expert would need to have additional and special qualifications. Reliance was placed on MB v Protective Commissioner [2000] NSWSC 718; (2000) 217 ALR 631, where Hodgson CJ in Eq said at [9]: In many cases, just the ordinary training and experience of a professional in the field would not be sufficient to justify admission of that person's opinion as to what a competent and careful professional would do in hypothetical circumstances. For that kind of opinion, I think one needs some additional and special qualification.
5. S&P also drew my attention to Brereton J's reasons in Lucantonio v Kleinert [2009] NSWSC 853 at [8(c)] where his Honour stated: Expert evidence of what a competent and prudent practitioner would have done in the particular circumstances of the defendant is not admissible if, in effect, it is no more than one professional commenting on the conduct of another, at least in the absence of evidence that the expert has additional training, study or experience to demonstrate the acquisition of specialist knowledge of what a competent and prudent practitioner would do.
6. It was submitted that the correctness of the principle stated by Brereton J in Lucantonio was implicitly accepted by Besanko J in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93 at [22]-[23] (albeit the circumstances of that case were different): see also Australian Securities & Investments Commission v Vines [2003] NSWSC 1095; (2003) 48 ACSR 291 at [13]-[34].
7. The Vale Applicants did not dispute the application of these principles. I accept that the reasoning in MB and Lucantonio is logical, but my view is that the question of what additional training, study or experience will be required to qualify an expert to express such opinions is likely to be fact dependent to the particular profession in question. Here, the relevant discipline is said to be quantitative modelling and structured finance. At this stage, I do not have any sense of what additional training, study or experience would qualify an expert to express opinions about what types of errors would have been obvious to specialists in those fields. The Vale Applicants contended that both Professor Schlögl and Dr Gregory were eminently qualified to express such opinions.
8. Professor Schlögl is a professor of quantitative finance at the University of Technology Sydney (UTS). He was the Director of the Quantitative Finance Research Centre at UTS from November 2006 to March 2022, which was the largest and internationally best known concentration of academic researchers in Quantitative and Mathematical Finance in Australia during that period. He has over thirty years of experience in teaching statistics, quantitative finance, the development of mathematical models, and the implementation of those models in computer programs to university students (both at an undergraduate and postgraduate level) at the University of Bonn and UTS. This includes over twenty years of experience developing and delivering subjects in the Master of Quantitative Finance degree at UTS, a degree specifically designed to train quantitative analysts for the finance industry. Professor Schlögl has also been retained in a number of consulting assignments for banks, financial institutions and software developers concerning the development and implementation in computer software of mathematical models, as well as to conduct "model validation" of computer software, that is, to determine whether the software was correctly implementing derivatives pricing models.
9. S&P contended that what Professor Schlögl has taught his students at UTS over the past twenty years tells the Court nothing of what would or would not have been obvious to employees of S&P in the mid-2000s. It was further submitted that Professor Schlögl's research and experience in consulting did not reveal any details sufficient to qualify him to state opinions as to what would (or would not) have been obvious to expert employees of ratings agencies in the mid-2000s. It was submitted that the obviousness that he states "is a mere ipse dixit".
10. Dr Gregory does not have Professor Schlögl's in-depth expertise in teaching basal principles of quantitative modelling and structured finance, but he has extensive practical work experience in the modelling of credit risk across financial products, and has worked for several decades, in various capacities, in the modelling of credit quantitative analysis. He was the Global Head of Credit Derivatives Research at BNP Paribas in which role one of his responsibilities was the 'Quantitative Structuring' team who were responsible for aspects "such as replicating rating agency models and understanding the quantitative part of the rating process for products such as CDOs". From 2005 to 2008, he was the Global Head of Quantitative Credit Analytics at Barclays Capital, in which role he was responsible for a team developing and implementing models and producing research for Barclays credit business, including the pricing and rating models for various types of CDOs.
11. S&P contended that Dr Gregory's expertise in quantitative analytics and the use and development of models such as CDOE had not been established. S&P submitted that Dr Gregory had not developed models as a quantitative analyst working for a ratings agency and his experience did not qualify him to opine on the alleged "errors" with models such as CDOE. And, as a result, he was not qualified to express opinions as to the "obviousness" of those errors to quantitative analysts working at S&P.
12. The Vale Applicants contended that Dr Gregory's opinion complements those expressed by Professor Schlögl. Whereas the latter expresses opinions as a leading quantitative academic and consultant, the former expresses opinions as a highly experienced practitioner in working with credit models. The Vale Applicants submitted that it was not to the point that these two experts had not worked with precisely the same models, as the point of their evidence was to address the fundamentals of quantitative models.
13. At this stage, notwithstanding the criticisms made by S&P, I am not satisfied that I should make the advance rulings sought in respect of either Professor Schlögl or Dr Gregory. Nor at this stage would I have been satisfied that Professor Schlögl does not have the necessary expertise to express opinions as to what would have been "obvious" to persons with expertise in quantitative modelling and structured finance. It is not entirely correct that the point of Professor Schlögl's opinions is to express opinions about what would have been obvious to employees of S&P in the mid-2000s. Rather, the point of the evidence is to express opinions about the types of errors that, at a fundamental level of computation and modelling, would have been obvious to experts in quantitative modelling and structured finance. Those opinions are being expressed at the level of professional and disciplinary approach to quantitative modelling and structured finance. And, the purpose of Dr Gregory's opinions are to complement those of Professor Schlögl. However, rather than express any concluded views about this matter at this stage, I will defer my rulings to trial. If S&P wishes to press the objection at trial, I will order a voir dire for the purpose of testing Professor Schlögl's and Dr Gregory's expertise.
14. S&P next contended that the opinions expressed by Professor Schlögl and Dr Gregory went beyond the case as pleaded and particularised. It was submitted that other than two references in the FASOC and two further references in the Vale Applicants' Consolidated Particulars of Knowledge, the Vale Applicants had not pleaded or particularised as part of their case that they would seek to infer knowledge on the part of the Key Employees that the errors they are alleged to have made or been involved in were ones that would have been obvious. At first blush, it appears to me that there is some substance in this point. Rule 16.42 of the Federal Court Rules 2011 (Cth) provide as follows: A party who pleads fraud, misrepresentation, unconscionable conduct, breach of trust, wilful default or undue influence must state in the pleading particulars of the facts on which the party relies.
15. Having heard the parties' submissions, it does appear to me that the Vale Applicants do rely upon the "obviousness" point as a fact from which to draw inferences as to the subjective state of mind of S&P and the Key Employees. These matters should be pleaded and particularised. Rather than resolve the pleading issue now, it will be matter for the Vale Applicants to address S&P's complaint, otherwise it will become a matter that will have to be addressed at trial where I will be bound to decide the case as pleaded and particularised.

3.2.4 The Fourth Argument

1. S&P next contended that the questions posed to Dr Gregory and Mr Adelson about the recognised meaning of ratings in the industry and as to competitive landscape were irrelevant to the deceit case.
2. As a starting point, S&P contended that the pleadings as to the ratings did not assert the matters that the Vale Applicants now wish to advance, including as to the way in which the ratings were understood in the marketplace. S&P further contended that the relevant issue was not how the ratings were understood by the industry generally or even specifically, but that for the purpose of the tort of deceit the relevant issues in this regard were (a) whether what was intended to be (falsely) conveyed by S&P was understood as such by the particular recipient(s), and (b) that the particular recipients relied upon the false representations in the sense that they were intended. S&P additionally submitted that, in any event, neither Dr Gregory nor Mr Adelson had the expertise to express these opinions.
3. In relation to the questions and opinions asked of Dr Gregory and Mr Adelson as to the "competitive landscape", S&P contended that the opinions expressed by these experts strayed well beyond anything that was relevant to the pleaded case. It was further submitted that Dr Gregory and Mr Adelson were not market economists who were qualified to express opinions about the competitive landscape and that in other respects their opinions were based on reasoning that was disconnected from their specialised knowledge.
4. In so far as S&P contended that the opinions expressed by Dr Gregory and Mr Adelson went beyond the pleaded case (especially at FASOC [86]) as to what S&P intended to convey by its representations and what was understood by the relevant representees, it was disputed by the Vale Applicants. The same applies to S&P's contentions as to the outer limits of the Vale Applicants' pleaded case as to the business objectives, strategies and targeting of investors: FASOC at [173]-[202]. At this preliminary stage, it does appear to me that the opinions expressed by each of Dr Gregory and Mr Adelson stray beyond the matters that have been pleaded, but the Vale Applicants dispute this to be the case. They contended that each of Dr Gregory and Mr Adelson express opinions about the industry's understanding of the ratings and the competitive landscape within which S&P was operating including the so-called "competitive laxity" that is alleged to have arisen. The Vale Applicants submitted that these opinions were a relevant basis from which to infer (a) what representees would have understood the ratings to mean, and (b) contextualise their pleaded case as to S&P's motives. As with other opinions, the Vale Applicants contend that these opinions were objective facts from which the Court could infer the matters that are pleaded. To that end, it may be accepted that the opinions are relevant in the sense that they could, together with other facts, rationally affect the probability of the existence of the facts that are pleaded.
5. Yet again, it appears to me that there is a dispute between the parties about the pleaded case and the purpose for which the expert evidence is to be called to prove that pleaded case. I do not consider it appropriate at this stage to rule on S&P's objections in advance of the trial. That is because pleading issues have been raised and, as with the other pleading issues I have addressed above, I do not consider it appropriate to rule on the admissibility of expert evidence in a way that requires me at this stage to resolve those pleading issues. I will deal with these issues at trial and, again, observe that it will be matter of the Vale Applicants to determine whether they consider the pleadings require amendment in light of the matters that have been raised by S&P.
6. In relation to the expertise of Dr Gregory and Mr Adelson to express the opinions that they do, I do not consider it appropriate at this stage to rule upon these matters. However, as with other matters going to the expertise of these experts, if they are pressed, I will order a voir dire for the purposes of resolving those issues.

3.2.5 The Fifth Argument and the Sixth Argument

1. More generally and by reference to specific examples, S&P submitted that the experts did not have "specialised knowledge" to express the opinions that they had, and, further, that their reasons in various respects were conclusory and did not identify the assumptions on which they relied or a reasoning process that was connected with their specialised knowledge. Some of S&P's submissions were granular, and others were more general. The Vale Applicants disputed every one of these contentions and submitted that S&P had parsed particular paragraphs of the respective expert reports without reading them as a whole.
2. As with the other objections, I am not satisfied that it is appropriate at this stage to rule on these objections and instead consider that the appropriate time to make such a ruling is after I have had the benefit of the Vale Applicants' opening submissions. However, during the course of oral argument, I raised with Senior Counsel for the Vale Applicants that particular paragraphs of the expert reports appeared to be problematic. It will be a matter for the Vale Applicants whether they wish to address those matters prior to trial.

3.2.6 The Seventh Argument

1. S&P contended that to the extent that there was overlap between Dr Gregor and Professor Schlögl and Dr Gregory and Mr Adelson, there was duplication that was inconsistent with the case management principles embodied in Part VB of the FCA Act.
2. The primary complaint made by S&P was that there was an overlap of topics as between the experts: S&P identified that the questions addressed by Professor Schlögl completely overlapped with those asked of Dr Gregory, and that the additional questions asked of Dr Gregory overlapped with those asked of Mr Adelson. It was further submitted that there was an overlap as between the experts' identification of their own expertise. For example, S&P pointed out that Professor Schlögl and Dr Gregory respectively described themselves as having expertise in the same discipline, namely, as persons with "expertise in quantitative modelling of credit risk". S&P also submitted that Professor Schlögl's academic expertise made his evidence of lesser significance: cf Novartis AG v Pharmacor Pty Ltd [2022] FCAFC 58; (2022) 290 FCR 345.
3. I do not accept S&P's contentions. Although Dr Gregory and Professor Schlögl have overlapping expertise, their opinions are expressed from their different focusses. Whereas Professor Schlögl's opinions are said to have been based upon his vast academic experience, Dr Gregory's opinions are said to have been expressed from his vast practical experience. The different perspectives from which it is said that they have expressed their opinions would assist me in determining whether there is any objective evidence available from which to infer a subjective state of mind on the part of S&P. The same position applies in relation to Mr Adelson, who, by way of contradistinction to Dr Gregory, has particular expertise having worked at S&P.
4. Whilst I accept that the number of experts involved adds to the case management burden, I am minded to order that the experts give evidence concurrently or make other orders at or prior to trial to ensure that unnecessary resources are not expended.
5. For these reasons, I do not accept S&P's arguments.

3.3 The Basis Proceeding

1. As noted above, during the course of the hearing before, S&P refined its position such that it only pressed objections to particular paragraphs of the Gregory Basis Proceeding Report and the Second Youngblood Report. The refined position was brought about in a constructive way as a result of further materials that the Basis Applicants provided to S&P during the course of the hearing.
2. In light of S&P's refined position, it is not necessary for me to set out the entirety of the background of the Basis Proceeding other than to make the following brief observations. Separate to the Vale Proceeding, the Basis Proceeding concentrate on S&P's ratings relating to "Collateral CDOs" being residential mortgage-backed securities (RMBS) including a substantial proportion of "Subprime RMBS" and other asset backed securities (ABS). The relevant ratings at issue in the Basis Proceeding were determined by S&P by the use of a computerised simulation model known as the "Loan Evaluation and Estimate Loss of System" (LEVELS). The case advanced by the Basis Applicants is that LEVELS was flawed because (a) it used out of drat (pre-1999) loan data to predict foreclosure frequency and loss severity of RMBS loan pools, and (b) the pre-1999 data did not account for radical changes in the US residential market in the period from 2000 to 2006.
3. For present purposes, it is relevant that the Basis Applicants claim that they relied upon the representations made by S&P to make a decision to invest in the "Claim CDOs" and would not have invested in them if they had known the true position. It is further asserted that S&P would not have issued the relevant ratings but for the alleged contraventions that are alleged. The Basis Applicants primarily advance a "no transaction case", which is pleaded as follows: 424 Further and in the alternative to the matters pleaded and particularised in the previous paragraph, had S&P not engaged in the conduct contravening s 1041F and s 1041G of the Corporations Act pleaded in paragraphs 386 to 394 and/or the unconscionable conduct contraventions pleaded in Part 15: 424.1 S&P would not have issued some or all of the Ratings and, as a result, the Claim CDOs would not have been issued in the same form or at all; 424.2 the Plaintiffs would not have invested in the Claim CDOs; 424.3 the issuers of the Claim CDOs would have refunded any consideration already paid by the Plaintiffs for the Claim CDOs due to the non-fulfillment of the terms of the CDO offerings and the Plaintiffs would have reinvested any refunded consideration in alternative investments; and 424.4 the Plaintiffs would have invested their capital in alternative investments.
4. With this brief background in mind, I will now turn to address S&P's objections.

3.3.1 Objections to the Gregory Basis Proceeding Report

1. S&P objected to Section 7 of the Gregory Basis Proceeding Report. In this section of his report, Dr Gregory expressed opinions in response to assumptions that he was asked to consider (as set out at [106] ff of that report). Those assumptions proceeded on the basis that Dr Gregory was to adopt his analysis of the CDO Evaluator as set out in his report in the Vale Proceeding, but then consider the impact of it to the "Claim CDOs" in the Basis Proceeding on the basis of three different inputs (as set out at [107] of the Report). S&P submitted that Dr Gregory's analysis and opinions in respect of this topic were inadmissible because they were infected by the admissibility issues arising from the Vale Proceeding and because the particular assumptions were not pleaded.
2. The Basis Applicants explained that the assumptions that Dr Gregory had been asked to make reflected a "notching analysis" by which the "Claim CDOs" would have been differentially rated had particular modelling errors not been made such that the underlying collateral would have been commercially unviable and the "Claim CDOs" would not have been issued. These assumptions reveal what is, in effect, a counterfactual scenario which the Basis Applicants submitted coheres with what is pleaded. In this regard, the Basis Applicants pointed to the fact that part of their pleaded case was that the "Claim CDOs" would not have been issued at all.
3. In my view, there is considerable force in the submissions advanced by the Basis Applicants. However, to the extent that there is a latent pleading issue at the heart of S&P's objection, as with the other pleading issues that have been identified, I will defer ruling on this issue until trial. In doing so, I accept, as S&P submitted, that the Basis Applicants are required to plead their counterfactual case: Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 271 CLR 151 at [72]. In my view, deferring the objections would also be an appropriate course to take in circumstances where S&P's objection to this part of the Gregory Basis Proceeding Report is also tied to its overall objections to Dr Gregory's opinions as expressed in the Vale Proceeding.
4. S&P further submitted that, to the extent that the Basis Applicants relied upon Dr Gregory's opinions as to "obviousness" as expressed in the Gregory Vale Proceeding Report, those opinions were not admissible in the Basis Proceeding because these matters had not been pleaded or particularised. Again, as with other objections that require me to resolve pleading issues, I will defer them to trial and leave it to the Basis Applicants to consider whether any amendment should be made to their pleadings and particulars.

3.3.2 Objections to the Second Youngblood Report

1. S&P pointed out that in the Second Youngblood Report, Dr Youngblood had been asked to express an opinion about a singular wide-ranging question, as follows: Describe the major developments in the RMBS market in the 2007 to 2008 period and how, if at all, those developments impacted the following during that period: (a) RMBS markets; (b) CDO markets; and (c) markets for financial instruments aside from RMBS and CDOs, including collateralised loan obligations, high-yield bonds and corporate bonds.
2. S&P objected to the whole of the Second Youngblood Report as being irrelevant and in particular to paragraphs 21 to 47 on the grounds that, there, Dr Youngblood was expressing opinions based on inference and speculation and in respect of which he had no established specialised knowledge, and had failed to expose his reasoning process.
3. As best as I can discern, it appears to me that Dr Youngblood is seeking to express opinions in the Second Youngblood Report that the subsequent downgrades in the ratings for the collateral and securities underlying CDOs such as the "Claim CDOs" had the effect of causing or being a substantial contributor to the Global Financial Crisis (GFC). The Basis Applicants submitted that the relevance of Dr Youngblood's opinions in this regard was to establish that in assessing its "no transaction case" the Court should not consider the performance of alternative investments simpliciter but consider whether any such alternative investments would have also been infected by the conduct alleged against S&P. The Basis Applicants say that the Second Youngblood Report is "prophylactic" in the sense that they anticipate that, in answer to their case, S&P will contend that even if they had not invested in the "Claim CDOs" any other alternative investment would have also incurred the same losses due to the adverse effects of the GFC. It was submitted that the Second Youngblood Report seeks to address why this would not have occurred. The Basis Applicants accept that if S&P does not in fact advance such a contention, then the Second Youngblood Report would not be relevant to any fact in issue.
4. Having regard to the parties' submissions, I consider that it would be appropriate to defer the determination of the admissibility of the Second Youngblood Report until trial. At that stage, I will have a clearer understanding as to its relevance, bearing in mind any positive evidentiary defence that S&P may raise in answer to the Basis Applicants' counterfactual case. However, should that need arise, the Basis Applicants will then have to deal with the other objections that S&P has raised to the Second Youngblood Report including as to Dr Youngblood's expertise to opine on the causes of the GFC and whether his reasoning, as presently expressed in that Report, is connected wholly or substantially with his specialised knowledge.

4. DISPOSITION
5. For the foregoing reasons, S&P's interlocutory applications should be dismissed. However, I will reserve the question of costs of, and incidental to, the applications.
6. I have listed the matter for case management at a time to immediately follow my publication of reasons to address the matters that I raised with the parties during the course of the hearing before me and to raise with the parties the issues that arise as a result of my orders dismissing the interlocutory applications. I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.