Collins Thomson v Clayton [2002] NSWSC 366 | Case summary

(3) if s 131(1) was held to apply, then its application was excluded by s131(2)(g), according to which sub-section (1) does not apply if evidence that has been adduced, or an inference from evidence that has been adduced, is likely to mislead the Court unless evidence of the communication or document is adduced to contradict or qualify that evidence. 9 In my view submission (1) by counsel for Mr Clayton is correct, and consequently there is no valid objection to the admissibility of the letter. That being so, it is unnecessary for me to deal with submissions (2) and (3). 10 I should note however that in my view the part of the letter that counsel would tender, had I reached a different view as to the application of s 131(1), is severable from the rest of it and could have been tendered separately, and further, sub-section 131(2)(g) is applicable in the present circumstances. 11 In reaching my conclusion on submission (1), I rely on the decision of Young J (as the Chief Judge in Equity then was) in GPI Leisure Corporation (in liq) v Yuill (1987) 42 NSWLR 225. (See also Young J's observations on s131 in Nodnara Pty Limited v Deputy Commissioner of Taxation (1997) 140 FLR 336.). In the GPI Leisure case his Honour considered whether the letter before him was properly described as an attempt to negotiate a settlement of the dispute for the purposes of s 131(1)(b), and held that the description was inappropriate. He said: "There may be many communications between parties which one could read between the lines as showing that certain things may happen, and if those certain things happened, the dispute might be settled. I do not consider that generally such a communication would fall within the privilege of s 131(1)(a). The present letter seems to me merely to be a communication which indicates that if the litigation can be dealt with in some practical way, the writer is open to suggestions. Alternatively it indicates that if a claim arises in the future 'a mechanism can be put in place to deal with it'. The letter does not suggest a method of compromising the underlying dispute. I do not consider that is sufficiently close to 'an attempt to negotiate a settlement' of the dispute to come within privilege." (at 227) 12 Those observations are apposite by analogy here. The letter, on a proper reading, does not have the character of an attempt to negotiate a settlement. It is instead a statement, admittedly in response to a series of letters of offer, in which the author provides his analysis of the various proceedings between the parties. The letter is expressed in robust terms, advances categorical claims as to the likely outcome of the proceedings, and then rejects the offers in question. It goes on to say some things about Mr Ellison's position which, it seems to me, are relevant to the application to exclude Mr Ellison's evidence, and could not by any stretch of the imagination be regarded as connected, in the direct sense required by Young J's judgment, with an attempt to negotiate settlement. Essentially those observations are to the effect that the liquidator had substantially nothing to lose by prosecuting the various proceedings, and stood to gain in various respects. 13 My decision therefore is that the letter of 22 March 2002 from Potts Latimer should be received into evidence on the voir dire, and I do so and mark it Exhibit DX2. Expert opinion evidence 14 That leads me to the contention of counsel for Mr Clayton that Mr Ellison's affidavit evidence should wholly or in substantial part be excluded on the ground that it is inadmissible because he does not satisfy the requirements for independence of expert evidence. 15 Section 79 of the Evidence Act is expressed in very broad terms. It operates as an exception to the proposition found in s 76 that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79 says: "If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to the evidence of an opinion of that person that is wholly or substantially based on that knowledge". 16 The section does not in terms articulate any requirement that the expert must be independent of the party to the proceedings who wishes to adduce the expert's evidence. However, counsel refers to Pt 36 Rule 13C of the Supreme Court Rules, and to Schedule K of the Rules. 17 Rule 13C establishes procedures for the preparation of the evidence of an expert witness, and requires that the evidence be prepared in compliance with Schedule K. Schedule K is a code of conduct applying to an expert engaged to give opinion evidence in proceedings. It requires that a report by an expert witness must do a number of things, which include specifying the facts, matters and assumptions on which the opinions in the report are based, and the reasons for each opinion expressed. 18 This regime applies to an "expert witness" as defined in Rule 13C(1). In that definition, an expert witness is an expert engaged for the purpose of providing a report as to his or her opinion for use as evidence in proceedings, or giving opinion evidence in proceedings. 19 It seems reasonably plain from the definition that a party to the proceedings cannot be an expert witness for the purposes of Rule 13C and Schedule K. This is because the expert witness must be engaged, presumably by a party. One assumes that a party cannot engage himself. 20 In the submission of counsel for Mr Clayton, Rule 13C limits the admissibility of expert evidence and must be read together with s 79. Specifically Rule 13C and Schedule K have the effect that a party to proceedings cannot be an expert witness and cannot therefore give admissible expert opinion evidence. Counsel contends that this result is reinforced by case law dealing with the independence of expert witnesses. 21 A starting point for an exploration of the subject is the well-known judgment of Cresswell J in National Justice v Prudential Insurance (The "Ikarian Reefer") [1993] 2 Lloyd's Reports 68 at 81. There his Honour said: "1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation ( Whitehouse v. Jordan , [1981] 1 W.L.R. 246 at p.256, per Lord Wilberforce). 2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise (see Polivitte Ltd. V. Commercial Union Assurance Co. Plc. , [1987] 1 Lloyd's Rep. 379 at p. 386 per Mr Justice Garland and Re J , [1990] F.C.R. 193 per Mr Justice Cazalet). An expert witness in the High Court should never assume the role of an advocate. 3. An expert witness should state the facts or assumptions upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion ( Re J sup.). 4. An expert witness should make it clear when a particular question or issue falls outside his expertise. 5. If an expert's opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one ( Re J sup.). In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report ( Derby & Co. Ltd. And Others v. Weldon and Others , The Times, Nov. 9, 1990 per Lord Justice Staughton). 6. If, after exchange of reports, an expert witness changes his view on a material matter having read the other side's expert's report or for any other reason, such change of view should be communicated (through legal representatives) to the other side without delay and when appropriate to the Court. 7. Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must be provided to the opposite party at the same time as the exchange of reports (see 15.5 of the Guide to Commercial Court Practice). 22 In my opinion, the propositions enunciated by Cresswell J are very weighty considerations which may lead the Court to exercise its discretion under s135 or s136 of the Act to exclude evidence which is otherwise admissible; or may lead the Court to attach limited or very little weight to the evidence in question. However, I think it would be a mistake to read Cresswell J's observations as requiring that in every case, unless it complies with the Rules that he enunciates, the evidence must be held to be inadmissible. 23 This conclusion is consistent, in my opinion, with the general approach taken in Australian case law, comprehensively explained in the judgment of Heydon JA in Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305. In that case at paragraph 79 his Honour quoted the seven propositions from The Ikarian Reefer that I have set out above, but he did not treat those propositions as principles of exclusion of evidence. He observed in the same paragraph that some of these matters have an ethical dimension, and that taken together, they point to the need for the trier of facts to be fully informed of the reasoning process employed in arriving at the expressed opinions. In other words, compliance with Cresswell J's proposition is an important matter going to the quality of the evidence adduced from the expert, but does not require the Court in all cases to exclude that evidence. 24 The same approach to questions relating to independence can be found in the judgment of Pagone J in Fagenblat v Feingold Partners Pty Limited [2001] VSC 454 (27 November 2001). In a thoughtful analysis of the relevant principles, his Honour found that the evidence, at the stage at which the objection was taken in the proceedings before him, was not sufficient to require that the expert's evidence be excluded, even though there were grounds for suspecting that the expert may be biased. 25 The case was one about a partnership dispute between solicitors. The expert was an accountant who had experience in failures of such partnership businesses and who had, for many years, prepared the financial statements and tax returns of the partnership and the majority of its members. However, he was the brother-in-law of the plaintiff, whose share in the partnership was held in trust for his wife, the accountant's sister. 26 As to questions of principle, his Honour said at paragraphs 7, 8 and 9: "7. … An expert witness has a special and important role in judicial proceedings to assist the Court by providing objective and unbiased opinions about matters that bear upon the determination which the Court is called upon to make. The exclusion of an expert's evidence should only occur where the Court is satisfied that the evidence to be led by the expert is unsound and cannot provide probative material of value to the Court's task of determining the issues in the proceeding. The possibility of a witness having a bias in favour of a party (directly or indirectly) is undoubtedly a matter to take into account by a court when deciding what weight to give to the expert's evidence, but it is not a ground for the Court rejecting evidence that may be of assistance to the Court in reaching the correct result. It is for the Court to do justice between the parties and in doing so should properly take into account all matters which bear upon the ultimate issues to be decided. The bias, actual, potential or perceived, of any witness is undoubtedly a factor which the Court must take into account when deciding the issues between the parties, but the hearing of evidence from such a witness does not mean that the Court will not be doing justice to the parties impartially. It is the Court, and not the witness, which has the task of doing justice to the parties and, in my view, the Court should not exclude from its consideration the probative evidence which expert witnesses may be capable of giving if the evidence which they do give can be shown to be probative and reliable. Accordingly, I am unable to agree with the view by Evans-Lombe, J. in the Liverpool Roman Catholic Archdiocese Trust case and decline to follow it. 8. The principal rationale of the test of reasonable apprehension of bias is to ensure that decision makers are perceived to be truly independent in their decisions. A biased witness does not impugn the independence of the decision maker, especially where the proceedings are adversarial and the evidence can be tested. The possibility that a witness of fact or expert opinion may be biased does not infect the impartiality of the Court. The situation might be otherwise where the expert is appointed by the Court or where the role or function of the expert is more than that of a giver of evidence (whether that evidence be in the form of an opinion, as librarian of a body of knowledge, or otherwise). In such a case the role or function of the expert may perhaps come to be incorporated into that of the decision maker, and, where the expert's role or function is such that there is actual decision making by the expert, then I can see some scope for the application of the test of reasonable apprehension of bias to exclude the evidence. I can see no scope for that test, however, to exclude expert evidence that may assist the Court where the expert is called in adversarial proceedings by one party and where an opposing party is at liberty to test whether any bias corrupts the evidence. 9. Experts do have duties to the Court to be independent. Those duties have some similarity to those owed by counsel conducting a case. The risk that such duties might be breached permits a testing of the partiality of a witness so that the Court may assess the assistance that can be gained from the expert evidence which is given. The product of the expert should itself be "the independent product of the expert, uninfluenced as to form or content by the exigencies of the litigation". The reason for these duties, however, stems from the need to ensure that the evidence which is before the Court is useful in the sense of being probative and reliable. The fact of partiality goes to those issues rather than to admissibility. It is for the Court to assess the value of the evidence. It is easy to conceive of instances of expert evidence where partiality could have no conceivable impact upon the reliability of the expert evidence tendered." 27 Counsel for Mr Clayton contended that these observations are distinguishable on the ground that in the present case there is (in Exhibits DX1 and DX2) clear evidence of actual partiality, and also on the ground that in the Victorian case the witness was apparently, in part, a witness of fact because of his experience in the partnership business in question. I agree that there are factual grounds for distinguishing the present case from the Fagenblat case, but it seems to me that the principle enunciated by Pagone J corresponds with the principle that emerges from Cresswell J's judgment in The Ikarian Reefer, and the observations of the Court of Appeal of NSW in the Makita case. 28 There is one obstacle to the conclusion that I have reached. The obstacle is the decision of Evans-Lombe J, disagreeing with an interlocutory ruling by Neuberger J (the latter being reported only in the Times Law Reports, 9 March 2001) in Liverpool Roman Catholic Arch Diocesan Trustees Inc v Goldberg (No. 3) [2001] 1 WLR 2337. The question in that case related to the admissibility of evidence by Queen's Counsel with expertise in taxation matters. The defendant sought to rely on expert evidence by Queen's Counsel in answer to an action by a plaintiff for professional negligence concerning the defendant's advice in respect of the plaintiff's taxation affairs. The defendant was also Queen's Counsel practising in the taxation field. 29 The expert witness belonged to the same chambers as the defendant and they were good friends, having known each other for 28 years. Neuberger J held that this connection alone was not sufficient to exclude the expert evidence. However, Evans-Lombe J disagreed. He held that the witness was unable to fulfil his role as an expert witness because of his close relationship with the defendant. He observed: "In my judgment, where it is demonstrated that there exists a relationship between the proposed expert and the party calling him which a reasonable observer might think was capable of affecting the views of the expert so as to make them unduly favourable to that party, his evidence should not be admitted, however unbiased the conclusions of the expert might probably be. The question is one of fact, namely the extent and nature of the relationship between the proposed witness and the party." (at 2340) 30 Those observations, which seem to be directed towards admissibility rather than discretion or weight, are, in my view, inconsistent with principles of the Australian Law of evidence. That was the conclusion reached by Pagone J in the Fagenblat case. His Honour quoted the remarks of Evans-Lombe J and expressly declined to follow them. I respectfully agree with Pagone J. 31 I would add this observation to Pagone J's remarks. Evans-Lombe J purported to rely on a passage from the speech of Lord Wilberforce in Whitehouse v Jordan [1981] 1 WLR 246 at 256-7, where Lord Wilberforce said that it is necessary that expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form and content by the exigencies of litigation. However, when Lord Wilberforce's observations are taken in context, it is plain that his Lordship was not intending to enunciate a rule of admissibility of evidence. He was, in fact, dealing with evidence that had been admitted and the purport of his remarks was to be critical of that evidence. This is plain when one considers the observations of Lord Denning MR [1980] 1 All ER 650 at 655 to which Lord Wilberforce referred. It therefore appears to me, with respect, that Whitehouse v Jordan does not support Evans-Lombe J's approach. 32 It follows, in my view, that the evidence of Mr Ellison is not, per se, inadmissible on grounds of lack of independence, either wholly or in part. 33 Counsel for Mr Clayton referred to another passage in the judgment of Heydon JA in Makita's case, where his Honour said at paragraph 85: "In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41])." 34 This very useful exposition of the requirements of s 79 does go to admissibility rather than discretion or weight, and should be borne in mind whenever a Court is required to consider the admissibility of expert opinion evidence. It will be necessary to look in more detail at the affidavit evidence of Mr Ellison during the hearing, and one of the issues that will need to be examined is whether the propositions which he puts forward in his evidence might fail to meet the standards set by Heydon JA in that passage. Discretionary considerations 35 Here there is evidence of partiality, both because of the very position occupied by Mr Ellison as liquidator of Collins Thomson, and because his solicitor's letter at Exhibit DX1 exhibits a partial attitude to the litigation on his behalf. However, it seems to me that in all the circumstances I should not allow that evidence of partiality to exclude Mr Ellison's affidavit evidence in its entirety. 36 Mr Ellison's evidence is the principal evidence upon which Collins Thomson will rely in these cases. I was informed by counsel for Collins Thomson that if I ruled that evidence to be inadmissible, he would have no option but to apply for an adjournment. Moreover, if I exclude Mr Ellison's evidence, it will be necessary for him, at the expense of creditors and contributories in the winding up of Collins Thomson, to obtain equivalent evidence from another expert. In a case such as the present, it seems to me undesirable to take that strict view. Finally, I would be concerned, if I were to rule this evidence to be inadmissible in principle, that my decision may impose an undue financial burden on the insolvent administration of companies generally. It is evident to any judge or practitioner concerned with the Corporations List that liquidators of companies which are parties to proceedings, or who are themselves parties to proceedings, relatively frequently seek to adduce evidence in the form of reports and other documents prepared by them, on the basis that such material is admissible as expert opinion evidence under s 79. I would not wish to take an approach in this case which might carry the implication that this practice is generally open to objection and that in future liquidators would be well advised to expend the creditors' money commissioning reports from other insolvency practitioners. **********

Collins Thomson v Clayton

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