Southern Cross Airports v Chief Commissioner of State Revenue

Judgment 1On 28 June 2002, the Plaintiff, Southern Cross Airports Corporation Pty Ltd (SCAC), acquired from the Commonwealth all the issued shares in Sydney Airport Corporation Ltd (SACL), the owner of Sydney International Airport. 2SACL obtained a valuation of land and buildings at Sydney Airport for stamp duty purposes from Maunsell Australia Pty Ltd on 24 June 2002. 3The 2002 report updated an earlier Maunsell report, Sydney Airport Valuation 2000, and that 2000 report updated an earlier Maunsell report, Sydney Airport Asset Valuation as at 1 July 1998. 4The issue in the proceedings is whether SACL was land-rich under former legislation: whether it held land in New South Wales with an unencumbered value of $1 M or more and its land holdings in all places, whether within or outside Australia, comprised 80% or more of the unencumbered value of all its property. 5Prima facie , one would expect the 2002 report to have a high degree of relevance. Since June 2002 there have been many changes in the assets at the airport making it difficult now to obtain a valuation as at 28 June 2002. Since the 2002 report was based upon the 2000 report and the 1998 report they also, prima facie , would be expected to have a high degree of relevance. 6By its amended notice of motion, SCAC seeks an order that each of the reports is admissible and should be admitted into evidence without restriction on purpose or use. 7The Evidence Act 1995, s 192A gives the court power to make an advance ruling on the admissibility of evidence. It provides: "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." 8SCAC seeks its order under that provision. 9Section 192(1) of the Evidence Act provides that if because of that Act, a court might give any leave, permission or direction, the leave, permission or direction may be given on such terms as the court thinks fit. 10In TKWJ v The Queen [2002] HCA 46; (2002) 212 CLR 124 at [42]; 137 Gaudron J said that the provisions of the Act requiring the giving of leave, permission or direction require a ruling to be made and unless the particular provision in question directed otherwise there was no reason why they should be read as precluding an "advance ruling" if that course was appropriate. Her Honour gave an example: " It may, for example, be appropriate to give an "advance ruling" if all matters relevant to the issue have been or can then be ascertained and if it is clear that a ruling will inevitably be required ." 11Her Honour went on at [45]; 138 to point out that the advance ruling that it was argued should have been sought, was not a ruling as to the giving of leave, permission or a direction required by the Evidence Act and was, thus, one not authorised by a provision of the Act requiring the giving of leave, permission or direction for the purposes of s 192. 12In Australian Competition and Consumer Commission v Allphones Retail Pty Ltd [2009] FCA 1075; (2009) 259 ALR 541 at [12]; 544 Foster J said there might be sound discretionary reasons for the court declining to entertain an application even though it clearly had the power to make an order of the kind sought under s 192A of the Evidence Act 1995 (Cth). 13It was submitted on behalf of the Chief Commissioner that an advance ruling should not be given as all matters relevant to the issue had not, or could not, be ascertained. 14But TKWJ was not a decision with respect to s 192A of the Evidence Act, which was introduced to promote efficiency of trials. The explanatory memorandum to the Commonwealth amending Act by which the provision was introduced stated: "The power to give advance rulings carries significant benefits in promoting the efficiency of trials. It allows counsel to select witnesses and prepare for trial with greater certainty. Without such a power, tactical decisions, particularly in relation to character evidence, are based on speculation." 15In my view it is appropriate to give an advance ruling in this matter. Inevitably there will be a need to rule because the Chief Commissioner does not accept the reports. If an advance ruling is made in favour of SCAC, it will provide certainty to both parties with respect to this portion of the expert evidence. If the advance ruling goes against SCAC, it will have the opportunity before the trial, which is due to commence on 27 June 2011, to address the question whether it can adduce further evidence to cure the inadmissibility. 16The Chief Commissioner argues that the way in which SCAC now seeks to deploy the reports has changed and expanded. SCAC seeks to support the first report of Professor Parker of 27 November 2009. It seeks to value the Sydney land by reference to the underlying land plus the value of improvements, the Maunsell reports being the basis for the improvements valuation. SCAC now wishes to use the figures as part of the valuation of the Badgerys Creek site, which the Chief Commissioner says significantly expands the use and deployment of the three reports. 17But that is not a reason to rule the reports inadmissible. The expansion of SCAC's case to include a second airport at Badgerys Creek may have ramifications in other directions. For example, the Chief Commissioner may argue that the reports lack relevance so far as prospective improvements at Badgerys Creek are concerned. 18The Chief Commissioner argued that Maunsell had stated to SACL that a comparison of its database and the SACL asset register had been made, there were major differences and in order to minimise time it would be necessary to utilise the Maunsell database. 19That is not, in my view, a reason to rule the Maunsell reports inadmissible. It is a matter that goes to weight. 20So does the fact that a peer review of the 2000 report undertaken by Opus International Consultancy Ltd for the ACCC, identified a number of matters that caused significant concerns as to the 2002 report because it was an update of the 2000 report. 21The spreadsheets that form part of the reports identify each integer taken into the calculations. Counsel for the Chief Commissioner established with respect to lighting and visual aids, however, that there are some errors, some inconsistencies and some figures that cannot be broken down. 22This means that if the witnesses called by SCAC do not survive cross-examination on these issues, the figures may not be accepted. But that is a different issue from the question of admissibility of the reports as expert opinion evidence. The basis upon which the calculations were made is set out in the spreadsheets. That there are errors, inconsistencies and global figures in them goes to weight and is to be tested in cross-examination. 23Appendix B to the 2002 report, a report prepared by Ernst & Young on asset valuation methodology, is the subject of objection because there is no witness to be put forward by SCAC who can be cross-examined as to the accuracy of the opinions expressed by Ernst & Young. 24SCAC responded that it was not putting forward Appendix B as evidence of the truth of the opinions as to valuation methodology contained in it. SCAC does not oppose an order limiting the use of Appendix B if sought by the Chief Commissioner. 25I will admit Appendix B subject to agreement or argument as to a suitable order limiting the use of it. 26Appendix A to the 1998 report is the subject of objection because it is expressed to be a draft for discussion purposes. Nonetheless the opinions expressed are admissible although their weight will be a matter for submission. 27It is SCAC's submission that the three reports are admissible as business records of SACL. 28The Chief Commissioner argued that if they are business records, there is no need for the exercise of discretion under s 192A of the Evidence Act . And if they are not business records, submissions on the topic are of no assistance to the court. 29But a decision one-way or the other on the topic produces certainty as to the admissibility or non-admissibility of the reports as business records. 30The Chief Commissioner argued that the 1998 report and the 2000 report are not relevant to the determination of value in the 2002 report. But the 2002 report was an update of the earlier reports and they would explain some of the steps taken in the 2002 report, albeit that they do not go to the optimised depreciated replacement cost (ODRC) value as at 28 June 2002. 31The exception to the hearsay rule for business records is excluded by s 69(3) of the Evidence Act if, amongst other things, the representation in the document was prepared in contemplation of an Australian proceeding. The Chief Commissioner submitted that the 2002 report fell within this exception. 32The evidence is that in 2002 Peter Humphreys was employed by Maunsell as an associate director and project manager. In late May 2002 he received a telephone call from Ewen McLean of SACL. He said SACL would like Maunsell to update the asset valuation previously prepared for stamp duty purposes. 33On 30 May 2002, Maunsell wrote to SACL confirming their engagement to undertake the valuation of the Sydney Airport assets to be used for the purpose of determining the airport's obligations in relation to the payment of land tax ( sic ). The letter stated that there was to be no reliance placed on the valuation in relation to any issues other than for the purpose of the payment of land tax. 34On 12 June 2002, SACL wrote to Maunsell and to Jones Lang LaSalle confirming its instructions to both to provide a valuation of the land and improvements at Sydney airport for stamp duty purposes. 35At this stage SCAC claims that what it calls the Principles Agreement had been reached with the Chief Commissioner under which he would accept a valuation report prepared by a qualified valuer and the difference between it and the consideration for the successful bid was attributable to goodwill. 36The Principles Agreement was a matter of administration. It was not for the purpose of a proceeding in an Australian court. In 2002 when SACL obtained the 2002 report, there was no probable expectation of legal proceedings. The Principles Agreement would avoid any reasonable prospect of such a proceeding. I do not accept the submission that s 69(3) of the Evidence Act applied to the 2002 report. 37The Chief Commissioner submitted that the 2002 report was not a record of the business of SACL or Maunsell. 38The term "records of a business" is not defined in the Evidence Act . 39In Roach v Page (No 15) [2003] NSWSC 939 at [5]-[6], Sperling J contrasted records of a business with its products and reference materials. His Honour said the records of a business are the documents or other means of holding information by which activities of the business are recorded, whereas if it was a function of a business to publish books, newspapers, magazines or journals, those publications are the product of the business, not a record of its business activities. And documents kept for reference purposes are not records of the business. 40While the 2002 report might not be a business record of Maunsell but a product of its business, the distinction does not apply to SACL by whom it was discovered. It acquired the 2002 report not as a product of its business or as reference material. If it was a land-rich company its business would be effected, for it would be, or its shares would be, less attractive to a prospective purchaser because of the liability to ad valorem duty. 41I do not understand Sperling J to have spoken categorically about what constituted a business record. In addition to the documents by which activities of a business are recorded I would include as business records documents relevant to the conduct of the business. 42The introductory words of s 69(1)(a)(i) of the Evidence Act that the provision applies to a document that is, or forms part of, the records belonging to or kept in the course of, or for the purposes of a business, encompasses more than documents recording the activities of a business. 43For example, a valuation of the assets of a business for insurance purposes or for the purpose of determining appropriate depreciation rates does not record the activities of a business but it is kept in the course of, or for the purposes of, the business. 44It is preferable, in my view, not to seek to define a business record but to be guided to a decision whether or not a document is a business record by the terms of the statutory provision itself. 45I am satisfied that the 2002 report was a business record of SACL. It was commissioned, received and kept in the course of, or for the purposes of, its business. 46In terms of s 69(2) of the Evidence Act the hearsay rule does not apply to a document if, amongst other things, the representation contained in it was made on the basis of information directly or indirectly supplied by a person who had, or might reasonably be supposed to have had, personal knowledge of the asserted fact. 47The Chief Commissioner submitted that this requirement was not satisfied. 48Graham Edwin Moult was a principal of Rawlinsons, quantity surveyors. He was involved in preparing the 1998 report and was responsible for the quantity surveying work carried out by Rawlinsons in respect of the 2000 report and the 2002 report. There is no challenge to those parts of the 2002 report carried out by him. 49Mr Humphreys had a detailed knowledge of the nature and condition of SACL's assets through his involvement in preparing asset condition reports. He utilised that knowledge in the preparation of the 2002 report. He also relied on the 2000 report and other records of SACL to carry out his task. There is no reason to doubt that the persons who recorded that information might reasonably be supposed to have had personal knowledge of the matters recorded. 50I reject the Chief Commissioner's submissions and hold that the hearsay rule does not apply to the 1998 report, the 2000 report and the 2002 report in terms of s 69 of the Evidence Act . 51The Chief Commissioner submitted that the court should limit the use to be made of the three reports on the basis that there is a danger that a particular use might be unfairly prejudicial to him in terms of Evidence Act , s 136(a). 52Some prejudice will inevitably flow from the reception of reports in evidence when made as long ago as 1998. But the task before the court involves some prejudice to the parties because of the difficulty of ascertaining the existence and physical condition of assets at Sydney International airport in June 2002. 53I do not think, however, that any order should be made under s 136 of the Evidence Act except in relation to Appendix B to the 2002 report. As I have said, I will hear the parties on the appropriate terms of the orders. 54The Chief Commissioner submitted that the notice of motion is amended in name only and that irrespective of the outcome and form of the motion SCAC should pay his costs in relation to the earlier forms of the motion that related to land valuations and not ODRC calculations. 55I will hear the parties on costs. I direct the parties to bring in short minutes of order reflecting these reasons.