Hotel (dry land) - tourism use
115Mr Dupont has undertaken an implicit adjustment approach in relation to his comparison of tourism use properties for dry land given the lack of explicit adjustment identified in his report and his oral evidence. He has not set out in his written report a clear three step process which enables scrutiny of the facts and assumptions relied upon by him in reaching his conclusions. I agree with the Appellant's counsel's submission that Mr Dupont started with individual transactions of potentially low comparability. Analysis of his selection of comparable sales and adjustments is difficult in the absence of explicit reasoning. A large number of adjustments were apparently required in light of his written and oral evidence particularly in cross-examination by the Applicant's counsel. The valid criticisms of Mr Dupont's evidence are highlighted in the Appellant's submissions above at par 100 - 101 and I do not need to repeat them here. Pepper J in Tomago stated at [45]:
... it is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency.
116It is important to identify at this point the obligations imposed on expert witnesses giving opinion evidence to a court of the statutory requirements imposed on them. Part 31 of the Uniform Civil Procedure Rules 2005 (the UCPR) applies in Class 3 proceedings as it is not excluded in Sch 1 column 4. Rule 31.23(1) requires an expert to comply with the expert witness code of conduct in Sch 7 "Expert witness code of conduct" (the Code). Clause 5(1)(b) of the Code requires that an expert's report include "the facts, and assumptions of fact, on which the opinions in the report are based ..." Clause 5(1)(c) of the Code requires that an expert report identify the reasons for each opinion expressed. UCPR r 31.27(1) repeats cl 5(1) of the Code. The importance of identifying assumptions and facts relied on by experts was identified in the Court of Appeal in the context of s 56 and s 79 of the Evidence Act 1995 (providing for the tender of expert opinion evidence) by Heydon JA (as he then was) in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [85] confirmed recently in the High Court in Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [37] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. Makita at [85] states:
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. ...
117Heydon J in Dasreef (in dissent on other issues) identified the need to have strict admissibility requirements for expert evidence. While Mr Dupont's report has been admitted into evidence, Heydon J's comments underscore the importance of experts identifying their reasoning process. His Honour states:
[58] The tendency of experts to dominate proceedings creates numerous other perils for the integrity of the trial process. One is that experts, who ex hypothesi know much more about their fields of expertise than judges and juries do, and who know of that vast disparity, will take over the conduct of cases and exert excessive influence over their outcomes. Another is that experts, no doubt contemptuous, often justifiably, of the ignorance of the lawyers, will appoint themselves as advocates for the party calling them. Another is that experts render their evidence less than useful by giving it in a form conventional in their discipline but not conforming to the rules of evidence. Another is the tendency of experts to drift into giving the courts reasons why they should accept or reject the evidence of lay witnesses on matters of primary fact.
[59] Finally, and very importantly, there is increasing concern about the risk of injustice that may flow from unsatisfactory expert evidence. The stricter the admissibility requirements for s 79 tenders, the greater the chance that evidence carrying that danger will be excluded. (footnotes omitted)
I consider these remarks are equally relevant to the integrity of the court process in Class 3 proceedings where expert evidence is of high importance, is often complex, and when not in conformity with the Code is rendered less useful and in this case of no utility.
118I have not inspected either the subject property or the tourism use sites relied on by Mr Dupont and therefore must rely entirely upon his written and oral evidence concerning the analysis, adjustment and application of the comparable sites. Having regard to the site area of the hotel at the subject property of 10,600 sqm, in my opinion Mr Dupont submitted no demonstrably relevant comparable sales on a tourism use basis. The comparable sales at Lot 7 Rafferty's Resort, Cams Wharf and 16 Crooked River Road, Gerroa could be considered to be indirectly relevant comparable sales. Having regard to site area, I consider the remaining comparable sales on a tourism use basis relied on by Mr Dupont to be of such limited relevance that they provide little assistance to me and I have not considered them further. I note that Lot 7 Rafferty's Resort, Cams Wharf and 16 Crooked River Road, Gerroa were analysed by Mr Dupont to indicate a range of $41,666 - $243,333 unimproved rate per room. I note that Mr Dupont's adjusted rate range of $23,817 - $41,666 unimproved rate per room is not supported by the unadjusted range of $41,666 - $243,333 unimproved rate for those tourism use comparable sales. Consequently, I do not consider that Mr Dupont has adequately identified how his alternative use approach provides a satisfactory basis upon which to draw conclusions regarding the value of the hotel site. How Mr Dupont applied his adopted rate of $25,000 per room to the property is unclear from his evidence.
119I consider the absence of an explicit process of analysis by Mr Dupont exposing the reasoning and logic adopted significantly limits the usefulness of his expressed opinion of value of the hotel. The Appellant's counsel's cross-examination highlighted the large number of necessary adjustments and the failure to identify these in Mr Dupont's report. Applying the obligations of expert witnesses referred to in par 116 - 117 above, as the facts and assumptions made by Mr Dupont in his report are not explicit nor were they sufficiently elucidated in oral evidence, I consider this part of his report and conclusions therein should not be given any weight.