Australia: Expert valuation evidence - when you should do more than use your brain

The recent decision in Eckford v Six Mile Creek Pty Ltd (No.2) [2019] FCA 1307 (Eckford) provides a valuable insight into the Court's considerations when determining the reliability of expert evidence.

It is also a timely reminder for experts that care and skill must be applied when forming an opinion and giving evidence during the course of proceedings, whether that be through the provision of an expert report or providing oral testimony.

Background

Mr Eckford commenced proceedings against Six Mile Creek alleging, amongst other things, that Six Mile Creek made misrepresentations during the sale of a lot of land. The substance of Six Mile Creek's representations in 2007 were as follows:

  • three lots of land (Lots), located on the southern boundary of the lot purchased by Mr Eckford had building covenants on them; and
  • the building covenants contained height restrictions limiting the height of any buildings, trees and vegetation.

In 2016, it came to Mr Eckford's attention that the Lots were sold to third parties by contracts that did not contain any of the height restrictions that were represented to Mr Eckford in 2007. This ultimately had a significant impact on the views from Mr Eckford's property.

Expert evidence was adduced in the proceedings in relation to the valuation of the lot purchased by Mr Eckford. This included a consideration of comparable properties and the views from these properties. Expert evidence was given by Mr Leeson (for Mr Eckford) and Ms Hunt (on behalf of Six Mile Creek). The court in Eckford (composed of Rares J) preferred Mr Leeson's evidence to that of Ms Hunt.

In this bulletin, we address the issues raised by Rares J in considering the expert evidence in the case and draw insights as to how experts should approach the provision of evidence.

  1. Prove expertise

An expert's written report must comply with the relevant expert witness code of conduct (Code) (In New South Wales the Code is found at Schedule 7 of the Uniform Civil Procedure Rule 2005 (NSW) and in Federal Court matters it is contained in the GPN-EXPT practice note). They require:

  • an acknowledgement that the expert has read, understood and agrees to be bound by the Code; and
  • a statement of the qualifications of the expert, establishing their entitlement to give evidence as an expert.

In Eckford, Ms Hunt was criticised by Rares J for:

  • not setting out any detail of her experience;
  • not providing detail of her career in the report; and
  • not stating when she qualified in Australia to give expert evidence, noting that she obtained her qualifications in the United Kingdom.

By comparison, Mr Leeson provided a detailed curriculum vitae. This assisted Mr Leeson in persuading Rares J that his evidence should be preferred.

It is imperative that experts comply with the formal requirements of the Code, and also detail their particular expertise for the task they have been retained to perform. Otherwise, their evidence may not be accepted as 'expert' at all, or given very little weight.

Useful tip: Experts should prepare and routinely update a curriculum vitae with detailed background of their training, study and experience which can then be tailored to suit each engagement as the emphasis for each engagement requires.

  1. Know the facts of the case

The Code requires experts to state, specify or provide the assumptions and material facts on which each opinion expressed in the report is based.

There is no utility in giving evidence based on assumptions that are contrary to the material facts of the case. In Eckford, on more than one occasion, Ms Hunt provided conclusions and opinions that were contrary to the actual facts. Some of these were as follows:

  • Ms Hunt erroneously stated in her report that at the time Mr Eckford purchased the lot in 2007, the property was subdivided into two separate lots. It was, in fact, not subdivided at that time but at a later date; and
  • Ms Hunt approached her 2007 valuations on the basis that the whole estate was unique and new to the market and was being marketed in stages. In contrast, Mr Leeson approached the valuation task on the basis that the whole estate had been on the market for about six months, as was the fact. This difference in approach caused a difference in the value of the relevant lot which was conceded by Ms Hunt in her oral evidence.

Ultimately, if it is evident that an expert is unaware of the facts or provides an opinion or assumption that is contrary to a material fact of the case, the court is likely to attribute less weight to their evidence.

Useful tip: Experts should ensure that they understand the material facts of each matter they are engaged to comment on. While this is often dependant on the accuracy and detail included in letters of instruction to the expert, experts should take positive steps to confirm the factual circumstances of the matter, and where assumptions must be made, prior to forming their opinion.

Useful tip: As cases evolve, the facts and assumptions relevant to an expert's opinion can change, and during a trial often very quickly. An expert should be able to clearly identify the facts and assumptions relevant to their opinion at the various stages of the case – report writing, expert conclave and oral evidence – and be able to modify their opinion to take into account changes in these factors.

  1. Do your Research

The Code requires experts to state, specify or provide:

  • the reasons for and any literature or other materials utilised in support of each opinion;
  • any examinations, tests or other investigations on which the expert has relied, identifying the person who carried them out and that person's qualifications; and
  • whether any opinion expressed in the report is not a concluded opinion because of insufficient research or insufficient data or for any other reason.

During the course of preparing their valuations, both Mr Leeson and Ms Hunt selected a number of properties as comparable sales to value the lot purchased by Mr Eckford. In the course of giving evidence, it came to light that:

  • Ms Hunt did not access the properties she used as comparable sales and as such, did not physically inspect the actual views from those properties;
  • unlike Mr Leeson's careful research, which included actual inspections of comparable properties referenced in his report, Ms Hunt:
    • inspected the views from the comparable properties by standing on the street outside them;
    • gave evidence that because she inspected the properties by standing on the street outside them, she "was able to determine from [her] brain" and "[her] own knowledge" the comparable elevations rather than using contour data or measurements; and
  • Ms Hunt's reliance on her own perception of contour height, rather than actual measurements, meant that some of the comparable properties she chose were not reasonably relevant or comparable when providing her valuation.

As result of the above, Ms Hunt's approach to valuation and her selection and evaluation of what she regarded as comparable properties was found by Rares J to be unscientific, at times prone to exaggeration and unpersuasive.

Useful tip: Ensure that conclusions are properly researched with demonstrated reasoning and where possible, supported by empirical data whether collected and analysed by you or someone else. Where another person's data is to be relied upon, ensure that the author, piece of work and extent of reliance is properly referenced.

Useful tip: Ensure comparable properties are truly comparable! If an expert is unable to demonstrate how a property is actually comparable and the reasoning process for this conclusion when forming their opinion on the value of the subject property (as was the case for Ms Hunt), it is likely that the Court will attribute that expert's evidence little weight.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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