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Thiess Pty Ltd Arup Pty Ltd[2012] QSC 131

Thiess Pty Ltd Arup Pty Ltd[2012] QSC 131

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

DELIVERED ON:

17 May 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

14 May 2012

JUDGE:

Applegarth J

ORDER:

The report of Mr Geoffrey Walsh, save for section 4.11, will be admitted into evidence.

CATCHWORDS:

EVIDENCE – ADMISSIBILITY AND RELEVANCY – OPINION EVIDENCE – EXPERT OPINION – Qualifications of witness – Where witness is accountant and auditor – Whether witness possesses expertise in a specialised field of knowledge relevant to the proceedings – Whether report prepared by witness sufficiently discloses the bases or reasoning for opinions

COUNSEL:

A J Myers AO QC, P L O'Shea SC and T J Bradley for the applicants

P A Freeburn SC and J P O'Regan for the first and second respondents

SOLICITORS:

Freehills for the first and second applicants

Schweikert Harris for the first and second respondents

Clayton Utz for the third respondent (excused from appearing during the trial)

[1] Objection is taken by the first and second respondents (“PBA”) to the admissibility of the report of Mr Geoffrey Walsh of Pitcher Partners.

Background

[2] The applicants (“TJH”) and PBA are parties to a “Collaborative Consultancy Agreement” (“the CCA”) dated 16 May 2008 in respect of the Airport Link, Northern Busway (Windsor to Kedron) and East-West Arterial Gateway Projects.  TJH engaged PBA as consultants for the design of the project.

[3] The matters in dispute between TJH and PBA include a dispute about the interpretation of the terms of the CCA.  Clause 16.1 of the CCA states that the compensation “set out in the Commercial Framework will be the sole compensation to the Consultant [PBA] for the complete fulfilment of all of their obligations under this Agreement”.

[4] The Commercial Framework contained in Schedule 7 to the CCA provides a “3-Element” compensation model.  Clause S7-1.1.1 relevantly provides:

 

“... the Consultant will be compensated for participating in carrying out Collaborative Agreement Work in accordance with the following ‘3-Element’ model, where:

 

Element 1 =The following costs incurred directly by the Consultant on the Collaborative Agreement Work will be reimbursed at actual cost subject to audit:

 

(i)the cost of personnel performing the Collaborative Agreement Work, including mistakes, rework and wasted effort, but not including costs incurred as a result of, or in committing, remedying or addressing a Wilful Default;

 

(ii)Project-specific overheads related to the Collaborative Agreement Work;  and

 

(iii)actual costs of Project-specific plant and materials ...

 

Reimbursement to the Consultant under Element 1 must not include any recovery of non Project-specific overheads or profit or costs arising under clause 22.4(b)(ii).

 

Element 2 =A fee (‘the Fee$’) to cover normal profit and a contribution towards recovery of non Project-specific overheads.  The entire Element 2 fee paid or payable to the Consultant for all work under this Collaborative Consultancy Agreement is ‘at risk’ based on outcomes of Element 3, in accordance with this Commercial Framework.

 

Element 3 =A share of ‘gain’ or ‘pain’ depending on how our collective actual performance compares with pre-agreed targets in various cost and non-cost key result areas (KRA).”

[5] Clause S7-1.3.1 provides:

 

“Within one month of the Commencement Date of this Collaborative Agreement the Collaborative Agreement Auditor will conduct investigations (‘Compliance Audits’) on the Consultant’s financial records:

 

(a)to clarify the basis of reimbursement under Element 1;  and

 

(b)to ensure that the demarcation between items reimbursable under Element 1 and items that are deemed to be covered under Element 2 (and therefore not directly reimbursable) is clear.”

[6] Clause S7-1.3.2 provides:

 

“All Payments made pursuant to this Collaborative Agreement are subject to investigation by the Collaborative Agreement Auditor and are subject to validation by the Collaborative Agreement Auditor that they are in accordance with the terms of compensation set out in this Schedule 7 and the principles of reimbursement determined during the Compliance Audits or those principles as amended by the Collaborative leadership Team (CLT).”

[7] Clause S7-1.3.3 provides:

 

“TJH will only be liable to reimburse costs to the Consultant to the extent such costs are verified by the Collaborative Agreement Auditor.  Any payment made by TJH shall be on account only until verified by the Collaborative Agreement Auditor.”

[8] Clauses S7-1.3.1 and S7-1.3.2 envisage two distinct roles for the Collaborative Agreement Auditor.  The first is to conduct the investigations described in cl S7-1.3.1, which are described as “Compliance Audits”, within one month of the commencement date of the CCA.  The second role is to undertake tasks of investigation and validation in respect of payments made pursuant to the CCA. 

[9] Reference should be had to the following provisions of the CCA:

 

(a)Clause 18.1(a) which provides:

 

“By the last business day of each month (or such other date as decided by the CLT), the Collaborate Agreement Manager will, with input from the Participants, prepare and submit a Payment Certificate to TJH which includes:

 

(i)costs incurred individually by each Participant, separated into the Airport Link, Northern Busway, and East-West Arterial Gateway (EWAG) elements of the Collaborative Agreement Work;  and

 

(ii)entitlements to the Consultant to Fees and (if applicable) Performance Adjustments.”

 

(b)Clause 18.1(d) which provides:

 

“At the frequency specified in the C.A.M.P. or as determined by the CLT, Certificates must be accompanied by a statement by the Collaborative Agreement Auditor confirming that the amounts shown in the certificate are in accordance with the terms of this Agreement.”

 

(c)Clause 18.3(b) which provides:

 

“Progress payments by TJH will not be evidence of the value of work, or an admission of liability, or that the work has been executed satisfactorily, but will be deemed to be provisional payments on account and subject to a final verification audit by the Collaborative Agreement Auditor.”

 

(d)Clause 20.1(a) which provides:

 

“[The Participants] acknowledge that it is of paramount importance that all commercial aspects of this Agreement are administered in a transparent manner that demonstrates to both Participants that all payments made under this Agreement are in accordance with the terms of this Agreement.”

 

(e)Clause 20.2(c) which provides:

 

“The Collaborative Agreement Auditor’s overriding brief is to carry out audits, to audit and verify Consultant Collaborative Agreement Costs incurred by Participants and to ensure that in respect of all payments made pursuant to this Agreement that PBA receives its exact entitlements as set out in Schedule 7.”

 

(f)Clause 20.3(a) which provides:

 

“Until all payments under this Agreement have been made, the Collaborative Agreement Auditor will have access at all reasonable times to the personnel and Records of the Participants that are related to Consultant Collaborative Agreement Costs pursuant to this Agreement.”

[10] Easdown Consulting Pty Ltd (“Easdown”) was appointed as the Collaborative Agreement Auditor pursuant to the CCA.  In June and July 2008 Easdown conducted investigations into PBA’s financial records.  In these proceedings PBA contends that the investigations conducted by Easdown were conducted pursuant to cl S7-1.3.1 of the CCA and comprised the Compliance Audits pursuant to the CCA.  TJH denies this.  Easdown produced a report dated 25 July 2008 (“the Easdown Report”).  PBA contends that the Easdown Report is the Compliance Audit Report referred to in cl S7-4 of the CCA.

[11] Clause S7-4 contains a table that provides “a high-level summary of what is reimbursable under Element 1” and states that the bases of reimbursement in each category will be as set out in the Compliance Audit Report.

[12] Clause S7-3 assumes importance in the proceedings.  It provides:

 

S7-3.Element 1 – staff rates

 

S7-3.1.1For the purposes of establishing the TOC and Fee$ we have agreed to use $/hr as detailed in Table S7.1.

 

S7-3.1.2Actual Element 1 rates for the Consultant’s staff, Consultant’s contracted staff, and sub-consultants’ staff will be calculated as ‘multiplier’ x ‘Raw Rate’, with the ‘Raw Rate’ to be confirmed during the Compliance Audit.

 

 

Raw Rate

Element 1 Multiplier

Consultant Full Time Staff

= Total Salary Package/1950

= $hrs

= 2.8

Consultant Staff (other than Full Time) including Permanent Part Time Staff, and In-House Contract Staff

= Hourly rate to be determined by CCA Auditor

= to be determined by CCA Auditor

Consultant Contract Staff (staff employed by and integrated into the Consultant team for ALNB or EWAG works only)

= agreed hourly rate

= 1.5

Consultant’s Sub-consultants

= agreed hourly rate

= 1.1

 

S7-3.1.3Without limiting clause S7-4.1.1, items not included in the Raw Rate include project specific hardware and software, travel ‘allowables’ to and from project design office from home office, out-of-town specialist travel and accommodation costs (by agreement with Collaborative Agreement Manager), vehicles for CPS, personnel protective equipment (PPE), etc.

 

S7-3.1.4Actual items included in the Element 1 staff rates comprise (without limitation) salary and salary related overheads, sick leave and the like, tax including superannuation, holiday leave and pay, training not specifically project related, work tools (including hardware and software normally used), staff procurement costs, home office administration support, bonuses, promotions (including salary increases associated with same), mobile phone (including costs), etc.”

[13] After July 2008 Easdown accessed certain records of PBA and validated progress claims.  In July 2009 a meeting of the Collaborative Agreement Leadership Team (“the CLT”) determined that Easdown was not required to conduct audits of PBA’s progress claims until further notice.

[14] In April 2010 the CLT resolved to instruct Easdown to resume investigation and validation of PBA’s progress claims, however, Easdown did not complete any validation of further progress claims and on 23 July 2010 resigned as Collaborative Agreement Auditor.

[15] Subsequently the third respondent (“BDO”) was approached by TJH to undertake the task of Collaborative Agreement Auditor.  It was appointed in October 2010.

[16] BDO sought access to certain records and a dispute arose as to whether PBA was obliged to provide access to them.  The contentions of the parties in that regard appear in a schedule to the second further amended defence and counterclaim and it is convenient to refer to this dispute as the “Access to Records Dispute”.

[17] As noted, TJH denies that the investigations undertaken by Easdown in June and July 2008, and which led to the Easdown Report, comprised the Compliance Audits provided for in the Agreement.  They contend that the investigations undertaken by Easdown did not:

 

(a)clarify the basis of reimbursement under Element 1, as required by
cl S7-1.3.1(a) of the CCA;

 

(b)ensure that the demarcation between items reimbursable under Element 1 and items that are deemed to be covered under Element 2 is clear, as required by cl S7-1.3.1(b) of the CCA;

 

(c)confirm the “Raw Rate” for each of the four categories of staff, as required by cl S7-3.1.2 of the CCA;

 

(d)determine the “Hourly rate” for Consultant Staff (other than Full Time) including Permanent Part Time Staff and In-House Contract Staff, as required by cl S7-3.1.2 Table row 2, column 1 of the CCA;  and

 

(e)determine the multiplier for Consultant Staff (other than Full Time) including Permanent part Time Staff and In-House Contract Staff, as required by
cl S7-3.1.2 Table row 3, column 3 of the CCA.”

[18] It is convenient to refer to this aspect as the “Compliance Audit Dispute”.

Questions asked of Mr Walsh

[19] TJH’s solicitors asked Mr Walsh to provide a report in which he expressed his opinion, based upon his qualifications and experience, about certain matters.  Objection is taken by PBA to Mr Walsh’s report on the basis that he was asked irrelevant questions.  The matters about which Mr Walsh was asked to report are:

 

“(1)The steps involved in audits of the kind described as the Compliance Audits, referred to in clause S7-1.3.1 of the CCA, including:

 

(a)the personnel and Records an auditor would need to examine to carry out the Compliance Audits, in order:

 

(i)to clarify the basis of reimbursement under Element 1;  and

 

(ii)to ensure that the demarcation between items reimbursable under Element 1 and items that are deemed to be covered under Element 2 is clear;

 

(b)the personnel and Records an auditor would need to examine to determine the ‘Hourly rate’ and ‘multiplier’ for Consultant Staff (other than Full Time) including Permanent Part Time Staff and In-House Contract Staff;  and

 

(c)the personnel and Records an auditor would need to examine to confirm the ‘Raw Rates’ specified in clause
S7-3.1.2 of the CCA.

 

(2)With reference to your responses to (1) above:

 

(a)whether the Easdown Report indicates that Easdown examined the personnel and Records an auditor would need to examine to carry out the Compliance Audits referred to in clause S7-1.3.1 of the CCA;

 

(b)whether the Easdown Report indicates that Easdown examined the personnel and Records an auditor would need to examine to determine the ‘Hourly rate’ and ‘multiplier’ for Consultant Staff (other than Full time) including Permanent Part Time Staff and In-House Contract Staff;

 

(c)whether the Easdown Report indicates that Easdown examined the personnel and Records which an auditor would need to examine to confirm the ‘Raw Rates’ in clause S7-3.1.2 of the CCA.

 

(3)The steps an auditor would need to undertake to provide a statement confirming the amounts shown in a monthly Payment Certificate are in accordance with the terms of the CCA, as referred to in clause 18.1(d) of the CCA, including the records an auditor would need to examine.

 

(4)With reference to your responses to (3) above, whether an auditor undertaking that task would need to examine the records referred to in the Schedule of Issues attached to the Defence and Counterclaim filed in the Proceeding.”

The Walsh Report

[20] The Walsh Report addresses these matters, but not in the same sequence or in the form of answers to questions.  It is convenient to adopt from TJH’s submissions the following description of the content and structure of Mr Walsh’s report. 

[21] After setting out certain preliminary matters, Mr Walsh’s opinions are set out in Section 4.  This section begins, in Part A, by identifying the CCA provisions relating to the audit matters.  Mr Walsh sets out first the provisions about the Collaborative Agreement Auditor (at 4.1.1 to 4.1.2) and then those relevant to the Auditor’s tasks (at 4.2.1 to 4.2.6).

[22] In Part B, at 4.3 Mr Walsh explains the audit process: what an audit is;  the fact that the CCA process is a special purpose audit;  and provides an overview of the three stages in which the audit tasks are undertaken.  He then turns to the details of each stage:  at 4.4 he described the planning and assessment stage; at 4.5 the examination stage; and at 4.6 the evaluation and reporting stage. 

[23] Against this background, in Part C Mr Walsh deals with each of the tasks involved in the Compliance Audits. 

[24] First he describes these tasks:  the demarcation of Element 1 and Element 2 costs (4.8.1 to 4.8.6);  clarifying the bases of reimbursement under Element 1 and the confirmation of the “raw rates” (4.9.1 to 4.9.8);  and determining the hourly rate and the multiplier for other consultant staff (4.10.1 to 4.10.2). 

[25] Next he considers the Easdown Report (at 4.11).  He notes the records that the Easdown Report indicates were examined (at 4.11.1 to 4.11.4).  He then notes the records the Easdown Report does not deal with (at 4.11.5).  He then considers the Easdown Report in some detail – the matters it canvasses and those it does not, from an audit perspective, at 4.11.6 to 4.11.17.  At 4.11.18 he concludes that it is not possible for an auditor to determine whether a multiplier of a particular value is appropriate for other consultant staff by reference to a multiplier for another category of staff, without information detailing how the multiplier has been built up and validated. 

[26] Part D of the report deals with the monthly payment claims.  At 4.12.1 to 4.12.3, Mr Walsh identifies the information required to audit a monthly payment claim and identifies two issues raised by BDO in its requests for access to the disputed records.   He sets out BDO’s requests concerning the “build-up” of the raw rate at 4.13.1 to 4.13.7. 

[27] At 4.14, Mr Walsh identifies the information required to audit the raw rate.  He explains why it is required at 4.14.3;  and notes that if the information has been the subject of prior audit investigations and the Auditor was satisfied as to its accuracy, it may not be necessary to repeat the audit process at all or for a period of time after the prior audit.  At 4.14.5, Mr Walsh expresses the opinion that the Easdown Report does not provide a basis for an Auditor to conclude that prior audit investigations had confirmed the accuracy of the raw rate calculation.  He explains why at 4.14.5. 

[28] Then, Mr Walsh deals with the other monthly payment claim issue:  overtime.  He sets out the BDO requests and explanations at 4.15.1 to 4.15.15. 

[29] At 4.16.1 he concurs with the view reported in the Easdown Report about the appropriate multiplier for overtime hours, and explains why.  At 4.16.2 to 4.16.3 he considers the different obligations with respect to overtime and the consequences of them for claims under Element 1 and cost reimbursement. 

[30] At 4.16.4, by reference to the considerations in the previous paragraphs, he comes to the opinion that in order to certify a monthly payment claim that includes a claim of overtime, the Auditor would need to obtain certain information about staff arrangements and examine the records that show the costs included in the staff rates claimed for overtime. 

[31] At 4.16.5, Mr Walsh notes that if the overtime related information has been the subject of prior audit investigations and the Auditor was satisfied as to its accuracy, it may not be necessary to repeat the audit process at all or for a period of time after the prior audit.  At 4.16.6, Mr Walsh expresses the opinion that the Easdown Report does not provide a basis for an Auditor to conclude that prior audit investigations had confirmed the accuracy of the staff rates claimed for overtime.  He gives his reasons for reaching this view.

[32] Finally, at 4.16.7, Mr Walsh expresses an opinion about the Auditor’s responsibility in the event that the Auditor concluded PBA had claimed hourly payments for staff overtime hours, but had not incurred additional cost in respect of those hours. 

The objections to the Walsh Report

[33] There are 11 separate objections to the admissibility of the Walsh Report.  The first is a contention that Mr Walsh was asked irrelevant questions.  The second is that his report does not explain how his field of specialised knowledge enables him to offer an opinion on the questions, and does not disclose whether his expertise is with contracts that are similar or not to the contract in question.  The next and related objection is that his specialised field of knowledge is not identified in the report and Mr Walsh is not shown to be an appropriately qualified expert in any specialised and relevant field.  Next it is submitted that Mr Walsh does not identify how his expert opinions are wholly or substantially based on his specialised knowledge.  The remaining objections are to the whole or part of the report on the grounds that the factual bases for his opinions are not explained or the report does not disclose the reasoning by which he reached his opinions.

Relevant principles of admissibility

[34] The Australian edition of Cross on Evidence summarises the conditions for admissibility of expert opinion as follows:

 

“First, there must be a field of specialised knowledge.  Secondly, 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.  Thirdly, the opinion proffered must be wholly or substantially based on the witness’s expert knowledge.  Fourthly, the expert must identify the assumptions of primary fact on which the opinion is offered (‘the assumption identification rule’).  Fifthly, the opinion is not admissible unless evidence has been, or will be, admitted, whether from the expert or from some other source, which is capable of supporting findings of primary fact which are ‘sufficiently like’ those factual assumptions ‘to render the opinion of the expert of ... value’ (‘the basis rule’).  Sixthly, it must be established that the facts on which the opinion is based form a proper foundation for it.  Seventhly, the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached.  It is not, however, necessary for the expert’s opinions to be described as such:  it is sufficient if in substance they are inferences from assumed facts drawn with the aid of the expert’s expertise.  These are rules of admissibility for the judge, although to the extent that the evidence, though admitted, transgresses these criteria they indicate matters material to weight;  however, there is no duty on the judge to direct the jury not to use the evidence unless they are satisfied the criteria have been complied with.”[1]

The learned authors of Cross observe that the largely formal character of the tests described is revealed by the fact that the tendering party does not have to establish, to get the evidence received, that the opinion evidence “is in fact intellectually convincing”:

 

“That is a matter to be decided at the close of the case.  The question, when admissibility is under consideration, is whether there is reasoning purporting to justify the expert’s conclusion, not whether the reasoning does justify it.  ‘[T]he giving of correct expert evidence cannot be treated as a qualification necessary for giving expert evidence.’”[2]

[35] The requirements that the witness called as an expert must have specialised knowledge based on training, study or experience in a field of specialised knowledge, and that the opinion expressed by the witness must be wholly or substantially based on that knowledge, were discussed recently by the High Court in Dasreef Pty Ltd v Hawchar.[3]  That authority was concerned with the requirements for admissibility contained in s 79(1) of the Evidence Act 1995 (NSW).  However, the observations of members of the Court are relevant to similar common law requirements that govern admissibility.  The Court referred to earlier decisions in relation to legislation that governs the admissibility of expert opinion including Makita (Australia) Pty Ltd v Sprowles.[4]  In Makita,[5] Heydon JA (as his Honour then was) considered the basis upon which expert opinion evidence is admissible including the requirement that the opinion proffered must be “wholly or substantially based on the witness’s expert knowledge”.[6]  In Dasreef, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ observed in relation to such requirements:

 

“… that is not to say that the requirements cannot be met in many, perhaps most, cases very quickly and easily.  That a specialist medical practitioner expressing a diagnostic opinion in his or her relevant field of specialisation is applying ‘specialised knowledge’ based on his or her ‘training, study or experience’, being an opinion ‘wholly or substantially based’ on that ‘specialised knowledge’, will require little explicit articulation or amplification once the witness has described his or her qualifications and experience, and has identified the subject matter about which the opinion is proffered.”[7]

[36] I shall now address each of the objections raised by PBA.

Objection A :Irrelevant questions

[37] The admissibility of the Walsh Report depends upon the qualifications and experience of its author and its content, not the precise form in which questions were asked of that expert.  Still, the questions asked and which are set out in the report bear upon the contents of the report.

[38] The first question asked for Mr Walsh’s opinion about the steps involved in “audits of the kind described as the Compliance Audits” referred to in the CCA, including three specific matters.  PBA submits that the question of what steps are involved in audits of the kind described as the Compliance Audits is an irrelevant question, and the relevant issue is the “investigations” which are, in effect, labelled “Compliance Audits”.  I do not regard the question as an impermissible one, notwithstanding the criticism that the opening words might invite a consideration of audits of an ill-defined class.  The question also asked Mr Walsh to address three specific matters and in answering the question as a whole Mr Walsh did not stray into irrelevant matters.  It was a permissible approach in addressing the matters specifically raised in subparagraphs 1(a), (b) and (c) to first address the three stages involved in a special purpose audit before turning to the steps involved in the Compliance Audits provided for in the CCA.

[39] The second question asked Mr Walsh for his opinion about whether the Easdown Report “indicates” that Easdown examined certain records.  I do not consider that it is appropriate to ask Mr Walsh to provide an opinion about what the Easdown Report “indicates”.  It has not been demonstrated that the reading and interpretation of the Easdown Report is the proper subject for expert opinion.  It has not been shown that the reading and interpretation of the report is a field of specialised knowledge on which expert evidence can be called.  The requirement that there must be a field of specialised knowledge engages certain principles.  One of these principles seeks to exclude evidence on the ground that the ordinary person is as capable of forming a correct view on the question as anyone else.[8]  Expert evidence is not necessary or appropriate in respect of the issue of whether the Easdown Report indicates certain matters.  Experts are not required about subjects where their aid is not necessary.

[40] Moreover, the relevant issue is not so much what the Easdown Report indicates.  The issue is whether Easdown carried out the investigations contemplated by the CCA, and that matter will be the subject of evidence from Mr Easdown.

[41] Accordingly, I decline to receive into evidence that part of the Walsh Report that addresses the second question.  This is section 4.11 of the report.

[42] The third and fourth questions, and the Walsh Report’s responses to them are relevant to the Access to Records Dispute.  I reject PBA’s submissions that these questions are irrelevant.  They assist in the determination of whether BDO is entitled to access certain documents in order to provide the statement contemplated by cl 18.1(d) of the CCA and to conduct the investigation and validation contemplated by cl S7-1.3.2. 

Objections B and C : No expertise or opinion not based on expertise

[43] It is convenient to deal with the second and third objections together.  PBA readily accepts that Mr Walsh is an experienced accountant and his area of expertise includes audits.  Mr Walsh discloses in Appendix 2 to his report his professional background and lists amongst his relevant area of expertise “relationship contracting and development of frameworks to align project outcomes with the commercial expectation of participants”.  He lists a number of infrastructure projects in which he has undertaken establishment audits and/or ongoing audits.  No explanation is given in his report as to how those projects are similar to the CCA and the respects in which they differ. 

[44] As already noted, an expert must be shown to be an appropriately qualified expert in a field of specialised knowledge, and the opinion expressed by the expert must be wholly or substantially based on the expert’s specialised knowledge.  PBA also objects to the admissibility of the report on the basis that Mr Walsh has not explained how his field of specialised knowledge, upon which his opinion is wholly or substantially based, enables him to give the opinions that he does.  PBA complains that Mr Walsh’s Report does not identify how his expert opinions are wholly or substantially based on his specialised knowledge.

[45] I do not accept these objections.  Mr Walsh’s field of specialised knowledge is auditing, and his experience extends to audits of infrastructure projects.  It is implicit that his opinions are based upon his general accountancy and audit expertise, and his expertise in auditing under an alliance contracting framework.  The fact that the “Alliances” to which he refers in his professional profile may differ from the CCA in certain respects, even in significant respects, does not mean that he does not possess expertise as an auditor, and cannot venture an expert opinion on the questions about which he has been asked to report.  I am satisfied from the terms of his report that the opinions expressed by Mr Walsh are substantially based on his specialised knowledge.  It may be that in reaching his opinions he has not taken account, or sufficient account, of differences between agreements that are described as alliances and the CCA.  This, however, is the proper subject matter of cross-examination.  It does not provide a basis to rule the report inadmissible.

Objection D : No basis or reasoning for opinion

[46] PBA submits that Mr Walsh’s assumptions, opinions and reasoning are not explained.  It will be necessary to address specific objections in relation to the reasoning contained in particular passages.  Objection D is of a more general kind and complains that, contrary to the requirement that an expert must state explicitly the facts or assumptions as to fact upon which the opinion is based,[9] the report does not do so.  The report does set out Mr Walsh’s instructions and makes clear that his report is based upon the background facts set out in his instructions.  These are not contentious.  PBA criticises Mr Walsh’s contention that the tasks required under the CCA are “special purpose audits” and, as such, involves three stages.  I consider that his reasoning or assumption that the investigations required by the CCA are in the nature of a special purpose audit is disclosed in the report.  The required investigations are of a special kind and differ from an audit of financial records for statutory returns or the like.  That the investigations that are described as Compliance Audits involves an audit process is obvious enough.  After all, they are described as Compliance Audits and are undertaken by the Collaborative Agreement Auditor.  Mr Walsh offers his opinion about the steps involved in carrying out the Compliance Audits that are referred to in cl S7-1.3.1.  He does so on the basis of the three stages of any audit process and relates those stages to the tasks required of the Collaborative Agreement Auditor under the CCA.  I do not accept this objection.

Objection E : No reasoning regarding certification

[47] PBA objects to the adequacy of Mr Walsh’s reasoning in relation to the task of clarifying the basis of reimbursement under the CCA.  It submits that, by his reasoning, the task of clarification requires, in effect, a full audit, including an audit of raw rates and an audit of the multiplier.  It submits that the process of reasoning is not explained in a form that it is properly comprehensible, and that the reasoning for the opinion expressed is such that one cannot identify the facts relied upon by him, the reasoning flowing from those facts or how his field of specialised knowledge enables him to give the opinion.

[48] I have had regard to paragraphs 4.9.1 to 4.9.8 of the Walsh Report, and there is some substance in the objections.  The reasoning set out in those paragraphs may be criticised.  However, I consider that the report sufficiently discloses Mr Walsh’s reasoning for this part of the report to be admissible. 

[49] Paragraph 4.9.7 states:

 

“The components appropriate to be included in the raw rate depend, in part, on the multiplier to be applied to it.  This is because the product of the raw rate and the multiplier is to provide the Consultant with reimbursement of their actual costs (save for those directly reimbursable outside the staff rates).”

[50] The contention made in this paragraph is central to Mr Walsh’s reasoning.  It is apparent that he apprehended the task of the Collaborative Agreement Auditor in undertaking the Compliance Audits as being to arrive at a “raw rate” which leads to the reimbursement of actual costs.  This begs the question of what the actual costs are and how they are defined in the CCA.

[51] Without canvassing issues of interpretation which I will be required to hear and determine, paragraph 4.9.7 and the Walsh Report in general assume, or at least appear to assume, that the relevant clauses of the agreement should be interpreted in a certain manner.  The interpretation or meaning upon which Mr Walsh’s opinions are based is not entirely clear.  To the extent that this part of his report or any other part is based upon an assumption about the correct meaning of the contract, and this assumption is falsified because a different interpretation of the agreement is adopted by the Court, then Mr Walsh’s opinions will not command acceptance.

[52] I anticipate that Mr Walsh’s assumptions about the meaning of relevant provisions of the CCA will be clarified in the course of his oral evidence.

[53] On the question of admissibility, I consider that the report’s contents sufficiently state the reasoning upon which his opinions are based to permit the report to be admitted into evidence.

Objection F : Reasoning regarding demarcation

[54] Similar issues arise in this context.  The reasoning in section 4.8 of the report is not elaborate.  The conclusion contained in paragraph 4.8.6 cross-refers to earlier parts of the report as a basis for concluding that without certain information the auditor would not be able to form the view necessary to be able to report to the parties.  Again, I consider the report sufficiently discloses the process of reasoning to permit it to be admitted.

Objection G : Reasoning regarding determination

[55] Again, the objection is taken that Mr Walsh’s reasoning is not explained.  In addition, PBA seeks to make something of the fact that Mr Walsh does not acknowledge that there are different methods possible, or even explain how the process would be undertaken.  I regard these matters as the proper subject for submission and not a basis to rule the report inadmissible.

Objection H : Reasoning regarding Easdown Report

[56] I have excluded section 4.11 of the report on other grounds and this makes it unnecessary to consider the adequacy of the reasoning which led to Mr Walsh’s conclusions regarding the Easdown Report.

Objection I : Reasoning regarding monthly audit

[57] Similar arguments are raised in this regard concerning Mr Walsh’s reasoning that the processes required by the CCA involve an auditing process.  The contentions raised by PBA go to the correctness of the opinions expressed by Mr Walsh, rather than to their admissibility.

Objection J : Reasoning regarding build-up of the raw rate

[58] PBA criticises the conclusion reached by Mr Walsh that:

 

“In order to certify the amount claimed in the monthly payment claim, the Auditor needs access to the calculation or build-up of the raw rate for each individual included in the payment claim.  This information is required so that the Auditor can check that the raw rate has been calculated correctly.”

PBA submits that this is a “bizarre conclusion unsupported by any discernible reasoning”.  However, the report does contain Mr Walsh’s explanation at paragraph 4.14.3.  I consider that the report is sufficient to allow this section to be admitted into evidence.

Objection K : Reasoning regarding monthly overtime claim

[59] Again, PBA’s objections relate to the adequacy of Mr Walsh’s reasoning.  I do not consider that it has established a valid ground for objection.

Conclusion

[60] Save for that part of the report which responded to Question 2 in relation to the Easdown Report, I decline to uphold PBA’s objections to the admissibility of the Walsh Report.  Mr Walsh has sufficiently exposed the reasoning upon which his opinions are based to allow cross-examination.  Mr Walsh has not made terribly clear the interpretation of the agreement upon which some of his opinions are based.  In particular, his opinions appear to assume that the agreed multipliers may be subject to audit for at least certain purposes.  If the interpretation of the agreement upon which his opinions are based proves to be incorrect then his opinions will be undermined.  As with any other assumption upon which an opinion is based, assumptions made by Mr Walsh as to the meaning of the contract will need to be established if his opinions are to be relied upon.  The assumptions upon which his report are based and the reasons for his opinions are sufficiently stated to satisfy the requirements for admissibility.  He has expertise in a field of specialised knowledge, and his opinions appear to be based substantially upon that knowledge. 

[61] The opinions expressed in his report, save for section 4.11, are relevant to the Compliance Audit Dispute and the Access Records Dispute.  The report, save for section 4.11, will be admitted into evidence.

Footnotes

[1] Paragraph [29045] (footnotes omitted).

[2] Ibid, citing Commissioner for Government Transport v Adamcik (1961) 106 CLR 292 at 303.

[3] (2011) 243 CLR 588 (“Dasreef”).

[4] (2001) 52 NSWLR 705 (“Makita”).

[5] At 744 [85].

[6] At 744 [85].

[7] Supra at 604 [37].

[8] Cross on Evidence (2nd Australian Edition) para [29050].

[9] Makita (supra) at [64], [69] and [85].

Close

Editorial Notes

  • Published Case Name:

    Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors

  • Shortened Case Name:

    Thiess Pty Ltd Arup Pty Ltd

  • MNC:

    [2012] QSC 131

  • Court:

    QSC

  • Judge(s):

    Applegarth J

  • Date:

    17 May 2012

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2012] QSC 13117 May 2012Court's ruling on an objection to the admissibility of an expert's report relied on by the applicants: Applegarth J.
Primary Judgment[2012] QSC 18510 Jul 2012Dispute between parties over differing interpretations of the terms of an agreement that governed the respondent's entitlement to compensation under the agreement. Declarations as to the proper construction of the agreement made: Applegarth J.
Appeal Determined (QCA)[2013] QCA 6502 Apr 2013Appeal allowed to the limited extent of deleting a declaration made below. Appellant ordered to pay the respondents costs: McMurdo P, Muir JA, Gotterson JA.

Appeal Status

Appeal Determined (QCA)

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