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- Notable Unreported Decision
SUPREME COURT OF QUEENSLAND
Springfield City Group Pty Ltd v PIPE Networks Pty Ltd  QSC 80
SPRINGFIELD CITY GROUP PTY LTD
ACN 055 714 531
PIPE NETWORKS PTY LTD
ACN 099 104 122
BS 2798 of 2016
21 April 2021
16 April 2021
The orders of the Court are:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – where the plaintiff seeks leave to amend its fourth further amended statement of claim – where the plaintiff provided a further document which is to be regarded as particulars of the proposed pleading – where, save for one paragraph of the proposed pleading, the defendant did not object to a grant of leave to amend the pleading in the form sought by the plaintiff – where the defendant conceded that its concerns as to the paragraph to which it objected could be remedied by requiring the plaintiff to provide further particulars
EVIDENCE – ADMISSIBILITY – OPINION EVIDENCE – EXPERT OPINION – GENERALLY – where the plaintiff was previously given leave to file and serve a further report from its expert – where the plaintiff later provided a further “addendum” report from the subject expert – where the defendant agreed in oral argument not to press several of the objections advanced in writing – where the defendant maintained an objection to the admissibility of the reports on the ground that they provided an insufficient statement of the reasoning by which the expert had reached his conclusions – whether the expert’s reports failed to comply with the statement of reasoning rule
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7)  QSC 241, applied
Wilson v Bauer Media (No 7)  VSC 357, cited
D Savage QC, with W LeMass, for the plaintiff
D de Jersey QC, for the defendant
McBride Legal for the plaintiff
RBG Lawyers for the defendant
- I explained the nature of the issues which arise in the present proceeding in Springfield City Group Pty Ltd v Pipe Networks Pty Ltd  QSC 395, delivered ex tempore on 20 November 2020. The present reasons will assume the reader is familiar with that judgment (my previous judgment).
- As I explained in my previous judgment, the plaintiff sought to prove the quantum of its claims for damages and for account of profits by way of the expert opinion evidence of Mr O’Shea, a chartered accountant. Mr O’Shea had appropriate professional qualifications and experience.
- In order to elicit admissible expert opinion evidence of the nature sought, the plaintiff necessarily had to ask Mr O’Shea to make assumptions about the operational and financial performance of the fibre optic networks concerned, and then to address the questions asked of him by reference to those assumptions.
- As I explained in my previous judgment, one problem was that a 2019 report of Mr O’Shea proceeded by reference to a particular set of assumptions, but, after the report was produced, the plaintiff made the forensic decision to prove the underlying facts in a completely different way. As a result, the defendant objected to the admissibility of the 2019 report and to relevant parts of the joint report on the basis that the report should be regarded as almost entirely based on obsolete assumptions. I accepted that submission in my previous judgment.
- The way in which the plaintiff sought to proceed was to ask Mr O’Shea to make assumptions concerning the operational and financial performance of the fibre optic networks concerned by reference to a Scott Schedule entitled “Revenue Data Schedule”. I explained the nature of the Revenue Data Schedule and the information contained in it in my previous judgment and annexed an extract from it.
- Mr O’Shea prepared a further expert report dated 15 November 2020 based on the instructions that he should assume the truth of the information contained in the Revenue Data Schedule. He used the Revenue Data Schedule as the source of inputs which he made into the mathematical model which he had used for the 2019 report and the joint expert report (albeit based on a different set of inputs). He and the defendant’s expert had previously reached agreement that the mathematical model was to be regarded as a broad framework which was suitable for loss and account of profits calculation purposes. The model, which may be referred to as the KM Model, took the form of an Excel workbook containing a series of individual spreadsheets used to calculate various outcomes.
- The Revenue Data Schedule was only itself completed on the last working day before the commencement of the trial and Mr O’Shea’s 15 November 2020 report was only produced halfway through the trial. The plaintiff needed leave to rely on that report (and the KM Model which formed part of it) because of the lateness of its production. Leave was opposed, including on the basis of objection to the admissibility of various parts of the report.
- My previous judgment explained the way in which I resolved the issues which were then before me. As I there explained, the structure of Mr O’Shea’s 15 November 2020 report was very much a bare ipse dixit by Mr O’Shea in which the KM Model was presented as little more than a “black box” through which facts had been processed to get an outcome. I concluded that the report did not sufficiently articulate the reasons which justified the conclusions it expressed.
- The result was that, amongst other things, I made the following orders:
- The plaintiff’s application for leave to tender the report of Mr O’Shea dated 15 November 2020 is dismissed.
- The plaintiff has leave to file and serve a further report from Mr O’Shea by 29 January 2021 which:
- consolidates his reasons;
- (subject to (d)) which is based on the assumptions identified in the report referred to in order 1;
- contains a statement of the reasoning and identifies the basis for his opinions;
- is relevant to the pleaded issues in the proceeding.
- The ruling on the defendant’s objections to Mr O’Shea’s report of December 2019 and to the joint expert report of Mr O’Shea and Mr Lytras is otherwise reserved.
- The trial of the proceeding is adjourned to a date to be fixed.
- The plaintiff did not file and serve a further report from Mr O’Shea by the date specified in order 2. Mr O’Shea’s further report was dated 5 February 2021 and was filed on 8 February 2021. The lateness necessitated an application by the plaintiff for leave to tender the further report.
- After Mr O’Shea’s 5 February 2021 report was filed, the defendant advanced and the plaintiff responded to various objections to its admissibility. The defendant’s objections resolved into two categories, namely –
- (a)parts of the 5 February 2021 report were irrelevant because they expressed views based on unpleaded counterfactual scenarios relevant to the plaintiff’s damages case; and
- (b)parts of the 5 February 2021 report were inadmissible because: (1) they relied on assumptions not sufficiently identified; and (2) they relied on reasoning which was not sufficiently exposed.
- The plaintiff made two substantive responses to the two categories of objections.
- First it obtained a further “addendum” report from Mr O’Shea dated 13 April 2021. Its application before me was for leave to tender the 5 February 2021 report; the addendum report; and the electronic Excel spreadsheet workbook which was the “KM Model” referred to in both reports. The last document (in electronic form contained on a USB flash drive) was exhibit 1 before me on the interlocutory application. It was essentially an updated form of the KM Model referred to in Mr O’Shea’s 15 November 2020 report and discussed in my previous judgment.
- Second, it proposed to amend its statement of claim in the form of a fifth further amended statement of claim, a draft of which was exhibit 2 before me on the interlocutory application. That became the plaintiff’s second application before me.
- During the course of argument before me, senior counsel for the plaintiff –
- (a)confirmed that the applications were advanced on the basis that the plaintiff did not propose to adduce further lay evidence in the trial;
- (b)confirmed that the application for leave to tender the reports of Mr O’Shea was advanced on the basis that the tender of Mr O’Shea’s 2019 report was withdrawn as Mr O’Shea’s proposed expert opinion evidence was contained in the two 2021 reports;
- (c)supplemented the proposed fifth further amended statement of claim with a further document (exhibit 3 before me on the interlocutory application) which, he confirmed, was to be regarded as particulars of the proposed pleading and which confined the plaintiff’s case; and
- (d)confirmed that the plaintiff would not be advancing a case at trial in reliance on the counterfactual scenarios identified in the evidence before me as scenarios 1 and 2.
- The result was that senior counsel for the defendant then advised me –
- (a)save for objections to paragraph 2AAAAR of the proposed pleading (which he conceded could be addressed by requiring the plaintiff to provide some further particulars), he no longer objected to a grant of leave to amend the pleading in the form sought;
- (b)if leave to amend was granted in the form sought and, in particular, in reliance on what senior counsel for the plaintiff had said concerning scenarios 1 and 2, the defendant would not press the first category of objections which it had advanced;
- (c)having regard to the amendments and to the addendum report, the defendant would not press the objections which had been advanced on the basis of insufficient identification of the assumptions relied upon by Mr O’Shea;
- (d)however, the defendant maintained the objections which he had articulated in writing and orally in reliance on a suggested insufficient statement in the reports of the reasoning by which Mr O’Shea had reached his conclusions.
- Senior counsel for the plaintiff agreed that the plaintiff could and would provide the particulars which had been identified as requisite during the course of argument. The result was that the only issue of substance upon which my ruling became necessary was the validity of the objections advanced in reliance on the so-called “statement of reasoning” rule.
- I summarised my view of the relevant law in Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7)  QSC 241 at  and applied that law in my previous judgment in this proceeding. No submission has been made that the law was erroneously stated. Accordingly, that is the law which I will apply.
- It suffices to deal specifically with the objection which was advanced in relation to paragraphs 2.3.3 and 2.3.4 of Mr O’Shea’s 5 February 2021 report, those paragraphs now being assessed with the benefit of the additional explanation contained in the addendum report of 13 April 2021. If the objections in relation to those paragraphs fail, then so do the other objections advanced on the same basis.
- The paragraphs appeared in the summary portion of the 5 February 2021 report. Paragraph 2.3.3 identified, in tabular and graphical form, Mr O’Shea’s assessment of the plaintiff’s lost profits from the Springfield Network as a result of the construction by the defendant of the Duplicate Network for the period 1 November 2009 to 16 February 2021 and 16 February 2036, adopting a discount rate of 18.0 per cent. The figures there recorded derive from particular tabs and cells from the KM Model. The KM Model is explained in section 4 and in appendix E to the report, and the general approach and methodology to the assessment of lost profits is further explained in section 3 and appendix F to the report. Section 4 and appendix E in particular present a detailed explanation as to the way in which data from the Revenue Data Schedule was input into the KM Model. Further information concerning the identification of the assumptions which had been relied on in the way previously explained was presented in the addendum report. Further information as to the extent of updates which had occurred to the KM Model was also presented in the addendum report.
- It was submitted by senior counsel for the defendant that there were matters within that explanation which should still be regarded as imperfectly developed and about which I would have some concerns as to whether I could sufficiently understand what had been done by Mr O’Shea.
- That may well be true. However, it is important to appreciate that the relevant rule of admissibility is not that the expert’s reasoning be perfectly articulated. It is not that the expressed reasoning be of such detail or cogency that, without more, the Court would inevitably accept the opinion as sound and give it full weight. The rule requires only that the expert must state, in chief, the reasoning by which the conclusions arrived at flow from the facts proved or assumed by the expert so as to reveal that the opinions expressed are based on the expert’s expertise. As Dixon J observed in Wilson v Bauer Media (No 7)  VSC 357 at :
“It is not the court’s function when the question of admissibility arises to engage in a comprehensive assessment of the reasoning. That is a matter best explored either in cross-examination or in submissions.”
- I have examined the material in the parts of the reports to which I have referred above. It is obvious from its nature that the opinions are based on Mr O’Shea’s expertise. The criticisms which I advanced in my previous judgment as to the form of his 15 November 2020 cannot be made of the current reports. I am satisfied that the impugned parts of Mr O’Shea’s 5 February 2021 report do present a statement of reasoning which reveals that the opinions expressed are based on Mr O’Shea’s expertise. I think that the defendant’s argument to the contrary seeks to invite me to engage in the sort of assessment of the expert’s reasoning which is not appropriate at the admissibility stage. Accordingly, I would overrule the objection taken to paragraphs 2.3.3 and 2.3.4 of the 5 February 2021 report based on the statement of reasoning rule.
- I make the following orders:
- The plaintiff has leave to amend the fourth further amended statement of claim in the manner identified in the draft fifth further amended statement of claim which is exhibit 2 and as further particularised in exhibit 3.
- The plaintiff must provide the defendant further particulars of paragraph 2AAAAR of the fifth further amended statement of claim.
- The plaintiff has leave to tender at the trial of this proceeding –
- (a)the report from Mr O’Shea dated 5 February 2021 (CFI 116);
- (b)the Excel workbook setting out the KM Model (exhibit 1);
- (c)the addendum report from Mr O’Shea dated 13 April 2021 (exhibit JGR-10 to the affidavit of Joshua Galvin Robson CFI 125).
- Insofar as the defendant advanced objections to the admissibility of parts of the reports based on the insufficiency of the statement of reasons by Mr O’Shea, those objections are overruled.
- I will hear the parties on costs and on any further directions which should be made in relation to this proceeding, including in relation to –
- (a)the time by which the plaintiff must comply with order 2;
- (b)the time by which any further pleadings must be delivered;
- (c)any expert opinion evidence to be adduced by the defendant;
- (d)joint expert conferences;
- (e)the production of a joint expert report; and
- (f)further trial dates.
- Published Case Name:
Springfield City Group Pty Ltd v PIPE Networks Pty Ltd
- Shortened Case Name:
Springfield City Group Pty Ltd v PIPE Networks Pty Ltd
 QSC 80
21 Apr 2021
- White Star Case: