Re Earlturn Pty Ltd

This decision concerned an objection to the admissibility of a forensic accountant’s expert report on the ground that the report’s reliance on information drawn from an “IBIS World Industry Report” and “Payscale.com” provided insufficient basis for the expert’s conclusions as these documents were admissible. Ultimately, Henry J held that the “IBIS World Report” was admissible as it was within the expert’s field of expertise, but the information from “Payscale.com” was not.

Henry J

28 April 2021 (delivered ex tempore)

In the context of a winding up application, objection was taken to the admissibility of a forensic accountant’s expert report. In that report, the expert concluded that the wages and salary costs of the company were significantly higher than industry benchmarks and that the wages of particular employees exceeded those expected in the industry for the roles that they performed. The expert’s conclusions were premised on forensic analysis of the company’s accounts, and on purported benchmarks drawn from an “IBIS World Industry Report” and “Payscale.com”.

The second respondent contended that it was impermissible for the IBIS Report and Payscale.com information, as inadmissible hearsay, to form the basis of the expert’s opinion. In addressing this issue, Henry J observed that there were two ways to avoid this operation of the basis rule. First, through “the taking of judicial notice of well-known, reliable data sources”. Secondly, where “the data is part of the corpus of the expert’s professional field of learning and experience, drawn from sources known to, and considered reliable, by those who are experts in that professional field”.

It was this second path that was relevant here. Justice Henry observed that a “difficult issue attending this admissibility pathway is the question of where the line is to be drawn between data which is and is not within the expert’s true field of expertise”. The question in this case was whether the IBIS Report and Payscale.com information could be considered within the expert’s expertise as a forensic accountant.

Based on the expert’s evidence that the IBIS Reports were used by other forensic accountants, Henry J was prepared to infer that forensic accountants “do sanction the trustworthiness of IBIS reports” and that the expert “comprehends the IBIS reports’ methodology”. In drawing these inferences, his Honour placed emphasis on the fact that the IBIS Report contained “comprehensive analytical detail”. Conversely, Henry J was unwilling to draw such inferences in respect of the Payscale.com information. In his evidence, the expert was unaware of Payscale.com being used by other forensic accountants and he “seemed unaware of Payscale.com’s methodology”. In Henry J’s view, Paycale.com only provided “spartan information” as to its methodology, in contrast to the IBIS Report.

Accordingly, Henry J considered that the Payscale.com information did not provide a sufficient basis for the expert’s conclusion. As for the IBIS Report, while “finely balanced”, his Honour considered that it did satisfy the basis rule.

In the result, the paragraphs of the expert report relying on the Payscale.com information were struck out.

S Walpole of Counsel