FEDERAL COURT OF AUSTRALIA Calder v Commissioner of Taxation [2004] FCA 1769 EVIDENCE – expert's affidavit – rulings on objections Evidence Act 1995 (Cth) s 79 Income Tax Assessment Act 1936 (Cth) s 177D ; MICHAEL CALDER v COMMISSIONER OF TAXATION W13 of 2003 MICHAEL CALDER v COMMISSIONER OF TAXATION W14 of 2003 RD NICHOLSON J 6 OCTOBER 2004 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W13 OF 2003 W14 OF 2003 BETWEEN: MICHAEL CALDER APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: RD NICHOLSON J DATE: 6 OCTOBER 2004 PLACE: PERTH REASONS FOR JUDGMENT 1 These are my reasons in relation to objections raised to the proposed tender of the affidavit of Mr Langridge sworn on 17 September 2004. He describes himself as a partner in the accounting firm of Deloitte Touche Tohmatsu, chartered accountants, and leading the Deloitte forensic practice in Perth. He states that he has extensive experience in relation to the matters on which he was briefed and he describes his report as relating to the Main Camp Tea‑Tree Oil Project Number 3. I will turn to more fulsome description of his qualifications as appears at p 27 of his report under the heading 'Qualifications and Experience'. 2 Mr Langridge says that he was admitted to the partnership of the firm in July 1998, having been previously employed by Arthur Andersen from 1987 to 1996. He states that from 1986 to 2001 he practised in the area of general business and taxation advisory and compliance services. He also undertook financial and strategy consulting work in both the public and private sectors. In June 2001 he established a forensic accounting practice as the lead partner and has been in that role fulltime since that date. 3 His tertiary qualification is a Bachelor of Arts with joint honours in accounting and economics from the University of Stirling, Scotland, taken in 1983. He has a variety of professional memberships including in chartered accountants and accountant institutes. 4 He is also registered as a tax agent and a licensed investigator under the Securities and Related Activities (Control) Act 1996 (WA) since July 2001. 5 Among his relevant experience he lists giving expert testimony in this Court and in the Supreme Courts of Western Australia and the Northern Territory. He lists a number of matters in relation to which his expert reports have been prepared. 6 The basis on which expert opinion is received is that stated in s 79 of the Evidence Act 1995 (Cth) which, as is well known, says that if a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. This is an exception to the general opinion rule elsewhere stated in the Act excluding opinion evidence. The keys to the application of the section are the terms that I have referred to, namely, that the person has 'specialised knowledge'. It is also significant that that knowledge may be derived from training, study or experience. It is not just knowledge gained either in training alone or in professional experience alone but may be a combination of those factors. It is important also to examine whether the opinion which is sought to be admitted is wholly or substantially based on that specialised knowledge so derived. 7 Initially a global objection was made to the whole of the affidavit of Mr Langridge on the basis that he is said to be addressing matters relating to agriculture generally, in which he has no experience, or matters which transgress into the area of investment advice, for which he is not license. However in the course of presenting submissions on particular passages it became apparent that they are matters that counsel for the objector applicant accepted involved the application of accounting skills and hence within what the applicant accepted as being the expertise of Mr Langridge. 8 I am not sure that to confine Mr Langridge's expertise to that of an accountant gives due credence and width to the provisions of the Evidence Act to which I have referred. He seems to me, from his training, study and experience, to have derived specialised knowledge going beyond pure accounting work and relating to many aspects of business and investment. That is exemplified, I believe, by the type of expert testimony which is listed as having been given by him. 9 I also do not accept that because he is not a licensed investment adviser, he is necessarily to be precluded from giving expert opinion in the terms sought, subject to examination of the particular passages. If his specialised knowledge, based on his training, study or experience, extends to the matters to which the objection relates, even if that expression of opinion wholly or substantially based on that knowledge transgresses into areas that an investment adviser might be licensed to practice in, that would not preclude this expert from giving that opinion simply because he is not a licensed investment adviser. The real question is whether his specialised knowledge as described in the attachment to the affidavit entitles him to make the statements to which objections are directed, and I turn to each of those. 10 The passages at pp 6, 7 and 8 of the report involve comments regarding statements in the prospectus and involve the proposed witness stating that they may be potentially misleading. I accept the submission for the respondent that s 177D of the Income Tax Assessment Act 1936 (Cth), requiring that regard is to be had to the manner in which a scheme was entered into or carried out, makes the manner in which the prospectus was expressed a relevant factor. I accept the further submission for the respondent that the approach of this witness is one which relates to the effect such statements would have had on calculations. So even by the applicant's definition of the expertise of the proposed witness, his evidence would be within that expertise. 11 At p 9 of the report, the issue there is again whether the prospectus in allowing for the increase by the rate of inflation has had a certain impact on the calculations that then flow from that premise. I again agree with the respondent that this is within the ambit of the expertise of the proposed witness, on the basis of the breadth of his accounting experience. It follows that I would not allow the objection to p 10 of the report, which I think has to be read with it. That brings me to p 12 of the report and the paragraph objected to there. Again, that paragraph deals with projections and the impact of the inflationary factor; in my view, that paragraph encompassed by the same reasoning which would lead to the disallowance of the objection. 12 The paragraph on p 13 of the report seeks to address the high-risk, low-return issues in relation to Mr Calder making an investment as an investor and is operative upon presumed investment risk profiles. It is substantially addressing assumptions in the prospectus and whether the returns calculated therein were of a reliable standard. That is within the expertise of the proposed witness. So far as it is based on presumed investment risk profiles, they are matters that are derivative from the prospectus and in any event I consider that the paragraph is one which is wholly or substantially based on the aspect of the calculation. If the presumed investment risk profiles have no foundation in fact then that will go to the weight of the evidence and I will hear more of it. 13 Again, so far as the selection of passages from the CALM report may be selective, that in my view is a matter going to the weight of the proposed evidence. I would consider that p 14 of the report continues the calculation approach in furtherance of the main thesis and is within the expertise of the proposed witness. 14 In relation to p 15 of the report, the statement beginning 'I note Mr Calder' and ending 'by this statement' is not one which is founded on the witness's expertise. I would therefore allow the objection to that statement. As to p 18 of the report, that is simply the witness's explanation of what he understands par 32 of the applicant's affidavit to mean, a paragraph which he is addressing. It simply clarifies what he is proceeding on. There are no objections taken to his quotation of that paragraph at the commencement of the section and in my view the quotation is making clear what he considers he is addressing in that paragraph. 15 The second last paragraph on p 18 of the report beginning 'This assumption' is also the subject of an objection. Again, I have already said that I do not consider that this witness is precluded from expressing opinions that transgress into the area of an investment adviser which are likely to be within his own specialised knowledge. In my opinion, this paragraph falls into that category and I would not allow the objection in relation to it. 16 In relation to p 19 of the report, an objection is taken to the quotation from two documents in the prospectus. This follows the quotation of par 23 of the applicant's affidavit in which he stated, 'Overall the opinions and forecasts in the prospectus were corroborated by the actual progress being made by Main Camp'. No objection is taken to the quotation of that paragraph. These other quotations of documents in the prospectus, if selective, will be issues that go to the weight of the evidence which might follow. These are simple quotations from the two documents concerned and I do not consider that this witness is precluded from drawing attention to them. The only element of opinion seems to be in a central paragraph, where he comments on business aspects of the quoted opinion of CALM. It would not seem to me that that falls outside his specialised knowledge as a person dealing with businesses. 17 At p 21 of the report, however, there is an opinion which seems to me to be conclusionary of an issue before the Court, that is, the last opinion on that page which seeks to express the witness's conclusion from the factors to which he has drawn attention. In that particular instance it is opinion evidence by which the Court is not assisted. The issue is something on which the Court itself must reach its conclusion from all the evidence before it. I would therefore allow the objection to that paragraph. 18 These are my rulings in relation to the objections to the affidavit of Mr Langridge. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 25 January 2005 Counsel for the Applicant: MJ McCusker QC with FC Wilson Solicitor for the Applicant: Wilson and Atkinson Counsel for the Respondent: H Symon SC with LB Price Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 6 October 2004 Date of Judgment: 6 October 2004