Reported Decision : (2003) 45 ACSR 564 (2003) 21 ACLC 1206 New South Wales Supreme Court CITATION : Dean-Willcocks v Commonwealth Bank of Australia [2003] NSWSC 466 HEARING DATE(S) : 28 May 2003 JUDGMENT DATE : 29 May 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Experts' reports inadmissible CATCHWORDS : EVIDENCE - expert opinion evidence - evidence as to reasonable grounds to suspect solvency and whether a reasonable person in the defendant's circumstances would suspect insolvency - whether experts' opinions wholly or substantially based on their specialised knowledge - whether experts' opinions would usurp function of trier of fact - whether evidence should be excluded on discretionary grounds LEGISLATION CITED : Corporations Act 2001 (Cth) ss 588FA, 588FE, 588FF, 588FG Evidence Act 1995 (NSW) ss 55, 76, 79, 80, 135 AAPT Ltd v Cable & Wireless Optus Ltd (1999) 32 ACSR 63 Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NSWSC 757 ASIC v Adler [2001] NSWSC 1103 Dyson v Pharmacy Board of New South Wales (24 October 2000, unreported) Godfrey v NSW (No 1) [2003] NSWSC 160 CASES CITED : Harkness v Commonwealth Bank of Australia (1993) 32 NSWLR 543 Keith Smith East West Transport Pty Ltd v Australian Taxation Office (2002) ACSR 501 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Notaras v Hugh [2003] NSWSC 167 Quick v Stoland Pty Ltd (1998) 87 FCR 371 Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 Ronald John Dean-Willcocks (in his capacity as Liquidator of Austral Pacific Group Ltd (in liquidation)) (P1) PARTIES : Austral Pacific Group Ltd (in liquidation) (P2) Commonwealth Bank of Australia (D) FILE NUMBER(S) : SC 5259/01 COUNSEL : C R C Newlinds with A Seward (P) R Forster SC with M B J Lee (D) SOLICITORS : Kemp Strang (P) Corrs Chambers Westgarth (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J THURSDAY 29 MAY 2003 5259/01 RONALD JOHN DEAN-WILLCOCKS (IN HIS CAPACITY AS LIQUIDATOR OF AUSTRAL PACIFIC GROUP LTD (IN LIQUIDATION)) & ANOR V COMMONWEALTH BANK OF AUSTRALIA JUDGMENT 1 HIS HONOUR: These reasons for judgment relate to the question whether two reports by experts are admissible at the hearing of unfair preference proceedings, having particular regard to ss 55, 76, 79, 80 and 135 of the Evidence Act 1995 (NSW). 2 The first plaintiff is the liquidator of the second plaintiff, Austral Pacific Group Limited ("the Company"). The relation-back day for the purposes of recovery of unfair preferences was 26 November 1998, the date upon which the plaintiff and his co-administrator were appointed voluntary administrators of the Company. It is conceded that the Company was in fact insolvent on that day and throughout the six months prior to that day. Therefore any transactions constituting unfair preferences as defined in s 588FA of the Corporations Act 2001 (Cth) would be voidable transactions under s 588FE if they were entered into or effectuated during the period from 27 May 1998 to 26 November 1998 (the relation-back period). 3 The Company conducted five banking accounts with the defendant ("the Bank"). During the relation-back period it was frequently the case that one or more, or all, of the accounts were in debit, and it was frequently the case that the net balance of the five accounts was a debit figure. However, on 26 November 1998 the net balance was a credit figure. The plaintiffs contend that if the five accounts, viewed together, constituted a running account for the purposes of s 588FA(3), the Court should make an order under s 588FF for the Bank to pay the Company an amount equal to the highest net debit of the five accounts during the relation-back period, plus interest. If there was no running account for the purposes of s 588FA(3), then according to the plaintiffs' contention the Bank should pay the Company an amount equal to the total amount of the deposits to the five accounts made during the relation-back period (other than deposits by related entities), if at the time of the deposit the accounts were in debit on a net basis, plus interest on the amount so calculated. 4 The Bank contends that the five accounts should be treated, throughout the relation-back period, as a single running account for the purposes of s 588FA(3). Additionally, and pertinently for the purposes of the present question, it contends that it has the benefit of the defence in s 588FG(2) during the period from 27 May 1998 to 23 June 1998, and that its liability should therefore be limited to the highest net debit of the five accounts in the period from close of business on 23 June 1998 up to 26 November 1998, a much lower figure than either of the amounts that the plaintiff seeks to recover. 5 Section 588FG(2) is in the following terms: "A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company [not asserted in this case] and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction." 6 It became evident from the commencement of the hearing that an important question for determination by the Court would be whether the Bank could discharge the onus of proving the ingredients sub-paragraph (b) of s 588FG(2) during the period from 27 May to 23 June 1998. The Bank seeks to rely upon a report by Paul Carter and Stephen Vaughan of PricewaterhouseCoopers dated 7 May 2003, and a supplementary report by the same authors dated 21 May 2003, which are directed to this issue. The plaintiff contends that the reports are inadmissible. 7 If the reports amounted to expert opinion evidence falling within s 79 of the Evidence Act, then they would be relevant evidence to the purposes of s 55. If they were to fall within s 79, the only remaining issue would be whether the Court should exercise its discretion to exclude them from evidence under s 135. Therefore the first, and critically important, issue relates to the application of s 79. 8 The reports are opinion evidence for the purposes of the Evidence Act, and therefore they would be excluded from evidence by the opinion rule in s 76 unless they were admissible under s 79. Section 79 is in the following terms: "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." 9 Counsel for both the plaintiff and the defendant referred me to the well-known decision in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. That was an action in negligence brought by an employee against her employer, after she fell down stairs at her workplace. A question arose with respect to evidence by an expert (Professor Morton) that the tread on the stairs was slippery. The Court of Appeal held that the expert's evidence should not have been accepted. In the course of his judgment, Heydon JA took the opportunity to review the law and practice concerning expert opinion evidence. 10 Particular attention was paid to the following passages in his Honour's judgment: "In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of 'specialised knowledge'; 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; the opinion proffered must be 'wholly or substantially based on the witness's expert knowledge'; so far as the opinion is based on facts 'observed' by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on 'assumed' or 'accepted' facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on any specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on 'a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise' (at [41])." (52 NSWLR at 743-4 [85]) "There is no doubt about Professor Morton's authority, experience, qualifications and skill. It is also the case that Professor Morton's report is quite lengthy and detailed. But, given that the court is not obliged to take the opinion of an expert as conclusive even though no other expert is called to contradict it, can it be said that Professor Morton's report goes beyond a series of oracular pronouncements? Does it usurp the function of the trier of fact? More vitally, did it furnish the trial judge with the necessary scientific criteria for testing the accuracy of the conclusions? Did it enable him to form his own independent judgment by applying the criteria furnished to the facts proved? Was it intelligible, convincing and tested? Did it go beyond a bare ipse dixit ? Did it contain within itself materials which could have convinced the trial judge of its fundamental soundness?" (52 NSWLR at 745 [87]) 11 For the reasons I shall explain, there are two principal issues about the admissibility of the reports in the present case: first, whether the opinions expressed in the reports are "wholly or substantially based" on the specialised knowledge of the experts, within the meaning of those words in s 79; and secondly, whether the reports purport to "usurp the function of the trier of fact". I was referred to subsequent cases in which Heydon JA's statements of principle were discussed, but for reasons I shall explain, I do not regard the later cases as shedding light directly on the issues arising in the present case. 12 In Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 the Full Federal Court considered an appeal in a passing off case, and made some observations concerning expert evidence adduced at the trial. Branson J quoted paragraph [85] of Heydon JA's judgment and described his Honour's approach as "a counsel of perfection" (at 356 [7]). According to her Honour, in the context of an actual trial, the issue of admissibility of expert opinion evidence may not be able to be addressed in the way outlined by Heydon JA. Weinberg and Dowsett JJ observed (at 379 [87]) that it would be very rare indeed for a Court at first instance to reach a decision as to whether tendered expert evidence satisfied all of Heydon JA's requirements before receiving it as evidence in the proceedings, and said that more commonly, once the witness's claim to expertise is made out and the relevance and admissibility of the opinion evidence is demonstrated, such evidence is received. 13 To the extent that the observations in the Full Federal Court may be taken to have qualified Heydon JA's statements (a question that is open to debate: see Notaras v Hugh [2003] NSWSC 167 (Sperling J, 18 March 2003), at [3]-[8]), it seems to me that the qualification was directed to a point that is not before me in the present case. The judges of the Full Federal Court appear to have been concerned that, as a practical matter, it will often be difficult for the judge to decide early in the trial, when asked to rule on the admissibility of an expert's report tendered in evidence, whether the assumed or proved facts form an adequate foundation for the expert's opinion, and whether the expert's reasoning process is sufficiently laid out and exposed to analysis (see also ASIC v Adler [2001] NSWSC 1103 (Santow J, 29 November 2001)). However, in my opinion there is no practical or other difficulty in the trial judge deciding, when an expert's report is tendered early in the hearing, whether the subject matter of the report is within the scope of the expert's specialised knowledge. Another Full Federal Court considered that question in Quick v Stoland Pty Ltd (1998) 87 FCR 371, without suggesting that there was any difficulty in the process (see also AAPT Ltd v Cable & Wireless Optus Ltd (1999) 32 ACSR 63; Allatech Pty Ltd v Construction Management Group Pty Ltd [2002] NSWSC 757 (23 August 2002)). It is the latter aspect of Makita, rather than the former, that arises in the present case. 14 The reference to expert evidence that "usurps the function of the trier of fact" needs to be understood in light of s 80 of the Evidence Act, which states that evidence of an opinion is not inadmissible only because it is about the fact in issue or an ultimate issue. Heydon JA had the following to say on that matter (at 745 [89]): "Though Professor Morton's views often go to ultimate issues, they are not on that ground inadmissible: Evidence Act, s 80. However, even though Professor Morton's evidence was uncontradicted, the trial judge was not bound to accept it, and nor is this Court, particularly where it was on ultimate issues: Brodie v Singleton Shire Council (2001) 75 ALJR 992, 1060 [355]; 180 ALR 145, 240, per Callinan J." 15 The effect of s 80 has been more fully explored in earlier authorities, which I had occasion to review in Dyson v Pharmacy Board of New South Wales (24 October 2000, unreported). For reasons I explained in that case (at paragraphs [25] to [35]), the general position after the enactment of s 80 is that evidence going to an ultimate issue, which is tendered as expert opinion evidence, is admissible (subject to discretionary considerations) unless it is not relevant, or the witness does not have specialised expertise to support his or her opinion. I would add, however, that if the expert chooses to address an ultimate issue which is a mixed issue of fact and law, and does not have expertise in the law and in the assessment of evidence, there is a probability that the opinion will be regarded as outside the scope of the expert's specialised knowledge. The strength of that probability will depend on the nature of the question and the nature of the expertise. 16 Mr Carter and Mr Vaughan have demonstrated, in their curricula vitae, that there is a field of "specialised knowledge" to which their reports relate, based on training, study and experience. The concept of "specialised knowledge" was explained in Godfrey v NSW (No 1) [2003] NSWSC 160 (Shaw J, 14 March 2003). Counsel for the Bank submitted, and counsel for the plaintiffs agreed, that Mr Carter has specialised knowledge of conducting loan portfolio reviews for banks, debtor provisioning, assessment of financial viability of businesses for bankers, and assessment of the financial position of businesses generally; and Mr Vaughan has specialised knowledge of conducting credit assessments for banks, managing debtor accounts with banks, and provisioning and assessment of financial viability of businesses for bankers. 17 This expertise would equip Mr Carter and Mr Vaughan to prepare a report relevant to the Court's determination under s 588FG(2)(b). For example, they would be equipped to give expert opinion evidence as to whether specific conduct on the part of a bank officer (either assumed in express terms or proven by other evidence) complied with standard credit assessment procedures used in the banking industry generally. They could give expert opinion evidence as to whether it would be reasonable, having regard to industry practice, for a bank officer to require specified additional information (such as monthly management accounts, management's monthly or weekly cash flow forecasts, up-to-date aged debtor and creditor schedules, and information concerning alternative sources of financing within the corporate group or externally), on the basis of specific assumed or proven facts. 18 In my opinion, however, the expertise of Mr Carter and Mr Vaughan does not provide a basis for them to give the opinion evidence contained in their two reports. To explain this conclusion, it is necessary to give a description of the contents of the reports. 19 Both reports purport to address the matters raised by s 588FG(2)(b). In the first report, the authors say they had been asked to consider, and form and opinion, on the following matters relating to the period from 26 May to 26 November 1998: (a) the extent of the Bank's knowledge relating to any insolvency of the Company; (b) whether the Bank had reasonable grounds for suspecting that the Company was insolvent or would become insolvent; and (c) whether a reasonable person in the Bank's circumstances would have had reasonable grounds for suspecting the insolvency of the Company. 20 The second report is directed to whether a reasonable person in the Bank's circumstances would not have had reasonable grounds for suspecting the insolvency of the Company as a consequence of seven specific aspects of the facts, to which they were instructed to give particular attention after delivering their first report. 21 For the purposes of both reports, the authors had regard to 20 files of bank documents relating to the period from August 1996 to November 1998. They selected from those files the documents they considered to be of particular relevance, and summarised them in chronological order in an appendix to the first report, attaching copies of the documents themselves in another appendix (although the latter appendix was not in the report that was the subject of the purported tender). They did not interview bank officers or have regard to affidavits by bank officers or by the plaintiff. They did not have regard to the public examinations conducted by the plaintiff. Necessarily they could not have taken into account any cross-examination of witnesses at the hearing. Indeed, counsel for the Bank submitted that, if the reports were found to be admissible, the Court should hear the oral evidence of the experts before hearing the oral evidence of bank officers. 22 The intention of those instructing Mr Carter and Mr Vaughan appears to have been that they would form their opinions by having regard to the Bank's complete file. It was discovered, shortly before the trial, that there were some other documents that the experts had not been given. I have considered the issue of admissibility of the reports on the assumption that, once the additional documents are taken into account, the experts have had before them, for the purpose of forming their opinions, all the documents that were available to the Bank with respect to the Company in the period from August 1996 to 26 November 1998. I understand that counsel for the Bank will seek to prove this assumption if the reports are admitted into evidence. Encouraged by submissions by counsel for the Bank, I have also proceeded on the assumption that Mr Carter and Mr Vaughan will give evidence that the additional documents provided to them after they wrote their reports would not have made any difference to the reasoning and conclusions contained in the reports. 23 The methodology employed by Mr Carter and Mr Vaughan was to review the Bank's files and analyse the key documents, so as to form opinions as to whether (a) the external information available to the Bank, and its internally generated material, demonstrated either knowledge or suspicion on the part of the Bank that the Company was insolvent at any particular time, and (b) the behaviour of the Bank was consistent or inconsistent with the documents in a manner shedding further light on the Bank's view of the Company's solvency; and (c) having regard to their specialised knowledge and experience in the banking industry, the Bank ought reasonably to have suspected insolvency. 24 Section III of the first report, headed "Background", summarises facts said to emerge from the documents. Such a statement of facts would be admissible to provide the basis or foundation for the expression of admissible expert opinions, provided that the facts were properly proved by other evidence. To a degree, however, Section III gives an interpretation of the facts, which appears to go beyond the documents themselves. Interpretations of evidence are proper matters for submissions by counsel after the evidence has been heard, but as a background for expert opinions they should be admissible only as assertions in the nature of assumptions. My view is that Section III is not admissible, because (for reasons I shall give) the expert opinions for which Section III is intended to be the foundation are not admissible. In reaching this conclusion I do not wish to discourage counsel for the Bank from providing in final submissions any interpretive analysis of the facts that might be of assistance to the Court, such as the graph of account movements shown in Appendix F. 25 Section IV, headed "Knowledge and reasonable grounds for suspicion", provides a discussion of the documents, supporting the conclusion by the authors that "there is no evidence that [the Bank] knew or suspected that [the Company] was allegedly insolvent during the relevant period" (at paragraph 37). To reach this conclusion, the authors consider a number of "indicators", relating to continued funding of the deficit position of the Company, the approval of finance, the Bank's information about cash flow, internal credit analysis reports, reports by the Bank to other banks, third party references such as newspaper articles on the Company and the Australian Corporate Reporting credit report, the availability of group funding, and other evidence tending to show that the Bank was not concerned as to the solvency of the Company during the relevant period. 26 The authors' attention is directed, in Section IV, to the question whether the Bank actually knew or suspected that the Company was insolvent. Strictly speaking, that is not the question posed by s 588FG(1)(b)(i), which speaks in terms of whether the person had no reasonable grounds for suspecting that the company was insolvent. Nevertheless, admissible evidence going to the question whether the person actually knew or actually suspected that the company was insolvent would be relevant to the question whether that person had any reasonable grounds for suspecting insolvency. Therefore Section IV would not be inadmissible solely because it considers the wrong question. 27 However, in my opinion the whole of Section IV is inadmissible, because the opinions expressed there are not wholly or substantially based on the specialised knowledge of the experts. In that part of the first report, the authors have purported to "usurp the function of the trier of facts", to use Heydon JA's language. In my opinion Section IV offers nothing more than the kind of analysis of the documentary facts that it is open to counsel to present in final submissions. The reasoning amounts to a series of inferences drawn from the text of the documents and the circumstances that the documents disclose. This is an analysis which involves an assessment of the documentary evidence, of the kind undertaken by a court to resolve disputed questions of fact. 28 Counsel for the Bank sought to avoid this conclusion by inviting me to admit Sections III and IV subject to a direction under s 136 of the Evidence Act, having the effect of treating that material as evidence of the belief of the two experts at the time when they formed and expressed the opinions contained in Section V of the first report, rather than as evidence of the truth of the assertions of fact in those two Sections. That approach would distort the report, by treating it as a report going only to the "reasonable person" aspect of s 588FG(2), rather than the "reasonable grounds to suspect" aspect of the statutory defence. On its face, the first report purports to give expert opinions as to both limbs of s 588FG(2)(b). Moreover, the opinions expressed in Section V do not in terms depend upon any particular view of the state of knowledge or suspicion of the Bank. 29 Section V, headed "Reasonable person in the circumstances", contains an analysis supporting the conclusion that "there was insufficient information in [the Bank's] files to be provide [sic] a reasonable person with grounds for suspecting insolvency" (at paragraph 84). Curiously, the authors see this issue as a more subjective issue than the question whether the Bank knew or suspected insolvency. A lawyer would use the words "subjective" and "objective" in the opposite way. In my view this does not, of itself, undermine the report, but rather serves to emphasise how slippery the concepts of objectivity and subjectivity are. What the authors appear to mean is that the "reasonable person" analysis involves a greater degree of judgment than the factual inquiry as to the Bank's state of knowledge. That is not an irrational perception, whether it is true or not. 30 In paragraphs 61-73 the authors set out some characteristics of common commercial lending practices amongst major lenders, asserting that this information is relevant to the question whether a reasonable person in the Bank's circumstances would have suspected insolvency. In my opinion these paragraphs are relevant in a general way to the issues before the Court for determination. At this stage in the hearing, it is not clear whether any attempt would be made, by either side, to sharpen their relevance by adducing evidence as to whether the Bank did or did not follow common commercial lending practices in its dealings with the Company, in the event that this material were to be admitted into evidence. In my opinion a report confined in content to the material in paragraphs 61-73 would probably be admissible under s 79. However, paragraphs 61-73 are not put forward in the first report as a separate analysis. They are tendered as part of the experts' analysis of the "reasonable person" question. To admit that material into evidence separately from the rest of the first report would be to risk distortion of the evidence. In any event, those paragraphs do not seem to me to say anything special or novel that would add to the Court's general understanding of lending practices. 31 In the remainder of Section V, the authors consider whether the Bank should have suspected insolvency, by considering a number of "possible indicators" of insolvency. They relate to requests for temporary funding, transfer of funds, loan applications, dishonoured cheques, certain publicly available information, the accounting policies of the Company's parent, and certain other evidence that may have caused concerns about solvency. 32 In my opinion, Section V (other than paragraphs 61-73) is inadmissible for two reasons. First, as with Section IV, the authors purport to usurp the function of the trier of fact, by providing an analysis directed to answering the question whether s 588FG(2)(b)(ii) applies. I concede that in Section V, unlike Section IV, the authors' analysis from time to time involves the expression of opinions relating to their field of expertise. The problem is that those expressions of specialist opinion are merely steps along the way to conclusions that involve analysing and interpreting evidence much in the same manner as counsel would do in final submissions, or the Court would do in its reasons the judgment. Taken as a whole Section V goes beyond the expression of opinions that are wholly or substantially based on the specialised knowledge of the experts. 33 Secondly, Section V appears to me to misinterpret the statutory question under s 588FG(2)(b)(ii). The authors move away from the question whether a reasonable person in the Bank's circumstances would have had no grounds for suspecting insolvency, to consider the question whether the Bank ought to have suspected insolvency, and that misinterpretation leads them make unwarranted assumptions as to the nature of the "reasonable person" test. 34 Section V seems to be based on the assumption that the question under consideration is whether a reasonable banker would have suspected insolvency. But the statutory language relates to a reasonable person in the Bank's circumstances, rather than to a reasonable banker. In Harkness v Commonwealth Bank of Australia (1993) 32 NSWLR 543, Young J said 545-6: "When considering the objective test, one is making an assessment 'according to the standards of an ordinary reasonable man' (per Latham CJ in Downs Distributing (at 476)) that is the standard of the 'ordinary man of business' (per Barwick CJ in Queensland Bacon (at 287)) would apply to the circumstances. As Kitto J said in the latter case (at 303): ' It is an objective question, what the payee or anyone else infer at the time is not to be treated as decisive, though the Court may be assisted in reaching its own conclusion by seeing how businessmen in fact reacted to the circumstances.' The standard is that of the ordinary person on the Bondi bus. That person is not necessarily a university graduate, that person is not necessarily a person who has a background in the financial world. One does not necessarily impute to the ordinary person of business in the short-term money market or even a banker any particular intellectual standard or standard of competence. The standard is that of the average business person. The fact that an expert financial analyst, or a barrister or a solicitor or even a judge might add up the factors and say that on the basis of his or her experience 'of course there must be reason to suspect insolvency' is not enough." 35 This approach is consistent with other cases, such as Keith Smith East West Transport Pty Ltd v Australian Taxation Office (2002) ACSR 501 and Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765. Although Young J was describing the position under the law prior to the enactment of Part 5.7B, counsel for the Bank conceded that the correct position under s 588FG(2)(b)(ii) was stated by his Honour. 36 Mr Carter and Mr Vaughan appear to have made another unwarranted assumption about the law. Their conclusion, asserted in paragraph 84, is as follows: "In our opinion there was insufficient information in CBA files to provide a reasonable person with grounds for suspecting insolvency. More timely and up to date information would have been required such as: (a) monthly management accounts, including detailed balance sheet, profit and loss and statements of cash flows (b) weekly cash flow forecasts supported by detailed assumptions about the quantum and timing of sales and expenses and flexibility for rescheduling (c) aged debtor and creditor schedules information concerning sources of other financing available to the group (d) ability and plans to raise equity arrangements with creditors (e) details of assets that could be converted to cash in the near term, and (h) financial information in relation to associated entities and confirmation as to their ability and intention to fund any cash requirements." 37 This fails to take into account the question whether a reasonable person in the Bank's circumstances would have obtained information of the kind outlined. The authors' reasoning seems to assume that the Bank was protected because it did not seek this additional information. I think it would be wrong to assume, as they appear to do, that a reasonable person in the Bank's circumstances would never be expected to make further inquiries and collect additional information on the matters they list, before it could be said that he or she had no reasonable grounds for suspecting insolvency. 38 In my opinion these misapprehensions as to the correct legal approach are fundamental to the reasoning in Section V of the first report. Because the wrong questions are addressed, the whole of Section V is strictly irrelevant to the issues I must consider in this case. If that were not so, I would exercise my discretion under s 135 of the Evidence Act to exclude Section V on the ground that, since the wrong legal questions are addressed, this material would be confusing and likely to lead to delay. 39 My conclusion, therefore, is that the whole of the substantive part of the first report is inadmissible. The remainder of that report, absent the substantive part, would be irrelevant to the issues before me in this case. Therefore the whole of the report is inadmissible. 40 The second report is essentially supplementary to the first report, and cannot now be admitted, in view of my decision that the first report is inadmissible. In addition, it suffers from each of the vices to which I drew attention in my consideration of the first report. It is essentially an analysis of the evidence concerning selected questions, of a kind that might be expected of counsel in submissions or the Court in reasons for judgment. It goes beyond the scope of the specialised knowledge of the experts, and tends to usurp the function of the Court as the trier of fact. The second report is therefore inadmissible. 41 Both reports suffer from another flaw. Because they are confined to an analysis of the contents of the Bank's files, and they exclude any consideration of other evidence including the plaintiffs' documents and the affidavit and oral evidence of the Bank's witnesses, they are necessarily analyses of a body of evidence that falls short of being the whole of the evidence under consideration in this case. Counsel for the plaintiffs submitted that the reports were therefore irrelevant and inadmissible on that basis. I am not convinced that their restrictive evidentiary base would make the reports irrelevant if they were otherwise admissible. I do take the view, however, that the limited evidentiary base upon which the reports have been built impairs their utility to the Court to such a degree that to admit them into evidence would be productive of confusion, and also result in undue waste of time. This is because it would be necessary to review the reports closely so as to determine whether any of the evidence not considered by the authors would affect their opinions. That would be a lengthy and uncertain process, and essentially an unprofitable one, given that the reports are for the most part an analysis of the evidence, comparable to but more limited than the analysis that the Court can and must directly undertake once the whole of the evidence is at hand. If, therefore, the reports were otherwise strictly admissible, I would exercise my discretion to exclude them under s 135 of the Evidence Act. ********** Last Modified: 06/04/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.