Supreme Court New South Wales Medium Neutral Citation: Eddie Michael Awad & anor v Twin Creek Properties Pty Ltd [2011] NSWSC 920 Hearing dates: 28/05/2011 Decision date: 28 May 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Opinion evidence of valuer admitted, except in relation to opinions of value of real property five years after date of purchase. Catchwords: EVIDENCE - Expert evidence - valuation of land - valuer proffers valuation evidence based on differing assumptions as to whether representations made about subject property were or were not true - valuer said not to sufficiently disclose reasoning underlying opinion - reasoning sufficiently exposed to enable testing in cross-examination - valuer provides figure of ten percent as to effect of representations - no underlying reasoning to explain figure - does not necessarily mean not based on specialised training, knowledge, study or experience - evidence admissible. Legislation Cited: (NSW) Evidence Act 1995, s 56, s 76, s 79 (CTH) Trade Practices Act 1974, s 82, s 87 Cases Cited: Arcus Shopfitters Pty Limited v Western Australia Planning Commission [2002] WASC 174 Roads Corporation v Love [2010] VSC 537 Smith v Eurobodalla Shire Council [2004] NSWCA 479 Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 Category: Procedural and other rulings Parties: Eddie Michael Awad (first plaintiff) Karen Elizabeth Awad (second plaintiff) Twin Creeks Properties Pty Ltd (defendant) Representation: Counsel: CJ Birch SC and DS Wienberger (plaintiffs) J Robson SC and D Healey (defendants) Solicitors: Thurlow Fisher Solicitors (plaintiff) Surry Partners Lawyers Pty Ltd (defendant) File Number(s): 2009/291401 Judgment (ex tempore) 1The plaintiffs Eddie Michael Awad and Karen Elizabeth Awad tender a report of Richard Foley-Jennings, a qualified valuer, of the subject property, for the purpose of proving the value of the lot on various alternative assumptions as at two dates, namely 18 February 2005, being the date of purchase, and 4 August 2010, being the date of valuation. 2Although I have articulated a theoretical basis upon which the valuation as at August 2010 could be relevant on a breach of contract case, the plaintiff does not put its case on the basis that damages should be assessed at that date, and it seems to me that a valuation as at that date is irrelevant. It was suggested that it was relevant to show, by some process of working back from it, what an appropriate value was some five years earlier. It seems to me that sales five years after the event in question are too remote from the relevant date, particularly when there is sales evidence available much closer to the relevant date, to make that exercise one of any practical utility. Such data, five years after the event, would be a most unhelpful way to approach the valuation exercise, so much so as to be devoid of practical relevance. 3It seems to me, therefore, that insofar as the report expresses opinions of value as at 4 August 2010, it is irrelevant and inadmissible. Accordingly, those parts of paragraphs 23 (from 23.20-23.27), and the second parts of paragraphs 24.1, 24.2 and 24.3, which refer to values "as at the date of this valuation", are inadmissible by operation of (NSW) Evidence Act 1995 , s 56(2). 4That leaves the opinions of value as at 18 February 2005, the date of the contract. These opinions of valuation are expressed on certain alternative hypotheses, namely that the representations made were true; that the representations made were false; and that no representations were made. 5In principle, those opinions are relevant, as they would inform the assessment of damages in the event that the plaintiffs' claim to avoid the contract under (CTH) Trade Practices Act 1974, s 87, did not succeed, but it was awarded damages for misrepresentation under s 82 of that Act. The essential objection by the defendant is that the valuer has not sufficiently exposed the reasoning that underlies his opinions in that respect, at least in such a way as to demonstrate that they rely on specialised knowledge or training. Accordingly, the defendant contends that the report cannot be admitted as an exception to the opinion rule ( Evidence Act, ss 76 and 79). 6The valuer's approach appears to be first, to accept (it seems, without much further examination), that the contract price was the value on the assumption that the relevant representations were correct and accurate as at the date of purchase; secondly, to conclude that the representation that a resort hotel operated and managed by Peppers would be built would have contributed about ten percent of that value; and thirdly, to conclude that the representations that the development at Twin Creeks would be limited to 177 lots would have contributed another ten percent of the value. Thus, on the assumption that the representations were cumulatively false, the land was worth ten percent less, and then a further ten percent less, than the contract price. For reasons that are not at all clear, the valuer reaches a different conclusion as to what would have been the value of the land as at the same date if the representations had not been made, although it is not different by a large amount. 7The defendant's complaint is that the valuer furnishes no basis for understanding how the allowance of ten percent in respect of each of the representations was made. This objection is not without force. For example, one might have contemplated that a development could be found in which there had been an association with a common brand name, such as Peppers, and compared with those in which there was no such association. On the other hand, there is no evidence that any development with such an association exists, or is capable of comparison. 8In Arcus Shopfitters Pty Limited v Western Australia Planning Commission [2002] WASC 174, Pullin J said (at [77]): It is not always possible to ask of a valuer, his or her exact exposition of reasons for the conclusions arrived at. In all valuations there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others: Secretary of State for Foreign Affairs v Charlesworth Pilling & Co [1901] AC 373 at 391. However, the valuer should, as far as possible, expose his [or her] reasoning in his [or her] report or evidence. 9In Smith v Eurobodalla Shire Council [2004] NSWCA 479, McClellan AJA, (with whom Mason P and Santow JA agreed), enunciated the following propositions: There is no doubt that the foundation for an expert's opinion must be adequately proved. This will include the evidence necessary to qualify the person as an expert in the relevant field and proof of facts in respect of which the expert is requested to give an opinion. As Heydon JA acknowledges, this can give rise to difficulties in areas such as land valuation where, in many cases, the available market evidence is limited and the expert's judgment must be based upon accumulated experience. Sometimes when evidence of comparable sales is not available, alternative but less satisfactory methods may be utilised ... But there will be many cases, particularly in relation to sales of "unique" property, where this may not be possible and a valuer will be required to exercise his or her judgment having regard to the objective material which is available, however inadequate. If there is simply no direct market evidence in relation to a particular property, this does not mean that a valuer cannot express an opinion as to its value. 10Vickery J adopted these propositions in the recent decision of Roads Corporation v Love [2010] VSC 537, at [203]-[205]. As McClure J (with whom Andersen and Steytler JJ agreed) pointed out in the Full Court of the Supreme Court of Western Australia in Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 (at [72]): The correct principle is, in my view, that the valuer must reveal as far as possible the process of reasoning actually employed so as to enable to Court to evaluate the evidence and the expert's conclusions. 11In my view, this valuer has explained, as far as possible, the reasoning process actually employed. I have summarised it above. It may well be that that reasoning process is open to criticism as involving no more than guesswork. On the other hand, it may more properly be described as professional judgment based on the valuer's experience. That is a matter about which the valuer can be cross-examined. I do not accept the complaint that the reasoning is insufficiently exposed to enable the opinion to be tested. It is sufficiently exposed to enable counsel preparing to cross-examine the valuer of the type of material that might be marshalled in order to show that ten percent is an inappropriate allowance. There is nothing preventing counsel preparing to cross-examine Mr Foley-Jennings from conducting research and obtaining relevant material to show on cross-examination that ten percent is quite inappropriate, or from retaining their own valuer to challenge Mr Foley-Jennings' assumptions and conclusions. 12It seems to me that this valuer's reasoning, whether sound or not, has been sufficiently exposed to permit it to be tested. I do not accept, in the circumstances, that because no further explanation for the adoption of the ten percent discount is revealed, this necessarily means that it is not based on specialised knowledge, study, training or experience. The opinion that that is an appropriate discount is one that falls plainly within the field of a qualified valuer, and is admissible pursuant to Evidence Act, s 79. That is not to say that it will ultimately be accepted as correct. 13Subject to the specific objections which were dealt with above in these reasons, I admit the report. ********** 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. Decision last updated: 19 August 2011