Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 5) [2014] NSWLEC 119

Land and Environment Court New South Wales

Medium Neutral Citation: Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 5) [2014] NSWLEC 119 Hearing dates: 23 July 2014 Decision date: 07 August 2014 Jurisdiction: Class 3 Before: Pain J Decision: See paragraph 13 Catchwords: PROCEDURE - applicant cannot rely on all parts of expert report where duplicative of other expert evidence Cases Cited: Allandale Blue Metal Pty Limited v Roads and Maritime Services (No 4) [2014] NSWLEC 102 Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Category: Procedural and other rulings Parties: Allandale Blue Metal Pty Ltd (Applicant) Roads and Maritime Services (Respondent) Representation: Mr R Lancaster SC with Mr M Seymour (Applicant) Mr P Tomasetti SC with Mr N Eastman (Respondent) Sparke Helmore (Applicant) Ashurst (Respondent) File Number(s): 30853 of 2010

Judgment

Ruling on application to rule out expert report 1The Applicant Allandale Blue Metal Pty Ltd (ABM) wishes to rely on a report of Mr Reed geologist dated 11 June 2014. Mr Reed has provided other reports in the proceedings, which are not objected to, relating to his expertise in mining geology. The disputed report deals in part with valuation issues. Mr Reed was asked by ABM's solicitors to address eleven questions. This judgment considers questions 1 to 8. ABM has already filed and will rely on a business valuation prepared by Mr Lonergan and a land valuation prepared by Mr Allsopp, both accepted experts in these areas. In support of its application to have the report not read the Respondent Roads and Maritime Services (RMS) provided a table which identified areas of Mr Lonergan's evidence which were said to address the same topics as Mr Reed's answers to questions 1 to 8 in his report. RMS submitted that Mr Reed's report duplicated other expert evidence relied on by ABM and should not be able to be read as it is unnecessary. 2The principles of case management already canvassed in Allandale Blue Metal Pty Limited v Roads and Maritime Services (No 4) [2014] NSWLEC 102 at [12] apply to my consideration in this ruling also. The just and efficient disposal of proceedings suggests that duplication of expert evidence should not be permitted unless essential for the fair conduct of proceedings, which does not arise as a consideration in relation to this evidence in my view. 3According to Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [85] in order to qualify as an expert a person must have demonstrated study, training or experience in an area of specialised knowledge. Mr Reed has no formal valuation study or training according to his lengthy curriculum vitae attached to the report. He does have extensive experience in the quarrying sector, having spent much of his working life in this field. According to his curriculum vitae and the report at par 2.2-2.8 he has been involved in DCF (discount cash flow) valuations of quarries on numerous occasions. 4Question 1 asks, in your experience, what valuation methodology is used to value quarry assets such as that owned by ABM. At par 2.3-2.10, as well as identifying his own experience, Mr Reed confirms that Mr Lonergan's approach of using a DCF method is an accepted and appropriate method in the industry for the valuation of quarries. As I do not understand there to be any challenge to Mr Lonergan's expertise as a business valuer I am not sure what this material is intended to add. I consider it is duplicative of other evidence and should not be relied on. The only new matter referred to in Mr Reed's response to question 1 is in par 2.1, in particular (iii). That paragraph states: 2.1 In responding to this question, I assume that the quarry assets owned by ABM are deemed to be the quarry operation and business conducted at Allandale. In that case, the value attaching to the land would have been the cumulative value of: (i) The net present value (NPV) of projected cash flows for continued quarry operations until exhaustion of quarriable reserves of hard rock, plus [the subject of Mr Lonergan's report] (ii) The residual value of the land (quarry and surrounds), owned by ABM after cessation of quarrying [the subject of Mr Allsopp's report]; plus (iii) The residual value of quarry assets comprising plant, equipment and infrastructure after cessation of quarrying. 5I accept that given Mr Reed's lengthy curriculum vitae attached to his report that he has the necessary experience to provide his opinion in 2.1 concerning the three bases, (iii) being identified by him, for the valuation of a quarry business. His evidence on this matter is additional to that of Mr Lonergan. This part of his answer to question 1 (par 2.1) can be relied upon and should be the subject of discussion between Mr Lonergan, Dr Ferrier the business valuer called by the RMS, and Mr Reed. 6Question 2 states on the basis that the lease between ABM and its current tenant Quarry Products (Newcastle) Pty Ltd (QPN) can be terminated on one month's notice, please provide your advice about the market for ABM's land had it been offered for sale on 12 February 2010. Mr Reed provides his opinion on the identity in the market of the most likely owner/operator. Question 2 is not a duplication of the business valuers' evidence, it being directed to the nature of the quarry market at the date of acquisition and is permissible for that reason. Mr Lonergan simply assumes that the buyer will be an owner/operator and does not identify who that might be. The question informs what a hypothetical purchaser/vendor might consider in assessing market value at the date of acquisition. This part of Mr Reed's report can be relied upon. 7Question 3 states if you regard a likely purchaser as an owner/operator, would you please identify the methodology that you consider a hypothetical purchaser would have used to determine the market value of the property in the before and after case. This asks Mr Reed to provide his opinion on the same matter as in question 1 framed as if for a hypothetical purchaser. His answer is essentially repetitive of the parts of question 1 I have said cannot be relied upon and cannot add anything to assist the Court. It cannot be relied upon. 8If it is agreed that the most likely purchaser is an owner/operator, as I understand it is, then question 4 will not arise as it assumes an investor will purchase. It can be put to one side. 9Question 5 states the plant and equipment at the quarry as at the date of acquisition is owned by QPN...Please outline what you would expect to be the likely approach to QPN's plant and equipment in the hypothetical transaction of ABM's land. If possible, please identify what value might be attributed to that plant and equipment if it was part of a transaction between a hypothetical purchaser and ABM. I was informed this is directed to the issue of the discount rate, a factor considered by Dr Ferrier not Mr Lonergan according to ABM's counsel. This also appears to be an extension of the issue identified in par 2.1(iii) which I have allowed to be read in relation to question 1. There does not appear to be duplication with Mr Lonergan on this issue. Mr Reed's answer to question 5 can be relied upon. 10Question 6 refers to the advice given about planning matters to a hypothetical purchaser about the extent of planning approval. This evidence entirely overlaps both the town planners' evidence and Mr Lonergan. It is duplicative and cannot be relied upon. 11Question 7 is explicitly linked to question 6 and asks what advice would you recommend a hypothetical purchaser obtain when considering the purchase of the ABM land at the date of acquisition having regard to the risks identified in question 6. This is also duplicative of other evidence and cannot be relied upon. 12Question 8 states on the assumption that there were a number of planning and environmental regulations requiring approvals for the quarry being operated on ABM's land, what advice would you have given the purchaser about the method for determining a market value or price it should pay for the land having regard to those issues. Would there have been any difference in the before and after case. I consider this question and response is also entirely duplicative of other evidence already relied upon by ABM and should not be allowed for that reason. 13In conclusion, the parts of Mr Reed's report dated 11 June 2014 which can be relied on by ABM are part of question 1 (par 2.1), question 2 and question 5.