[edit on 5 October 2024 to note that this decision was overturned on appeal, see my blog here]

Background

The Purchaser of a neighbourhood shopping centre alleged that the vendor’s conduct was misleading and deceptive due to a claimed failure to disclose the true position of rental arrears, incentives and delayed lease commencements.  It claimed damages of $6m, which it calculated as the difference between the purchase price it paid on settlement, and the claimed “true” value as determined by an expert valuer engaged by the Purchaser (the Valuer).

In Elanor Funds Management Ltd v Alceon Group Pty Ltd [2023] FCA 1291, the Purchaser was comprehensively unsuccessful.  First, the Court did not accept that the Purchaser had established that the information was misleading and deceptive.  Secondly, it did not accept that the Purchaser had relied on the information.  Thirdly, it did not accept that the Purchaser had suffered a loss, because it preferred the valuation evidence of the Vendor’s expert valuer.

In dealing with the valuation evidence there were questions about the independence and impartiality of the Valuer, and the specific and detailed assessment of that issue are my focus here.

Multiple valuations and multiple values

The Valuer had provided three different valuations of the shopping centre as at the settlement date, on three separate occasions.

Firstly, he was engaged by the Purchaser in 2017 to prepare a valuation for mortgage purposes, which assessed the value as $55.25m.  He was also engaged by the Purchaser in 2021, to prepare a “retrospective indicative valuation” under specific assumptions, which assessed the value as $51m. Lastly, he was engaged a third time as an independent expert witness by the Purchaser’s solicitor in 2022, to prepare a valuation to support the damages claim, which assessed the value as $49m.

A well-qualified valuer who acted honestly

The Court found that the Valuer was a well-qualified, experienced, and professional valuer who had honestly approached his work, and in his evidence had answered questions in a straightforward manner without evasiveness, and had repeatedly made appropriate admissions.

…but not impartially

Notwithstanding that it accepted his expertise and honesty, there were concerns about the actions of the Valuer, who, the Court held:

• Was prepared to adjust his valuation calculations at the request of the Purchaser, which reflected “against his ultimate independence as an expert witness.”
• Understood “that the purpose of his engagement was to assist [the Purchaser] in litigation by deriving a lower figure than the purchase price for the centre.”
• “Did not act as one would expect an independent expert witness to act in the preparation of a valuation opinion…[and was] an active participant in assisting [the Purchaser].”
• Had made unnecessary negative comments about the relevant experience of the Vendor’s expert in a response affidavit, which were not a matter for reply evidence and were “a further basis for questioning his independence.”
• Asked a question in the concurrent evidence session about the Vendor’s expert’s registration, which, the Court held, demonstrated his role as an advocate for the Purchaser.

Notably, despite those concerns, the Court specifically declined to personally criticise the Valuer for accepting the expert witness engagement, for two reasons.  It noted that it was his first engagement as an expert witness, and further, noted that the Purchaser’s solicitor was aware that he was not independent, as evidenced in a letter of engagement, which noted “Given that you have already provided advice to [the Purchaser] in respect of its acquisition of the Centre, it cannot be said that you are truly an independent, arms-length expert.”

Comment

“Hot tubbing” is the informal name used to describe expert witnesses giving evidence at the same time, “concurrent evidence” is the formal term.  It allows counsel to ask the experts to comment on each other’s answers in real time, and judges to develop a conversation between two experts to discuss, for example, how and why they hold different positions.  Sometimes experts will be given the opportunity to ask each other questions.  This is the first judgement I have seen reflecting attention being paid to an expert’s question rather that his or her answer.