Category: Expert Witness

The “missing” banking expert

On By Geoff GreenIn Banking, Expert Witness, Non-bank lending, SME lendingLeave a comment

Background

A lender took action to recover a debt of $430,000 which in three years had grown to $3.61m, due to the impact of fees, and interest of $3.18m.

The borrowers disputed the amount of the debt. They said that a compounding monthly interest rate of 70.72% per annum was excessive, and amounted to a penalty.  They also claimed that the loan agreement was unenforceable due to misleading and deceptive conduct on the part of the Lender, and that it an unjust contract under the Contracts Review Act 1980 (NSW).

The loan agreement adopted an interest rate structure which is typical of non-bank lenders: a specified “Higher Rate” (in this case, 1.36% per week), which reduced to a “Lower Rate” (in this case 0.35% per week) if paid on time.

The “Missing” expert

The Court noted that there was no expert evidence provided by either party as to whether the Higher Rate was “excessive or even unusual in the context of a short term financing by way of a second mortgage.”

Outcome

In Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23, the New South Wales Supreme Court held that:

  • Higher Rate – Lower Rate mechanisms had been subject to judicial review on many occasions, and the position was well-established: if drafting made it clear that a Lower Rate was a discount for timely payment then a such a mechanism could not of itself amount to a penalty.
  • The Higher Rate of 70.72% per annum was “very high” relative to the lower interest rate and “seemingly extravagant” – but there was no expert evidence on the point, and the rate was within the range of rates accepted by the Court in other matters.
  • Although the Higher Rate was not of itself unconscionable, monthly compounding at that Rate was “inherently oppressive and unconscionable” because it equated to an “utterly crushing” effective annual rate of interest of about 417% per annum.
  • The Lender took no steps to highlight the effect of the compounding rate to the Borrowers other than to refer to “a lengthy set of interest provisions” which included a formula “attended by a degree of ambiguity,” and was aware that they may need to sell their home to repay the loan.
  • In the circumstances, the Lender’s conduct was “irreconcilable with what is right and reasonable” and involved “a level of sharp practice and unfairness that [was] unconscionable”

The Borrowers were successful in obtaining orders removing the compounding regime from the loan contract, which reduced the interest charge by almost $2m.

Comment

This case pre-dates the 9 November 2023 amendments to the Unfair Contracts legislation (discussed here), which shifts the burden of proof to lenders.  There may well have been a different outcome under the now current regime.

How quickly is the finance required?

On By Geoff GreenIn Banking, Concurrent evidence, Expert WitnessLeave a comment

Background

A property developer arranged for a prospective lender (the Lender) to sign a confidentiality and exclusivity agreement before submitting a request for funding to acquire the Olympia Exhibition Centre in London.

The Lender declined the request, and some twelve months later became involved in arranging finance for another bidder who became the successful purchaser (the Purchaser).

The unsuccessful developer commenced legal action against the Lender, claiming damages said to arise due to breaches of the confidentiality agreement.

The Lender admitted that there had been “repeated and continuous breaches” of its obligations under the agreement – but denied that there was any damage caused by those breaches, for two reasons.  First, it claimed that the purchaser’s bid would have been successful if the funding had been provided by another lender.  Secondly, it claimed that the unsuccessful developer would have been unable to complete the project successfully.

The Banking Expert Evidence

The parties provided banking expert evidence including expert reports, memoranda from joint meetings, oral evidence under cross examination and concurrent oral evidence.  The Court noted that “each made a considerable contribution even if some of their reports cover areas of fact that did not need an expert.”

Outcome

In Bugsby Property LLC v LGIM Commercial Lending Ltd & Anor [2022] EWHC 2001 the Court held that:

  • The lender’s breaches were inadvertent, and there was no misuse of confidential information.
  • The Lender have provided a full credit approval, which saved the Purchaser’s bid at a crucial juncture – and had therefore reduced the unsuccessful bidder’s chances of success.
  • The unsuccessful bidder was no more or less reputable or reliable than the Purchaser, and it was “a near certainty” that the vendor would have sold to the unsuccessful bidder if required, and equally “a near certainty” that the unsuccessful bidder would have been able to secure finance and complete the development.
  • It was also “a near certainty” that the Purchaser would have been able to finance its bid without the Lender, given enough time – but the central question was whether any other lender would have been able to provide funding in the time required to meet the vendor’s timetable – and it was likely that they would have missed the deadline by at least two weeks.
  • The most likely outcome of the missed deadline was that the vendor would have extended the timetable rather than switch to the unsuccessful developer, but the possibility that it might have refused – assessed by the Court as a 40% probability – entitled the unsuccessful purchaser to damages for “loss of chance” which the Court quantified as £14,980,000.

Arm’s length lender loses their security due to a liquidator’s attack on related-party transactions

On By Geoff GreenIn Banking, Expert Witness, Non-bank lending, SME lending1 Comment

[edit on 10 April 2025  to note that this decision was overturned on appeal, a blog on the appeal decision is now on the to-do list!]

Background

A company (the Guarantor) had provided a mortgage to secure the borrowings of two associated companies, which were guaranteed by its directors.

Almost four years later the Guarantor was placed into liquidation, and the liquidator attacked the mortgage as an unreasonable director-related transaction, asking the lender to disgorge $12.15m in net proceeds, received after the land was sold and the first mortgagee repaid.

The Expert Evidence

The Lender arranged expert evidence to the effect that:

(1) It was common for lenders to take cross-securities from related entities when the security on offer from a borrower was inadequate.

(2) It was reasonable for the Guarantor to provide a mortgage in the circumstances; and

(3) The Lender acted in accordance with reasonably accepted lending practices in the circumstances.

That opinion was provided by an insolvency practitioner, rather than a banking expert, but it appears that there was no challenge to her expertise.

Conclusion

In Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liquidation) v CEG Direct Securities Pty Ltd [2024] FCA 6, the Federal Court held that:

  • The evidence was “incomplete and lacking a number of important respects.” None of the directors of the three companies gave evidence, and the purpose of at least some of the funding was never explained.
  • The Expert’s conclusion that the three companies were a part of a group was “no more than speculation on her part” given the “paucity of the evidence,” and so her conclusions based on that assumption could not be accepted.
  • It was true that some part of the advances were later used to develop the mortgaged land but that did not demonstrate any benefit to the Guarantor at the time the mortgage was entered into. Once that was recognised, there was no benefit to the Guarantor in providing the mortgage whereas the detriment to the Guarantor was “obvious and substantial.”
  • The liquidator was successful in having the mortgage declared an unreasonable director-related transaction – but was not entitled to the whole of the proceeds, because the Lender was entitled to credit for the circa $10m used to develop the mortgaged land, and which increased its value.

Comment

If the circumstances of the transaction had been properly understood and documented by the Lender it may well have been able to show that there was a genuine corporate benefit to the Guarantor in entering into the mortgage – but that opportunity being missed it was not something that could be later remedied in the absence of directors who had no reason to return to Australia.

Difficult questions in the hot tub!

On By Geoff GreenIn Concurrent evidence, Expert Witness1 Comment

[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.

The High Court on Expert Evidence

On By Geoff GreenIn Expert WitnessLeave a comment

This week the High Court handed down judgment in a matter dealing with expert evidence this week: 𝘓𝘢𝘯𝘨 𝘷 𝘛𝘩𝘦 𝘘𝘶𝘦𝘦𝘯 [2023] HCA 29.

The Court endorsed the 𝘔𝘢𝘬𝘪𝘵𝘢 𝘷 𝘚𝘱𝘳𝘰𝘸𝘭𝘦𝘴 requirement that an expert opinion must be demonstrated to be the product of the application of the specialised knowledge of the expert – but said that that the requirement was “not absolute” [at 12].

The High Court identified “a distinction touched on but not elaborated upon” in 𝘔𝘢𝘬𝘪𝘵𝘢, between “a question as to whether a process of reasoning engaged in by an expert is sufficient to demonstrate that his or her opinion is the product of the application of specialised knowledge and the question of the extent to which a process of reasoning engaged in by an expert through the application of specialised knowledge is clear and convincing.” [15].

In the present case the question was “whether the process of reasoning disclosed by [the forensic scientist’s] testimony was sufficient to demonstrate that his opinion…was the product of his application of the specialised knowledge.”[19]

There was “difficulty appreciating [his] evidence…merely from the transcript” because it appeared “that English may not be his first language” [20] but it was “clear enough from his cross-examination in the pre-trial hearing that what he was saying was that he had engaged in a process of inductive reasoning which involved applying his knowledge…to observed features…to form a conclusion.”[21]

The appeal was dismissed.

“As far removed from serious, credible expert evidence as I find it possible to imagine”

On By Geoff GreenIn Banking, Expert WitnessLeave a comment

An apparently successful property developer turned out to be a “conman and a forger.”  After the collapse of his £600m property empire, he and an accomplice were prosecuted for fraud, convicted, and sentenced to lengthy prison sentences.

Some years later, in his capacity as the beneficiary of a purported trust, the conman’s son took legal action against his father and the lender to the property empire (which lost at least £150m).

The court held that all the claims had failed, on multiple grounds: it did not accept the existence of the claimed trust;  it held that the litigation was an abuse of process because the real litigant was the conman father, who had manipulated his son (and about whom it said “the extent of his dishonesty is astonishing, and some of the individual charades in which he engaged are almost comical”); and, finally, that the actions of the lender did not in fact cause any loss.

Before arriving at those conclusions, the role and evidence of a banking expert was the subject of severe criticism, which is the focus here.

Which expert, by whom engaged?

The son was given permission for expert evidence “in the field of real estate valuation” – limited to the issue of the best price reasonably obtainable for the portfolio properties, at the time of their sale by the lender.

The father sought permission to submit an expert report “relating to [the bank’s] banking misconduct.” When that application was refused, the banking expert proposed for the father’s report on banking misconduct was engaged by the son to prepare the real estate valuation report for which permission had been given.

Should the expert have accepted the engagement?

On the question of whether the banking expert should have accepted the engagement, it was said:

[205] [the banking expert] should not have been asked to give expert evidence…He was not competent to do so. Having been asked, he should have declined to assist, recognising that he was not an expert in the field of expertise from which expert evidence had been permitted. In a rare moment of concession, [the banking expert] said in answer to my direct question that had he been told that [the son] had been given permission to provide expert evidence in the field of real estate valuation…‘I would say go for a – go for a working chartered surveyor.’

The expert’s evidence

On the evidence actually given by the banking expert, it was said:

[206] Having thus failed in his most basic duty to the court to ascertain whether he was competent to provide the kind of expert evidence for which the court had granted permission, in my judgment [the banking expert] presented an ill-reasoned and for the most part obviously unsustainable or irrelevant argument about the case that had very little to do with the issue…His opinions did not withstand serious scrutiny, he declined to make obviously appropriate, reasonable concessions, and I regret to say that on a number of occasions, I was left in no real doubt that [the banking expert] was making his evidence up as he went along, which involved him not telling the truth to the court about how he had derived some of the opinions he had expressed in writing.

[215] In re-examination, in response to an obviously loaded series of questions…[the banking expert] invented [a]  thesis…[216] …about as far removed from serious, credible expert evidence as I find it possible to imagine.

The (lengthy) judgement is available here: Kallakis v Kallakis & Ors [2023] EWHC 2148.

Reference to the Code of Conduct is key

On By Geoff GreenIn Expert WitnessLeave a comment

Background

A medical expert was the subject of a claim for damages said to arise because – it was alleged – the report he prepared was “false, misleading, incorrect, vague and not fit for purpose” and “so poor and…so wrong” that it resulted in the abandonment of a claim in the Australian Human Rights Commission (AHRC).

A claim for witness immunity

The expert asked the Court to dismiss the proceedings, without a full hearing.  He said that the claim could not possibly succeed, because as an expert witness who was instructed to prepare a report for use in litigation, he had the benefit of an absolute immunity against such claims.

The plaintiff argued that witness immunity only applied to reports prepared for use in litigation.  The plaintiff pointed to the fact that the AHRC was not a Court, and further, said that the report was prepared to assist an assessment of a potential claim against the plaintiff’s former employer.

Consideration

In Hastwell v Parmegiani [2023] NSWSC 1016 the Court held that:

  • Nothing turned on the fact that the AHRC was not a court, because referral to the AHRC was only the first step in the process of recovering compensation.
  • It was the purpose of the report that was important, not the actual use – otherwise immunity would depend on whether the expert opinion was favourable or unfavourable to the client.
  • The expert had been asked to confirm his compliance with the Expert Witness Code of Conduct, and did so, and instructed that he may be required to give evidence in court. In the circumstances, he was clearly “retained to prepare a report as an expert witness in future court proceedings.”
  • Expert witness immunity was not dependent upon whether an expert actually gave evidence, or even whether there was any litigation at all.

Outcome

The Court held that notwithstanding the abolition of witness immunity in the UK (see Jones v Kaney), the law in Australia remained clear: an expert who was required to comply with the Expert Witness Code of Conduct on the basis that evidence might be used in court, continued to have immunity.  Accordingly, the case was “bound to fail,” and was dismissed.

New angle on New Aim

On By Geoff GreenIn Expert Witness1 Comment

In an earlier blog I wrote about the decision in New Aim Pty Ltd v Leung [2022] FCA 722, a decision in which the Federal Court rejected an expert’s written and oral evidence in light of the extent of lawyer involvement in the drafting of the expert’s report.

Background

Apparently prompted by what was described as a “remarkable” timeline – a sixteen page report delivered on the day after the expert has received the letter of instruction, the Court paid careful attention to the process by which the report was prepared.

The Court found that “most of the report was, at least initially, the product of drafting by the lawyers” that was “well beyond permissible guidance” and meant that the Court could not be satisfied that the opinions in the report “truly represented the expert’s honest and independent opinions” – and concluded that the report should not be admitted.

The Appeal

In New Aim Pty Ltd v Leung [2023] FCAFC 67 the Full Court held:

  • A question might not “be formulated at the time the expert [is] first retained – and in fact might be finalised after discussing the issues with the expert.
  • The issue of a final letter of instructions containing the final form of the questions to be answered by an expert, shortly before an expert report is finalised, was in fact “a common occurrence.”
  • Ordinarily a report would be drafted by the expert, but there were circumstances such as “physical, language or resource difficulties” in which the legal practitioner’s involvement might be appropriate.
  • The primary judge had “erred in rejecting the entirety of the evidence of [the expert].”

The appeal was successful.

Independence of opinion the most important aspect of an expert’s independence?

On By Geoff GreenIn Expert Witness, Experts in SingaporeLeave a comment

[this is an expanded version of a earlier blog, as recently published in the July 2023 edition of the APIEx newsletter]

Background

An international manufacturer of insulation products was suspicious about an Australian rival’s claimed fire rating for a feature product.  In particular, it was concerned that the fire rating from a ceiling only test was presented to potential purchasers as the result from a walls and ceiling test. In practical terms, this meant it overstated its fire-resistance qualities.

It commissioned its own scientific analysis, which seemed to confirm its suspicions. 

From a business point of view the international manufacturer was impacted by what it saw as unfair competition, but in the aftermath of the 2017 Grenfell Tower fire in London – in which a fire spread rapidly via combustible aluminium composite cladding, resulting in 72 deaths – there was also a significant fire safety issue potentially in play.

The international manufacturer arranged for its lawyers to write to the Australian manufacturer outlining their concerns and providing copies of their own test results, and asked it to correct what were said to be misleading and deceptive representations.  The Australian manufacturer declined, and told the international manufacturer that it should raise any concerns it had with the relevant authorities.

The international manufacturer then implemented a “counter-marketing” campaign – dramatically named “Project Shield and Sword” – including the distribution of a narrated video to key customers and decision makers.  The video showed footage of the international manufacturer’s own test of its rival’s feature product, with an outcome that contradicted the claimed rating.

When the Australian manufacturer learned about the counter-marketing campaign, it commenced legal action seeking injunctions to stop any further distribution, and damages for the loss that it said had been caused by the campaign.

A central question for the trial was whether the original testing, and the dramatic re-test, were conducted in accordance with the fire safety testing standards, and so technical expert evidence was critical.  There were also important legal questions around the interpretation of standards – drafted for engineering purposes, rather than to facilitate legal analysis – notably, whether transitional provisions allowed the Australian manufacturer to rely upon a ceiling only test that had been conducted prior to a change in the standard that appeared to now preclude their use.

The international manufacturer engaged the fire safety engineer who undertook the original Project Shield and Sword analysis as one of its independent technical experts.  At trial, his independence was challenged twice.  First, the Australian manufacturer said that it was wrong for his original analysis to be described as “independent” as part of the counter-marketing campaign.  Secondly, it argued that his role in the original analysis, and other earlier work for the international manufacturer demonstrated that he was a “hired gun,” and not truly independent.  The Australian manufacturer said that his evidence should not be admitted in the proceedings because it was the product of a lack of independence.

The expert’s independence

The expert was subject to specific cross-examination about his understanding of the Practice Note and Expert Witness Code of Conduct, and it was clear that the court was satisfied that he had complied with those requirements, not just in relation to his evidence to the court, but critically, also in relation to the original analysis.

There was also forensic analysis of the communication between the international manufacturer’s lawyers and the expert, which, the Australian manufacturer argued, “improperly pre-empted the opinion or statements sought [from the expert].”

On this point the court found that the communication “neither occasioned nor established any want of independence on [the expert’s part]” noting the guidance in Boland v Yates Property Corporation Pty Ltd [1999] 74 ALJR 209:

“For…legal advisors to make suggestions is a quite different matter from seeking to have an expert witness give an opinion which is…not an honest opinion that he or she holds or is prepared to adopt…counsel and solicitors have a proper role to perform in advising or suggesting, not only which legal principles apply, but also that a different form of expression might appropriately or more accurately state the propositions that the expert would advance…so long as no attempt is made to invite the expert to distort or misstate facts or give other than honest opinions.”

Clearly the expert’s response in cross-examination impressed the court, which noted that “the opinions that he expressed…were his own and were arrived at independently of any held within [the international manufacturer].”

It appears that the independence of approach actually demonstrated by the expert outweighed any concerns about a theoretical risk to his independence.

Weaponisation!

The international manufacturer claimed that it was merely passing on the work of the experts, without making the alleged representations.  The court did not accept that argument, finding instead that the international manufacturer had “weaponised” the analysis, distributing it “effectively and with enthusiasm,” – but, notably, ruled that:

“[The international manufacturer] cannot be criticised for wanting to make as much as it could of the views that [the expert] expressed; and the fact that it did so is not evidence of some want of independence on [the expert’s] part. The alignment of [the expert’s] opinion with [the international manufacturer’s] interests arose as a result of the correct construction of the Transitional Provision.”

Conclusions

In Pirmax Pty Ltd v Kingspan Insulation Pty Ltd [2022] FCA 1340,[1] the Federal Court of Australia held that:

  • The Evidence Act did not “require untrammelled independence or impartiality (however preferable those qualities plainly are).”
  • The international manufacturer’s original engagement of the expert did not compromise his independence, and his views were arrived at independently – even if they were later weaponised as part of Project Shield and Sword.
  • The international manufacturer’s concerns were genuinely held, and it sought to verify those concerns through a series of tests including those by independent testing bodies, and it repeatedly sought to engage with the Australian manufacturer about the results of that testing over an extended period, prior to commencing Project Shield and Sword.
  • The international manufacturer did make the alleged representations that the product was non-compliant and could not safely be used, and it did represent that the original Project Shield and Sword analysis was independent.
  • The transitional rules did not allow the Australian manufacturer to rely on the outdated ceiling only test, and so the representations made by the international manufacturer were factually correct.  Not only was the Australian manufacturer unsuccessful in its attempts to prevent the further distribution of the Project Shield and Sword materials, the court also held that it should be prevented from making claims about fire rating based on the ceiling only test.

[1] The subject of an appeal, per Pirmax Pty Ltd v Kingspan Insulation Pty Ltd (No 2) [2022] FCA 1526 at [3].

Crystal ball not required

On By Geoff GreenIn Banking, Expert WitnessLeave a comment

Background

The owner of a large development site in the Western suburbs of Sydney (the Owner) entered into negotiations to set up a joint venture to develop the land.  From his point of view, it was essential that a $20m loan and mortgage on the land be transferred to the new joint venture, because he did not have any other way to repay the loan.

It turned out that the joint venture agreement signed after extensive negotiations didn’t transfer the debt as he wanted – in fact, it included a clause which, critically, required him to pay out the loan and arrange clear title once planning approval was obtained.

In due course planning approval was obtained.  The Owner was unable to pay out the loan and clear the mortgage – just as he had anticipated.  The JV partner relied upon that non-compliance with the JV agreement to call a default, and force the early sale of the undeveloped property.

In Lindsay-Owen v HWL Ebsworth Lawyers [2023] NSWSC 68 the Owner took legal action claiming damages from the legal firm that assisted with the JV negotiations and the drafting of the JV agreement (the Lawyer).  He said that if he had understood that the JV agreement did not include the debt transfer, he would have negotiated to have it added, and if that was not possible, that he would have arranged for the bank loan to be extended so that he could negotiate a similar arrangement with other interested parties.

His bank had earlier issued a default notice of its own, and so the likely response of the bank to a hypothetical extension request was a key, contested, question before the Court.

The Banking Expert Witness

The Owner arranged a report from a Banking Expert Witness to provide an opinion about how the bank would have responded if it had been asked for an extension.

The Lawyer objected to the banking expert’s report.  It said that a prediction about a response to a hypothetical question was outside the scope of matters that an expert was able to express an opinion upon.

The Court agreed.  It said that the evidence of the banking expert witness was:

…inadmissible on the question of what [the Bank] would have done in 2010. His report does not satisfy the requirements of s 79 of the Evidence Act 1995. [The Expert] purports to express opinions about what [the Bank] might have done, about what [the Bank’s] state of mind was, and even about what an alternative joint venture partner might have done. These opinions are not evidence of banking practice or any other fields of expertise based on specialised knowledge.

Outcome

The rejection of the banking expert’s report wasn’t fatal to the Owner’s case.  Having determined that the question of the bank’s response was a question for the Court, not an expert, the Court concluded that the bank would have granted an extension if it had been asked i.e., in fact agreeing with the inadmissible view of the banking expert.

The Court held that the Owner was entitled to damages, to be assessed separately.

Comment – In my experience it would be more usual to be asked about the response of a “reasonable lender” in the circumstances, rather than to be asked to predict what a nominated party might do – but depending on the circumstances and the question, even a question framed that way might be regarded as too speculative. 

The opinion of a banking expert might still assist the parties, however, without speculating.  A banking expert could be asked to identify the matters that reasonable lenders take into account when making such discretionary decisions, and to identify whether or not those matters were in evidence in the particular case – while still leaving the ultimate question to the Court.