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[2011] NSWSC 349
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Southern Cross Airports v Chief Commissioner of State Revenue [2011] NSWSC 349 (29 April 2011)
Last Updated: 26 May 2011
Case Title:
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Southern Cross Airports v Chief Commissioner of
State Revenue
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Medium Neutral Citation:
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Hearing Date(s):
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Decision Date:
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Jurisdiction:
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Before:
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Decision:
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Advance ruling given that three valuation reports
are admissible as opinions and as business records
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Catchwords:
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EVIDENCE - Admissibility and Relevancy - advance
ruling under Evidence Act 1995, s 192A - expanded use of valuation reports -
errors in underlying material - draft report - business records
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Legislation Cited:
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Cases Cited:
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Texts Cited:
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Interlocutory applications
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Parties:
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Southern Cross Airports Corporation Pty Ltd
(Plaintiff) Chief Commissioner of State Revenue (Defendant)
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Representation
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Counsel: R Dick SC/D Barnett (Plaintiff) E
Hyde (Defendant)
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- Solicitors:
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Solicitors: Freehills (Plaintiff) Crown
Solicitor (Defendant)
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File number(s):
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Publication Restriction:
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Judgment
- On
28 June 2002, the Plaintiff, Southern Cross Airports Corporation Pty Ltd (SCAC),
acquired from the Commonwealth all the issued
shares in Sydney Airport
Corporation Ltd (SACL), the owner of Sydney International Airport.
- SACL
obtained a valuation of land and buildings at Sydney Airport for stamp duty
purposes from Maunsell Australia Pty Ltd on 24 June
2002.
- The
2002 report updated an earlier Maunsell report, Sydney Airport Valuation 2000,
and that 2000 report updated an earlier Maunsell
report, Sydney Airport Asset
Valuation as at 1 July 1998.
- The
issue in the proceedings is whether SACL was land-rich under former legislation:
whether it held land in New South Wales with
an unencumbered value of $1 M or
more and its land holdings in all places, whether within or outside Australia,
comprised 80% or
more of the unencumbered value of all its property.
- Prima
facie , one would expect the 2002 report to have a high degree of relevance.
Since June 2002 there have been many changes in the assets
at the airport making
it difficult now to obtain a valuation as at 28 June 2002. Since the 2002 report
was based upon the 2000 report
and the 1998 report they also, prima facie
, would be expected to have a high degree of relevance.
- By
its amended notice of motion, SCAC seeks an order that each of the reports is
admissible and should be admitted into evidence without
restriction on purpose
or use.
- The
Evidence Act 1995, s 192A gives the court power to make an advance ruling
on the admissibility of evidence. It provides:
"Where a question arises in any proceedings, being a question
about:
(a) the admissibility or use of evidence proposed to be adduced; or
(b) the operation of a provision of this Act or another law in relation to
evidence proposed to be adduced; or
(c) the giving of leave, permission or direction under section 192;
the court may, if it considers it to be appropriate to do so, give a ruling
or make a finding in relation to the question before the
evidence is adduced in
the proceedings."
- SCAC
seeks its order under that provision.
- Section
192(1) of the Evidence Act provides that if because of that Act, a court
might give any leave, permission or direction, the leave, permission or
direction may
be given on such terms as the court thinks fit.
- In
TKWJ v The Queen [2002] HCA 46; (2002) 212 CLR 124 at [42]; 137 Gaudron J
said that the provisions of the Act requiring the giving of leave, permission or
direction require a ruling to be
made and unless the particular provision in
question directed otherwise there was no reason why they should be read as
precluding
an "advance ruling" if that course was appropriate. Her Honour gave
an example:
" It may, for example, be appropriate to give an "advance ruling"
if all matters relevant to the issue have been or can then be ascertained
and if
it is clear that a ruling will inevitably be required ."
- Her
Honour went on at [45]; 138 to point out that the advance ruling that it was
argued should have been sought, was not a ruling
as to the giving of leave,
permission or a direction required by the Evidence Act and was, thus, one
not authorised by a provision of the Act requiring the giving of leave,
permission or direction for the purposes
of s 192.
- In
Australian Competition and Consumer Commission v Allphones Retail Pty Ltd
[2009] FCA 1075; (2009) 259 ALR 541 at [12]; 544 Foster J said there might
be sound discretionary reasons for the court declining to entertain an
application even though it
clearly had the power to make an order of the kind
sought under s 192A of the Evidence Act 1995 (Cth).
- It
was submitted on behalf of the Chief Commissioner that an advance ruling should
not be given as all matters relevant to the issue
had not, or could not, be
ascertained.
- But
TKWJ was not a decision with respect to s 192A of the Evidence Act,
which was introduced to promote efficiency of trials. The explanatory
memorandum to the Commonwealth amending Act by which the provision
was
introduced stated:
"The power to give advance rulings carries significant benefits in
promoting the efficiency of trials. It allows counsel to select
witnesses and
prepare for trial with greater certainty. Without such a power, tactical
decisions, particularly in relation to character
evidence, are based on
speculation."
- In
my view it is appropriate to give an advance ruling in this matter. Inevitably
there will be a need to rule because the Chief Commissioner
does not accept the
reports. If an advance ruling is made in favour of SCAC, it will provide
certainty to both parties with respect
to this portion of the expert evidence.
If the advance ruling goes against SCAC, it will have the opportunity before the
trial, which
is due to commence on 27 June 2011, to address the question whether
it can adduce further evidence to cure the inadmissibility.
- The
Chief Commissioner argues that the way in which SCAC now seeks to deploy the
reports has changed and expanded. SCAC seeks to support
the first report of
Professor Parker of 27 November 2009. It seeks to value the Sydney land by
reference to the underlying land plus
the value of improvements, the Maunsell
reports being the basis for the improvements valuation. SCAC now wishes to use
the figures
as part of the valuation of the Badgerys Creek site, which the Chief
Commissioner says significantly expands the use and deployment
of the three
reports.
- But
that is not a reason to rule the reports inadmissible. The expansion of SCAC's
case to include a second airport at Badgerys Creek
may have ramifications in
other directions. For example, the Chief Commissioner may argue that the reports
lack relevance so far
as prospective improvements at Badgerys Creek are
concerned.
- The
Chief Commissioner argued that Maunsell had stated to SACL that a comparison of
its database and the SACL asset register had been
made, there were major
differences and in order to minimise time it would be necessary to utilise the
Maunsell database.
- That
is not, in my view, a reason to rule the Maunsell reports inadmissible. It is a
matter that goes to weight.
- So
does the fact that a peer review of the 2000 report undertaken by Opus
International Consultancy Ltd for the ACCC, identified a
number of matters that
caused significant concerns as to the 2002 report because it was an update of
the 2000 report.
- The
spreadsheets that form part of the reports identify each integer taken into the
calculations. Counsel for the Chief Commissioner
established with respect to
lighting and visual aids, however, that there are some errors, some
inconsistencies and some figures
that cannot be broken down.
- This
means that if the witnesses called by SCAC do not survive cross-examination on
these issues, the figures may not be accepted.
But that is a different issue
from the question of admissibility of the reports as expert opinion evidence.
The basis upon which
the calculations were made is set out in the spreadsheets.
That there are errors, inconsistencies and global figures in them goes
to weight
and is to be tested in cross-examination.
- Appendix
B to the 2002 report, a report prepared by Ernst & Young on asset valuation
methodology, is the subject of objection
because there is no witness to be put
forward by SCAC who can be cross-examined as to the accuracy of the opinions
expressed by Ernst
& Young.
- SCAC
responded that it was not putting forward Appendix B as evidence of the truth of
the opinions as to valuation methodology contained
in it. SCAC does not oppose
an order limiting the use of Appendix B if sought by the Chief Commissioner.
- I
will admit Appendix B subject to agreement or argument as to a suitable order
limiting the use of it.
- Appendix
A to the 1998 report is the subject of objection because it is expressed to be a
draft for discussion purposes. Nonetheless
the opinions expressed are admissible
although their weight will be a matter for submission.
- It
is SCAC's submission that the three reports are admissible as business records
of SACL.
- The
Chief Commissioner argued that if they are business records, there is no need
for the exercise of discretion under s 192A of the Evidence Act . And if
they are not business records, submissions on the topic are of no assistance to
the court.
- But
a decision one-way or the other on the topic produces certainty as to the
admissibility or non-admissibility of the reports as
business records.
- The
Chief Commissioner argued that the 1998 report and the 2000 report are not
relevant to the determination of value in the 2002
report. But the 2002 report
was an update of the earlier reports and they would explain some of the steps
taken in the 2002 report,
albeit that they do not go to the optimised
depreciated replacement cost (ODRC) value as at 28 June 2002.
- The
exception to the hearsay rule for business records is excluded by s 69(3) of the
Evidence Act if, amongst other things, the representation in the document
was prepared in contemplation of an Australian proceeding. The Chief
Commissioner submitted that the 2002 report fell within this exception.
- The
evidence is that in 2002 Peter Humphreys was employed by Maunsell as an
associate director and project manager. In late May 2002
he received a telephone
call from Ewen McLean of SACL. He said SACL would like Maunsell to update the
asset valuation previously
prepared for stamp duty purposes.
- On
30 May 2002, Maunsell wrote to SACL confirming their engagement to undertake the
valuation of the Sydney Airport assets to be used
for the purpose of determining
the airport's obligations in relation to the payment of land tax ( sic ).
The letter stated that there was to be no reliance placed on the valuation in
relation to any issues other than for the purpose
of the payment of land tax.
- On
12 June 2002, SACL wrote to Maunsell and to Jones Lang LaSalle confirming its
instructions to both to provide a valuation of the
land and improvements at
Sydney airport for stamp duty purposes.
- At
this stage SCAC claims that what it calls the Principles Agreement had been
reached with the Chief Commissioner under which he
would accept a valuation
report prepared by a qualified valuer and the difference between it and the
consideration for the successful
bid was attributable to goodwill.
- The
Principles Agreement was a matter of administration. It was not for the purpose
of a proceeding in an Australian court. In 2002
when SACL obtained the 2002
report, there was no probable expectation of legal proceedings. The Principles
Agreement would avoid
any reasonable prospect of such a proceeding. I do not
accept the submission that s 69(3) of the Evidence Act applied to the
2002 report.
- The
Chief Commissioner submitted that the 2002 report was not a record of the
business of SACL or Maunsell.
- The
term "records of a business" is not defined in the Evidence Act .
- In
Roach v Page (No 15) [2003] NSWSC 939 at [5]- [6], Sperling J contrasted
records of a business with its products and reference materials. His Honour said
the records of a business
are the documents or other means of holding
information by which activities of the business are recorded, whereas if it was
a function
of a business to publish books, newspapers, magazines or journals,
those publications are the product of the business, not a record
of its business
activities. And documents kept for reference purposes are not records of the
business.
- While
the 2002 report might not be a business record of Maunsell but a product of its
business, the distinction does not apply to
SACL by whom it was discovered. It
acquired the 2002 report not as a product of its business or as reference
material. If it was
a land-rich company its business would be effected, for it
would be, or its shares would be, less attractive to a prospective purchaser
because of the liability to ad valorem duty.
- I
do not understand Sperling J to have spoken categorically about what constituted
a business record. In addition to the documents
by which activities of a
business are recorded I would include as business records documents relevant to
the conduct of the business.
- The
introductory words of s 69(1)(a)(i) of the Evidence Act that the
provision applies to a document that is, or forms part of, the records belonging
to or kept in the course of, or for the
purposes of a business, encompasses more
than documents recording the activities of a business.
- For
example, a valuation of the assets of a business for insurance purposes or for
the purpose of determining appropriate depreciation
rates does not record the
activities of a business but it is kept in the course of, or for the purposes
of, the business.
- It
is preferable, in my view, not to seek to define a business record but to be
guided to a decision whether or not a document is
a business record by the terms
of the statutory provision itself.
- I
am satisfied that the 2002 report was a business record of SACL. It was
commissioned, received and kept in the course of, or for
the purposes of, its
business.
- In
terms of s 69(2) of the Evidence Act the hearsay rule does not apply to a
document if, amongst other things, the representation contained in it was made
on the basis of
information directly or indirectly supplied by a person who had,
or might reasonably be supposed to have had, personal knowledge
of the asserted
fact.
- The
Chief Commissioner submitted that this requirement was not satisfied.
- Graham
Edwin Moult was a principal of Rawlinsons, quantity surveyors. He was involved
in preparing the 1998 report and was responsible
for the quantity surveying work
carried out by Rawlinsons in respect of the 2000 report and the 2002 report.
There is no challenge
to those parts of the 2002 report carried out by him.
- Mr
Humphreys had a detailed knowledge of the nature and condition of SACL's assets
through his involvement in preparing asset condition
reports. He utilised that
knowledge in the preparation of the 2002 report. He also relied on the 2000
report and other records of
SACL to carry out his task. There is no reason to
doubt that the persons who recorded that information might reasonably be
supposed
to have had personal knowledge of the matters recorded.
- I
reject the Chief Commissioner's submissions and hold that the hearsay rule does
not apply to the 1998 report, the 2000 report and
the 2002 report in terms of s
69 of the Evidence Act .
- The
Chief Commissioner submitted that the court should limit the use to be made of
the three reports on the basis that there is a
danger that a particular use
might be unfairly prejudicial to him in terms of Evidence Act , s 136(a).
- Some
prejudice will inevitably flow from the reception of reports in evidence when
made as long ago as 1998. But the task before the
court involves some prejudice
to the parties because of the difficulty of ascertaining the existence and
physical condition of assets
at Sydney International airport in June 2002.
- I
do not think, however, that any order should be made under s 136 of the
Evidence Act except in relation to Appendix B to the 2002 report. As I
have said, I will hear the parties on the appropriate terms of the orders.
- The
Chief Commissioner submitted that the notice of motion is amended in name only
and that irrespective of the outcome and form of
the motion SCAC should pay his
costs in relation to the earlier forms of the motion that related to land
valuations and not ODRC
calculations.
- I
will hear the parties on costs. I direct the parties to bring in short minutes
of order reflecting these reasons.
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