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Expertly Prepared – Making or Breaking Expert Evidence
Professional Skills| What area(s) of law does this episode consider? | Selecting and briefing independent experts. |
| Why is this topic relevant? | Expert evidence can make or break a case. Since an expert is independent they shouldn’t be told what answer to reach, but asking the right questions, outlining assumptions, and selecting the right expert are all key steps to ensuring success. |
| What legislation is considered in this episode? | Uniform Civil Procedure Rules 2005 (NSW), Sch 7 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) |
| What cases are considered in this episode? | Makita Australia Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305
Honeysett v The Queen (2014) 253 CLR 122; [2014] HCA 29
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| What are the main points? |
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| What are the practical takeaways? |
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| Show notes | APES 110 ‘Code of Ethics for Professional Accountants’ The Law Society of NSW Young Lawyers ‘The Practitioner’s Guide to Briefing Experts’ (2018) (PDF download) |
| David Turner:
1:00 | Hello and welcome to Hearsay, a podcast about Australian laws and lawyers for the Australian legal profession, my name is David Turner. As always, this podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm making complex simple. From voidable transaction claims to retail lease disputes to medical negligence, expert evidence can make or break a case and since experts’ evidence is independent, we can’t change the answers we get, but asking the right expert to answer the right questions based on the right material is essential to success in litigation. Here to share his insights as both an expert and as a litigant using experts is Matthew Hudson from SV Partners. Matthew, thanks so much for joining me on Hearsay. |
| Matthew Hudson: | Oh, thanks for having me, David really appreciate it. Looking forward to it. |
| DT: | Now I want to start with your work as an expert, how long have you been doing expert work and what sort of issues are you called upon to give evidence about? |
| MH:
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| Well, I started probably about 10 years ago now, I wasn’t obviously an expert 10 years ago, but I’ve certainly had to develop skills and learn through the process. I had some pretty incredible teachers along the way, people who work at SV Partners who were themselves phenomenal at forensic related reports. So yeah, it’s been a good 10 years now. I think I signed my first ever report back in about late 2014 was my first ever one and I still remember the report to this date and it was probably one of my proudest days ever to be honest when I had that opportunity to sign it off as my name, I’m the expert on this particular solvency report. So it was pretty cool. So, a lot of my forensic accounting work tends to be insolvency reports as I mentioned, which are used generally when you have a litigation between a liquidator and some type of defendant to a voidable transaction claim. I probably do one or two of those a month at the moment. Then there are other aspects of insolvency reports that you can work on, so critique reports where you’re critiquing some other expert’s view of whether or not a company is insolvent or not, which between you and me that’s actually probably my favourite. And then there’s also the defence side of the solvency report where you’re obviously proving the company was solvent. Other types of expert reports that I do a lot of are things like an investigative accounting report where you’re reporting back to a bank or some type of secured creditor around the financial capacity and ability of this business, so to speak, to continue trading and able to pay its debts. So we’ve done quite a few of those, and I’ve got one in particular that I’m incredibly proud of that I can talk about later during this podcast. And then we do a lot of money tracing. So money tracing is one of my bigger service lines. So we do a lot of investigations where we’re trying to work out where flows of money have gone between related parties, whether that is within Australia or overseas and you try to piece together, you know what’s happened to money. Particularly when a company’s gone into liquidation, or where there’s some type of family law dispute where the wife is a director and the husband trying to work out where the money has gone or vice versa. So they’re probably my main three in the forensics world. And then after our firm that does a lot of business valuations and I’ve done plenty in my life, but we actually have our own online portal now which automates most of the process so I don’t get as much fun anymore doing them. It’s done pretty much mainly by a robot at this valuation spot online, so it’s all pretty well automated. So they’re probably the main I guess service lines. But yeah, the solvency report one is probably my favourite. |
| DT: 4:00 | I’m sure that is disappointing that you don’t get to do the business valuations by analogue, but as an advocate for automation and business process innovation, I’m excited that you’re doing that. That’s a really cool project. |
| MH: | We were very excited as well when we were able to get that together, run by Brett Goodyer down in our Wollongong office, put it together and it’s, I think, transformed the way that you could do business valuations before. |
| DT: | And just a perfect product for the SME market really who have the sort of business that really can be valued on that algorithmic basis, right? |
| MH:
5:00 | Exactly. And it’s fixed price model – you know what you’re getting straight away. It’ll produce a 40-page report for you and at least it gets checked by someone either myself or Brett will review it, but mostly it’s automated. And that’s where I think we can head with a lot of these other forensic reports moving forward, particularly for solvency reports. There’s a lot of data input that certainly can be automated and we’re working on at the moment to do that. And even critiquing someone else’s report certainly can be automated because once you get the data out of their report, plug in their assumptions, that’s really where you’re targeting those assumptions. So to me, I don’t think it’s too hard to automate a lot of that process. You just need to be out of work out what are those assumptions and what is your attack points so to speak. |
| DT: | One of the reasons I’m really excited to speak to you today about expert evidence is you’re actually on both sides of the fence, you’re an expert as you’ve just described, but as an insolvency practitioner, you’re also a litigant and so you’re often engaging experts. It’s always been my experience as an insolvency litigator that you cover some pretty broad ranging areas in insolvency litigation, part of being parachuted into someone else’s business is you often have to deal with some unusual issues. What disciplines have you engaged experts in? |
| MH:
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10:00 | So I guess the main ones will be your real estate experts, people who can help you work out the value of property. That can be very useful for bankruptcies I think particularly where a bankrupt or their spouse might own a property and you’re looking to see whether or not you might have some type of beneficial interest or proprietary interest in the property. So that’s probably one of the main times when you use it. You’ll obviously have auctioneers, there’s plenty of very good auctioneers around the country that will give you a valuation report on how much plant equipment and that is worth, stock, potentially IP. There was a speaker I think a couple years ago at the ARITA conference that came out and was that expert in IP valuations. So when I talk IP, I’m talking intellectual property, goodwill, trademarks brands – all that type of stuff. So we use all those types of people as much as possible whenever a company goes under or potentially if, say, a company has been or a business has been legally or illegally phoenixed you might need those valuers to come in and determine what was sold at a reasonable value or not. And I would say most that I see nowadays, at least since COVID, are not there. And we’ve got some pretty interesting jobs at the moment that we’re certainly alleging were illegal phoenixing and trying to unpick them and the use of those real estate agents, the auctioneers and that is very helpful to be able to unpick that. At the moment for a lot of those jobs we’re using our own in-house system to determine value of a business, but obviously there’s an inherent conflict there if we go to court, so you would need that independent forensic accountant from another firm to come in and say this is what they think the business is worth. TIP: Now, we’ve spoken about ‘phoenix’ activity on the podcast before, but as a quick recap, it’s basically when a new company takes over the business and the assets of an existing company, paying little or no value for them, while the owners abandon the old company in order to avoid paying its outstanding debts. It’s an illegal practise designed to cheat creditors out of the value of the company’s assets which they’d otherwise get in a liquidation, and it leaves those creditors out of pocket, and the taxpayer bearing the cost of some debts like employee entitlements. Illegal phoenix activity involves a breach of director’s duties and can carry hefty fines and even up to 15 years imprisonment. It’s also an enforcement priority for ASIC and the ATO. So you’ll have those types of experts, and then when you go to the more litigation side around solvency, if you’re going to go after a voidable transaction claim obviously you’re going to use a solvency report there. Over many, many years now there’s certainly been a habit of liquidators preparing their own solvency report although there’s a number of cases, I think there’s about five or six cases now that certainly approve a liquidator preparing their own in the sense of not disapproving of it, like that they’re not saying that you can’t do it, they’re saying that it just comes down to the weight or relevance of the court might place on that evidence because they know it’s genuinely coming from a place of potential conflict. I’ve always maintained the view that a liquidator shouldn’t prepare their own report where they’re unfunded in particular, and I know there’ll be a lot of people jumping down my throat about that but I’m only saying that because how else is the liquidator actually meant to spend money or pay for some other person to prepare a report. And unfortunately, the APES standards, which are the professional standards for CA, CPA and IPA, basically there’s an insolvency standard within it and then there’s a forensic standard and one of the clauses in the insolvency standard actually pick up on the forensic standard. And so then it requires you to meet the standard of a forensic accountant under their rules. And so one of the main rules in there says that as an expert, you can’t have a conflict or any independence issues. So if you’ve prepared this report and it is what is going to decide basically the result of this matter – how can there not be a conflict? Although courts might not take issue with some code of conduct or anything like that, certainly the APES might. To me that’s quite a big issue and something that very few people stop to think about. TIP: APES stands for Accounting Professional and Ethical Standards, and as Matthew has just mentioned, these standards require forensic accountants to adhere to independence standards set out in APES 110. Other APES standards similarly reminds members providing expert witness services of their paramount duty to the court and refers to the independence standards set out in APES 110. Now, there’s two kinds of independence that experts have to show: (a) First, independence of mind — the state of mind that permits the expression of an expert opinion without being affected by influences that compromise professional judgement; and (b) Independence in appearance — the avoidance of circumstances that might lead a reasonable third party to conclude that an expert’s integrity or objectivity has been compromised. Now, you might recognise these are very closely reflecting Lord Chief Justice Hewart’s maxim – justice must be done and must be seen to be done. |
| DT: 11:00 | The independent report is definitely still the gold standard, and I suppose just because it’s admissible as evidence, if it’s prepared by yourself, particularly when you have a competing report prepared by an independent insolvency practitioner on the other side, as you say those issues of weight and relevance could mean the difference between success and failure. |
| MH: | And it might be that you could slightly get around it by getting somebody else within the firm to prepare it if you can show that that person’s livelihood or income is not dependent on the result, but I think that’s very grey and you know, I’ve certainly seen a lot of firms doing that where they’ll, rather than the liquidator prepare the report, there might be some other salary partner or someone else within the firm to prepare it for them. And you certainly see that at the big firms but I don’t know if that really does overcome it. |
| DT:
12:00 | Now the first step in successfully obtaining expert evidence is really briefing the right expert and that can be hard because you don’t know what you don’t know. And it’s hard to identify the correct discipline when you’re not yourself an expert in that discipline. Have you had an experience either as an expert where you’ve been asked to give evidence on a topic that maybe you weren’t the right expert for, or alternatively, as a litigant where you’ve had trouble finding an expert? Have you had an experience where it’s been difficult to identify the right discipline? |
| MH:
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15:00 | Yeah, and I think that tends to come out a lot when you look at, for instance, an illegal phoenix. I was thinking about this the other day, and I’ve got a matter, for instance at the moment where I’m 100% sure that this business was illegally phoenixed. So we’re looking at doing this claim through the courts. But what we did was we went out and sourced an independent valuer to come in and give us a valuation on plant equipment and then also on the goodwill of the business. And when I was going through the valuation report from the forensic accountant, I started to realise that quite a lot of the key assumptions and key points of their report actually came down to things that they would never really know anything about. So what I mean by that is, one of the arguments that no doubt the other side will raise is that a director’s salary should be a certain amount of money, whereas in the books and records it’s recorded at a different amount. TIP: Just before we dive right in, let’s quickly go over the basics of expert evidence, just as a refresher. Expert evidence is used in court proceedings where specialised knowledge, experience or learning can help the court understand something about the facts in issue. It fills a gap when the tribunal of fact – the judge or jury – doesn’t have the requisite knowledge or training to understand an issue in dispute. Now, most opinions are inadmissible as evidence, but expert opinions are admissible under section 79 as an exception to the opinion rule but only where ‘a person has specialised knowledge based on the person’s training, study or experience,’ and their evidence ‘is wholly or substantially based on that knowledge.’ We’ll talk a bit more about that test in a moment. When providing their report or other evidence, expert witnesses are required to state the sources and assumptions that they’ve based their opinion on, which is why it’s extremely helpful for their instructing solicitors to provide experts with a summary or list of the facts or assumptions that the expert is expected to adopt. We’ll include a link in the show notes to the Law Society of NSW’s 2018 practitioner guide to briefing experts which includes some examples of summary facts. So just because the profit and loss statement of a business might say that the director’s salary was $80 grand a year does not necessarily mean that’s reasonable or whatnot. Now, I haven’t seen a single forensic accountant yet that could demonstrate an expertise in knowing how much a director should be paid as part of their salary for a year because you make those adjustments to work out what the appropriate future maintainable earnings are for that business. So as I was reading through it, I went back to the forensic account and I said to them, ‘you’ve adopted an assumption that the director’s wage in the books and records,’ which I think in this text was about 80 or 90 grand, ‘was reasonable because in your experience, you’ve identified that that’s typically what you see directors be paid. But what sources are you relying upon for all that type of stuff?’ It’s very difficult, if not impossible, to actually find an expert in that world. And you can get HR who might write a report, but again the courts are just going to have to effectively take a lot of that stuff at face value unless the other side takes issue with the assumption and gives you their thoughts on it, you know it can be very difficult. I remember a couple years ago we were running an unfair preference claim, this is just another example, against a trade creditor and probably the first time I’ve ever seen it and the only time ever was an expert report prepared by a trade credit manager at one of the big trade credit companies. They wrote a report for an independent party, so an independent creditor, that basically said that it was typical in their particular industry relating to that creditor for payments to be received on invoices up to 150 – 180 days outside terms. |
| DT: | Wow. |
| MH: 16:00
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| Yeah, I know. And I’ve never seen a report like it. It went on for, from memory, I think was like 10 or 15 pages. They sourced information, they sourced staff, all that type of stuff to put forward their arguments. But a lot of it was still hearsay and was still just their opinion. But I thought that was quite an interesting approach to trying to defend an unfair preference in the sense of if you could show that it’s difficult for payments to be made that late, well then obviously the creditor can try to argue that they received the payments, that it wasn’t unusual for the payments to be so late. So when I went back to them to the expert on the other side, I found a bunch of reports produced by one of the credit bureaus which anualises and averages how much it’s typical within a particular industry for invoices to be paid and sent that to them and said, ‘look well, this is what a credit bureau is saying,’ but we found it nearly impossible to get one of those credit bureaus to sign a report agreeing to it or agreeing that they could do a report on something like that. So instead we were running the risk of going to court with an expert on one side saying that invoices could be paid up to 150 days, but we didn’t have our own expert to disprove that. All we had was just some source documents we found from online, so it was quite risky for us, even though I still think to this day it was rubbish a rubbish report but it was a good try I thought. |
| DT:
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19:00 | One of the interesting issues that story raises is what is an expert opinion? Because it’s important to remember that expert evidence is an opinion expressed based on someone’s education, training or experience, that Makita v Sprowles test. And an expression of a kind of anecdotal observation about, ‘well, this is what directors are usually paid’ or ‘this is when invoices are usually paid’ isn’t necessarily based on someone’s education, training or experience. Classic example of that is the body mapping expert or the body identification expert in criminal cases, who’s really opining on something that any human being can do, which is compare an image of a person to an image of another person and tell you if they’re the same person. It’s cloaked in expertise, but it’s not something that’s outside of the skill of the tribunal. And I could imagine a court taking notice of the reports that you described from credit bureaus around what’s common in terms of payment outside trading terms. TIP: Now, that specialised knowledge test comes from the decision in Makita Australia Pty Ltd v Sprowles (2001) 52 NSWLR 705 in which the Court said that the expert’s evidence must explain how the field of specialised knowledge in which the witness is an expert is connected to their training study or experience. The requirement of specialised knowledge was also explored a bit further in Honeysett v The Queen [2014] HCA 29, which concerned the evidence of a body mapping expert, who gave evidence that he could identify the accused from CCTV footage based on his expert knowledge of human anatomy. Now, in that case the High Court found that Dr Heninburg’s evidence – the body mapping expert – was inadmissible as expert opinion evidence and that his view was based on a subjective impression of what he saw from the CCTV footage and that that subjective impression was not wholly or substantially based on his specialised knowledge. The exercise of drawing a conclusion about whether the person on the footage was the accused or not was not a question of specialised knowledge which fell outside the knowledge of the Court – it was a task that, even without an expert knowledge of human anatomy, a judge or jury could perform. Now, we’ve covered some other aspects of expert evidence before in Episode 10 of Hearsay with John-Henry Eversgerd. Why not give that episode a try after this one to round out your understanding of expert evidence? |
| MH: 20:00 | Another example would be your cap rate on evaluation. So when the cap rate is like your multiplier on future maintainable earnings to work out what the value of the business is. And in most cases it tends to come down to a rule of thumb rule to work out what that cap rate is. You know, it’s pretty irregular for one to be above 3, sometimes we might go to four, but rule of thumb says it’s somewhere between one and four generally. And I see that all the time, I saw an expert report the other day come to my desk which we’re looking at potentially responding to and the methodology used to build up the cap rate is largely just rule of thumb. So going back to your original question, trying to find the right experts and that is very difficult. What I’ve been trying to do through my LinkedIn is demonstrate that expertise and the knowledge in there and hopefully people will give me an opportunity to prove that and I think that’s really the only way you could differentiate yourself in the market. |
| DT:
21:00 | You mentioned assumptions before and, and that’s really another important piece of briefing an expert correctly, even before you get to the questions that you’re asking them about, which is the assumptions that you ask them to adopt when answering those questions. As an expert, to what extent do you interrogate those assumptions? Or do you get your letter of instruction that says assume this ‘assume X, Y and Z’ and you say all right, well that’s it those are finite, or do you test the extent to which they’re realistic? And as a litigant, would you expect that from an expert? |
| MH:
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24:00 | Well I think you have a duty to, firstly, so I think you have a duty where you have available information you should state that the assumption is wrong or that there’s facts stating that that may not be the right assumption. But I think if you were given a letter of instructions that says you are to assume something, then it’s unlikely that there’s going to be further source documents or further information that disproves the assumption anyway. But I saw a letter of instructions the other day to the other side’s expert that basically said that the expert was to assume that the reasonable wage of the director is 30 – 40 grand, something like that, and as I was going through the financials, I realised that although that might be what the financials or the profit and loss said the director was paid in a year, if you actually look at the balance sheet, there was shareholder drawings going to the director over the last year of more than 100 and something grand. So the assumption should have been blatantly clear that the director’s wage isn’t 30 grand, should be a lot more. So I think the best way to answer this question is that when you send an instruction letter, very important that you state what assumptions you are expecting the expert to take on board and apply and to be as detailed as possible about that. Because the amount of instruction letters I get where the assumptions are just very general, most of them don’t even have assumptions stated in there at all. It would just be an instruction letter that says. “here are the facts that are agreed between the parties and this is what we want you to do.” And as you go through the work, you start picking up on all these assumptions you’re going to have to make, and then you go back to the parties and say, “hey, can you please agree that I am to make these assumptions?” Otherwise you just state all these assumptions in your report and one of the parties is obviously going to have to take issue with that. It’s very important that you can pick up on them at the start and I tend to think that’s probably where you can have that conversation with the expert at the start to say, ‘when you read through this material are there some assumptions here that you’re going to have to make?’ So my approach to it is, I’ll read the material, the brief, really closely, pick up on what I think are going to be the key issues that are going to get me to where I need to get to and have I actually got enough information for that. So I know that, if I go back to that shareholder drawings conversation, the packet of information I’ve been given does not include any information about that shareholder’s drawing account. So I know in my head that moving forward I’m going to want to get that information so that I don’t have to make a similar assumption or anything like that, because even now I’m making the assumption that that shareholder’s drawings was his or hers, depending on who the director is. And I’m also assuming that it’s legitimate money going out of the bank and etc etc. So you need more information to do that. But I’ve seen a lot of expert reports in my life and I think one of the things that really stands out to me is people not stating their assumptions enough or their presumptions. There is a big difference between the two. There’s not enough of that that goes on and I don’t think there’s enough clarity at the start to help people to work out what they need. I think I’m pretty clear when I’m briefing out another expert where I’d say to them, ‘I want you to assume these things.’ But it can be a bit tough like when you’re dealing with an auctioneer or a real estate agent and all that you know, you’re not really going to be having to point out all the assumptions to them and that, because you don’t really have that expertise. You don’t even know their process and stuff like that, and I think that’ll be the same with a lot of lawyers and that you may not understand the accounting terminology and all the underlying numbers and all that, but where you do or where you can understand it, try and put those assumptions in for them. |
| DT: 25:00 | And I guess we’ll come on to talking about some of the practical ways that as an expert you can assist your instructor, and as an instructor you can assist your expert in arriving at the right assumptions before a formal engagement. But certainly I agree with you assumptions are so important, as a cross examiner I know that it’s going to be a very rare expert where I have any kind of grounds to attack their qualifications and I’m usually going to be ill-equipped to attack their conclusions and so that leaves the only battleground is really the assumptions. And that tends to be the most fruitful way to cross examine an expert is to say, ‘well, you’ve reached this conclusion on the basis of this assumption. If I want to change that because of a separate factual dispute, what would your conclusion be? Great thank you.’ |
| MH:
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27:00 | And actually just on that, something that comes to mind is because I was actually having a conversation about this with a couple of barristers the other day, is that I think actually that’s where a shadow expert comes in quite neatly where you might have already had your own expert, or potentially not, and the other side has theirs and you just want someone there in the ear of the of the barrister who doesn’t necessarily need to be independent in that sense, but they’re just there to attack the conclusion or the basis of the assumptions and the methodology to get there. TIP: A ‘shadow’ or ‘dirty’ expert is an expert engaged by one party to advise them on a dispute before the court. Unlike ‘clean’ experts, since they’re not giving evidence in court, they don’t have a paramount duty to the court, and they don’t have to be independent. Shadow experts are used to identify errors, inaccuracies, omissions and methodology issues in the clean expert’s report and they can help with the cross-examination of the other side’s expert witnesses. So I’ve done plenty of shadow experts work with in the past and you can have so many conversations with the barristers and that prior to the trial or whatever and you can just kind of pick reports is the plan. And it’s all about attacking the conclusion and the methodology. Recently I’ve noticed some assumptions that are so big that they pretty much make or break a report. The assumption that an agreement was entered into which by defaulting on the agreement causes a loss, if one party says you are to assume that there was no agreement, but the other party says you are to assume there is, then the party who is assuming there’s no contract how can there be a loss? Your report says it’s 0. So then, if you haven’t, then made an alternative statement in your report that says, ‘if there was a contract and then there might have been a loss, and this is what the loss would have been,’ if you don’t go down that path then you’re not really I don’t think producing an expert report, you’re just adopting one assumption. |
| DT: | Or at least your expert report isn’t really joining issue with the other one. They’re kind of passing in the night and not actually useful as a comparison for the court, they’re just answering 2 entirely different questions. |
| MH: 28:00 | I had a one the other day where I was doing a insolvency report for the defence and one of the key issues was because liquidator was suing a director for insolvent trading and the director is arguing that at no point in time was a debt actually incurred when another debt was due and payable – OK because there wasn’t that many debts. And so it all comes down to whether or not one specific creditor agreement became due and payable on a specific date. And I was basically asked to assume that the agreement had been extended between the creditor and the company. And I said, ‘well, you haven’t actually given me any proper evidence to prove that it had actually been extended,’ and so I made the assumption, I produced a report on the basis that that assumption was correct, but then I did a secondary alternative scenario where it wasn’t for me and then stepped through what that might mean for the situation. Luckily, in this circumstance, I think in both situations the company was still solvent. |
| DT: 29:00 | That’s such a great point you made earlier about the shadow expert, you know it’s sometimes called the ‘dirty expert’ and the clean expert, I think I prefer shadow expert personally, but again, a really practical, especially in a case where the cost permits because it can be an expensive exercise to brief a shadow expert, but where the costs are proportionate a really practical way to enhance your cross examination and enhance not just the cross examination as you described, but the briefing of the expert in the first place – to have that dirty expert report to understand the issues as a team first and then to say, ‘well now we kind of have a rudimentary understanding of this topic, we’ve engaged with our dirty expert we’ve read their report, now we’re equipped with the skills to speak to our independent expert.’ |
| MH:
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33:00 | Absolutely, and it’ll hopefully give the barristers the right questions to ask, or at least some concepts to talk to both experts about because, if you break your own expert, you’re going to have an issue there with independence and that if you try to bring them into the room and ask them more questions you should be asking of the other expert. That’s where I think a shadow can be quite powerful. And it can be even more than just trial, it could be for a potential mediation coming up if you want to pick holes in the other expert’s report whilst in the mediation, it could be for a public examination where you want someone to sit there and give the barristers some idea of some holes to go down from an insolvency point of view, or even what the financial position of the directors could be in this situation. It could be for whilst in that public examination you might have that shadow expert go through bank transactions and stuff like that and points out the key areas that the liquidator may not have done so. I think that shadow expert is potentially very helpful for barristers but yeah, you don’t hear a lot about people actually doing it because you know they’re in the shadows so who knows how many barristers are utilising that service. A lot of lawyers probably don’t understand much accounting, and I think that’s where a shadow expert can help. And that doesn’t have to just be accounting, could be real estate, could be auctioneers. You know, I had an auctioneer the other day actually, they were sort of shadowing something for me on an illegal phoenixing and we’d already briefed out an expert who came back with their report and even our own expert and I haven’t even picked up on this issue, but my shadow did and the shadow basically said to me, ‘when you look through the contract of sale for this business,’ and this is actually something I want to write about soon on LinkedIn is that a lot of the times when a business is sold when it’s about to go into liquidation they’ll go out and get a value from an auctioneer potentially and potentially also a business valuer and as part of that valuation the valuers will just go ‘here’s the auction value and here’s the market value’ for whatever it is – the business or the equipment. And then 9 times out of 10, the business will be sold through probably a related party at the auction value because they’ll say well, that’s otherwise what we would pay anyway. But I would say 100% of the time in the contract, it’ll say that there’s consideration of X, whatever that amount is, and it’s normally the amount of the auction value, but then just below that they’ll then mark or tick the going concern box. So you’ve got a business trading being exchanged with another business as a going concern, but yet at the same time they’ve sold at auction value. So when you actually look at the causes in the particular, and this is where the shadow was good for us is he was looking at from the plant equipment side, he said if you actually look at the terminology of the future market value or however, it’s described in the report most of the time it will refer to some type of going concern basis for them creating that value in the market. And then on their auction value side it’ll basically saying that it’s for fire sale when it’s not. So these people have adopted a plant equipment value of an auction value, so how is that not incongruous? Once I realised that and he told me about it, I was like that’s why you should have a shadow expert; sometimes they can just give you those little things that stay in your mind. |
| DT: | And those sorts of forensic insights that you won’t get from someone who has to remain independent. Now we’ve got our correct expert briefed, we’ve identified the right discipline, we’ve identified the outer bounds of their exercise through assumptions, perhaps we’ve had the assistance of a shadow expert along the way to do that, we’ve now got to ask them the right questions to elicit evidence that’s relevant to the case. We can’t ask them to give us the right evidence, but we can ask the right questions at least. From your perspective as an expert, what’s the best way to ensure that your instructors are asking the right questions? You mentioned earlier that sometimes you get a letter of instruction that doesn’t contain any assumptions, that have the wrong questions and it just sort of comes out of the blue. What’s a practical way to ensure that that’s not happening? |
| MH:
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39:00 | Yeah, so generally someone will call you at the start and they’ll say, ‘hey, I’ve got a potential matter for you are you willing to consent and we can send you an engagement letter’ or they’ll say ‘are you willing to consent but we’re going to put you on a panel and you might be one of three or four people that gets chosen.’ So you’re not really going to have a lot of power at the start of that time to be able to say that you know you want these particular questions asked or anything like that. You will probably in an insolvency context where you know you’ve been asked to prepare an insolvency report on behalf of someone else or a solvency report, you probably do have that power. But realistically, you know you’re more likely to get the phone call, a month or two later, you get another, you get a letter in the mail, an email that says you know you’ve been instructed by the court to prepare this report and here are the questions. So unfortunately, that’s probably 80 or 90% of the time. Once you do get that letter, I think it is very important you read through the questions and if you’re not happy with the letter, go back to the instructing solicitors for potentially both sides if you’re meant to be the single expert for both and just say, ‘look these questions are not right. They don’t actually make sense based off my understanding of issues.’ And I think that really is just going to come down to you knowing what you need to do in this situation and just going back to the instructing solicitors and setting it right. Because what is the point in answering questions that aren’t actually relevant? And it might just be that it’s a misunderstanding around what the financials actually say or whatnot. And I had recently a matter where I was given four questions on a particular transaction, so you’ve got all these related party general journal transactions that are effectively novating liabilities over to one related party to another, and effectively there was no real consideration for it. It’s a bit airy-fairy, but there was so many general journal transactions I’m talking thousands of them. And you could spend a year trying to unpick all of them because general journal transactions don’t actually necessarily mean any cash was transferred, it doesn’t mean that any actual transaction occurred, it’s really just an accountant book entry to try to re-balance up the accounts and stuff like that. So the practical effect of it is that you’re effectively novating one liability of a related party to another. And you know sometimes that might be without notice of the time agreement. So in that particular case I was asked to go through all these general journals, I was given a sample, and try to unpick it effectively and the aim there was to prove that the novations were valid effectively. And so I was asked four questions and no wonder why the last two questions made absolutely no sense. I had a pretty good understanding of exactly what they wanted from me, I had already read through all of the ledgers and stuff prior and I personally called them because I didn’t put it in writing at first instance until I discussed it with them, but I called them and said, ‘well your questions the way they’re stated will end up most likely me just responding on the basis of I have nothing to answer with, but I’ll probably say something like ‘I don’t have a comment to make on this question,’ but if the question was referred to as this, then this is the answer. And basically once I went through that with them, I then sent an email that said can you please rephrase the question to say this? Because I think you just got to be brave enough to do that because otherwise what’s the point responding to a question that just doesn’t make sense. I saw one of other partners here at the firm they were given I think 25 something questions and they were basically asked to prepare this expert report and the questions, there were so many of them it didn’t really allow you to put together a proper report because the questions either just kept repeating themselves or would just change something ever so slightly that you were just responding to other questions, but you knew what they wanted at the end result or what the actual question should have been and unfortunately in that case every question was just answered and you know, I remember reading the draft report at the end and I was like ‘I just don’t understand why we would allow so many questions to be asked,’ and I think that’s the really delicate balance is when you’re preparing that instruction letter, the more questions does not necessarily mean the better report that you get. You’re almost better off asking a question about the conclusion that they’re after, or the really key points, but not focusing too much. If I go back to that other matter also that before where the case came down to whether or not a particular agreement was due and payable at the date that a different agreement was entered into for that insolvent trading claim. Now imagine I was asked a question that said as at 30 June ‘19 was the company insolvent? Well, in my mind that’s irrelevant. The key issue is as of the date of that agreement becoming due and payable, allegedly, was the company insolvent as at that date? So you just need to be brave about going back to them and saying, ‘no, that’s actually not the issue at all, let’s just focus in on that one date’ because it doesn’t matter if the company was insolvent as at 30 June 19 because the debt was incurred well earlier. So you’re just going to have to understand the key issues and then get on with it and just say it, be brave and you’re the expert. |
| DT:
40:00 | And in that story you were telling earlier, you were brave and identified that the questions were wrong, but even in that engagement that’s resulted in wasted time, wasted costs in terms of preparing kind of a misconceived briefing letter. It sounds like though that there would be experts who wouldn’t do that, who would just answer the wrong questions correctly, possibly, but answering the wrong questions and obviously that’s going to result in even greater wasted cost and time and potentially, if the instructing solicitors aren’t identifying that that’s a problem an unsuccessful outcome for the client. It sounds like instructing solicitors really have to have the conversation that you ultimately had with your client there at the beginning of the engagement, rather than halfway through. That phone conversation to find out if you’re available really needs to be a broader one about the nature of the evidence that you’re trying to elicit. |
| MH:
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42:00 | Absolutely. And unfortunately, family law proceedings and that you’re never going to get that because of the single expert rules. TIP: Rule 7.03 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) states that if ‘the parties agree that expert evidence may help to resolve a substantial issue in a case, they may agree to jointly appoint a single expert witness to prepare a report in relation to the issue.’ Now, single expert procedural rules have been criticised, including by the Family Law Section of the Law Council of Australia, which said that single expert rules did not take into account the benefit of discussion of an issue by a number of different expert minds. Still, in an effort to reduce costs, single expert rules have been introduced in a number of other forums as well, for example in the Local Court in relation to small civil disputes. There’s always a balancing act between assisting the Court to the maximum extent possible with as many expert opinions as possible, and controlling the cost of civil proceedings for the litigants. Luckily, I don’t really do anything in that space anymore, so I’m not too worried about that but yeah, I think when you when you’ve got someone who’s called through asking you to do like a money tracing exercise or do a solvency report or whatnot they will always ask you for a quote and stuff like that and I would say 50-60% of the time, I’ll say, ‘no, I can’t really do the quote until I can get further information,’ so you ask them for it. The other probably 40% of the time you would ask some pretty basic questions on the phone to understand the size of it and what the issues are and you could probably give them a quote. But yeah, I think it just depends on what it is you’re being asked to do, how big is the job. I can understand why someone who you know, maybe is being engaged to a 2 grand – 3 grand business valuation might not care too much about how many assumptions they’re making or what the actual questions are on that because I’m sure the question is: ‘what’s my business worth?’ And they’ll probably be asked to assume 10 things or the expert will quite quickly work out what those 10 things are. I mean there are carve outs within the APES standards that allow for less formal reports and stuff like that that are being used not for court purposes and stuff like that. |
| DT:
| Yeah, it’s important to distinguish between those reports prepared for the purposes of litigation, which not only are subject to the standards that you’re referring to, but also to the expert witness code of conduct… |
| MH: | Absolutely, yeah. |
| DT: | …in the Uniform Procedure Rules and one that’s prepared for a commercial purpose. We’ve talked a bit about good briefing letters, not so good briefing letters, the kind of conversations that improve them, if you were writing a wish list for all the good things that would be in a briefing letter to you when you’re being engaged as an expert, what would be on that wish list? |
| MH: 43:00 | I think a good summary of the background to me is quite important, making sure that the statement of claim, defence, amended versions of those are actually included in the bundle because I think it’s amazing how many times assumptions aren’t actually put forward in the briefing letter but actually the assumptions are what you’ll see in the pleadings. |
| DT: | That’s interesting. I think a lot of our listeners wouldn’t even really think that the experts are reviewing the pleadings, but I think that’s good feedback. |
| MH:
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46:00 | I 100% definitely review the pleadings, especially for like an economic loss case where we’re trying to work out whether one party agrees that a particular act occurred or not, and the briefing letter may not refer to that. So you want to understand things from that point of view. You’ll want to understand, like from a trading point of view when you’re preparing the insolvency report what are the creditors? What are the debts that are incurred in there? What are the timings that the plaintiff is saying certain acts have occurred? You’ll want to understand all those things. So I love copies of those included in my bundle if they’ve been prepared, obviously. So you want a good background, you want a proper basis for assumptions and that so it’s clearly stipulated out, ‘these are the key assumptions or you might be wanting a copy of this document, but we don’t have it please assume that it is there. So that document could be, going back to my example before around the extension, they believed that one was done, there’s an affidavit signed by the director that says that it was done, but we don’t have the agreement, so that should be specifically stated in there. So you should consider what are the documents that the expert’s going to want, 9 times out of 10 but you don’t have. So really think about those key questions. Questions that are going to be determinative of the issue, not asking 20 questions that say, ‘as at this date do you think this occurred?’ Or ‘what do you think the loss is at this date?’ I think too many questions is not going to get you to where you want to get to. So I just want very specific questions for that, and then my bundle of documents. I think one of the absolutely most important documents in the whole world is the general ledger. It drives me absolutely bonkers that no one ever includes it in their briefing. I always specifically ask for it especially when I’m on a phone call with someone. I just don’t understand how you can do a particular solvency report without one. So the general ledger has all of the different accounts for the business with all their debits and credits on a running balance account basis. So it will show you the flow of all transactions and potentially any transactions that’s setting off one from another and stuff like that so it will have all your general journal entries, etc. Because if I look at a balance sheet for instance, and the balance sheet says that the company has a related party loan of like 200 grand in the assets column, but if I go to the general ledger it might be that that 200 grand was just a general journal entry that was recorded the day prior to me being given this information. And so then I’ll go back and say, ‘well hang on, where did this come from?’ And stuff like that, so the general ledger will show you all those little things. And it also goes back to my example before around that shareholders story by getting that general ledger, you’ll be able to get all of the shareholder drawing transactions over the past couple of years and then you can unpick what was actually relating to a director wage, how much did they spend at the vet, how much did they spend at the local Woollies, how much did they spend at Dan Murphy’s? You know, all the normal things that come out in the drawings account… |
| DT: | Lease on the Ferrari every now and then… |
| MH:
| Yeah I had one a couple of years ago where the director had borrowed, it must have been $1.5 million from investors because she was trying to set up this crypto platform type thing, and she borrowed all this money and she basically just spent it all on personal lifestyle stuff. So I had spreadsheets dedicated to all of her household stuff, all of her toiletries, all of her Uber receipts, travelling around the world, and you just get all of that from general ledgers. It’s so much easier a lot of the time than having to go through bank statements. |
| DT: 47:00 | Just reflecting on your comment before about not asking too many questions, I think maybe some lawyers and I suppose if this is the case you’d have to have been practising for a while, but there used to be a prohibition on experts giving evidence on the ultimate issue. You’d have to kind of dance around the ultimate issue and get evidence that didn’t touch upon the question that was ultimately for the court to decide, but that rule no longer exists, so you really can just get to the ultimate issue, assuming it’s one for an expert to opine on and say, ‘well, you know this is the root of the case, what do you think, expert?’ |
| MH:
48:00 | That’s where you can have that conversation with them pretty early on. Going back to my solvency report example the whole thing came down to that one issue, and although the instructions that I was given was basically a very simple question, it was basically was the company insolvent at any point in the four years? If so, when? And that then gave me the opportunity to properly review the material, work out what the actual key dates were, what key issue was, and then you can build your analysis out of that. Now that’s obviously not going to be everyone’s cup of tea because you’re going to have monetary restraints and no doubt there’ll be a lot of lawyers who will want to just have the right questions in place at the start, but sometimes letting the expert be the one to pick up on what that is can actually work in your favour. |
| DT: | I want to move on now to preparing for cross examination. You’ve prepared the report you’ve briefed the expert successfully with the right questions and the right material and you’ve got a report that you’re quite satisfied with, as an expert who’s preparing to be sent into the crucible of cross examination, what can your instructing solicitors do to help you prepare for cross examination? And have you had an experience where you felt particularly well prepared for cross examination and had a really good outcome as a result? |
| MH:
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50:00 | Yeah, so going to the first part of the question some of the main things will be where the solicitor or the barrister involved, might bring you in and to start asking some questions about your report and start pretending as if they were the other side’s barrister or solicitors, and they might start trying to pick you apart as a bit of preparation. You’ve obviously got to be careful in what you do with that but I have always found that very helpful in the sense of it’s amazing, I think, what lawyers and barristers focus on because I think one of my first times being cross examined, the amount of questions that there were that my mind were completely irrelevant to the issues of where they were focusing on bank statement transactions and stuff like that that weren’t even close to the relevant dates, you know they almost expect you to know a lot of that information off the top of your head and so I think it’s about being very well prepared, so being clear with your instructing solicitors upfront that, ‘hey I’m going to need a day or two or more to prepare,’ so making sure that’s being set aside. Make sure you thoroughly read your affidavit and report, making sure that the solicitor has given you a full copy of the actual documents. Because you know, a lot of the time you’ll prepare a report, you’ll save it all into the cloud and all that and you’ll send everything through to the solicitors and that, but you won’t really have a budget to then print it all out and have it all nice and neatly there, whereas the solicitors will have 5 copies of it or I’m sure many copies of it. So keep reading, keep trying to remember things and try to understand what the key issues are going to be and what your assumptions are. Almost writing down your assumptions on a paper next to you as you’re going through and reading your report and then thinking about what would happen in the alternative scenarios for those assumptions, hopefully you’ve done that report, but you know, sometimes you might go, ‘oh, actually, that actually should have been treated as an assumption.’ |
| DT:
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53:00 | That’s a really good point, because I think a lot of cross examiners do expect or try to create the expectation that an expert’s evidence is unreliable if they can’t remember it. But also that their level of expertise is unreliable if they can’t go beyond the report, if they can’t opine on an alternate factual scenario as you said, if one of the assumptions were different, and if they can’t do that without significant preparation, I think that the case that people often refer to is that someone couldn’t multiply 2 numbers together without going back and preparing another report and he was asked to substitute one number that was a factor in a conclusion for another number, and he said, ‘well, I can’t. I’d need to go back and use my tools to do that.’ TIP: So this isn’t an Australian case – I was actually thinking of a re-enactment of a deposition that was taken in the United States, which was portrayed in the New York Times video series Verbatim. It’s played for humour, but it’s a real life situation. This expert witness who specialised in accident recreation was asked to determine distances by applying these mathematical formulae. In response to a question from a cross-examiner, the expert refused to do some primary school level maths – multiplying two numbers – without a formula sheet in front of him. Now, the question then arose, was the expert witness refusing to do the multiplication without his sheets because he couldn’t work it out or because he didn’t want to risk inaccuracy? It’s a fun exchange of dialogue, but it raises an important question – what’s the limit of an expert’s field of expertise? Does the expert’s field of specialised knowledge and experience include performing arithmetic, and if not, does that question in cross-examination really impact on their reliability or the quality of the considered opinion they’ve expressed? Now, these are questions worth thinking about when considering how to attack the other side’s expert report – are you attacking the opinion and its foundations, which is a useful exercise, or are you just attacking the expert, which isn’t so useful? So it’s important to be flexible and to be able to, as you say, adjust some of those assumptions if you’ve got them as a reference paper. The preparation dry run of the cross examination, as you said, very useful tool, but you’re right, you do have to be careful with whether you use that as a genuine dry run of cross examination or you use as a bit of a coaching exercise to say, ‘you answered this way when you should have answered this way’ so you do have to be careful both expert and lawyer to make sure you’re not overstepping your ethical obligations. |
| MH: | Yeah 100% and I’m always very cautious in that room whenever we’re doing that, you’ve just got to be professional. At the end of the day you have an absolute overriding duty to court, and I think that’s actually something that everyone should always remember that when you’re sitting in that stand and all that, you might be anxious, you might be nervous but you just got to be frank and truthful and don’t be argumentative or anything like that to the court. I’m always looking for those cases where a court referred to how the expert has behaved on the stand and all that because there’s sometimes very funny ones. They can’t just accept the basic facts and they’ll be argumentative, and as you know, you’ll see that with heaps of witnesses, but hopefully not the expert ones. |
| DT:
54:00 | And the irony there is might be a temptation to bend the rules or even break them in service of providing a good customer service experience for the person who’s instructing you as an independent expert because you want to get more work from them and you think, well, if I’m difficult, if I put my responsibilities to the court ahead of my responsibilities to the instructor as I rightly should, then maybe I won’t get more work from them, maybe they’ll tell their friends and I won’t get work from them. But nothing is going to stop you from getting work faster than a comment from the court that you were unreliable and perhaps unethical, so that’s definitely the worst press you could get. |
| MH:
55:00 | Yeah and I had a judgement handed down a couple years ago now, Tremco was the case name, and Judge Porter made very favourable remarks about me on the on the stand and I remember reading through that and I was nervous as hell when the judgement first came out, not for the result, necessarily. Obviously, you have some things within yourself where you’re like ‘hopefully I was right,’ but also just how he talked about how I presented myself on the stand and was I able to willingly say that, I accept certain propositions when put to me and stuff like that. And yeah, luckily it was very favourable towards me. That gave me a lot more confidence moving forward. TIP: In Tremco Pty Ltd v Thomson [2018] QDC 101, Judge Porter said of Matthew, that ‘in the course of cross examination, he presented as someone who had undertaken a careful analysis of the evidence before him. He was co-operative under cross examination and not overly defensive of his report. Rather he relied on the reasoning in his report to sustain his conclusions’, and was found to be a credible witness.’ Nice one Matthew! |
| DT:
56:00 | There’s one other element of the expert evidence process that I want to ask you about, and this one, perhaps one that you’ll be conducting before cross examination, and perhaps even during it if you’re giving concurrent evidence. You’ve received the other side’s expert report, or you’re listening in concurrent evidence to their expert opinion, what are you looking for in terms of critiques of your own report, prospective critiques of theirs. If, as you said earlier, you were preparing a critique report, and have you ever had an experience where you were actually persuaded to the way of thinking of the other expert? |
| MH:
57:00 | The answer to the last part is probably no, I don’t think there’s been one, but basically I think one of the key parts is trying to understand, do their assumptions match up with yours? You know, if they’ve adopted a particular assumption and then created this conclusion or result out of it, did you adopt a similar assumption and therefore came up with a similar conclusion or a slightly different one because of something else? So it’s just about trying to pick up on the assumptions that they’ve made or potentially they’ve made them and not even disclosed them. And I think it’s trying to unpick those types of issues. There have been circumstances in my career where the plaintiff’s expert has produced their report first and they’ve had less information than I have. So I’ve then produced my report, which is a lot bigger than theirs because I’ve got a lot more information because I’m there for the defendant. And then the other side might then respond to my report based on all this new information. And so I’ll be looking at how this new information has changed their views or solidified their views from their initial report and then work that into my own analysis and stuff, but look it’s tricky. It’s very tricky because you don’t want to overstep the mark in the sense of almost advocating for your own side when you get the other side’s report because it can be very easy for you to go, ‘oh this person made all these assumptions and they seem to be wrong because of all these reasons.’ It can be very easy to jump into that mindset and you just need to, not attack so to speak when you when you’re doing a reply report you’re not saying, ‘this person’s report is fundamentally wrong because of all these reasons,’ it’s understanding what they’ve said and then try to explain why you might share the same view, or why you don’t necessarily agree. You got to be polite about it, but at the same time find the holes. |
| DT: 58:00 | You’re not likely to persuade one another of a difference of opinion. You’re not likely to ultimately say, ‘oh I was wrong, sorry!’ But really what’s most useful for both the lawyers on either side and the Court is to understand why the reports diverge because that isn’t in itself really a question of expert evidence, and so that way you’ve described the task of well, it’s not about criticising, it’s not about saying this person’s an idiot and they’re wrong, and it’s also not about just persuading them to agree with you. It’s really about the reports diverge for this reason and letting the court then make a decision about which one they prefer based on that reason. |
| MH:
59:00 | Absolutely, yeah. And the other part of it is that you’re explaining to the court where you might actually agree with them so that you can narrow the issues down for the parties and that might be that you agree that a specific event occurred on a date for the purpose of your report or you know that a certain transaction should not have been included in the financials for a particular reason. I had one the other day, the same matter, actually, about whether or not the debt was due and payable at the time of another contract coming in. There was an earlier debt that was incurred but when you actually go to the agreement, the agreement was actually between a different related party and that creditor, and so the funds were accidentally deposited into the funds of the company that we were looking at. And so I pointed out in my report, that it’s not a debt of the company because it was never their debt and the other side’s expert quickly picked up on that as well after the case, because they didn’t have that information and because I was on the defence I did tend to have more information than they did. So in their reply they quickly acknowledged that I’m right, that that debt should never have been included as part of it. And I think that’s what you would expect from a professional who can say ‘yep, look that that makes sense.’ We agree on that point and move on. |
| DT: | We’ve talked about today a lot of different ways expert evidence can go wrong, a lot of ways expert evidence can go right as well, and some practical tips about how to make sure it goes that way, but a lot of ways that it could go wrong. In your experience as an expert and as a litigant, what would you say is the biggest danger in preparing expert evidence? What’s the biggest pitfall? |
| MH: 1:00:00
1:01:00
1:02:00 | So I think the biggest pitfall is that you fall into being an advocate for the person who’s briefing you. So if you’ve been given a list of issues or a list of questions, and you sit there thinking ‘OK, how do I prove this for them?’ I think that’s probably the biggest issue. And it’s human nature to almost want to do that because effectively you’re being paid by these people to give them an expert report, so you got to be incredibly careful to make sure that you’re not advocating, you know that you’re properly identifying your assumptions, that you’re brave in your response back to them that you can say to them, ‘look your questions just aren’t up to scratch. You’re going to have to redraft them to more focus in on the key issues here.’ I think they’re probably your main things. Money will always be an issue for where there’s always going to be this sort of interaction between the expert and the lawyers. And I think this is probably one of the big issues with family law valuations is that we’ve gone into this system and luckily I’m out of it, the problem with family law is that the way that we’ve done family law valuations is that it’s almost become like a conveyancing now. You would start up a panel, panel will be say one to four people and then the two sides will decide on one expert to prepare a report and that expert is probably quoted prior. They would have never seen any of the instructions, they’ve probably never seen any of the information. That may not always be the case, but largely, even if they have, it would have been for maybe a page or two of minor facts and they probably quoted something like you know almost conveyancer rates so to speak. And so it’s like a race to the bottom in terms of price because you know you’re always going to compete with three or four other people and your own nature is to quote at the lowest price possible. So you might give a range and you’ll probably start as low as possible as part of that range, and then and up a little bit to give you some gap there, but because of how full on now that has become, it’s almost like the conveyancing world. And what I mean by that is conveyancing now is what $750? |
| DT: | It’s highly commoditised. |
| MH:
1:03:00 | Yeah, highly commoditised. But a valuation when it’s a family law one, really shouldn’t be too commoditised. I was talking with the staff around, obviously we’ve built our own valuation tool, but we would never really use that for a family law valuation. Family law valuation requires so many more inputs and so many more questions and things like that, so I think part of the issue will always be that there’s going to be this tension between your instructing side and you around how much you should be quoting on jobs, how much time you should be spending on it because as that professional expert, you want to make your report the absolute best thing in the world. But when it comes time to sending out your invoice if you’ve quoted let’s say 8 grand for a particular report, or 10 grand for a report, but you got five to six more grand on the clock because you’ve spent that extra bit of time perfecting and making sure it’s 100%, unfortunately, you can only send it out for that 10 grand. And over time it wears down on experts. So, then you stop spending that time, you start getting more and more staff involved because you’re trying to spread out the cost base and stuff like that, and that’s where errors and stuff can start creeping in. You know you’re always going to have those issues there where your expert may not be able to produce the absolute best report in the world because of cost, money constraints and stuff. But that’s the way the world works. But it’s something that you just need to be brave about at the start. Be upfront and say, ‘look, this is how much I think it’s going to cost, if you want it done right.’ |
| DT: | It’s trite but true that you get what you pay for. |
| MH:
1:04:00 | Absolutely, yeah. And I’m pretty particular on my solvency reports, in particular because that is my favourite type of report in the world. I think if someone came to me and said can you do a report for X amount of money and I didn’t think that X enough was going to cover it, I’d just say no because then they’re not obviously wanting the best or they don’t want something that’s really going to get into the issues properly. And that might be a bit arrogant of me or whatever, but I really enjoy doing this type of work and I want it done properly. I do fixed fee solvency reports all the time, I’m very upfront and open about how much it will cost. If I need to take a discount down on it and I believe what the report’s going to be then sure, I’ll do that, but if someone’s trying to come in and start selling their wares as doing solvency reports for half the price of the normal one, then you’re definitely getting what you’re paying for. |
| DT: | Yeah. Matthew, we’ve talked about a whole range of issues in terms of the preparation of expert evidence, selecting an expert, defining their assumptions, asking the right questions, providing the right material, preparing for court and ultimately being cross examined or cross examining an expert in court – if there’s one practical tip that you’d like our listeners to take away from today’s episode, what would that be? |
| MH: 1:05:00 | I think the practical tip that I’d take away is to have that sort of upfront conversation with the expert at the start. Understand or try to get them up to speed with the basic issues that you think are involved, but talk to them about that to start with and say, ‘look these are the issues that we think are here, is there anything else that you would typically see in these types of situations that you think we need to address? And then we’ll put together this engagement letter and all that for you.’ But I think it’s just having that upfront conversation is incredibly important and definitely doesn’t happen enough. There’s too many too many letters that are just sent to ‘the expert at SV Partners’ as opposed to knowing the person who’s going to be the expert and then talking to them to start with and then going from there. |
| DT: | Yeah, absolutely. That short conversation at the start of the engagement can save you so much time in terms of asking the right questions and setting the right assumptions later on. Matthew, thanks so much for joining me today on Hearsay. |
| MH: | Thanks David. |
| DT:
1:06:00
1:07:00 | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank my guest today, Matthew Hudson from SV Partners, for coming on the show. Now, I’ve got a really interesting expert evidence adjacent episode for you to try after this one. It features Nicholas Lennings, a class action lawyer from Quinn Emanuel, and it’s all about his PhD topic at Oxford. Statistics in Adjudicative Fact Finding, or in other words, when statistical evidence can be used in court proceedings. It’s a really fascinating discussion about the nature of proof and truth and it’s episode 14 of Hearsay. If you’re an Australian legal practitioner, you can claim one Continuing Professional Development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is, as you know, self assessed but we suggest this episode entitles you to claim a professional skills point. More information on claiming and tracking your points on Hearsay can be found on our website. The end of the CPD year is only a few weeks away. If you know a few people in your team who need a few extra points before the end of March, why not suggest signing up for a team subscription, if you haven’t already that is, and save on your own subscription price or, hey, just tell a friend to start listening. We’d love to have more listeners. Hearsay the Legal Podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm that makes complex simple. You can find all of our episodes, as well as summary papers, transcripts, quizzes and more, on our website and if you’re a subscriber, we’ll let you know by email whenever we release a new episode. Thanks for listening. I’ll see you next time. |
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