Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 49

Reported Decision : 75 NSWLR 380

New South Wales Supreme Court

CITATION : Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 49

HEARING DATE(S) : 16/06/08. 17/06/08. 18/06/08, 19/06/08, 20/06/08, 23/06/08. 24/06/08, 25/06/08, 26/06/08, 27/07/08, 30/06/08, 04/07/08, 28/07/08, 29/07/08, 27/08/08, 28/08/08, 24/11/08, 25/11/08, 26/11/08, 27/11/08, 28/11/08

JUDGMENT DATE : 16 February 2009

JURISDICTION : Equity Division

JUDGMENT OF : Barrett J

DECISION : Order under Evidence Act s 136(a) to be made

CATCHWORDS : EVIDENCE - report of expert - report as to value of land - not commissioned or obtained for use in proceedings - no Schedule 7 acknowledgment - not served as required by rules of court - whether admissible under Evidence Act - held it is - but need for s 136(a) order to promote purpose of rules of court

Evidence Act 1995, s 55, 56, 59, 60(1), 69, 76(1), 77, 135, 136(a), 137 LEGISLATION CITED : Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005, rules 31.18, 31.23(3), 31.28

CATEGORY : Procedural and other rulings

Bakerland Pty Ltd v Coleridge [2002] NSWCA 30; (2002) 12 ANZ Ins Cas 61-521 Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd [2007] NSWSC 1128 Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297 CASES CITED : Seven Network Ltd v News Ltd (No 8) [2005] FCA 1348; (2005) 224 ALR 317 State of New South Wales v Tszyk [2008] NSWCA 107 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 654 Yacoub v Pilkington (Australia) Pty Ltd [2007] NSWCA 290

Tim Barr Pty Limited - First Plaintiff PARTIES : Timothy James Barr - Second Plaintiff Narui Gold Coast Pty Limited - Defendant

FILE NUMBER(S) : SC 2762/02

Mr RG McHugh SC/Mr J E Lazarus (to 4 July 2008 and from 24 November 2008) - Plaintiffs Mr I M Barker QC/Mr RG McHugh SC/Mr J E Lazarus (from 28 July 2008 to 28 August 2008) - Plaintiffs COUNSEL : Mr M L Einfeld QC/Mr R E Dubler SC/Mr A C Harding (to 27 June 2008) - Defendant Mr A C Harding (30 June 2008) - Defendant Mr I M Neil SC/Mr AC Harding (from 28 July 2008) - Defendant

SOLICITORS : Corrs Chambers Westgarth - Plaintiffs Verekers - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

MONDAY 16 FEBRUARY 2009

2762/02 TIM BARR PTY LIMITED & ANOR v GOLD COAST NARUI PTY LIMITED JUDGMENT 1 I am dealing with the tender by the plaintiffs of a valuation report relating to the Cudgen Paddock land (Tab 651). The report was prepared by Mr Sharpe, a registered valuer, and is dated 11 February 2002. 2 Mr McHugh SC submits on the plaintiffs' behalf that the report should be admitted into evidence. Mr Neil SC submits on the defendant's behalf that it should not. 3 Several questions require attention. First, however, it is appropriate to refer to the purpose for which the plaintiffs seek to use the report. While the use to which the tendering party proposes to put a document is often not relevant to questions of admissibility, this case is one where it does assume some importance. The plaintiffs' purpose is twofold. First, they wish to rely on the expert opinion of Mr Sharpe in order to prove the value of the relevant land in the period following the completion of the report. Second (and in addition), they wish to use the report to prove the state of mind of Mr Barr, on the matter of the land's value, in the period following the completion of the report and, more particularly, in the period leading up to the purported exercise by Tim Barr Pty Ltd of the option to purchase the land on 14 April 2003. I shall return to these matters. 4 The first question going to the admissibility of the report arises under the Uniform Civil Procedure Rules 2005. Rule 31.23(3) of those rules is as follows: "Unless the court otherwise orders, an expert's report may not be admitted in evidence unless the report contains an acknowledgment by the expert witness by whom it was prepared that he or she has read the code of conduct and agrees to be bound by it." 5 An acknowledgment of the kind referred to in this rule is often referred to as a "Schedule 7 acknowledgment". Mr Sharpe's report does not contain a Schedule 7 acknowledgment. The question therefore arises whether the report is one to which the rule applies so as to render it inadmissible. 6 The plaintiffs eventually did not make any submission that the rules of court cannot render inadmissible something that the Evidence Act 1995 does not exclude. It was accepted that rule 31.23(3) is capable of operating according to its terms despite provisions of the Evidence Act. The reasons were stated at [45] and [46] of the judgment of McDougall J in Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd [2007] NSWSC 1128. That case was decided in September 2007. In the following month, in Yacoub v Pilkington (Australia) Pty Ltd [2007] NSWCA 290 at [59], Campbell JA, with the concurrence of Tobias JA and Handley AJA, accepted the capacity of the Uniform Civil Procedure Rules to "modify the law of evidence by imposing a precondition upon the admissibility of an expert's report". 7 In construing rule 31.23(3), it is necessary to have regard to definitions of "expert", "expert witness" and "expert's report" in rule 31.18: "'expert', in relation to any issue, means a person who has such knowledge or experience of, or in connection with, that issue, or issues of the character of that issue, that his or her opinion on that issue would be admissible in evidence.

'expert witness' means an expert engaged or appointed for the purpose of: (a) providing an expert's report for use as evidence in proceedings or proposed proceedings, or (b) giving opinion evidence in proceedings or proposed proceedings.

'expert's report' means a written statement by an expert (whether or not an expert witness in the proceedings concerned) that sets out the expert's opinion and the facts, and assumptions of fact, on which the opinion is based." 8 It is, I think, uncontroversial that Mr Sharpe, a registered valuer, is, in relation to the valuation of land, an "expert" as defined. Whatever may be the precise boundaries of the definition of "expert's report", the form and content of the document dated 11 February 2002 cause it to be within that definition; and this is so even though he is not an "expert witness" as defined. I say that he is not an "expert witness" because the content of the document shows that he was obviously not engaged or appointed to provide a report for use in any proceedings. I say that his not being an "expert witness" does not mean that the report is not an "expert's report" because that is the force of the "whether or not" specification in the bracketed part of the definition of "expert's report". 9 But does it follow that the report of 11 February 2002, being an "expert's report" that does not contain any Schedule 7 acknowledgment, may not be admitted in evidence unless, as envisaged by rule 31.23(3), the court makes a specific order admitting it? 10 When the definition of "expert's report" is, as it were, injected to rule 31.23(3), the rule reads: "Unless the court otherwise orders, a written statement by an expert (whether or not an expert witness in the proceedings concerned) that sets out the expert's opinion and the facts, and assumptions of fact, on which the opinion is based may not be admitted in evidence unless the written statement contains an acknowledgment by the expert witness by whom it was prepared that he or she has read the code of conduct and agrees to be bound by it." 11 The "unless" part of the rule (that is, the part laying down the condition that must be satisfied to remove the barrier to admissibility) is predicated on certain action by the "expert witness by whom it was prepared". But as the description of the report shows (by reference to the definition of "expert report") the person who prepared the report, while an "expert", as defined, may or may not be an "expert witness" as defined. 12 On first reading, my inclination was to think that, if (as here) the person who prepared the report is an "expert" but not an "expert witness", the condition introduced by the word "unless" simply has no work to do and is inapplicable, with the result that the rule as a whole does not apply. 13 On closer reading, I am persuaded that this is not correct. The condition introduced by the word "unless" requires that there be a Schedule 7 acknowledgement given by the "expert witness" by whom the report was prepared. It follows that if the report is an "expert's report" by reason of its having been prepared by an "expert" who is not an "expert witness", the condition cannot be satisfied. And if the condition is not satisfied because it cannot be satisfied, the consequence is that the exclusion effected by the words before "unless" operates unconditionally and the report is inadmissible. 14 The true effect of the rule, as it thus appears to me, is that a report that is an "expert's report" because prepared by an "expert" who is an "expert witness" in the proceedings may not be admitted in evidence unless it contains a Schedule 7 acknowledgment by that "expert witness"; but a report that is an "expert's report" by reason of its having been prepared by an "expert" who is not an "expert witness" in the proceedings may not be admitted in evidence at all. In either case, however, the exclusion the rule otherwise effects may be overcome by a specific order of the court as contemplated by the opening words of the rule. 15 This construction is consistent with that adopted by McDougall J in Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd (above) at [43]. His Honour referred to differences between rule 31.23(3) and the analogous provision of the Supreme Court Rules 1970 and noted (at [44]): "In my view, the clear intention of this change in the regulatory framework is to reinforce the proposition that, as a general rule, expert evidence should not be admitted unless the expert has at the relevant time subscribed to the obligations that are now to be found in Schedule 7 ." 16 Mr Sharpe is not, in the context of this case, an "expert witness". But he is an "expert". Rule 31.23(3) therefore operates in the way described at paragraph [13] above to make Mr Sharpe's report of 11 February 2002 inadmissible unless the court otherwise orders. The question whether the court should make an order admitting the report is best considered after other objections to it have been addressed. 17 It is necessary to refer next to rule 31.28 of the Uniform Civil Procedure Rules. Rule 31.28(3), so far as relevant provides: "Except by leave of the court, or by consent of the parties:

(a) an expert's report … is not admissible unless it has been served in accordance with this rule, and

(b) without limiting paragraph (a), an expert's report …, when tendered under section 63, 64 or 69 of the Evidence Act 1995, is not admissible unless it has been served in accordance with this rule, and …" 18 The reference to service "in accordance with this rule" is a reference to service in accordance with an order of the court or an applicable practice note or, if no order or practice note applies, service at least 28 days before the date of the hearing. This is made clear by rule 31.28(1). 19 It is also relevant to quote rule 31.28(4)(a): "Leave is not to be given as referred to in subrule (3) unless the court is satisfied:

(a) that there are exceptional circumstances that warrant the granting of leave, or

…" 20 It is accepted that Mr Sharpe's report was not "served in accordance with this rule". That, coupled with its status as an "expert's report" within the rule 31.18 definition (which applies to rule 31.28), means that it is "not admissible" unless the court grants leave as contemplated by rule 31.28(3). And the court may not grant such leave unless it is satisfied as the matter in rule 31.28(4)(a), that is, that the grant of leave is warranted by "exceptional circumstances". 21 Again, the question whether the court should grant leave (and the antecedent question whether it is permitted by rule 31.28(4)(a) to grant leave) is best left until other questions concerning the admissibility of Mr Sharpe's report have been considered. 22 I turn now to the Evidence Act. It is accepted that the "opinion rule" in s.76(1) will render Mr Sharpe's opinion inadmissible to prove the existence of a fact about the existence of which the opinion was expressed unless some exception to that opinion rule applies. 23 Mr McHugh submitted on behalf of the plaintiffs that the exception in s.77 operates. That section is as follows: "The opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed." 24 As I said at the outset, one of the purposes for which the plaintiffs seek to tender Mr Sharpe's report is to establish the state of mind of Mr Barr regarding the value of the land in the period after the preparation of the report and leading up to the purported exercise of the option in April 2003. In the context of the case as a whole, one consequence may follow if it is found that Mr Barr had a reasonable basis for a certain belief on the question of the land's value, while another result may follow if no such basis is shown. I am satisfied that, for this reason, the report is relevant for a purpose other than proof of the value itself. But that is on the assumption, of course, that Mr Barr received the report and that it may therefore be taken to have played a part in his reaching whatever view he did reach on the question of value at the relevant time. 25 Mr Neil submitted on behalf of the defendant that it has not been shown that Mr Barr received the report, with the result that its content cannot be seen to be relevant for the purpose of establishing Mr Barr's state of mind on the question of value. 26 I am of the opinion that there is ample room for an inference that Mr Barr did receive the document and that that inference should be drawn. 27 In the first place, the valuation says on its face that it was prepared under instructions from Mr Barr. Under the heading "Instructions" appears the following: "To estimate the open market value, for the exclusive use of Mr Tim Barr, solely for the purchase of a call option purposes, of the land known as 'Cudgen Paddock' off Old Bogangar Road, Kingscliff NSW 2489, as at the date hereof." 28 There is also a statement in the report that it is for the use "only of the party to whom it is addressed and for no other purpose". The party to whom it is addressed is clearly Mr Barr. 29 In a letter to Mr Edgar Hung dated 11 April 2003, Mr Barr discussed exercise of "the call option under my lease agreement with Narui Gold Coast Pty Ltd". In that letter, Mr Barr spoke of submitting a market value "using, for example, the John Sharpe market evaluation of $A1.8 million" subject to certain adjustments. The value stated in the 11 February 2002 report is $1.8 million. 30 A letter from Mr Barr to Mr Sharpe dated 25 January 2002 (that is, a little over two weeks before the date the report bears) shows that Mr Barr had already commissioned Mr Sharpe to prepare a "land evaluation". 31 When the valuation report itself is viewed in the light of the letter of 25 January 2002 and the letter of 11 April 2003, there is, in my view, a firm foundation for the conclusion that Mr Barr commissioned Mr Sharpe to prepare the report and that Mr Sharpe furnished the completed report to Mr Barr some time before Mr Barr wrote to Mr Hung. 32 I am accordingly satisfied that the content of Mr Sharpe's report is material to establishing the state of mind of Mr Barr as to the value of the land at (or before) the time option was exercised. 33 It follows that I accept Mr McHugh's submission that the valuation report is admissible as evidence of Mr Sharpe's opinion on value by virtue of s 77 despite the fact that it contains an opinion otherwise excluded by s 76. And once the report is found to be admissible by operation of s 77, it is, of course, admissible for all purposes and without limitation as to use unless a limitation arises under some other provision. 34 Mr Neil next says, however, that Mr Sharpe's opinion is excluded by the hearsay rule in s 59 of the Evidence Act. The riposte is that it is a business record of Mr Barr within s 69(1) and that its hearsay content is therefore made admissible by s 69(2). Mr Neil accepted that the report is a business record but submitted that the operation of s 69(2) is excluded by s 69(3) because the report was "prepared or obtained … in contemplation of … an Australian or overseas proceeding" (s 69(3)(a)). The only potentially relevant proceedings are these proceedings. 35 Mr McHugh submitted that the valuation report was not prepared or obtained "in contemplation" of these proceedings. For reasons I am about to state, I accept that submission. 36 The only apparent connection between the valuation report and these proceedings comes from the simple matter of timing. The report is dated 11 February 2002. The proceedings were commenced by Mr Barr and his company (Tim Barr Pty Ltd) on 17 May 2002, a little more than three months later. This timing factor provides only scant grounds, at best, for finding a connection of the kind described by the words "in contemplation of". 37 There is, however, other evidence about the genesis of the report. First, there is Mr Barr's letter to Mr Sharpe dated 25 January 2002 to which reference has already been made. That letter shows that Mr Sharpe had been briefed and given his instructions to prepare the report before that date, so that the time interval can be seen to be even greater. Also in evidence is a letter from Mr Barr dated 14 January 2002 to "Land Evaluator". It begins: "Please receive additional information regarding your report on market value of the provided description of property located within Kings Forest property." 38 Then follow references to features of the land and matters affecting it. The letter contains a passage as follows: "I would like to purchase this property on today's market value to continue my lemon scented tea tree plantation and I look forward to your fair price as my contract clearly states that there is a call option on market value and it must be accepted by independent land valuer and the client will accept accordingly, regarding your market value on the Cudgen Paddock." 39 The letter just quoted is not addressed to Mr Sharpe by name. But the reference at the beginning to a purpose of providing "additional information" to the "Land Evaluator", plus the nature of the information given and other content of the letter, makes it clear enough that it was sent to a "Land Evaluator" already retained by Mr Barr. The "Land Evaluator" was probably Mr Sharpe, given that he produced a valuation report in relation to the particular land slightly less than a month later. And whether the "Land Evaluator" was Mr Sharpe or someone else, the letter clearly states the purpose for which Mr Barr was seeking, in January 2002, a valuation of the Cudgen Paddock. It was a purpose wholly related to the need to establish the current market value for the purposes of the exercise of the option. Mr Sharpe's report must be accepted as having been commissioned and obtained for that purpose. 40 It follows, in my view, that any weak inference, based on timing alone, that these proceedings were in contemplation at the time of the commissioning and obtaining of a valuation and that the report was commissioned and obtained in contemplation of the proceedings is entirely overborne by the evidence about purpose stated in the letter of 14 January 2002 which has nothing to do with contemplated legal proceedings. 41 I am accordingly of the opinion that s 69(3) does not preclude the operation of s 69(2) to exclude the hearsay rule in relation to Mr Sharpe's report. 42 This conclusion with respect to s 69(2) is sufficient to deal with the hearsay objection. It is therefore not necessary to deal with submissions directed to s 60(1): "(1) The hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of an asserted fact." 43 I nevertheless observe that, had s 69(2) not operated, Mr Sharpe's report would have been admissible to prove Mr Barr's state of mind despite the hearsay rule in s 59(1). That is because s 59(1) operates to make a person's previous representation inadmissible to prove the existence of a fact that the person intended to assert by the representation – that is, in the present context, to prove the facts stated in the report, as distinct from, for example, that a party, at a past time, was aware of the content of the report (whatever may be the quality or accuracy of that content). And had the report been admitted on that basis, s 60(1) would have caused the hearsay rule not to apply to the facts stated in the report – in other words, the report would, as in the case of s 77 discussed at paragraph [33] above, have been admissible for all purposes and without limitation as to use, unless some limitation came from some other section of the Act. 44 At this point, therefore, the position reached is that the content of Mr Sharpe's report, being evidence that is, in terms of s 55, relevant in these proceedings, is admissible by virtue of s 56 unless excluded by some other Evidence Act provision; that none of the potentially excluding provisions of that Act to which the defendant points operates to exclude; and that, in terms of the Evidence Act itself, the report is admissible. Having reached that point, I must return to the Uniform Civil Procedure Rules. 45 I have found that each of rule 31.23(3) and rule 31.28(3) of the Uniform Civil Procedure Rules makes the report inadmissible unless the court, by order, allows it to be admitted into evidence; also that the exclusion effected by the rules is effective even though the Evidence Act does not operate to exclude. In relation to rule 31.28(3) the court may not make such an order unless it is satisfied that "exceptional circumstances" warrant its doing so, that being the effect of rule 31.28(4)(a). It is necessary for the possibility of an enabling order to be considered separately by reference to each rule. 46 In relation to rule 31.23(3), the clear intention is as stated by McDougall J in the Investmentsource case at [44], that is, to keep out expert evidence unless it can be seen that the expert has conduct himself or herself in the way required by Schedule 7 in relation to the preparation of the report and the formation of the opinion stated in it. The concern is a quality assurance concern: to be sure that an expert has approached the task responsibly and mindful of the importance the expression of opinion will have as part of a body of evidence placed before the court. As a general rule, a written statement of the opinion of an expert should not be accepted as authoritative on a matter within the relevant field of expertise unless the person expressing the opinion is shown to have proceeded in that way; but the court may, in a particular case, allow the statement to be admitted even where the person is not shown to have proceeded in that way. 47 I accept that the absence of a Schedule 7 acknowledgment from Mr Sharpe's valuation report means that the court should not receive it as evidence of the value of the relevant land in January 2002. A party wishing to lead evidence of that value should do so by commissioning a qualified valuer to make a valuation as at the relevant past time, with that valuer then approaching the task in the way rule 31.23 and Schedule 7 envisage. There is no basis on which the court could confidently conclude that the report had been prepared in accordance with the prescribed regime of quality control. 48 As I have noted, however, the plaintiffs wish to have Mr Sharpe's report in evidence for a second purpose, that is, as evidence indicative of the state of mind of Mr Barr on the question of value in the period after preparation and delivery of the report. The concern underlying rule 31.23(3) is not relevant to that second purpose. It might therefore be appropriate to make an order under rule 31.23(3) allowing the report to be admitted into evidence, provided that its use was limited to the second purpose. 49 Rule 31.28(3) has a quite different purpose. The rule exists in aid of an objective of efficient case management. It seeks to keep out an expert's report which has not been made available to the other side in a timely way and in circumstances making it clear that the party making it available intends to seek to rely on it at trial. The main purpose of the rule appears to be to prevent the other party being taken by surprise. This is, I think, borne out by the fact that the other party's consent, if given, removes the barrier. 50 In approaching the question whether the court should make an order under both rule 31.23(3) and 31.28(3) in the present case, two particular matters must be borne in mind. First, the plaintiffs' purpose of using Mr Sharpe's report to prove Mr Barr's state of mind on the question of value is one that does not cut across the purpose of rule 31.23(3). Second, the defendant has been aware of Mr Sharpe's report for a long time and the plaintiffs' intention to seek to introduce it into evidence is no surprise at all to the defendant. 51 There is, to my mind, a case for making an order under rule 31.23(3) allowing the report to be used in evidence if the use is restricted to proof of Mr Barr's state of mind on the question of land value. With such a restriction in place, the policy of rule 31.23(3) of keeping out evidence of the actual opinion of an expert who has not made a Schedule 7 acknowledgment is observed and the evil against which the rule is directed is avoided. At the same time, the admissibility provided for by the Evidence Act will be preserved to the extent consistent with the rule of court. 52 When it comes to the question of a grant of leave under rule 31.28(3), the same approach will be appropriate, provided that the requirement for "exceptional circumstances" laid down by rule 31.28(4) is met. The meaning of "exceptional circumstances" was discussed by Campbell JA at [66] and [67] of his judgment in Yacoub v Pilkington (Australia) Pty Ltd (above) in a passage repeated at [206] of his Honour's judgment in State of New South Wales v Tyszyk [2008] NSWCA 107: "Another question of construction concerned "exceptional circumstances" in rule 31.18(4). In San v Rumble (No 2) [2007] NSWCA 259 at [59]-[69], I gave consideration to the expression "exceptional circumstances" in a different statutory context to the present. Without repeating that discussion in full, I shall state such of the conclusions as seem to me applicable in the construction of rule 31.18(4).

(a) Exceptional circumstances are out of the ordinary course or unusual, or special, or uncommon. They need not be unique, or unprecedented, or very rare, but they cannot be circumstances that are regularly, routinely or normally encountered: R v Kelly (Edward) [2000] 1 QB 198 (at 208). (b) Exceptional circumstances can exist not only by reference to quantitative matters concerning relative frequency of occurrence, but also by reference to qualitative factors: R v Buckland [2000] 1 WLR 1262; [2000] 1 All ER 907 (at 1268; 912-913). (c) Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional: Ho v Professional Services Review Committee No 295 [2007] FCA 388 (at [26]). (d) In deciding whether circumstances are exceptional within the meaning of a particular statutory provision, one must keep in mind the rationale of that particular statutory provision: R v Buckland (at 1268; 912-913). (e) Beyond these general guidelines, whether exceptional circumstances exist depends upon a careful consideration of the facts of the individual case: Awa v Independent News Auckland [1996] 2 NZLR 184 (at 186). In the context of rule 31.18(4) UCP Rules , any decision about whether there are exceptional circumstances would need to bear in mind the explicit statement of objectives of a court in the management of litigation contained in sections 56-59 Civil Procedure Act 2005." 53 In State of New South Wales v Tyszyk, Campbell J found that there were "exceptional circumstances". His Honour said at [207]: "In my view, the combination of the reports having been cross-examined on, the reports having been in the plaintiff's possession for nearly one year, the defendant having notified an intention to tender the reports, lapse of a reasonable time for the plaintiff to take steps to deal with the tender of the reports (which might or might not be 28 days), and lack of any identifiable prejudice would, in the absence of any other countervailing factors, amount to exceptional circumstances." 54 I am of the opinion that an order granting leave under rule 31.28(3) should be made on the same proviso as I have mentioned in relation to rule 31.23(3), that is, that use of the report is restricted to proof of Mr Barr's state of mind in the period February 2002 to 14 April 2003, so that the report is not available to prove the value of the land at that or any other time. There are, in my opinion, "exceptional circumstances", for the purposes of rule 31.28(4(a) in that the report has been in the possession of the defendant for a long time and the defendant has long been aware of the plaintiffs' intention to rely on it; also (and importantly) that an order restricting use of the report to proving Mr Barr's state of mind, made at the same time, will take the case well outside the mainstream of cases of tender of expert reports with which rule 31.28(3) is concerned, that is, cases where it is sought to prove the matter upon which the report is given. This last "exceptional circumstance" is of particular significance.

55 Power to make a restricting order of the kind I consider necessary to comes from s 136(a) of the Evidence Act: "The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might: (a) be unfairly prejudicial to a party, or …" 56 Mr McHugh emphasised that the power given by s 136(a) cannot be exercised just because the evidence in question is, in some fashion, inconvenient. In an earlier ruling on evidence in these proceedings (Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 654), I noted, referring to observations of Sackville J in Seven Network Ltd v News Ltd (No 8) [2005] FCA 1348; (2005) 224 ALR 317, that the s 136(a) discretion is to be exercised in the context of the Evidence Act as a whole. Referring specifically to s 60(1) and the effect it has of making a hearsay representation admissible notwithstanding its hearsay quality if it is relevant for a purpose other than proving the fact asserted by the hearsay representation (see paragraph [42] above), I said at [18] and [19]: "[18] … That section provides, in effect, that hearsay evidence that is made admissible by the Act (for example, through the business records exception) is admissible for all purposes. Any exercise of the s 136(a) discretion of the kind now sought cuts across that policy. It follows that the court should, before exercising the discretion, be satisfied that there is a good and substantial reason to depart from the policy.

[19] The same message had already emerged clearly from the decision of the High Court in Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297. There was emphasis there on the need to exercise discretions conferred by provisions such as ss 135 and 136 so as not to subvert the policy of the legislation." 57 In Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297 at [97], McHugh J said that s 136 – and the related ss 135 and 137 – "confer no authority to emasculate provisions of the Act" and "are to be applied on a case by case basis because of considerations peculiar to the evidence in the particular case". 58 In this case, the power conferred by s 136(a) of the Evidence Act is to be exercised in the context of that Act and the relevant rules of court, taken as a whole; and there should be no "emasculation" of that whole 59 A powerful consideration in the present case is that there is no assurance of the quality control the rules make compulsory if a report of an expert is to be admitted as proof of matters within his or her expertise. I refer, of course, to the Schedule 7 acknowledgment. That, coupled with unavailability of the author of the report to be cross-examined – which is relevant to the question whether a s 136(a) danger exists: Bakerland Pty Ltd v Coleridge [2002] NSWCA 30; (2002) 12 ANZ Ins Cas 61-521 at [55] – provides, to my mind, a sound and sufficient basis to find a danger of the kind of unfair prejudice to which s 136(a) refers. 60 I am satisfied that a danger of the 136(a) kind will exist unless the use to which Mr Sharpe's report may be put is limited in the way I have described. 61 The order I think it appropriate to make is a single order embodying elements drawn from rule 31.23(3), rule 31.28(3) and s 136(a), to the following effect: "Order in relation to the valuation report of John R Sharpe dated 11 February 2002 concerning the Cudgen Paddock land and tendered by the plaintiffs: (a) pursuant to rule 31.23(3) of the Uniform Civil Procedure Rules 2005, that the report be admitted into evidence even though it does not contain an acknowledgment as required by that rule; (b) pursuant to rule 3.18(3) of the Uniform Civil Procedure Rules 2005, that leave be granted so as to make the report admissible in evidence even though it has not been served in accordance with that rule; and (c) pursuant to s 136 of the Evidence Act 1995, that the use to be made of the report be limited to proof of the state of mind of the second plaintiff with respect to the value of the land the subject of the report." 62 I will, however, receive submissions on the precise form of the order before pronouncing it, noting that my various references to use of the report to prove Mr Barr's state of mind (including the reference in the form of order) may be too narrow a description of the use the plaintiffs wish to make of the report. The real point is that the use should be limited so that the report is not available to prove facts stated in it or value as such. If the parties are able to agree the appropriate form of order and forward it to my Associate, so much the better. **********

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