Admissibility of Expert Evidence Containing Hearsay

In two recent appellate decisions of the Courts of Appeal of Western Australia and the New South Wales respectively, there was considered the admissibility of expert evidence containing, in part, factual evidence derived by the reporting and testifying expert from another source (not just an assumption of fact the expert was asked to make and which the tendering party otherwise needed to prove). Dehors the Uniform Evidence Act and the common law, the reader ought also take account – in civil causes – the provisions of the Evidence Act 1977 (Qld) ss 33 and 129A, the latter being set out further below.

In Fitzroy River Ltd Liability Company v Tucker (as Joint and Several Administrator of Yeeda Pastoral Company Pty Ltd) [2025] WASCA 118 (28 July 2025), the Court of Appeal of the Supreme Court of Western Australia addressed a ground of appeal concerning the admissibility, or alternatively weight, to be attributed to expert valuation evidence tendered at trial, pertaining to the value of certain assets. The expert evidence contained some hearsay components in relation to the comparative transactions utilised for valuation. Useful comments were made in relation to the principles pertaining to expert evidence bearing such attributes, generally and where the reports were such evidence, subject to qualification, is adduced without objection. The court (Mitchell and Vaughan JJA and Musikanth J) wrote:

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Overview

[2] The appellant (Fitzroy) holds approximately 20% of the issued shares in Yeeda Pastoral Company Proprietary Limited (Yeeda). Yeeda runs a pastoral operation in the Kimberley region of Western Australia and is the parent company of several wholly owned subsidiaries. Yeeda’s subsidiaries include Kimberley Meat Co Pty Ltd (KMC) which owns and operates an abattoir located in the north of Western Australia (Abattoir).

[3] In late February 2024, the first, second and third respondents were appointed as joint and several administrators of Yeeda and its subsidiaries (including KMC).

[4] On 30 July 2024, Yeeda’s creditors resolved that Yeeda and its subsidiaries should enter into five interdependent deeds of company arrangement (DOCAs). The proponent of the DOCAs was the fourth respondent (TLP4). The DOCAs, which were executed on 16 and 17 August 2024, contain several conditions precedent. One of those conditions is that the court make an order, pursuant to s 444GA of the Corporations Act 2001 (Cth) (Act), for leave to transfer all issued shares in Yeeda (Shares) to TLP4.

[5] On 31 October 2024, the first, second and third respondents as deed administrators (Deed Administrators) filed originating process in the General Division of this court seeking such an order.

[6] On 1 April 2025, the primary judge made an order granting leave to transfer the Shares to TLP4 together with ancillary orders. Her Honour relevantly did so on the strength of a finding to the effect that the transfer of the Shares to TLP4 would not unfairly prejudice the interests of the members of Yeeda because there was no residual value in the Shares.1

[7] Fitzroy, which had appeared by counsel in the proceedings before the primary judge as an interested party with leave to be heard, now appeals her Honour’s orders. It advances a single ground of appeal boiling down to this: the primary judge incorrectly found that the Deed Administrators had adduced admissible evidence concerning the value of the Abattoir and impermissibly relied on such evidence in concluding that the transfer of the Shares would not unfairly prejudice the interests of Yeeda’s members. There is otherwise no challenge to any ruling or finding of fact made by the primary judge.

[8] The Deed Administrators and TLP4 each seek to uphold the primary judge’s orders on grounds not relied upon by her Honour.

Leave to appeal

[9] Fitzroy contended that it did not require leave to appeal against the orders of the primary judge. According to Fitzroy, its position was the same as the appellant in Kipoi;2 having not been a party to the primary proceedings but having participated as an interested non-party with leave to be heard under r 2.13(1) of the Supreme Court (Corporations) Rules 2004(WA).

[10] The Deed Administrators made no submissions as to whether Fitzroy required leave to appeal.

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[28] After referring to authorities,16 engaging with the evidence,17 and addressing various alleged ‘discrepancies’ identified by Fitzroy,18 the primary judge concluded:

(1)The Deed Administrators had ‘now’ adduced admissible evidence of each of the comparable sales referred to in the Pastoral leases valuation report.19

(2)On that basis, the value of the Yeeda pastoral leases was not more than $30.25 million, and between $24.2 million and $27.225 million in a liquidation scenario.20

(3)The Deed Administrators had also adduced admissible evidence to support the conclusion in the Abattoir valuation report as to the value of the Abattoir of $7.5 million.21

(4)Consequently, the Deed Administrators had discharged their onus and proved that there was a ‘very significant’ shortfall between the assets and liabilities of Yeeda (of at least $66 million) and, therefore, there was no residual value in the Shares.22

(5)There was no reasonable prospect that the Shares would obtain some value within a reasonable period.23

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Ground of appeal

[63] Fitzroy’s ground of appeal reads as follows:

1. The primary judge erred in law at [64]-[95] of the [Further reasons]:

(a)in finding that the [Deed Administrators] had adduced admissible evidence of the comparable sales used for the valuation of [the Abattoir] owned by [KMC], a wholly owned subsidiary of [Yeeda], sufficient to support the conclusion as to the value of the Abattoir;

Particulars

The [Productive Unit method] involves analysis of sales evidence for properties the subject of comparable transactions and comparison with the subject property.

(ii) The sale price is an essential element of the sales evidence for properties used for the [Productive Unit method] valuation.

(iii) For two of the three properties relied on for the [Productive Unit method] valuation of the Abattoir, there was no admissible evidence of the sale price.

(b)and holding that the transfer of the shares in Yeeda (Shares) would not unfairly prejudice the interests of Yeeda’s members, without adequate admissible evidence as to the value of the Shares.

Particulars

The primary judge found that the transfer of the Shares would not unfairly prejudice the interests of members of Yeeda because the Shares had no residual value.

(ii) To arrive at this conclusion, there needed to be an admissible valuation of the Abattoir which was missing.

(emphasis added)

[64] Despite the presence of the words ‘sufficient’ and ‘adequate’ in pars (a) and (b) of its ground, Fitzroy’s ground was ultimately concerned with admissibility not weight.76 That is, the appeal ground depended on a proposition to the effect that in concluding that the Shares had no residual value, the primary judge relied upon a ‘view’ about the value of the Abattoir that was ‘inadmissible in its entirety’.77

[65] Moreover, Fitzroy’s challenge was confined to the admissibility of the evidence relating to but one aspect of only two of the comparable sales referred to in the Abattoir valuation report: the sale price for each of V & V Walsh and Tabro Meats.78

Expert valuation evidence and hearsay: applicable legal principles

[66] Fitzroy’s ground of appeal falls to be considered against the backdrop of the principles which govern the admissibility of evidence about comparable sales specifically relied on by an expert in reaching an opinion as to the value of a particular asset.

[67] The principles were summarised by Megarry J in English Exporters (London) Ltd v Eldonwall Ltd,79 who concluded that such an expert may:80

(1) Express the opinions he or she has formed as to values even though substantial contributions to the formation of those opinions have been made by matters of which the expert has no first-hand knowledge.

(2) Give evidence as to the details of any transactions within the expert’s personal knowledge, in order to establish them as matters of fact.

(3) Express an opinion as to the significance of any transactions which are or will be proved by admissible evidence (whether or not given by the expert) in relation to the valuation with which the expert is concerned.

(4) Not, however, give hearsay evidence stating the details of any transactions not within his or her personal knowledge in order to establish them as matters of fact.

[68] Megarry J’s summary was referred to with approval by this court in Clack,81 with his reasons in English Exporters having previously been approved by this court’s predecessor in Pownall v Conlan Management Pty Ltd.82

[69] In Pownall, Ipp J had also highlighted the distinction between two types of hearsay in the context of expert valuation evidence involving comparable transactions: non-specific hearsay and specific hearsay. As his Honour explained:83

(1) Non-specific hearsay consists of ‘information obtained by a valuer from others, relating to particular transactions’, which forms part of the valuer’s general experience, knowledge and expertise.84 ‘Hearsay information of this kind may be used by a valuer, for example, to give a general exposition of the subject, to assess market trends, or to determine whether a particular transaction is aberrant or consistent with overall market conditions’.85

(2) Specific hearsay, on the other hand, consists of evidence of particular comparable transactions that are used to infer the value of the property that is directly in issue.86 Evidence of this kind cannot be used by the valuer unless otherwise proved by direct evidence. 87

[70] Ipp J’s reasoning was cited with approval by this court in Clack.88 The court in Clack also approved Megarry J’s earlier observations, in English Exporters, to the following effect concerning what was later termed ‘specific hearsay’:89

[D]etails of comparable transactions upon which a valuer intends to rely in his evidence must, if they are to be put before the court, be confined to those details which have been, or will be, proved by admissible evidence, given either by the valuer himself or some other way.

[71] It may therefore be accepted, as Fitzroy correctly submits, that where an expert valuer relies on specific comparable transactions to infer the value of a particular asset, those transactions must be proved:

(a) by direct evidence given by the valuer, if the valuer has personal knowledge of the transaction; or

(b) by direct evidence of another witness having such personal knowledge; and/or

(c) by admissible documentary evidence proving the relevant details of the transaction.

[72] The mere fact that an expert opinion may in part be based on inadmissible hearsay does not necessarily mean the entirety of the expert’s opinion must be rejected. As Ipp J observed in Pownall, where expert evidence ‘contains a mixture of objectionable hearsay and legitimate material, obviously there may be instances where the evidence will be trimmed, with the objectionable material being discarded so that the legitimate evidence remains’.90

[73] The relevant principles were summarised by his Honour as follows:91

(1) Expert opinion based entirely on inadmissible evidence is itself inadmissible and there is no discretion to admit it.

(2) On the other hand, where the expert opinion is based only partly on inadmissible testimony and that inadmissible testimony can readily be ascertained and discarded, the opinion should be admitted subject to weight.

(3) However, the evidence should be excluded where the expert opinion is based on a combination of admissible and inadmissible material, and it is impossible to determine:

(a) what conclusions are based on the expert’s own observations and what conclusions are based on what the expert has been told; or

(b) to what degree the expert has been influenced by the hearsay material.

[74] To the above may be added the observation that if no objection is taken to expert evidence, and such evidence is already before the court, the issue is not one of admissibility but rather one of weight,92 noting these questions will often overlap when it comes to expert evidence.93

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[104] It follows, in our view, that the ‘evidence’ concerning the sale price relating to the V & V Walsh transaction in the Productive Unit method of valuation was legally inadmissible. The primary judge erred in concluding that Mr McKinnon’s evidence and knowledge of the V & V Walsh abattoir provided a basis for his opinion as to its productive unit rate, and in concluding that Mr McKinnon’s evidence was sufficient to prove the ‘underlying facts’ of the sale relating to the transaction for the purposes of applying the Productive Unit method of valuation.133

Tabro Meats

[105] As noted earlier, the Deed Administrators accepted there was no admissible evidence of the sale price relating to the Tabro Meats transaction.

[106] While conceding that without proof of the relevant sale price the productive unit rate for Tabro Meats was derived from inadmissible hearsay, the Deed Administrators nonetheless submitted that the opinion as to valuation based on the Productive Unit method of valuation (and the Abattoir valuation itself) was not entirely inadmissible.134 In short, the Deed Administrators contended that the information relating to Tabro Meats was capable of ‘severance’ from the report.135

[107] The difficulty with this submission is that once it is accepted the ‘evidence’ of the sale price relating to V & V Walsh was legally inadmissible, and was an ‘essential element’ of its corresponding productive unit rate, it necessarily follows there could have been no admissible evidence of that productive unit rate.

[108] That consequence, coupled with the Deed Administrators’ concession concerning the inadmissibility of the authors’ evidence of the sale price (and, therefore, also the productive unit rate) relating to Tabro Meats, means there remained only one transaction, involving an abattoir processing ‘big’ or ‘large’ stock, for which legally admissible evidence of a sale price (and therefore a productive unit rate) had been adduced: Hilltop Meats.

[109] It is in our view difficult to see how any expert adopting a method of valuation premised on ‘direct comparison’ might have reasonably considered a single transaction to be a sufficient dataset for the purposes of any reliable application of such a method.

Conclusionary remarks — ground of appeal

[110] As noted earlier, Fitzroy did not object to the reception of the Abattoir valuation report into evidence. To the contrary, then senior counsel for Fitzroy informed the primary judge, unequivocally, that there were no objections to the trial bundle.136 Mr McKinnon’s affidavit sworn 3 January 2025 verifying the Abattoir valuation report was part of the trial bundle. As such the affidavit (and the Abattoir valuation report) was received into evidence, without any objection as to its admissibility, as exhibit 23.

[111] As no objection was taken to the Abattoir valuation report, it might be thought that the only issue for this court ought to be the weight to be given to the opinion.137

[112] In this respect it is necessary to distinguish between the significance of the non-objection to the admissibility of the Abattoir valuation report for the purposes of trial and for the purposes of appeal. For the purposes of trial, it is commonly said that, once expert evidence is tendered without objection, it is admissible for all purposes.138 That can only be taken so far. The better view as to the effect of the admission, without objection, of inadmissible evidence in a civil case is that expressed by Gibbs J in Hughes v National Trustees, Executors and Agency Company of Australasia Ltd:139

There are no doubt some cases in which inadmissible evidence, having been admitted, may be treated as evidence for all purposes; for example, where one party by his conduct at the trial has led the other to believe that evidence, although hearsay, may be treated as evidence of the facts stated, and the other in reliance on that belief has refrained from adducing proper evidence, the former party is precluded from objecting to the use of the evidence to prove the facts stated. However, in general it is the duty of a judge to reach his decision on evidence that is legally admissible, and to put evidence only to those uses which the law allows. When a statement is admitted, not as evidence of its truth but simply as original evidence, the mere fact of its admission cannot enable it to be given an additional probative value which the law denies it.

See also Jones v Sutherland Shire Council,140Ritz Hotel Ltd v Charles of the Ritz Ltd141 and Auxil Pty Ltd v Terranova.142

[113] Hence why, in some cases, it is said that expert evidence — admitted without objection — can carry no weight where in fact inadmissible for want of exposed reasoning.143 This also explains why, where expert evidence is uncontradicted and not challenged in cross-examination, it nevertheless may not be accepted where the assumptions on which it is founded are not established: Hull v Thompson.144

[114] The admission at trial, without objection, of inadmissible expert evidence in a civil case has implications for the grounds that may be advanced on appeal. A trial judge does not make an error of law in accepting the tender of inadmissible evidence to which no objection is made.145 However, it may be permissible — depending on the appellant’s conduct at the trial — to contend on appeal that it was not open as a matter of law to accept the expert opinion. A ground to that effect was upheld in Kipoi in circumstances where the appellant argued at trial that ‘no weight’ should be given to purported valuation evidence because of the witness’s lack of any relevant expertise.146 Ordinarily, however, in a civil case it will be untenable for an appellant who did not object at trial to the admission of expert evidence to pursue a ground on appeal to the effect that the trial judge erred in law in admitting the expert opinion in evidence as it was inadmissible. The appellant will be bound by the conduct of its case at trial.147

[115] The point is well illustrated by the decision of this court’s predecessor in Hankinson v Brookview Holdings Pty Ltd.148 In that case an accountant gave expert evidence quantifying a claimant’s damage as a result of a breach of a contractual restraint of trade. The opinion was based on an examination of the claimant’s books and records. Those materials were not tendered at trial. At trial there was no objection as to the admissibility of the accountant’s evidence. On appeal it was alleged that the accountant’s opinion was inadmissible as the underlying facts had not been proved. In the alternative it was asserted that, if the opinion was admissible, no or negligible weight should have been placed on the opinion as it was based on hearsay evidence. Both grounds were rejected.

[116] Wheeler J (Simmonds J agreeing) referred to Suttor v Gundowda Pty Ltd149 and Coulton v Holcombe.150 It was said that, had objection been taken, it was clear from the course of the trial that the claimant would have been likely to have produced the underlying records.151 Her Honour also referred to the reasons of Gibbs J in Re Montecatini’s Patent Application.152 There, in relation to a failure to verify books and statements on which an accountant had based his views, his Honour observed that so far as a party sought to raise this as an issue on appeal ‘by failing to make early objection to the evidence … [the party must] be taken not to have insisted upon any requirement that the records be tendered or that their contents be proved in some other way’.153 E M Heenan J thought that, in the circumstances of the case, the failure to object constituted a waiver of the right to object to admissibility.154

[117] In the present case Fitzroy did not object to the Abattoir valuation report being received in evidence. However, in its initial written submissions Fitzroy contended that there were material deficiencies in the Deed Administrators’ valuation evidence such that the evidence ‘should be given very little weight’.155 Fitzroy also expressly raised a contention that Mr McKinnon did not depose to having personal knowledge of the values of the comparable properties referred to in the LAWD reports.156 And, after the primary judge raised the evidentiary issue in the Initial Reasons (albeit in the context of the pastoral leases) and the Deed Administrators were given leave to file and serve further affidavits going to the transactions referred to in the Abattoir valuation report, Fitzroy submitted that157

in relation to four of the five comparative sales referred to in the [Abattoir valuation report], Mr McKinnon does not depose to having personal knowledge of the sale, and the other evidence relied on is either inadmissible or otherwise problematic, such that it should not be accorded much, if any, weight. (emphasis added)

[118] Fitzroy made the latter submission in a context where it had also contended that ‘the remaining question for the Court is whether the [Deed Administrators] have now adduced admissible evidence of the comparable sales referred to in the [Abattoir valuation report] and the [Pastoral leases valuation report]‘158 (emphasis added). Accordingly, while at one juncture the opposition was advanced in terms of weight, it was also put in terms of admissibility.

[119] The further hearing before the primary judge was conducted on the basis that it was necessary for the Deed Administrators to address the matter from the perspective of admissibility notwithstanding the earlier admission of the Abattoir valuation report into evidence without objection. The Deed Administrators did not contest the hearing proceeding in that manner. The Deed Administrators were provided with ample opportunity to deal with the admissibility point insofar as the primary judge’s orders of 5 March 2025 permitted them to adduce further affidavit evidence.

[120] In the circumstances, while ordinarily the question of the admissibility of the underlying facts for the purpose of the Abattoir valuation report could not have sustained a successful appeal given the admission into evidence of the report without objection, we are satisfied that this is not an ordinary case. In the unusual circumstances of the present case Fitzroy’s failure to object to the admissibility of the Abattoir valuation report does not preclude it pursuing its single ground of appeal.

[121] The practical consequence of our conclusion that the evidence of the V & V Walsh sale price was legally inadmissible, coupled with the Deed Administrators’ concession that there was no admissible evidence of the Tabro Meats sale price, means that the material before the primary judge relating to those matters carried no weight at all as a matter of law.

[122] In circumstances where no weight could be attached to that evidence, where each sale price was an ‘essential element’ of the productive unit rate for each corresponding abattoir, and where no adequate dataset remained for the purposes of any reliable application of the Productive Unit method, there was in our view no evidence before the primary judge capable of supporting a conclusion as to the value of the Abattoir by application of that method. It necessarily follows that we would uphold Fitzroy’s single ground of appeal.

(emphasis added)

The link to the decision is here.

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1 Re Yeeda Pastoral Company Pty Ltd (Subject to Deed of Company Arrangement) (ACN 094 819 717) [No 2] [2025] WASC 109 (Further reasons) [106] read with [65] and [95].

2 Kipoi Holdings Mauritius Ltd v Kirman and Brauer as joint and several administrators of Tiger Resources Ltd (subject to deed of company arrangement) [No 4] [2024] WASCA 145 [448] –[463].

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16 Further reasons [17]-[18]: English Exporters (London) Ltd v Edonwall Ltd [1973] 1 Ch 415, Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 and Clack v Murray [2018] WASCA 120.

17 Further reasons [19]–[61], [66]–[91].

18 For example, Further reasons [27]–[31], [35]–[39], [43]–[48], [58]–[60].

19 Further reasons [62].

20 Further reasons [63].

21 Further reasons [94].

22 Further reasons [95].

23 Further reasons [101].

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76 Appeal ts 31, 37. Compare Kipoi, [542]–[548].

77 Fitzroy’s written submissions on appeal [4] (White AB 9). Emphasis added.

78 Fitzroy’s written submissions on appeal [33]–[35] (White AB 19–20).

79 English Exporters (London) Ltd v Eldonwall Ltd [1973] 1 Ch 415.

80 English Exporters (423).

81 Clack [52] (Martin CJ, Buss P & Murphy JA).

82 Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, 374 (Ipp J, Malcolm CJ agreeing).

83 Pownall (374–375) (Malcolm CJ agreeing).

84 Pownall (374), referring to Pattenden, ‘Expert Opinion Evidence Based on Hearsay‘ [1982] Crim LR 85 (Pattenden) (95).

85 Pownall (374), referring to English Exporters (421).

86 Pownall (375), referring to Pattenden (93).

87 Pownall (375).

88 Clack [53]-[54].

89 Clack [49] citing English Exporters (422).

90 Pownall (376). For a useful illustration of this approach see Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229 [32] (Steytler J, Murray & Wheeler JJ agreeing).

91 Pownall (377–378). See alsoSteffen v Ruban [1966] 2 NSWR 662 (1966) 84 WN (Pt 1) (NSW) 264, 269.

92 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 [86] (Heydon JA); Hevi Lift (PNG) Ltd v Etherington [2005] NSWCA 42 [27] (McColl JA, Mason P & Beazley JA agreeing); Kipoi [542] (Vaughan JA, Buss P & Mitchell JA agreeing).

93 Kipoi [542] (Vaughan JA, Buss P & Mitchell JA agreeing), referring to Lang v R [2023] HCA 29; (2023) 97 ALJR 758 [221].

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133 Further reasons [81].

134 Deed Administrators’ submissions [36]–[37] (White AB 43–44).

135 Deed Administrators’ submissions [39] (White AB 43–44).

136 Hevi Lift (PNG) Ltd v Etherington [2005] NSWCA 42 [80] (McColl JA, Mason P & Beazley JA agreeing); Kipoi [542]–[545] (Vaughan JA, Buss P & Mitchell JA agreeing).

137 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 [86] (Heydon JA); Kipoi [542] (Vaughan JA, Buss P & Mitchell JA agreeing).

138 See eg TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim [2016] NSWCA 68; (2016) 91 NSWLR 439 [205] (Leeming JA, Beazley P & Emmett AJA agreeing).

139 Hughes v National Trustees, Executors and Agency Company of Australasia Ltd [1979] HCA 2; (1979) 143 CLR 134, 153.

140 Jones v Sutherland Shire Council [1979] 2 NSWLR 206, 219.

141 Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158, 170–171.

142 Auxil Pty Ltd v Terranova [2009] WASCA 163 [61] –[63].

143 Hevi Lift (PNG) Ltd v Etherington [2005] NSWCA 42 [80] (McColl JA, Mason P & Beazley JA agreeing); Kipoi [542]–[545] (Vaughan JA, Buss P & Mitchell JA agreeing).

144 Hull v Thompson [2001] NSWCA 359 [21] (Rolfe AJA, Sheller JA & Davies AJA agreeing) (approved in Keith v Gal [2013] NSWCA 339 [4] , [130] , [156]).

145 Auxil Pty Ltd v Terranova [2009] WASCA 163 [60] (Buss JA, Miller JA agreeing).

146 Kipoi [537]–[579] (Vaughan JA, Buss P & Mitchell JA agreeing).

147 See generally Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [65] –[67] (Buss P, Murphy & Vaughan JJA).

148 Hankinson v Brookview Holdings Pty Ltd [2004] WASCA 279.

149 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418.

150 Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1.

151 Hankinson v Brookview Holdings Pty Ltd [11]–[12].

152 Re Montecatini’s Patent Application (1973) 47 ALJR 161, 169.

153 Hankinson v Brookview Holdings Pty Ltd [12].

154 Hankinson v Brookview Holdings Pty Ltd [43] (see also [44]).

155 Fitzroy’s initial submissions filed 27 January 2025 [8] (Blue AB 102).

156 Fitzroy’s initial submissions filed 27 January 2025 [16] (Blue AB 104).

157 Fitzroy’s further submissions filed 21 March 2025 [22] (Blue AB 154).

158 Fitzroy’s further submissions filed 21 March 2025 [12] (Blue AB 150).

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The second case is Netdeen Pty Ltd t/as GJ Gardner Homes v Lindfield NSW Pty Ltd (2025) NSWCA 196 (28 August 2025). There the expert report in question was an expert valuation report of a Mr Potter – an expert charactered accountant – going to the assessment of damages. The court wrote (“MBA referring to the Master Builders’ Association and “HIA” referring to the Housing Industry Association, whose published data and industry outlook material Mr Potter sourced and adopted in his report):

1. THE COURT: The central issue in this appeal is whether the appellant, Netdeen Pty Ltd trading as GJ Gardner Homes (Netdeen), the Franchisor under a national home building franchise known as GJ Gardner Homes, was entitled to refuse to renew a Master Franchise for New South Wales and the Australian Capital Territory granted to the respondent, Lindfield NSW Pty Ltd (Lindfield), under a Master Franchise Agreement entered into on 1 July 2014 (MFA). Related issues arise as to whether the primary judge erred in his findings as to unconscionability, repudiation of the MFA, the admissibility of expert valuation reports of Mr Michael Potter (an expert chartered accountant retained by Lindfield) and in the assessment of damages. The primary judge, Elkaim AJ, found that in refusing to renew the Master Franchise Netdeen was in breach of the MFA and acted unconscionably contrary to s 21 of the Australian Consumer Law (ACL), being Sch 2 of the Competition and Consumer Act 2010 (Cth), and awarded Lindfield damages of $20 million and costs.

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Issue 6: Damages and admissibility of the Potter reports

172. As noted above, the primary judge awarded Lindfield damages in the amount of $20 million, representing what his Honour found to be the loss of the value of the renewal term. In arriving at that figure, the primary judge referred to the evidence of both Mr Potter and Mr Ross. Mr Potter had prepared expert evidence as to the valuation of the opportunity that Lindfield lost. Mr Ross was not instructed to, and in his reports did not, prepare his own valuation. Rather, he was instructed to, and did, identify what were said to be errors in Mr Potter’s reports.
173. As also noted above, his Honour explained in PJ2 why he rejected Netdeen’s challenge to the admissibility of Mr Potter’s reports. On appeal, by ground 29 of the notice of appeal, Netdeen challenges that evidentiary ruling. It renews its claim that the materials from the HIA and MBA relied upon by Mr Potter regarding forecasts were themselves inadmissible and could not be relied upon by Mr Potter. Netdeen also contends that if the Potter reports had been ruled inadmissible, it would not have called Mr Ross as a witness, with the consequence that there would have been no evidence to support Lindfield’s primary damages claim. (For completeness, it should be noted that, on appeal, Netdeen did not press its challenge at ground 41 of the notice of appeal to the primary judge’s alternative damages assessment at PJ3[266]-[271].)
174. Netdeen further contends in grounds 30 to 40 of the notice of appeal that, even if the primary judge was correct to admit the Potter reports, there were other matters raised by it below which rendered the reports an unacceptable basis for calculating the primary damages claim. Those criticisms include Mr Potter’s assumption that, for the next 10 years, there would be 35 Sub‑Franchisees, notwithstanding that he was not instructed to assume that number and there was evidence that, as at the end of May 2024, there were only 30 Sub‑Franchisees. Netdeen also points out that Mr Potter himself had acknowledged that, if his estimate was based on there being 30 Sub‑Franchisees, he would get a different result.
175. Netdeen also contends that, in arriving at a figure of $20 million as representing the value of the business Lindfield lost because of non-renewal, the primary judge erred in not using an annual profit figure which took into account the liability of the company to pay income tax.
176. Netdeen contends that the primary judge erred in not accepting Netdeen’s criticisms of the Potter reports. Paradoxically, however, it then contends that ultimately the primary judge did not in fact rely upon the Potter reports as the basis for his assessment of damages.
177. To the extent that the primary judge’s assessment of damages was based on Mr Ross’s evidence (as referred to at PJ3[247]-[259]), Netdeen challenges that approach on several grounds, claiming that the primary judge erred in:
     1. misstating Mr Ross’s evidence at PJ3[248] in finding that Mr Ross “suggested that there was a simpler and alternative method of valuing the business”, being the “multiples” approach; and
     2. not proceeding on the basis that any “multiple” had to be applied to after‑tax income and that, if a multiples approach was applied to after-tax profit, it would produce a sum substantially less than $20 million.
178. Lindfield defends the ruling that Mr Potter’s reports were admissible, as well as the primary judge’s quantification of damages.
179. Essentially there are two issues:
     1. the correctness of the primary judge’s ruling that Mr Potter’s two expert reports were admissible; and
     2. the correctness of the primary judge’s approach to quantification of damages.
180. For the following reasons, we consider that Netdeen has failed to establish any appealable error regarding the primary judge’s ruling on admissibility, but we find that his Honour’s quantification of damages is flawed.

Admissibility of Mr Potter’s two expert reports

181. Netdeen contends that the primary judge wrongly admitted two reports by Mr Potter, one dated 3 May 2024, which is Mr Potter’s primary report, and one dated 17 July 2024, which replies to Mr Ross’s report dated 3 July 2024.
182. As we have explained, two consequences are said to follow from the wrongful admission of Mr Potter’s reports. First, to the extent that the primary judge relied on Mr Potter’s reports in concluding that Lindfield’s damages were $20 million, that reliance was misplaced. Secondly, Netdeen submits that if Mr Potter’s report dated 3 May 2024 had been rejected, it would not have relied on the report of Mr Ross. Consequently, Mr Ross’s report would not have been in evidence and, to the extent that the primary judge relied on that report or oral evidence given by Mr Ross, he would not have been able to do so, with the result that there would have been no evidence before the primary judge concerning the quantification of damages and Lindfield would have failed to prove its loss.
183. Mr Potter’s reports were said to be inadmissible because they depended on unproven assumptions and in substantial respects were not based on his relevant expertise. To understand those criticisms, it is necessary to say something more about the valuation methodology adopted by Mr Potter.
184. Mr Potter was asked to prepare an expert report which “assesses the value to Lindfield of a ten-year renewal term from 1 July 2024 to 30 June 2034 (Renewal Term)”. He was asked to make several assumptions including that the “Essential Financial Arrangements between Lindfield, the Sub–Franchisees and Netdeen will remain unchanged during the Renewal Term”.
185. Mr Potter was also asked to adopt the following “approaches”:

“a. ‘An integer to forecast expected future cash flows over the Renewal Term will necessarily be the future volume of contracts. The volume of contracts that could be expected to be undertaken by the sub-franchisees over the Renewal Term should be based on the historical actual volume and market share obtained by reference to ABS approval data and a reasonable high and low estimated range of expected future approvals in the areas for each sub-franchisee having regard to publicly available home building industry forecast data you have been able to obtain’; and

b. ‘If, in the course of providing your opinion, you rely on any external data or assumptions, please identify that data or those assumptions’.” [footnotes omitted]

186. In his primary report, Mr Potter set out both historical and forecast information in relation to the house construction industry in Australia and in New South Wales and the ACT. The information in relation to Australia is taken from the IBISWorld Report, House Construction in Australia, October 2023. The information in relation to NSW and the ACT is taken largely from the August 2022 and April 2024 versions of an MBA publication titled “Building and Construction Forecasts NSW”. However, Mr Potter also says that he had regard to “ABS data as to the volume of detached house approvals granted per month from FY2019 to January 2024, by local government area (LGA)”.
187. Mr Potter also had regard to data provided by the HIA. He summarised the information obtained from the sources he referred to in the following terms:

“a. IBISWorld predicts an increase in housing industry revenue over the next several years, before declines in FY2029 and FY2030;

b. MBA predicts an increase in build start volume in FY2024, decline in FY2025, increases in FY2026, FY2027 and FY2028 before a decline in FY2030; and

c. HIA predicts a decline in build start volume in FY2024 followed by increases in FY2025 and FY2026.”

188. Mr Potter explained that in undertaking the requisite task he regarded the most appropriate methodology as a DCF (discounted cash flow) methodology. This involved estimating the expected cash flows that Lindfield would have derived from the MFA from 1 July 2024 and discounting those cash flows to obtain their present day value applying an appropriate discount rate.
189. In estimating cash flows, Mr Potter adopted what he described as a “bottom‑up” approach, which involved estimating the number of houses that would be built (or, more accurately, the number of slabs that would be laid) by each Sub‑Franchisee and the income (royalties less expenses) that would be earned by Lindfield from the construction of those houses.
190. In order to do that, Mr Potter sought to estimate the total size of each Sub‑Franchisee’s market and the expected market share of each Sub‑Franchisee. He also needed to make an assumption about the number of Lindfield’s Sub-Franchisees.
191. To estimate the total size of each Sub-Franchisee’s market, Mr Potter started with the historical ABS data (from which the market size for each Sub‑Franchisee area could be determined) and applied percentage increases or decreases using data available from MBA and HIA (which he preferred to “the revenue‑based outlook published by IBISWorld”). Two points may be made about Mr Potter’s approach. First, although he was instructed on the approach that he should take, it seems clear that he used his own judgment in selecting which data to use and what adjustments should be made to them. Secondly, and relatedly, it could not be said that Mr Potter made any assumption about the accuracy of the data that he chose to use. The most that could be said is that, as an expert, he considered it appropriate to use the data, making adjustments he considered relevant, to derive figures that he used in the analysis in his report.
192. Netdeen makes two broad criticisms of Mr Potter’s approach. First, it is said that Mr Potter assumed the accuracy of the data contained in the reports from MBA and HIA. However, the accuracy of those data could not be proved by the reports (since the reports were inadmissible hearsay and could not be admitted as business records). Consequently, Mr Potter’s reports depended upon unproved assumptions and were therefore inadmissible. Secondly, it is said that Mr Potter was not an expert in the housing market and therefore he was not qualified to express an opinion on the likely size of the market in the franchise areas over the following 10 years.
193. In considering these criticisms, it is convenient first to set out the relevant principles relating to the admission of opinion evidence.
194. Section 56 of the Evidence Act 1995 (NSW) (Evidence Act) provides:

“56 Relevant evidence to be admissible

(1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding.

(2) Evidence that is not relevant in the proceeding is not admissible.”

195. Evidence is relevant if, if it were accepted, it “could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding” (s 55(1)).
196. Section 76 of the Evidence Act provides:

“76 The opinion rule

(1) Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.

(2) Subsection (1) does not apply to evidence of an opinion contained in a certificate or other document given or made under regulations made under an Act other than this Act to the extent to which the regulations provide that the certificate or other document has evidentiary effect.”

197. Section 79(1) creates the following exception to the opinion rule in respect of expert evidence:

“If a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.”

198. Pausing there, it is apparent that expert evidence is admissible if (1) it is relevant to an issue in the proceeding; and (2) it is wholly or substantially based on specialised knowledge that the expert has gained from his or her training, study or experience. If the underlying facts in respect of which the opinion is expressed are sufficiently different from the facts of the case, the opinion may not be relevant, although whether the proved facts are sufficiently different from the assumed facts to render the opinion irrelevant may itself be a matter of expert opinion. For example, the relevance of particular facts to a medical diagnosis may itself be a matter of expert opinion.
199. Section 135 of the Evidence Act provides:

“135 General discretion to exclude evidence

The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might—

(a) be unfairly prejudicial to a party, or

(b) be misleading or confusing, or

(c) cause or result in undue waste of time.”

200. An expert report which fails to comply with the principles set out in cases such as Makita at [85] per Heydon JA concerning the need of an expert to identify the assumptions on which his or her opinion is based and the expert’s reasoning may be excluded under s 135 if the requirements of that section are met.
201. Section 59 of the Evidence Act sets out the general principle relating to hearsay evidence. It relevantly provides:

“59 The hearsay rule—exclusion of hearsay evidence

(1) Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that it can reasonably be supposed that the person intended to assert by the representation.

(2) Such a fact is in this Part referred to as an asserted fact.

(2A) For the purposes of determining under subsection (1) whether it can reasonably be supposed that the person intended to assert a particular fact by the representation, the court may have regard to the circumstances in which the representation was made.

Note—

Subsection (2A) was inserted as a response to the decision of the Supreme Court of NSW in R v Hannes (2000) 158 FLR 359.

(3) …”

202. The Evidence Act contains a number of exceptions to s 59. Relevantly, s 60 provides:

“60 Exception: evidence relevant for a non-hearsay purpose

(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.

(2) This section applies whether or not the person who made the representation had personal knowledge of the asserted fact (within the meaning of section 62 (2)).

Note—

Subsection (2) was inserted as a response to the decision of the High Court of Australia in Lee v The Queen (1998) 195 CLR 594.

(3) …”

203. It is well accepted that to be admissible an expert opinion itself does not need to be based on admissible evidence. The nature of the material the expert relies on will be relevant to the weight that should be placed on the expert opinion. It does not go to the admissibility of the opinion. The position was explained by the Full Court of the Federal Court (Finn, Sundberg and Mansfield JJ) in Bodney v Bennell (2008) 167 FCR 84; [2008] FCAFC 63 at [92]-[93] in these terms:

“Before the Evidence Act it was well established that experts are entitled to rely upon reputable articles, publications and material produced by others in the area in which they have expertise, as a basis for their opinions. In Borowski v Quayle [1966] VR 382 at 386 (Borowski) Gowans J, quoting Wigmore on Evidence (3rd ed) vol 2 at 784-785, said that to reject expert opinion because some facts to which the witness testifies are known only upon the authority of others, ‘would be to ignore the accepted methods of professional work and to insist on finical and impossible standards’. Experts may not only base their opinions on such sources, but may give evidence of fact which is based on them. They may do this although the data on which they base their opinion or evidence of fact will usually be hearsay information, in the sense they rely for such data not on their own knowledge but on the knowledge of someone else. The weight to be accorded to such evidence is a matter for the court: see generally Borowski [1966] VR at 385-387; PQ v Australian Red Cross Society [1992] 1 VR 19 at 34-35; H v Schering Chemicals Ltd [1983] 1 WLR 143 at 148-149; Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 at 161-163 and Jango (No 4) 214 ALR 608 at [8].

There is nothing in the Evidence Act that displaces this body of law. The Australian Law Reform Commission, on whose report the Act was based, said:

‘Under existing law hearsay evidence that is admissible for a non-hearsay purpose is not excluded, but may not be used by the court as evidence of the facts stated. This involves the drawing of unrealistic distinctions. The issue is resolved by defining the hearsay rule as preventing the admissibility of hearsay evidence where it is relevant by reason only that it would affect the court’s assessment of the facts intended to be asserted. This would have the effect that evidence relevant for a non-hearsay purpose — eg to prove a prior consistent or inconsistent statement, or to prove the basis of the expert’s opinion — will be admissible also as evidence of the facts stated.’

See Interim Report No 26, Evidence (1985) vol 1 at para 685.”

204. Although the Full Court was concerned with the Evidence Act 1995 (Cth), its comments apply equally to the Evidence Act.
205. The High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [41] adopted an approach consistent with that set out above. There, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ said:

“Contrary to submissions on behalf of Mr Hawchar, this analysis does not seek to introduce what has been called “the basis rule”: a rule by which opinion evidence is to be excluded unless the factual bases upon which the opinion is proffered are established by other evidence. Whether that rule formed part of the common law of evidence need not be examined. It may be accepted that the Law Reform Commission’s interim report on evidence denied the existence of such a common law rule and expressed the intention to refrain from including a basis rule in the legislation the Commission proposed and which was later enacted as the Evidence Act 1995 (Cth) and the Evidence Act 1995 (NSW). What has been called the basis rule is a rule directed to the facts of the particular case about which an expert is asked to proffer an opinion and the facts upon which the expert relies to form the opinion expressed.” (footnotes omitted)

206. That approach was applied by this Court in Cambridge v Anastasopoulos [2012] NSWCA 405. That case relevantly concerned the value of a motorboat. In finding that expert evidence given by the witness Captain Kysil was inadmissible, Meagher JA (Barrett JA and Sackville AJA agreeing) said at [40]:

“In cross-examination, Captain Kysil said that he had searched a number of websites to inform himself about the Donzi motorboat. That he did so was consistent with his having no relevant training, study or experience to express a view about the correct description of the vessel or as to its rarity. He explained that his conclusion that the vessel “may be rare” was due in part to the fact that the “information [he] received off the Internet was insufficient to give … a more fulsome research background on the boat because there was insufficient evidence of the type of boat I was looking for” (Black 580). Captain Kysil did not identify or adopt as correct any information obtained from any particular website. Nor was it suggested or established that any of the websites to which he referred were sources of information which experienced valuers of Donzi motorboats treated as reliable and used when forming opinions as to value: as to the possible admissibility of such information, see English Exporters (London) Ltd v Eldonwall Ltd [1973] Ch 415 at 420; PQ v Australian Red Cross Society [1992] 1 VR 19 at 34-36; R v Fazio (1997) 69 SASR 54 at 63-64; Woods v Director of Public Prosecutions [2008] WASCA 188; 38 WAR 217 at [55]-[58]; Bodney v Bennell [2008] FCAFC 63; 167 FCR 84 at [92]-[93].”

See also Fuller v Avichem Pty Ltd (t/as Adkins Building & Hardware) [2019] NSWCA 305 at [89] (Payne JA, White JA agreeing).

207. It may be accepted that the reports from the MBA and HIA were hearsay and were inadmissible to prove the truth of the data they contained. However, the question was not whether the reports from the MBA and HIA were admissible. Rather, it was whether Mr Potter’s evidence was admissible because he relied on those reports. For the reasons given, they were. What made the reports from the MBA and HIA admissible was that they were part of the material relied on by Mr Potter to form his expert opinion, with the result that they were admissible under s 60 of the Evidence Act (see Malone v Queensland (No 3) [2022] FCA 827 at [58] per O’Bryan J).
208. It was not disputed that the valuation of the cash flows of a business is an area of specialised knowledge that Mr Potter had. In considering whether the opinion expressed by Mr Potter was based wholly or substantially on that specialised knowledge, it is important to bear in mind what Mr Potter did. Mr Potter was required to value the future cash flows that Lindfield would derive from the MFA had it been renewed for a period of 10 years. In order to value those cash flows, Mr Potter selected a particular valuation methodology that required him to reach conclusions about the likely size of the market for home building in various geographic areas. In order to do that, he identified what he considered to be the most relevant publicly available data and derived predicted increases (or decreases) in the size of the market over time using those data. The adjustments he made did not depend on his own knowledge of the relevant markets but rather on the adjustments that he thought were appropriate having regard to the different industry data and the fact that the industry data only covered some of the years in question.
209. In essence, then, Mr Potter relevantly did the following:
     1. He selected the appropriate valuation methodology.
     2. He selected the appropriate industry data to rely on.
     3. He decided how to use that data and how to extrapolate from the data he had to derive figures for the 10 years.
     4. He performed the necessary calculations.
210. The tasks referred to in (1) and (4) were plainly within Mr Potter’s specialised knowledge. Although perhaps not as obvious, the same is true of the tasks referred to in (2) and (3).
211. In the case of (2), it is to be expected that a valuer would have general knowledge of the sources of publicly available data, or how to go about finding the sources of publicly available data, relevant to general business activity, such as information about interest rates, inflation, employment and economic growth. Housing construction is such an important area of economic activity, that the same is true of it. Mr Potter gave unchallenged evidence that he had done “a number of analyses and reports in [the house building] industry” and that the reports that he identified were “widely used”. The same reports were used by Mr Ross; and it was not suggested that there were more reliable industry data.
212. As to (3), those tasks involved a combination of what might be thought of as common sense – for example, averaging the figures obtained from the HIA and MBA reports – together with specialised knowledge concerning appropriate projections that can be made from historical and industry data. They did not depend on detailed knowledge of the house building industry as such but on expert accounting and valuation knowledge on what conclusions can reasonably be drawn from industry specific data. They are the types of tasks undertaken by valuers both in projecting the future income of a business and selecting an appropriate discount rate.
213. It follows that the primary judge was correct to admit Mr Potter’s reports. It is unnecessary, therefore, to consider what the position would be in relation to Mr Ross’s report or the evidence he gave if Mr Potter’s primary report had not been admitted.

(emphasis added)

A link to the decision is here.

In addition there ought be kept in mind, in this regard, the provisions of the Evidence Act 1977 (Qld) which, relevantly, provides:

129A Order that evidence may be given in a different way

(1) This section applies in a proceeding that is not a criminal proceeding if either—

(a) the fact in issue is any of the following—

(i) the proof of handwriting;

(ii) the proof of documents;

(iii) the proof of the identity of parties;

(iv) the proof of authority; or

(b) a court considers—

(i) a fact in issue is not seriously in dispute; or

(ii) strict proof of a fact in issue might cause unnecessary or unreasonable expense, delay or inconvenience in a proceeding.

(2) The court may order that evidence of the fact may be given at the trial, or any other stage of the proceeding, in any way the court directs.

(3) Without limiting subsection (2), the court may order that evidence of a fact be given by—

(a) a statement on oath of information and belief; or

(b) the production of documents or entries in records; or

(c) the production of copies of documents or copies of entries in records.

(4) The court may at any time vary or revoke an order made under this section.

See also s 92 of the Evidence Act.