#26 Lessons from the Courtroom – Independence (Part 1)

A recent judgment issued in the Supreme Court of Queensland saw Senior Counsel disavowed any reliance on their own expert’s opinion, leaving the plaintiff expert unchallenged due to a lack of independence whereby the accounting expert was a previous employee of the Defendant in the matter.

In the VSC matter of ATG Lanka (PVT) Limited v Safety Mate Pty Ltd [2021] VSC 820, the independence of both accounting experts was challenged, however the Court found neither at fault despite the vastly different reasons in which their independence was being criticised.

In his judgment, Connock J stated that:

Mr V?and Ms W each filed expert reports addressing claimed loss and damage. They each presented as relatively straightforward, direct and engaged expert witnesses during the full day of expert evidence that was given concurrently by audio visual link. The link was clear and close up and I was able to observe Mr?V?and Ms W closely throughout the day. Hearing the evidence concurrently proved to be effective and efficient, with the relevant differences between the experts being identified in their joint report and the concurrent evidence proceeding largely by reference to the areas of disagreement identified in their joint report. [169]

In their oral evidence, and after becoming comfortable with the concurrent evidence approach, each of Mr?V?and Ms W engaged effectively and responsively to the questions and issues raised by the parties and by the court. There was no material issue raised about their respective expertise and it was plain that they possessed the necessary expertise to address and opine upon the issues under consideration. [170]

The experts also engaged effectively but courteously when responding to each other. Although in the very early stages of the session it appeared that Ms W was a little more enthusiastic in defending her opinions on a couple of matters, this quickly settled and I perceived this to be more a reflection of initially adjusting to the environment and hearing dynamics, which is not uncommon for experts at the start of concurrent evidence sessions at trial. Although there were some material areas of disagreement, generally speaking it was apparent that each of Mr?V?and Ms W were properly conscious of their duty to the court. They also each made concessions or qualified opinions expressed in their reports when they considered appropriate, although areas of disagreement remained. These included, for example, the sales growth rate, the discount rate, and the appropriate methodology for addressing the impact on sales of the COVID-19 pandemic. [171]

As to Plaintiff’s submission that Mr?V’s evidence should be accorded less weight because his firm, being a firm that he founded, has been the Defendant’s accountants for an extended period and remains so, I do not accept that in the circumstances of this case there is material force in that submission. Whilst it is true that there is a connection, and that the firm receives remuneration for the professional services provided to the Defendant and thereby indirectly benefits Mr?V, the connection was disclosed by Mr?V, and Mr?V?addressed naturally and responsively questions asked of him on the topic during cross-examination by the Plaintiff’s senior counsel. He said, and I accept, that he has not done any professional work for the Defendant other than this assignment and that the commercial relationship between his firm and the Defendant has not influenced his views. He also said, and I accept, that the only work he has been doing in the firm for an extended number of years is forensic accounting work — which was also consistent with the terms of his curriculum vitae. [172]

To the extent that the Defendant pressed its submission that Ms W’s methodology and approach to the assessment of the impact of the COVID-19 pandemic and her resistance to embrace Mr?V’s position should ‘… cause the court considerable concern regarding … her independence’ or concern regarding Ms W being ‘partial’,?I do not accept that submission.?Whilst there was a material issue between the experts about the appropriate methodology to adopt to assess the impact of COVID-19, my assessment was and remains that this was a genuine difference of opinion between the experts.?Contrary to the Defendant’s submission, it does not impact on Ms W’s integrity as an expert witness.?Of course, that is to say nothing regarding how the difference between the experts is to be resolved. [173]

In summary, the decision handed down by Judge Connock in ATG Lanka (PVT) Limited v Safety Mate Pty Ltd [2021] VSC 820 provides two pieces of vastly different feedback to accounting experts:

1. a genuine difference of opinion between experts and an Expert’s unwillingness to adopt their opposing experts view does not impact upon one’s independence; and
2. The Court has left the ‘door ajar’ for accounting experts (albeit heavily dependent on their conduct as an expert) in allowing experts to act for clients of other areas within the accounting firm they are employed.?However, in my opinion, it would be far more prudent to remove even the hint of the appearance of independence by ensuring an Expert is not undertaking such a formal appointment for a client of their employer’s firm (despite the separation of duties) but may be able to assist as a ‘dirty’ expert in the preparation and facilitation of the case.

For more information on the services we provide to commercial litigation and dispute resolution lawyers, please contact myself or your local Grant Thornton Australia forensic accounting expert.