Tag Archive for: court

Engaging expert witnesses – practical advice

/in

Expert evidence often plays a crucial role in building disputes, either in identifying defects, valuing works, or providing other technical information. Expert witnesses take on the role of an independent observer, with an overriding duty to assist the Court impartially on matters relevant to their expertise.[1] Typically, an expert will deliver their opinion in a report, in response to stated questions.[2]

The procedural rules governing expert evidence and expert reports are set out in:

  • Part 31 Division 2 to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR);
  • the Expert Witness Code of Conduct, found in Schedule 7 to the UCPR; and
  • NSW Civil and Administrative Tribunal (NCAT) Procedural Direction 3.
    (collectively, the Codes)

The Codes create various procedural requirements for expert reports, for example, that the report contain an acknowledgement that the expert has read and agrees to be bound by the code of conduct.[3] For a detailed overview of these requirements, see our article here.

A common issue engaging experts

We have noticed a common scenario when parties obtain expert evidence:

A party engages an expert to inspect and provide a preliminary report. The report does not comply with the Codes. Later, litigation commences, and the expert either:

  • prepares a second more thorough report which complies with the Codes; or
  • puts on an affidavit acknowledging that their first report will be bound by the Codes.

No problem, the expert has fulfilled their obligations under the Codes… right?

Not necessarily. This approach may result in non-compliance with the Codes, which leads to two risks:

  1. the Court may hold that the expert report is inadmissible; or
  2. the Court may admit the report but give it little weight due to concerns regarding the expert’s credibility.

The Court may hold that the expert report is inadmissible

Courts have a broad discretion whether to admit into evidence expert reports which have been prepared in the scenario outlined above. In Welker & Ors v Rinehart & Anor (No 6),[4] the respondent sought to rely on expert reports which did not comply with the UCPR Code. The experts were not provided with a copy of the Code until after they had prepared their reports, meaning the reports did not contain an acknowledgement that the experts had read and agreed to be bound by the Code. The experts subsequently filed affidavits swearing they had since read the Code and agreed for their earlier report to be bound by it.

Rule 31.23(3) of the UCPR provides that an expert report which does not comply with the Code may not be admitted into evidence unless the Court orders otherwise. Ball J considered whether there was substantial compliance with the Code by examining the circumstances in which the report was prepared.[5] His Honour noted that the Court has a broad discretion whether to admit expert reports, but held that these particular reports were inadmissible because they:

  • did not give evidence justifying the assumptions underlying the expressed opinions;
  • lacked reasoning to support the conclusions in the report; and
  • contained generalised assertions which did not reflect the expert’s area of expertise.[6]

Although the Court retains a discretion when applying rule 31.23(3), this judgment demonstrates that non-compliant expert reports prepared in the above scenario may be deemed inadmissible.

The Court may give the expert report little weight 

Even if the Court admits an expert report prepared in the above scenario, there is a serious risk that the Court will give the report little evidentiary weight. In Smith v Ulan Coal Mines Ltd,[7] Campbell J exercised the discretion under rule 31.23(3) to admit an expert report filed by the plaintiff which did not strictly comply with the UCPR Code. His Honour made the following remarks in relation to rule 31.23(3):

“[…] Where it appears that the expert in preparing the report has been guided by impartiality, independence from the parties and a motivation to assist the Court rather than the party retaining him, there will have been substantial compliance with the Code. However mere retrospective inclusion of the required acknowledgment in an amended report will not satisfy the requirements of the sub-rule unless it can be shown that there has been substantial compliance in the sense I have already discussed.”[8] (emphasis added)

Although the report was technically admissible, it was given little weight at the final hearing. Hoeben CJ noted that in relation to the expert’s evidence that “there was a tendency to favour the plaintiff in some of the responses”.[9] The plaintiff’s claim failed, in part because his Honour was “not persuaded on balance that the plaintiff has given accurate evidence”.[10]

If parties prepare expert reports in the above scenario, they risk the Court drawing similar conclusions about the reliability of their expert evidence. If experts are not aware of their obligations under the Code at the time of preparing the report, including their overarching duty to the Court, this may raise doubts as to the expert’s credibility, and as a result, the persuasiveness of the expert report. These doubts may adversely impact the outcome of the proceedings, even if the reports are technically admissible.

Obligations in NCAT

Finally, parties should be aware that these same risks may exist in NCAT proceedings. Although NCAT is not usually bound by rules of evidence,[11] the Tribunal may direct that expert reports must comply with the NCAT Code.  In McGrath v The Owners – Strata Plan No 13631,[12] the Tribunal made this direction in respect of two expert reports, and the applicant failed to comply. As a result, the Tribunal refused to admit part of one report and the entirety of the other report into evidence.[13] The judgment was upheld on appeal.[14] This decision serves as a warning – the same risks set out above may apply to parties seeking to file expert evidence in NCAT proceedings.

Take home tips

When engaging expert witnesses, parties must be careful to comply with the Codes – this is true even when only a preliminary report is required.  In other words, parties must ensure when an expert is engaged that:

  • the expert is familiar with the Codes; and
  • the Codes are at the forefront of the expert’s mind when any preliminary inspections, condition reports or investigations are carried out.

This is to ensure that the credibility of the expert is not compromised in any subsequent litigation.

Bradbury Legal has extensive knowledge of the procedural rules governing expert evidence. We can assist in engaging expert witnesses in a manner which will best protect a party’s position at trial. For specialist and tailored advice, please contact a member of our team by phone on (02) 9030 7400 or by email at info@bradburylegal.com.au.

[1] UCPR Schedule 7 clause 2.

[2] UCPR r 31.21, 31.23(4).

[3] UCPR r 31.23(3); UCPR Schedule 7 clause 3(b); NCAT Procedural Direction 3 clause 19(a).

[4] [2012] NSWSC 160.

[5] Welker & Ors v Rinehart & Anor (No 6) [2012] NSWSC 160, [35].

[6] Welker & Ors v Rinehart & Anor (No 6) [2012] NSWSC 160, [40]–[44].

[7] [2019] NSWSC 1263.

[8] Smith v Ulan Coal Mines Ltd [2019] NSWSC 1263, [11].

[9] Smith v Ulan Coal Mines Ltd (No 2) [2020] NSWSC 416, [160].

[10] Smith v Ulan Coal Mines Ltd (No 2) [2020] NSWSC 416, [188].

[11] Civil and Administrative Tribunal Act 2013 (NSW) s 38(2).

[12] [2021] NSWCATAP 167.

[13] McGrath v The Owners – Strata Plan No 13631 [2021] NSWCATAP 167, [3].

[14] McGrath v The Owners – Strata Plan No 13631 [2021] NSWCATAP 167, [87].

When are settlement agreements concerning payment claims void under SOPA?

/in

If a respondent fails to issue a payment schedule in time, but the parties then reach a settlement agreement in relation to the payment claim and construction contract, can the claimant still pursue summary judgment for the full claimed amount due to s.34 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA)?

Facts

In Reward Interiors Pty Ltd v Master Fabrication (NSW AU) Pty Ltd [2020] NSWSC 1251, the claimant served a payment claim and the respondent did not respond within 10 business days as required by the SOPA.  The parties attended a meeting three weeks after the payment claim was issued and agreed to a reduced amount to be paid on the payment claim.[1]  The respondent paid the settlement amount the following day.[2]

The respondent then commenced proceedings against the claimant for damages arising from work performed by the claimant.

The claimant cross-claimed and sought summary judgment on the full payment claim amount. The claimant argued that s.34, which prohibits parties from contracting out of the SOPA, rendered the settlement agreement void.[3]

Decision

The claimant offered no authority for the argument that s.34 of the SOPA renders void settlement agreements which compromise a dispute concerning an amount claimed in a payment claim or the construction contract between the parties generally.[4]  The claimant had agreed not to move for summary judgment on the full claimed amount by accepting the reduced settlement amount.[5]

Stevenson J held that it was at least arguable that the settlement agreement was not rendered void because it acknowledged the operation of the SOPA, yet recorded the parties’ intention that in the particular circumstances their rights would instead be governed by their agreement.[6]  This did not constitute an ‘attempt to deter a person from taking action under’ the SOPA.[7]

Tips for binding settlement agreements on payment claims

The answer to the question posed in the introduction is no.  Assuming the settlement agreement seeks to properly compromise existing entitlements, it will not be voided by s.34 of the SOPA.

The terms should be clearly expressed and specific.  It should state that the claimant has agreed to accept the settlement amount in “full and final satisfaction” of the payment claim and claims made in the payment claim. The terms should provide that once the respondent pays the settlement amount, the claimant “releases” the respondent from any claims or proceedings in respect of the payment claim and claims made in the payment claim.

Where settlement agreement may be rendered void under s 34 is where it seeks to exclude or restrict rights or entitlements arising in the future.  For example, where the parties simply agree (without more) that the claimant will have no entitlement to submit further payment claims.

Of course, the respondent should always serve a proper payment schedule (scheduling nil or a reduced amount and giving reasons) in response to a payment claim, even if confident in securing a settlement, in order to avoid the type of argument raised in Reward Interiors.

[1] At [11].

[2] At [14].

[3] At [15].

[4] At [19].

[5] At [23].

[6] At [24] and [26].

[7] At [25], re s.34(2)(b).

ADR Processes Part II

/in

This article is Part II of our article on ADR process. In this article, we will be covering the common pitfalls of ADR clauses. In Part I, we discussed the different types of ADR processes that are common in construction law matters. You can find Part I of our article HERE. While there are benefits to ADR processes, the drafting of dispute resolution clauses can sometimes result in the clause being void and unenforceable. Alternatively, there are times where the drafting of the dispute resolution clause means parties are left with a result under the contract which is unfair or unjust in the relevant circumstances. Often dispute resolution clauses are thrown into a contract without the parties giving much thought or consideration as to its enforceability or suitability to the circumstances. The following matters are pitfalls you should consider when you are drafting a dispute resolution clause.

 

Factors that may make the clause void and unenforceable:

 

Precondition to Court or other legal action

 

One of the biggest problems with ADR clauses arises when they set compliance with the ADR process as a pre-condition to seeking any court relief. This is problematic because it attempts to prevent the parties from approaching the Court when it has jurisdiction. If not properly drafted, these types of clauses can make the dispute resolution term unenforceable.

 

Words or phrases to look out for:

 

‘The parties must not seek any court orders until the parties have attended mediation.’

 

Words or phrases that can prevent the clause being unenforceable:

 

‘Nothing in this clause X prevents the parties from seeking urgent or injunctive relief from the Court.’

 

The key difference between these clauses is that the first tries to remove the jurisdiction of the Court by preventing the parties from seeking any relief from the Court until after the ADR processes have been complied with. This can result in some of the parties’ legal rights being wrongly enforced under the contract. For example, in cases where one party seeks to have recourse to security and the other party disputes this, the ADR process mechanisms may be too slow in resolving this dispute. Therefore, it is appropriate for the Court to be able to order urgent or injunctive relief to prevent recourse to the security. The parties can still have the underlying dispute proceed to the elected ADR process, but the security providing party may be able to (in the interim) prevent recourse where it is contested that the other party is not entitled to the benefit of that security.

 

Agreement to agree

 

A dispute resolution clause will be unenforceable if it is void for uncertainty. This often happens when there is an agreement to agree in a clause. For example, if a contract provides that the parties must agree on a matter and the parties are unable to reach an agreement, where do the parties stand in respect of their contractual duties? In the context of a dispute resolution clause, this can occur when the parties are required to agree on the form of the dispute process, or the appropriate body to determine the dispute or the rules that are to be applied to determine the dispute.

 

Words or phrases to look out for:

 

‘The parties must agree on an expert’ or ‘the parties must agree on the form of dispute process’

 

Words or phrases that can prevent the clause being unenforceable:

 

‘The parties must agree on an expert. If the parties cannot agree, the expert shall be appointed or administered by the [for example] Australian Disputes Centre.’

 

The important difference between the two clauses is the second has a mechanism for resolving the uncertainty. If the parties cannot agree on which expert should be appointed, the clause provides for a third party to appoint or determine who the expert will be. Obviously, when nominating a third party to make the decision, it is important to confirm that the third party can and will appoint a dispute resolution professional.

 

Time frames should also be included as part of these clauses to avoid uncertainty. For example, a clause may state that parties are given 14 days to meet together to discuss the dispute before it proceeds to mediation. Without the 14 day timeframe, there is no clear indicator of when the parties are to engage in their dispute resolution process. A deeming mechanism should also be included to account for when the parties simply do not comply with the dispute resolution process. For instance, if the parties do not meet within 14 days, then the dispute should be automatically referred to mediation, or expert determination (as per the next tier of the agreed dispute resolution process) or simply allowed to proceed to litigation.

 

Broad and unclear drafting

 

The last pitfall of dispute resolution clauses discussed in this article is broad and/or unclear drafting. As a general problem with contracts, broad and/or unclear drafting can result in less certainty in the obligations between the parties. In the context of a dispute resolution clause, unclear drafting may occur in any of the following circumstances:

 

  • where there is not a clear process for a dispute to be resolved;
  • where the scope of the ADR powers and what can they determine is not defined;
  • where the rules that guide the ADR process are not clearly referenced; and
  • when can parties appeal the decision.

 

The consequence of broad and/or unclear drafting is that when a dispute arises, further disputes may occur when it comes time to interpret the clause. If a Court considers that the clause is uncertain and is unable to be properly interpreted, it may be held that the clause is void for uncertainty.

 

To assist with some of the considerations that arise with broad or unclear drafting, the next section of this article gives commentary on some of the considerations of ADR clauses so as to ensure your clause is suited to the parties and properly drafted.

 

Important Considerations in ADR clauses

 

Scope of ADR power

 

A dispute resolution clause can be customised by the parties. One way that parties can customise their dispute resolution clause is by determining what types of dispute will be resolved in which ways. For example, the parties may agree that technical matters to do with the scope of works or variations are unsuited to a determination by a legal professional. In such technical matters, the Courts will often have to consider expert reports from both parties, including any updates and responses from the experts. Even after considering the expert reports, the Court may nevertheless be unequipped or unsuitable to determine exactly what the correct outcome is or should be. Methods such as expert appraisal or expert determination can be effective ways of the parties reducing their costs and ensuring an appropriate resolution of the dispute. If this method is agreed by the parties, it is important to clearly set out exactly which disputes are to be resolved in which way. For example, the dispute resolution clause may state that any dispute involving a disputed variation or defective work that hinges on a technical interpretation must be resolved through expert determination. Accordingly, such a clause would also express that any dispute that hinges on legal interpretation be directed to a court of competent jurisdiction.

 

Statutory Provisions

 

When drafting a dispute resolution clause, it is important to consider whether there are any statutory provisions that may impact on the operation of the clause. For example, the Home Building Act 1989 (NSW) prevents the use of arbitration in some contracts for residential building work. In Victoria, the Building and Construction Industry Security of Payment Act 2002 (VIC) has an intricate regime for claimable variations in high value contracts (being contracts with a consideration over $5,000,000). These statutory provisions can have significant impacts on the clauses chosen by the parties. Further, while the Home Building Act prohibits the use of arbitration, the Victorian Security of Payment Act has consequences for the parties depending on the type of resolution used. It is important then to consider the statutory provisions and what their effects may be.

 

Binding or non-binding

 

A major consideration that parties should think about is whether to have the dispute resolution process as a binding or non-binding method. The Courts have generally held that where parties agree to a binding dispute resolution process, they will be unable to appeal the determination. While there may be circumstances where the parties can appeal to have the determination overturned, as a general rule, parties should expect to be bound by the decision. Therefore, parties should consider when they want to be bound by the decision of the dispute resolution professional.

 

Rights of appeal

 

While the process may be binding, the parties may agree to allow for appeal rights in the dispute resolution clause. For example, the parties may agree that a decision can be appealed where a party claims there has been a manifest error of law or where the amount in dispute exceeds a specified threshold. These mechanisms are interesting ways that parties can customise their dispute process and ensure that they are satisfied with the way any potential disputes will play out. It is important to consider any cost implications with appeal rights. While parties may not wish to be bound by a decision in certain circumstances, appeal rights may inevitably lead to higher costs in resolving a dispute.