#27 Lessons from the Courtroom – Independence (Part 2)

A recent theme in the courtroom is the issue of the independence of Expert’s.

Across the past six months, matters such as Yelland, Cassa Bedding and Safety Mate have involved the independence of Expert’s for a variety of reasons, including the prior employment of an Expert and an Experts (or their colleagues) personal and professional relationships.

I have explored the issues stemming from the above cases through LinkedIn Case Review posts and LinkedIn articles concluding that the key determining factor in any issue regarding independence to be – is your conduct as an Expert the expected conduct of an Expert? In other words, did you act as any Expert would have who would not have been subjected to the criticism of independence. 

However, in the VSC matter of Troiano v Voci & Ors [2021] VSC 851, Delany J found comfort in the compliance with the Expert’s professional standards and the relevant court rules as a key factor in accepting there to be no independence issue with the Expert despite the previous ‘engagement’.

Relevent extracts of the judgment [redacted] are below:

The defendants cross-examined Ms S [the Plaintiff’s accounting expert] on the basis that her opinions were not independent. In closing submissions, they asserted that her evidence was tainted, lacked independence and should not be accepted. I do not agree with those criticisms of Ms S’s evidence. [793]

In her expert report, Ms S disclosed that in September 2019 she ‘assisted Ms T [the Plaintiff] by reviewing certain documents in relation to the proceeding and providing a list of further information that [she] thought should be obtained from the defendants’. She went on to say that she had not previously provided any opinions in relation to profitability of the projects. [794]

In cross-examination, Ms S was questioned about an email forwarded to her firm on 13 August 2019 which requested that her firm act as ‘shadow expert’, ‘who can aggressively represent [Ms T’s] interests as first step to confirm the quantum of [her] claim’. On 3 September 2019, an engagement letter was sent to Ms S’s firm to retain Ms S and her firm as a shadow expert. The engagement letter made it clear that Accounting Professional and Ethical Standards APES 225 (Valuation Services) and APES 215 (Forensic Accounting Services) (together, the ‘Accounting Standards’), both of which include obligations of independence, would not have application to that retainer. [795]

Questioned about the work that she undertook in 2019, Ms S said that she was undertaking an independent assessment for the purpose of quantifying the claim. The retainer letter identified the scope of work as including the review of all information and documents provided, the provision of a list of additional information that an expert would require to form a firmer view as to loss of profit, and the provision of a preliminary view on the calculation of loss of profit. [796]

While expressly referring in her 25 January 2021 expert report, to the earlier work and describing that work, Ms S did not refer to the fact that in September 2019 she was engaged as a ‘shadow expert’. She did not refer to the engagement to provide a preliminary view on the calculation of loss of profit. She was criticised by the defendants for her failure to do so. [797]

I accept Ms S’s evidence when cross-examined that in 2019 she did not provide a valuation and nor, despite initial instructions to do so, did she provide a preliminary view on the calculation of loss of profit. A preliminary spreadsheet was prepared summarising information and a series of questions asked of the Plaintiff by Ms S’s firm to which responses were received. However, Ms S did not undertake all of the tasks referred to in the 3 September 2019 engagement letter and that the work performed by her and her firm at that time was very limited. Her disclosure of previous work in her 2021 report was appropriate. [798]

It was a theme of cross-examination of Ms S that thereafter she continued to act ‘aggressively’ in the interests of the Plaintiff. There was no substance to that criticism. There was a gap of 12 months between the limited ‘shadow expert’ work performed which concluded with the provision of a list of documents to be sought from Mr V [the Defendant] and his entities on 18 November 2019 and the sending of an email to the solicitor for the Plaintiff on 11 December 2020. In that email Ms S said she would not commence acting unless outstanding fees were paid to her firm. Ms S was subsequently retained as an independent expert. [799 & 800]

The December 2020 retainer letter exhibited to Ms S’s report, and the report itself, made it clear that in performing that role Ms S agreed to be bound by both the Expert Witness Code of Conduct contained in Form 44A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and by the Accounting Standards. Although Ms S had only limited previous experience of actually giving expert evidence, she had prepared a number of expert reports in the past. I have no doubt that she maintained a high level of professional independence when carrying out the work the subject of her expert report, when participating in the joint conference and when giving her evidence. [801]

There was no continuous retainer of Ms S as a shadow expert and only very limited work, not including expressions of opinion, was performed by Ms S and her firm in 2019. This was a case far removed from the circumstances in ASIC v Rich,[203] where the forensic accountant had prepared an investigative report in a similar role to that of a shadow expert and then was ‘converted’ to a supposedly independent expert. [802]

The attack on Ms S’s independence continued when she gave evidence and was cross-examined about various topics in the joint report. There was no basis for that criticism. I do not accept that Ms S’s opinions and the evidence that she gave were in any way coloured by a desire to advance the Plaintiff’s case. [805]

The above judgment states that an Expert’s acknowledgement of their obligations as an Expert set out in the relevant court rules and their professional obligations can provide a level of security (coupled with the appropriate conduct as an Expert) in any criticisms of independence.

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.