FEDERAL COURT OF AUSTRALIA

Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 5) [2015] FCA 571

THE COURT ORDERS THAT:

1.    Objections to the admissibility of expert statement and report dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

The application to exclude Mr van der Heyden’s evidence

1    The CITIC parties seek to exclude the evidence of an expert who Mineralogy wish to call today. The CITIC parties rely on four overlapping grounds:

(1)    that Mr van der Heyden’s evidence is not relevant to any fact in issue;

(2)    that Mr van der Heyden’s evidence is opinion evidence which is not in a form which is suitable for expert evidence;

(3)    that Mr van der Heyden’s evidence should be excluded by the exercise of the general discretion in s 135 of the Evidence Act 1995 (Cth); and

(4)    that Mr van der Heyden’s evidence should be limited by the exercise of the general discretion in s 136 of the Evidence Act 1995 (Cth).

2    For the reasons below, each of these objections is rejected. Mr van der Heyden’s evidence is admissible.

Relevance of Mr van der Heyden’s evidence

3    At para 51(b) of the CITIC parties’ defence they plead that “any breach (which is denied) has not resulted in any damage to Mineralogy and on that basis cannot constitute a serious or persistent breach in accordance with clause 33(c) of the Facilities Deeds”.

4    In para 29A of Mineralogy’s Reply, Mineralogy denies the allegation of lack of damage arising from the alleged breach of the Facilities Deeds. Mineralogy pleads that the breach by Sino Iron and Korean Steel “has prevented Mineralogy from being able to take any practical commercial advantage of its ownership of the Port, the vesting of the facilities in it, and its right to operate the Port and the facilities”.

5    In response to a request for particulars of the alleged “practical commercial advantage” that Mineralogy pleaded that it had been impeded from taking, Mineralogy makes a series of points including that the land that is the subject of Mineralogy’s Mining Leases and Exploration Licences has billions of tonnes of iron ore, which can be mined.

6    This is denied by the CITIC parties. There is therefore an issue between the parties concerning whether Mineralogy’s Mining Leases and Exploration Licences have “billions of tonnes of iron ore which can be mined”. This is the issue to which Mr van der Heyden’s evidence is addressed.

7    Mr van der Heyden’s evidence is relied upon in support of his conclusion that “there is potentially between 60 and 160 billion tonnes of iron ore in the Mineralogy Area A”. His evidence is relevant to a fact in issue.

Form of Mr van der Heyden’s evidence

8    Next, it is said that Mr van der Heyden’s evidence does not comply with the requirements for an expert report contained in r 23.13 the Federal Court Rules 2011 (Cth). In particular, the CITIC parties submit that Mr Van der Heyden is incorrect in his statement that “if it be necessary, I acknowledge that I have read, understood and complied with the Practice Note” dealing with expert evidence in Federal Court proceedings.

9    Counsel for the CITIC parties points out that the date of Mr van der Heyden’s first report is 10 November 2004. It is not a report that could have been prepared for the purposes of these proceedings which were commenced many years later. The same is true of his second report dated December 2005.

10    The short answer to this point is addressed by Brereton J in Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2011] NSWSC 395 [7]. His Honour said that although the expert witness

has not, and could not, comply with the expert witness code of conduct – being associated as he is with the defendants – but that does not impact on the admissibility of an out-of-court opinion expressed by the witness before litigation was contemplated. The expert witness code of conduct could never be complied with by an expert in that situation. I do not consider that the provisions relating to the code of conduct were ever intended to prevent opinion evidence, otherwise admissible in exception to the hearsay rule, being admitted because of non-compliance with the code of conduct.

11    The CITIC parties did not submit that this reasoning was inapplicable to the Federal Court Rules. That was an appropriate position to take. Any failure to comply with r 23.13 of the Federal Court Rules does not automatically make any expert evidence inadmissible. The defects in form in this case do not make the evidence inadmissible.

Exercise of discretion

12    Next it is said that Mr van der Heyden’s evidence should be excluded under s 135 or limited under s 136. Essentially, counsel’s submission was that Mr van der Heyden’s report was so broad, and based on so many assumptions which are subject to such uncertainty that it would be unfairly prejudicial to the CITIC parties, or be misleading or confusing, or result in an undue waste of time.

13    In Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 2) [2007] WASC 244; (2007) 35 WAR 394, 406, E M Heenan J referred to Wigmore’s Treatise on the Anglo-American System of Evidence (3rd ed, 1940) and quoted from Dr Pattenden’s article “Expert Opinion Evidence Based on Hearsay” [1982] Criminal Law Review 85, explaining that it was “both unobjectionable and desirable” for an expert to relate to the court “information derived at second-hand which underpins his opinion”:

It is unobjectionable because when the expert relates the basis of his opinion to the court he does so in order to explain why he formed a particular opinion – not to prove that which he was told out of court. It is desirable because without knowing on what information the expert drew in forming his opinion the weight to be placed on his opinion cannot begin to be assessed. Further, the fact that the opinion rests on facts learnt at second-hand may be an important factor in deciding how much weight to attach to the opinion.

14    There is no doubt that Mr van der Heyden’s evidence is based on a number of assumptions. Those assumptions are set out in his report. This is also not a case like Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 where the assumptions are lacking.

15    Counsel for the CITIC parties focused his submissions upon the extent and nature of the assumptions made by Mr van der Heyden. The premise of an assumption can be proved in different ways. One way, for some but not all assumptions, may be for the witness to explain that the premise arises from application to accepted or proved facts of an accumulated specialised knowledge, such as the knowledge acquired by Mr van der Heyden over his 30 years of experience as a geologist. Another way, where the assumption is purely one of fact, may be by direct proof of the underlying facts from documentary evidence or from a witness who is in a position to be able to give that evidence. A third way, again where the assumption is of fact, may be by inference. But the court must be satisfied that the foundation of the assumptions is or may be shown to be sound before the evidence is accepted: Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, 743 [85] (Heydon JA).

16    Sometimes the extent, content, and nature of the assumptions might be so extensive or might create such a lack of clarity that it would be unfairly prejudicial to the other party who seeks to cross-examine the expert or to understand the expert evidence. A mark of unfairness and prejudice will be if the assumptions are not transparent or if the underlying facts cannot be tested. The assumptions in this case do not cross that line. In this case the assumptions are matters which affect the weight of the expert report. They are matters for cross-examination and submission. And to the extent that counsel for the CITIC parties submitted that the assumptions meant that the evidence would result in an undue waste of time, I also reject this submission. This is especially so in the context of litigation involving a multi-billion dollar project in which the parties have spent millions of dollars in legal fees and the cross-examination is unlikely to substantially delay proceedings.

17    Counsel gave a primary example of the alleged prejudice to the CITIC parties caused by the assumptions made by Mr van der Heyden. He said that the essence of Mr van der Heyden’s first report was based upon, and extrapolates from, data about the mineralisation of Balmoral Central. But the data to support those assumptions does not appear in the report. For instance, counsel for the CITIC parties pointed to various assumptions based on the average depth of mineralisation at the Balmoral Central Block deposit (300m below surface) and a subtraction of 40m which was assumed to be oxidation. Counsel also referred to Mr van der Heyden’s increase in the “areal extent” of the banded iron formation and the increase in thickness by 50% “to account for possible variations in stratigraphic thickness and topography”. Another assumption described by counsel for the CITIC parties concerns Mr van der Heyden’s statement that it “would seem unlikely that underground mining would proceed in the foreseeable future while mineralisation amenable to open cut mining is still available”. Counsel submitted that the effect of this opinion by Mr van der Heyden was that a mineralisation of between 60 and 160 billion tonnes of iron ore was immaterial because any mining in the foreseeable future would be confined to open cut mining.

18    The short answer to all these points concerning admissibility is twofold. First, Mr van der Heyden is a geologist with 30 years of experience. A number of the assumptions that he makes are made as a result of his knowledge of geology, potentially including the geology of the relevant region. It is possible, and not unfair upon the CITIC parties, to test these assumptions in cross-examination including by reference to other facts in evidence, and inferences arising from those facts including those relating to the Balmoral Central Deposit. The second point is that Mr van der Heyden’s evidence is not being led to establish a precise quantity of iron ore mineralisation or the quantity that might be exploited by open cut mining in the immediate future. It is being led to establish that there is a very large mineralisation involving “billions of tonnes of iron ore”. Mr van der Heyden’s evidence does not seek to quantify those amounts with any precision, and Mineralogy’s pleading does not assert any precision.

19    The same is true of the submission made by counsel for the CITIC parties that the conclusions of Mr van der Heyden are expressed at too high a level of generality to be of any utility. Counsel pointed to the breadth of Mr van der Heyden’s conclusion about mineralisation: between 60 and 160 billion tonnes. But, again, Mineralogy’s point in relation to this issue does not rely upon any precision.

Conclusion

20    The evidence of Mr van der Heyden is admissible.

Associate:    

Dated:    9 June 2015