NSW ruling applies Expert Witness Code principle to insolvency case

The Expert Witness Code of Conduct in Schedule 7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) is largely mirrored in other states and territories around Australia. The code provides that an expert witness is not an advocate for a party and has a paramount duty, overriding any duty to the party in the proceedings or any other person retaining the expert witness, to assist the court impartially on matters relevant to the area of expertise of the witness.

In the recent NSW Supreme Court decision involving Alora Davies Developments 104 Pty Ltd, a company in liquidation, the Court outlined the general principles applicable to the Expert Witness Code and confirmed when it will apply.

The judgment was originally delivered ‘ex tempore’ during a final hearing concerning a range of claims pursued by the plaintiff liquidator including an insolvent trading claim, various voidable transaction claims, breaches of directors’ duties and a de facto director claim. The liquidator had provided detailed affidavit evidence in the proceedings arising from their statutory appointment, their investigations into Alora including creditors’ reports and its books and records.

Before the final hearing, no notice was provided that the entirety of the liquidator’s affidavits would be objected to on the basis that they allegedly did not comply with the Expert Witness Code. The liquidator was then called to give evidence in the proceedings and the defendants - Alora’s directors - objected to the liquidator relying on the entirety of those affidavits on the basis that it amounted to unqualified expert evidence. Specifically, the defendants alleged that the liquidator had failed to comply with rule 31.23 of the UCPR which provides that an expert witness must state that they are bound by and otherwise have complied with the Expert Witness Code.

The defendants submitted that it was unknown whether the liquidator, when preparing their evidence, adopted the Expert Witness Code and that the liquidator’s evidence amounted to unqualified expert opinion and ought to be rejected in its entirety.

The Court rejected the defendants’ arguments. The Court observed that the liquidator was neither an expert engaged nor appointed for doing any of the specified things which fall within the definition of ‘expert witness’ as provided for in the UCPR. Rather, the Court observed that they were simply a plaintiff in their own case and had not engaged themselves to give expert evidence in their own case.

Implications of the Court’s decision for liquidators

In rejecting the defendants’ objection to the liquidator’s affidavit, the Court found that “rule 31.23 of the UCPR, in respect of the Expert Witness Code, is not directed to a person who is an expert, as defined. It is instead directed to a person who is an ‘expert witness’ as defined. The term ‘expert witness’ is defined in UCPR r 31.18 as an expert, ‘engaged or appointed’ for specified purposes. The short answer to this objection … is that it is plain that (the Liquidator) is not an expert ‘engaged or appointed’ by himself, to give evidence in these proceedings.”.

In reaching its conclusion, the Court also commented on the practical impediments that would necessarily occur if a liquidator were required to lead separate expert evidence in every case which may involve their expertise and experience.

The decision canvasses the authorities on the application of the Expert Witness Code, referring to decisions such as in the case between Chaina and Presbyterian Church (NSW) Property Trust, which draws attention to the distinction between an ‘expert’ and an ‘expert witness’ as defined in the UCPR.

When preparing evidence in their own case, liquidators can expect that any objection taken on grounds of non-compliance with the Expert Witness Code will be rejected by the court based on this useful authority. The decision confirms that rule 31.23 of the UCPR does not apply to a liquidator’s affidavit in circumstances where the liquidator is an ‘expert’ but not an ‘expert witness’ for the purposes of rule 31.18 of the UCPR. The ruling has made it clear that liquidators who give evidence in their own case do not need to comply with the requirements of the Expert Witness Code.

The Court also observed that this was not the first occasion where objection had been taken relying on the relevant provisions of the UCPR and noted that the Expert Witness Code in schedule 7 of the UCPR does not comfortably apply to a situation where a plaintiff is a witness in their own case. It is expected that this decision will now deter parties litigating against liquidators from taking an evidence objection on such unmeritorious grounds.

Co-written by Jemimah George of Pinsent Masons.