My evidence has been preferred/adopted in the Federal Court, Victorian Supreme Court, NSW Land and Environment Court, and Singapore International Commercial Court:
BCBC Singapore Pte Ltd & Anor v PT Bayan Resources TBK & Anor  SGHC(I) 2
I was asked to provide an opinion about whether Indonesian based joint venture would have been able to arrange funding to expand its Tabang plant, and if so, on what terms, in the context of a damages claim for “loss of chance”.
I prepared a separate report, prepared a joint report with another banking expert witness, and gave concurrent evidence for three hours. There were several other technical experts involved, dealing with commodity pricing, financial models, and engineering and production issues.
Extracts from the judgement below provide context, and the Court’s assessment of the work of the banking experts. I have added headings, and explanatory notes [italicised in square brackets], to assist the reader:
“ …these proceedings…arise from a joint venture between Australian and Indonesian companies to exploit a new technology to upgrade coal for commercial sale that ended in a series of disputes.
 [In earlier proceedings between the same parties] We…found that BR repudiated the JV Deed by wrongfully issuing the Termination Notice…
 BCBCS claims damages under two heads. First, it seeks to recover wasted expenditure of US$91,591,206.68…
 Second, BCBCS claims damages for the loss of a chance to increase the production capacity of the Tabang Plant to at least 3 MTPA and to profit therefrom.
Would the technology have work?
 …the technology…would have worked, and with the proposed modifications which would have been carried out after November 2011, the Tabang Plant would have achieved nameplate capacity…by June 2012 at the latest, and…the upgraded coal [which it produced] would have been a saleable product.
The wasted expenditure claim
 …although the Tabang Plant could have achieved nameplate capacity by June 2012 …BR would have been entitled to put KSC [the Joint Venture company] into liquidation (see  above). This would have had the effect of preventing BCBCS from recouping any of its wasted expenditure (see  above).
Evidence from the Banking Experts
…there is, strictly speaking, no need for us to decide whether BCBCS has proved its loss of a chance to profit from the Tabang Plant’s increased capacity. Nevertheless, for completeness, we briefly explain why we answer this question in the negative.
…BCBCS’s and BR’s financial experts agree that the deteriorating relationship between the parties would have concerned prospective lenders, thereby throwing into question KSC’s ability to secure additional funding from third party lenders for the expansion of the Tabang Plant.
 In relation to funding, we do not consider that third party funding would have been available. We accept BR’s submissions that prospective lenders would not have lent money to KSC because of the breakdown of the parties’ relationship.
Further, even on…Mr Nicholson’s [BR’s Financial Modelling Expert] own numbers, however, KSC would only have an EBITDA of approximately US$36.4 million during the life of the loan, which would be substantially below the requisite DSC Ratio of 1.7.
We do not think that the evidence of BCBCS’s witnesses about the interest of banks and others in providing finance constitutes any basis for coming to a different conclusion.
 On that basis, we conclude that BCBCS would not have secured funding for the construction of the second and third plants, either by way of third party financing or gift funding from WEC/BCBCS.
The Plaintiffs’ claim was dismissed
Stuart v Rabobank Australia Ltd [2021 FCA 1388]
I was engaged to prepare a report “in reply” to another expert in a Federal Court matter. Together with my counterpart I prepared a joint report and gave “hot-tub” evidence.
Set out below are selected paragraphs from the judgement which explain the background and provide (limited, in the circumstances) comment about the work of the experts:
“ By late 2007, after a series of successful rural property acquisitions and realisations, the applicants Mark and Catherine “Cate” Stuart (the Stuarts) by late 2007 found themselves in a position where they could no longer meet their financial commitments on their current rural property without continued extensions to their facility limit of the financing provided to them by the respondent, Rabobank Australia Ltd (Rabobank).
 The Stuarts were confident that they could address this predicament by increasing the limit of their facility to enable them to purchase an alternative property pending the sale of their existing property. Unfortunately, the combined effect of the severe drought and the global financial crisis frustrated their efforts to sell their existing property. The Stuarts were not able to continue to meet interest payments on their facility with Rabobank and they defaulted.
 Ultimately, both properties were sold for prices well beneath their expectations, receivers were appointed, and the Stuarts have been left with virtually nothing and a substantial debt outstanding to Rabobank.
 In this proceeding the Stuarts seek declarations of contravention, damages, compensation and various orders relieving them from liability and setting aside facilities and mortgages against Rabobank.
The banking expert witness evidence
The Court found that the questions directed to the first expert were in fact “matter[s] for the Court to determine” and said (at 111) “much of the cross-examination of Mr White and Mr Green only served to highlight the inherent lack of utility in asking experts to address what are innately counterfactual issues” but did note (at 101) “Mr Green’s evidence was of assistance in determining the issue [as to whether the periodic reviews had any effect on the term of the Facility].”
“ The Stuarts [were] wholly unsuccessful and Rabobank…succeeded on its cross-claim.”
Tomlak Pty Ltd & Ors v Westpac Banking Corporation  VSC 79
This was an expert witness report about whether a lender had met their obligations under the Banking Code of Practice in the making of loans, and also in their enforcement of security. The engagement involved the preparation of a separate report, a joint report with another expert witness, and six hours of concurrent evidence in the Supreme Court of Victoria.
The following selected paragraphs from the judgement provide background to the case, and a summary of the work I performed:
“ Mr Gregory Butera and his brother Mr Joseph Butera have been residential builders and property developers in the northern suburbs of Melbourne and in the Frankston area since the 1990s. Their business, the ‘Butera Group’, typically involved the purchase of blocks of land with an existing single dwelling, the demolition of that dwelling and the construction of multiple residential units in its place.
“ The Butera Group pursued its property development business through three companies: Tomlak Pty Ltd (Tomlak), Raventhorpe Pty Ltd (Raventhorpe) and Benafield Pty Ltd (Benafield). Another company in the Butera Group — Kimpal Pty Ltd — generally undertook the building work involved in the property developments.
“ The Butera Group encountered financial difficulties in 2013 and 2014. Receivers were appointed in March 2014. The Butera Group attributes its demise to various failures by Westpac Banking Corporation in the period between 2010 and 2014. Westpac had been the Butera Group’s principal financier since 2003 and had funded many of the Butera Group’s property purchases and developments.
“ Tomlak, Raventhorpe and Benafield commenced separate proceedings against Westpac in relation to various claimed failures by Westpac in the period between 2010 and 2014 in respect of the above properties. In each of the proceedings it was alleged that Westpac engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL); unconscionable conduct in contravention of ss 20 and/or 21 of the ACL; and conduct in contravention of cls 2.2, 25.1 and 25.2 of the Code of Banking Practice 2004 (the Banking Code).
Commentary on the expert witness evidence:
“ The contention that Westpac failed to exercise reasonable care in forming its opinion about Tomlak’s ability to repay the loan was advanced principally by reference to expert evidence…”
“112 The unrealistic nature of…[the] standard imposed by…[the borrower’s expert] is highlighted by the following common sense evidence given by Mr Green, which I accept:
… you can’t say to your borrower, “I am not going to lend you the money to buy this property until you tell me what year and what month you’re going to start construction, until you tell me how many units you’re putting up there, what it will cost and how you are going to fund your share of the equity”. I don’t expect the bank to ask that and I don’t expect a – a customer of this size to provide that information.
Mr Green’s evidence was that such a request by a bank would be met with a borrower indicating that they could not provide the requested information and would take their business elsewhere.
“ I have accepted…[the bank manager’s] evidence as to why he decided to issue the demand for repayment of the Butera Group’s debts within one business day. In the circumstances which confronted Westpac on 27 March 2014, seen in the context of its previous dealings with the Butera Group…[his] reasons for taking this step were entirely understandable. I am affirmed in that view by Mr Green’s evidence, which I accept.”
G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services  NSWLEC 12
This was an expert witness report which was accepted, unchallenged. The following selected paragraphs from the judgement provide background to the case and a summary of the work I performed:
“ These Class 3 proceedings comprise three objections to the Valuer General’s determination of compensation under s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) by…. related corporate entities.
“ The Applicants relied on three contracts of the sale of the Properties for a total of $56.5 million which had been exchanged on 28 June 2016 before the Properties were compulsorily acquired by the RMS. The contracts were made between the Applicants…and three purchasers…(the Purchasers). The Applicants state that three deposits of $50,000 were paid to them by the Purchasers, with settlement due on 28 June 2018.
My Expert Witness work
“ Mr Green chartered accountant prepared an expert report dated 23 November 2018. He was instructed to provide an opinion on the following matters. First, the lending institutions or banks that would have been willing to provide finance to the Purchasers that would have enabled them to complete the contracts of sale by 28 June 2018. Secondly, the terms on which any such finance would have been offered to the Purchasers. Thirdly, the inquiries that a lending institution or bank would have made of the Purchasers before agreeing to provide any such finance. Fourthly, the amount of money that a lender would have been willing to loan the Purchasers.
“ Mr Green concluded that there were ample lenders in the Australian market who would have been willing to provide funding to the Purchasers provided that they were able to demonstrate compliance with the criteria of the relevant lender. He described the terms on which any such finance would have been offered to the Purchasers and found that the funding required to settle the purchases was $59,822,165. He estimated the amount of money that a lender would have been willing to loan the Purchasers as:
|Bank Investment||Non-bank Investment||Asset Based||Bank Developer||Non-bank Developer|
|Max. Loan ($)||13,997,418||9,331,612||9,331,612||16,550,000||16,550,000|
“ The RMS contended that in addition to the unusual features of the asserted transactions, as a further and independent matter, there is ample evidence that the Purchasers would have been unable to access sufficient funds that would have enabled them to complete the contracts of the sale of the Properties:
“ The RMS sought to emphasise the unusual nature of the contracts of sale given that Mr Savell did not know who the Purchasers were acting as trustees for according to his cross-examination, see , and that there was no written communication between the Purchasers and the Applicants before the contracts were entered into. The evidence of the expert accountants Dr Ferrier and Mr Green that the Purchasers would have had difficulty borrowing the necessary funds to complete the purchases from financial institutions such as banks highlights the absence of any evidence from the Applicants about the likelihood of the contracts settling. Mr Green’s evidence identifies the likely substantial shortfall in the amount that various types of lending institutions would be prepared to lend given the contract prices, at . The basis for doing so is summarised in .
Senate Inquiry into Insolvency in the Australian Construction Industry
In 2015 I appeared as a witness at a Senate Inquiry into Insolvency in the Australian Construction Industry. One of the issues raised was the “voting value” of purchased debt with an example of a debt purchased for $30,000 having a voting value of $18m.
As a result of reforms that came into effect on 7 December 2018, debt purchased by a related party now has the voting value of the amount paid – not the face value, fixing the problem discussed in the Inquiry.
Cases of Interest
Banking expert “out of date”: Tecnimont Arabia Ltd v National Westminster Bank Plc  EWHC 1172 (Comm)
Following what appeared to be a legitimate instruction from head office, a company paid $US5m to an account held at NatWest. In fact, the payment instruction was bogus, issued by a fraudster who also controlled the bank account into which the money was paid. By the time the fraud was discovered, almost all of the funds had been paid out from the NatWest account, and were lost.
The company took action against NatWest, claiming that it had been “unjustly enriched” by the transaction, arguing that NatWest had failed to follow its own systems – a failure that it said would prevent NatWest from being able to rely on the “change of position” defence.
Two NatWest systems were relevant: SilverTail – a real time system aimed at protecting customers from fraud; and Fortent – an Anti-Mooney Laundering (AML) system which operated retrospectively.
The Banking Expert evidence
The experts agreed that a bank staffer had failed to follow the Bank’s internal protocols, however they also agreed that following the procedure would not have led to a different outcome. Firstly, if the bank had contacted the account holder, the fraudster would have confirmed the validity of the payments. Secondly, if the previous three day’s transactions had been examined, there was nothing that would have raised concerns either.
The experts didn’t agree about the adequacy of NatWest’s AML system. The company’s banking expert expressed the opinion that AML analysis should be monitored in real time, whereas NatWest’s banking expert gave evidence that it was industry standard to monitor AML retrospectively.
The Court held that:
- The mechanics of the international payment system meant that any unjust enrichment did not occur “at the claimant’s expense,” and so the claim must fail.
- Natwest’s systems were “perfectly acceptable and in line with industry standards.”
- Evidence to the contrary “harked back to the long-gone practices of a golden age of banking,” was from an expert whose approach to banking practice “was out of date,” and was explicitly rejected. As a consequence, NatWest would have been entitled to a change of position defence if it had been required.
Allowing unpleaded claims would deny the defendant the benefit of Expert evidence – CJ & LK Perks Partnership & Ors v NatWest Markets Plc  EWHC 726
A borrower took action against RBS, claiming mis-selling of an interest rate swap, as well as a conspiracy on the part of the Lender said to arise from the involvement of a borrower-side adviser engaged and paid by the borrower but nominated by the lender.
The borrower contended that the lender had failed to properly explain risks from entering into the swap, which it said arose from:
- Substantial break costs
- A negative impact on future lending decisions of RBS
- That the borrowers might be restricted from selling properties that they owned.
The need for banking expert evidence
The Court held that it would be unfair to allow the points to be argued at trial without having been pleaded, because the absence of a pleading meant that RBS did not have a fair opportunity to prepare for the case, in particular by arranging for expert evidence which, the Court noted, was typically sought in similar cases.
The Court found that:
- The borrower “had become obsessed with blaming the Bank for the collapse of his business” and some parts of his evidence were “at best wishful thinking, mis-recollection and bluster, and at worst (as the Bank submitted) an obvious lie.”
- There was no complaint by the borrower at the time when advised that loan approval was subject to interest rate hedging.
- There was no evidence to support the conclusion that claimed misrepresentations were made, or that risks had not been properly explained.
- There was no causation because the borrower wanted the loan and was “happy to enter a swap if that is what the Bank wanted.”
- It was true that the adviser had put moderate positions to RBS, but that was because she recognised that a favourable outcome for the businesses required the agreement of RBS, and that “it was unproductive to take positions which were likely to be rejected.”
- There was “no substance in the case of conspiracy” and it was appropriate to exonerate both the adviser and the RBS staff, who had “acted with integrity.”
The borrower was unsuccessful.
Routhan v PGG Wrightson Real Estate  NZHC 3585 (21 December 2021)
The purchasers of a New Zealand dairy farm were unable to achieve the results that the vendor had apparently reported. They tried re-seeding the property, brought in expert dairy consultants, increased supplementary feeding, and changed the herd – but nothing worked, and eventually they were forced to sell the farm at a loss.
They later discovered that not only were the farm’s true production figures lower than they had been told, but that production was also steadily trending down. They took legal action against the real estate agent, alleging misleading conduct in breach of New Zealand’s Fair Trading Act, negligence, and deceit.
The banking expert
Part of the agent’s defence was around the issue of causation: the agent said that there were multiple causes of the farmer’s loss, unrelated to anything the agent had done. The agent also argued that the “chain of causation” had been broken by the actions of the farmer’s bank, which – it was claimed – had provided credit when it should not have, and had failed to enforce its security as early as it should have.
The agent tabled the report of a rural banking expert who criticised the bank for lending to a borrower with “very little equity” and with minimal surplus cashflow to pay down debt.
The Court did not accept the expert’s opinion. It held that a subordinated low-interest rate unsecured loan from a friend was quasi-equity for the bank’s purpose, and that interest-only loans were “common” when the loan was advanced.
The Court held that the reason that the bank allowed the position to continue rather than enforce security was that they too had been misled about the farm’s potential – but that in any event, the purchasers had already lost their capital investment well before the misrepresentation was realised.
The Court awarded damages against the agent.
Banking expert evidence inadmissible – Philipp and Barclays Bank UK PLC  EWHC 10
A bank account holder made two international payments totalling £700,000 thinking that that she was assisting an investigation by the Police. In fact, she was the victim of an “authorised push payment” fraud, and the monies were completely lost.
She took action against the bank arguing that it failed to comply with a duty to protect her by stopping or delaying the transactions. The Bank argued that that the Quincecare duty did not extend to protect an account holder from their own actions, especially when it would conflict with the established duty to comply with the account holder’s instructions; and the bank sought summary judgement against her.
The Bank had objected to a witness statement on several grounds, including that it sought to introduce expert evidence by reference to “expert evidence” from a banking expert when the court had not granted permission for expert evidence.
The Court that there was a realistic prospect that expert evidence might have been permitted if the case did proceed to a trial, but held that in the circumstances the evidence was not admissible:
…it is important to bear in mind the proper limit of such contemplated expert evidence. It is one thing for the court to be guided by expert evidence which expresses a view as to whether or not, in the particular circumstances of the case, a bank complied with generally accepted and practised banking standards or (which may not necessarily be the same thing) the standards legally required of the ordinary prudent banker. However, it is for the court to determine what legal duty was owed by the bank – including the requisite standard of care carried with it – in those circumstances.
While the England and Wales High Court expressed “acute sympathy” for the victim, it held that the Quincecare duty could not be extended in the way that victim proposed, and it would not be fair, just or reasonable to impose liability on the Bank.
KinCare Community Services Limited v Chief Commissioner of State Revenue  NSWSC 182 (6 March 2019)  NSWSC 182
A company sought the review of a decision withdrawing a previous exemption from payroll tax, made on the basis that – it was said – the company had ceased to be a non-profit charitable organisation.
The key question was whether the company was a “non-profit organisation. Central to this was the relationship between the company, and related “for profit” entities with which it contracted for the supply of services.
Banking Expert Evidence.
The Commissioner relied upon two expert reports from an accounting expert, and another report from a banking expert.
The banking expert gave evidence that the company and its related entities were “inextricably linked,” and that a related for profit entity would not have been able to secure a loan if the company had not provided a guarantee. His evidence was not challenged, and he was not required for cross-examination.
The Supreme Court found that:
- The question of whether the company was a “non-profit organisation” required an assessment firstly as to whether its constitution prevented profits from being distributed to members, and secondly whether its business was “carried on for the benefit or gain of particular individuals.”
- On the evidence, funds flowed from the “for profit” entities to the non-profit company, and no income or property of company had ever been paid or transferred to its members.
- “On any fair view of the evidence, the company was being “carried on” throughout the relevant period for the purpose of providing home care services to its aged, disabled and Aboriginal and Torres Strait Islander clients in accordance with its Commonwealth and NSW Government grants.”
- The granting of a guarantee was a benefit – but that did not of itself prove the case that the company was being carried on for the benefit or gain of particular individuals because such benefit was incidental to its purpose.
The objection was allowed, and the original decision was revoked.
Banking expert’s evidence accepted – Smart v AAI Ltd; JRK Realty Pty Ltd v AAI Ltd  NSWSC 392
In 2007 and early 2008, two investors transferred funds into the bank account of a finance broker in the belief that they were to be on-lent to clients of the broker. In fact, the funds were not invested – they were misappropriated by the then general manager and part-owner.
After the misappropriation was discovered, the brokerage closed, and was wound up and de-registered. Several years later, the two investors commenced proceedings against the broker’s insurance company.
The insurer denied coverage, pointing to five exclusion clauses.
The Banking Expert Witness Evidence
One of the exclusion clauses addressed liabilities that arose from activities “outside the normal course of the Professional Services” as defined in the policy.
The insurer arranged evidence from an banking expert witness who said:
… once [the broker] approached [the investors] for funds and received funds from [them], in my opinion [the broker] ceased to be acting as a mortgage broker and/or finance broker. This was not a usual method of disbursing loan funds. In my experience lenders generally provide loan funds directly to borrowers and not to mortgage or finance brokers.
The Court accepted the expert’s evidence, and agreed that the claim arose from activities not covered by the policy. Even if this were not the case, the claim had been made after the policy expired, the Court ruled, and would also have been excluded because it arose from dishonesty. There was a “write-back” clause for the dishonest or fraudulent acts of employees – but, the Court ruled, the general manager did not work in the business as an employee, but as a half- owner.
Expert Evidence not required: Commonwealth Bank of Australia v Doggett & Ors  VSC 423
Two borrowers owned several apartments in a Queensland apartment complex, and when the management rights became available they arranged bank finance to purchase both the management rights business, and the managers’ apartment.
As soon became obvious after they took over, the business was undercapitalised and did not trade profitably. Efforts to improve the business – further impacted by the GFC – failed, and the bank appointed receivers some two years later. The receivers sold all of the security, and in due course the bank took action to recover a $3.1 million shortfall from the guarantors.
The guarantors raised several counterclaims. The claimed that the bank had made misleading or deceptive representations that the business could service the loan, said that the bank had acted unconscionably, and argued that the bank had failed “to exercise the care and skill of a diligent and prudent banker” as clause 25.1 of the Code of Banking Practice required. They said that a “compromise letter” had been obtained by duress, and that the bank should not be allowed to rely upon it.
Financial due diligence
The sale contract was conditional upon the borrowers obtaining independent verification by an accountant of the business’s financial records, with the right to terminate the contract if an independent accountant did not verify a specified minimum net operating profit.
Critically, that accountant’s report (provided to the purchaser and the bank) assumed that the purchasers would work in the business and perform the role of a ‘two person management team.’ That assumption was incorrect and so in practical terms the business profit would be reduced by two additional management salaries – which meant that the minimum profit hurdle would not be met.
Was expert evidence required?
The Bank contended that the Court could not make a finding of negligence, or breach of warranty, because the defendants had not called expert evidence as to the practice of bankers in assessing credit risk, relying on a 1998 English decision of Sansom v Metcalfe Hambleton & Co, where the Court stated:
a court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a client (or third party), without evidence from those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard. It is not an absolute rule …but, unless it is an obvious case, in the absence of the relevant expert evidence the claim will not be proved.
The Court held that on the facts, it was indeed “an obvious case” and so the Court “did not require the assistance of an impartial [expert] witness with special skills, training or expertise.”
The Court held that the Banking Code of Practice was incorporated into the defendants’ guarantee as a term, and the Bank had breached clause 25.1 of the Code by failing to recognise the impact of the management salaries. However, it found that the compromise letter was not procured by duress, and so it did operate to release the Bank from such a claim arising from that breach, which last finding was also confirmed on appeal.