Valuation evidence: the requirements for admissibility

Rolleston v Insurance Australia Ltd [2017] NSWCA 168

Meagher JA:

4 The valuer adopted the comparable sales method. That method involves the identification of qualities or characteristics of the relevant comparable properties which are considered to be indicators of value, or as contributing to value or perceptions of value; and the comparison and assessment in terms of value of those qualities and characteristics as between the property being valued and the comparable sales properties.

5 Ultimately that comparison must provide a basis for expressing an opinion as to the value of the subject property. That exercise may involve deriving, from the comparable sales, measures of value for particular characteristics and applying those measures to the subject property. It also may involve, in forming an opinion as to value, the making of adjustments to comparable sale prices to take account of differences in those characteristics as between the comparable sale properties and the property being valued.

6 These and other analyses undertaken by the valuer will involve estimate, inference, deduction and other judgments that are not likely to be exact or precise. Nonetheless, the valuer must lay out the process by which this method has been followed. It is not sufficient, as happened in this case, for the valuer to identify in fairly general terms the differences and similarities between the various comparable sale properties and the subject property, and then to express a view as to the value of that property. The valuer must explain, in a way which demonstrates the application of the adopted methodology and specialised knowledge, how the comparable sales justify the conclusion as to value.

 

Emmett AJA:

  1. Section 79 of the Evidence Act will not be satisfied unless the opinion in question is that of a person who has specialised knowledge, being knowledge based on that person’s training, study or experience and the opinion is wholly or substantially based on that specialised knowledge. The requirement that the opinion be based on specialised knowledge would normally be satisfied by the person who expresses the opinion demonstrating the reasoning process by which the opinion was reached, provided of course that it exposes the author’s reasoning in a way that shows that the opinion is based on particular specialised knowledge. [1]
  2. Evidence not satisfying those requirements might be inadmissible as being irrelevant; as not complying with s 79; or on discretionary grounds under s 135. Before the requirements of s 79 will be satisfied in relation to opinion evidence, the evidence must explain how the field of “specialised knowledge” in which the witness is expert applies to the facts assumed or observed so as to produce the opinion propounded. If that matter is not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the specialised knowledge of the witness. If the Court cannot be sure of that, the evidence is, strictly speaking, not admissible. [2]
  3. The requirement that the relevant opinion be based wholly or substantially on specialised knowledge is an explicit precondition of admissibility. Like other preconditions under s 79, it is to be established by the party tendering the evidence in examination-in-chief either during the trial or on the voir dire. The opinions of witnesses should be confined, in accordance with s 79, to opinions that are wholly or substantially based on their specialised knowledge. A witness who ventures an opinion outside the field of specialised knowledge of that witness may otherwise invest such “opinions” with a spurious appearance of authority and, with a consequence that legitimate processes of fact finding may be subverted. [3]