The Secretary to the Department of Infrastructure v
Williamstown Bay and River Cruises Pty Ltd  VSC 191
The task of a forensic accountant often involves working with
substandard financial information to express expert opinions
regarding complex financial issues. When faced with less than ideal
information, it can be a matter of doing the best job possible with
the documents available, stating clearly when assumptions are
necessary. But can deficient information lead to a state of
This case relates an application of the Department of
Infrastructure ("DOI") for leave to appeal a decision of
VCAT on the basis (among other matters) that VCAT erred in its
finding that financial statements of a water taxi business were
fundamentally reliable, because there was no evidence that they
were fundamentally unreliable.
Before VCAT, water taxi business Williamstown Bay & River
Cruises Pty Ltd ("WBRC"), sought compensation from the
DOI for losses arising from the compulsory acquisition of a
sub-lease for part of South Wharf and the loss of its mooring
rights on the Yarra River. The application succeeded and the DOI
was ordered to pay compensation assessed at $1.08 million.
The accounting expert engaged by WBRC prepared cash flows
relying on financial information of the business and discussions
with the business owner. In the VCAT hearing, the veracity of the
financial information that had been relied on was questioned and a
number of inconsistencies were identified in the information. The
financial statements were not audited and the expert could not
vouch for their accuracy. Also, the owner of the business was
unable to verify the accuracy, as his financial accountant had
prepared the information.
VCAT accepted that, while the primary financial statements were
not wholly reliable, the anomalies and errors did not compel the
conclusion that the accounts were fundamentally unreliable. The DOI
sought leave of the Supreme Court to appeal VCAT's finding and
the assessment of compensation with reference to valuations based
on the substandard information.
The Supreme Court commented that:
For an expert opinion as to the value of a business to be
persuasive, it must bear some relationship to the primary facts of
the case, as eventually found on the basis of the evidence tendered
by the parties. There may be conflicts in that evidence. That was
the case here in respect of the financial statements. It was for
VCAT, as the trier of fact, to resolve conflicts and to identify
the relevant financial features of the business for the purposes of
valuation. Unless the relevant financial features of the business,
as either assumed or deposed to by the expert, bear some
relationship with those identified by VCAT, the expert valuation
opinion will be too remote from the business identified to be of
any use. As the learned author of Cross on Evidence explains the
"basis rule" provides that an expert opinion is not
admissible unless evidence has been or will be admitted, whether
from the expert or from some other source, which is capable of
supporting findings of primary fact sufficiently like the factual
assumptions on which the opinion is based to render the opinion of
value. In R v Ryan, the Court of Appeal described as basic the
proposition that an opinion without any evidentiary basis is
Regarding WBRC's information, the Supreme Court found
...with the tax returns, financial statements and the
statements of the director and accountant accompanying each of
them, there was before VCAT evidentiary material capable, if used
correctly, of providing a basis for a valuation opinion. Care was
required in using such evidence but there was no error of law in
the sense that there was no evidence of the fundamental or
antecedent facts on which the valuation opinions were
Accordingly, this aspect of the DOI's appeal was
Ideally, the financial information made available to an expert
should be sufficiently reliable. In many instances, however,
conflicting information is unavoidable. In these instances, the
expert engaged should specify which documents have been relied on
and why, or provide more than one view where the scenarios may
differ depending on the particular documents relied on.
If it is shown that financial information of a business is
deficient or that an expert's assumptions bear little
resemblance to the actual position, the expert's evidence may
be given little weight by the Court.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Singhania & Partners LLP, Solicitors and Advocates
The Government of India decided to amend the Arbitration and Conciliation Act, 1996 by introducing the Arbitration and Conciliation (Amendment) Bill, 2015 in the Parliament.
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