Good help is hard to find for Piper Alderman as substitute expert rejected

When Piper Alderman ran into difficulty with its key expert witness just prior to trial in the Discovery Metals shareholder class action, its application for leave shortly before trial to rely on a report of a substituted expert was refused.

This is a class action on behalf of shareholders in Discovery Metals Ltd, arising from a failed hostile take-over bid by Cathay Fortune Investment Ltd. The defendant (KPMG) provided an independent expert report in connection with the proposed take-over, which the plaintiff claims was misleading or deceptive. The proceeding is listed for a three week trial, which is due to commence on 25 March 2019. In this judgment, Stevenson J dealt with an application by the plaintiff for leave to rely on a report of a substituted expert, in circumstances which appear quite remarkable.

The plaintiff had, in chief, served an expert report of a Mr Molony (a mergers and acquisitions expert). In response, the defendant served an expert report of Mr Nash. The plaintiff’s lawyers then sought to instruct Mr Molony to prepare a reply report in response to Mr Nash’s report. Initially, Mr Molony refused to communicate with the plaintiff’s lawyers, and when he ultimately did so (through his own lawyer) he refused to prepare a reply report. It appears (reading between the lines) that his refusal was based on his dealings with the plaintiff’s lawyers during the course of preparing his expert report in chief. Ultimately, however, Mr Molony did agree to prepare a reply report, but on conditions including that “it is acknowledged and agreed that whilst Mr Molony is willing to discuss in detail the contents of any draft report, he is entitled to cease those discussions should he consider that to do so would conflict with his paramount duty to the court”. Mr Molony’s reply report was subsequently prepared, and was served on the defendant.

However, the plaintiff’s lawyers, having lost confidence in Mr Molony’s preparedness to co-operate, engaged a substituted expert (Mr McCarty) to prepare a report, and in this application sought leave to rely on Mr McCarty’s report in substitution for Mr Molony’s reports. Justice Stevenson refused the application, essentially on the basis that:

  • service of the substituted report, so close to trial, would undoubtedly cause serious prejudice to KPMG
  • it was unnecessary, in circumstances where there was no indication that Mr Molony would not, consistent with his duties as an independent expert, attend a conclave with the defendant’s expert (if required), and also attend the trial to give evidence.

Thus, it appears, the plaintiff is now in the unenviable position of proceeding to a trial with an expert witness in whom his lawyers have not only lost confidence, but have also disclosed that very fact to both the defendant and to the Court.

Case details

Tredrea v KPMG Financial Advisory Services (Australia) Pty Ltd [2019] NSWSC 130

  • Supreme Court of New South Wales, Stevenson J, 21 February 2019
  • Plaintiff's Solicitors: Piper Alderman
  • Defendant's Solicitors: Corrs Chambers Westgarth
  • Plaintiff's Funder: N/A

Read more on Austlii: Tredrea v KPMG Financial Advisory Services (Australia) Pty Ltd [2019] NSWSC 130

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