Introduction
1 According to the Gospel of St Matthew, people do not put new wine into old wine skins. Otherwise, the skins burst,
the wine spills out and the skins are ruined. Rather, they pour new wine into fresh wine skins, and both are preserved. A question
raised in this paper is whether the rules of evidence governing the admissibility of expert evidence are like old wine skins asked
to contain new wine. For such testimony extends beyond inferences of fact past or future to argumentative statements of a normative
or evaluative character. Moreover, some aspects of such evidence and particularly economic evidence about future outcomes of proposed
conduct are either inherently or practically untestable. This paper considers approaches to expert testimony, by reference, inter
alia, to other jurisdictions, and how it interacts with the rules governing the reception of opinion evidence.
2 The use of experts to try disputes has a long history. For many centuries special juries were used in England
in disputes whose resolution required specialised knowledge. Where a woman, sentenced to death, claimed a stay of execution on the
ground that she was pregnant, the court could direct a jury of 12 matrons to determine the question. This could be done with the
assistance of a writ de ventre inspiciendo. A similar system was used in cases of breaches of trade regulations. Juries of merchants
tried merchants’ affairs in the 17th century as they might have "better Knowledge of the Matters and Difference which were
to be tried, than others who were not of that Profession".
3 The use of expert witnesses to give evidence as part of dispute resolution processes goes back at least as far
as the 14th century. In 1345 surgeons were called in an appeal of mayhem to assist a court in determining whether a wound was fresh.
Experts designated "masters of grammar" assisted in the construction of bonds in 1494. The same usage was followed in the interpretation
of other commercial instruments. Experts were even called on questions of law. Lord Holt obtained the opinion of London merchants
about the effect of refusing negotiability to promissory notes in Buller v Cripps 6 Mod 29 (1703). In a paper by Judge Learned Hand in the Harvard Law Review in 1901 the position of the expert witness was described
as "peculiar" because the witness was allowed to offer conclusions "from facts which he has either himself observed or which are
in evidence from the testimony of others". The requirement that conclusions offered be founded on fact underpinned the common law
"basis rule". Whether viewed as a rule of admissibility or a matter going to weight, it is essentially a rule of logic. In a generalised
form it applies to any conclusion advanced in a court whether it be the opinion of an expert or the argument of counsel. For an argument
dependent upon the existence of facts which are not made out, in one way or another, must fail.
4 In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, Heydon JA referred to the logic underlying the basis rule as a "basal principle" which he enunciated thus:
… what an expert gives is an opinion based on facts.
The ways in which the factual foundation of an expert’s opinion may be established vary. For the most part admissible evidence
is required of facts upon which opinions are based but this is not universal. The requirements are dependent upon the applicable
rules governing admissibility and are undoubtedly stricter in relation to jury trials.
5 Interestingly, Judge Learned Hand’s review of the history of expert evidence suggested that experts were
used as witnesses at a time when exclusionary rules of evidence had not been developed or enforced. As the rules excluding opinion
evidence took form, the role of experts, having been established, remained unaffected. He put it thus:
What I have called the "exception" which expert evidence represents is therefore no more than a relic of the usage of an undeveloped
age which had not so far differentiated witness from jury as rigidly to confine each to its function. The rise of expert testimony
is no more than the gradual recognition of such testimony, amid the gradual definition of rules of evidence, as a permissible, because
supposedly useful archaism.
6 Expert testimony is a well entrenched feature of litigation. Its contemporary ubiquity has attracted concerns about
its effects upon the cost and timeliness of proceedings and upon the integrity of the judicial process when experts are partisans
in the cause of those who call them. In his ‘Principles of Judicial Proof’, published in 1892, Professor John Wigmore quoted a passage about expert evidence from a text of the day called ‘Hints on Advocacy’:
[as] the diversity of climes and soils produce diversities of trees, so the various kinds of contentious legal businesses give rise
to a vast variety of witnesses.
The observation remains valid. The myriad subject matters upon which courts are required to make decisions inevitably attract many
different kinds of "expertise" which it is claimed will assist them in their determinations. Their varieties are distinguished by
more than subject matter. Differences in conceptual foundations and methodology and the nature of the intellectual or other enterprises
they represent raise a question about the proper construction to be given to such phrases as "specialised knowledge based on training,
study or experience" which appears in s 76 of the Evidence Act 1995 (Cth). Its construction determines the range of claimed expertise it may accommodate.
7 "Knowledge" covers a variety of states of mind. There is the common or garden variety which involves awareness
of a "truth" which is "out there". It is available to the non-expert and is defined in the Shorter Oxford English Dictionary as "intellectual
perception of a fact or truth; clear and certain understanding or awareness, especially as opposed to opinion". More relevant to
the concept of specialised knowledge which may support expert testimony is "understanding of a branch of learning, a language etc
(a) theoretical or practical understanding of an art, science, industry etc".
8 In the so-called hard sciences the fit is relatively easy. These are the sciences which supply experts who routinely
appear before judges and juries. A pathologist who examines a deceased person’s body and organs may, on the basis of established
scientific knowledge offer inferences about the cause of death and, in some cases, the approximate time of death. A physicist may
be able to offer inferences about whether a body fell or was thrown from a cliff by calculating its trajectory and the distance it
was found from the base of the cliff by applying Newtonian dynamics. A chemist may be able to speak of the interactions of certain
chemicals and an environmental scientist of their effects upon the environment.
9 For technical or applied sciences the fit is again an easy one. An engineer examining the position of vehicles
following an accident and examining skid marks on the road may be able to offer inferences about the motion and speeds of the vehicles
prior to the collision. Engineers may bring their expertise to bear on such questions as what caused a bridge to collapse or machinery
to fail.
10 The fit is not quite so easy, but nevertheless well established, in relation to opinion evidence about business
and professional practice. In a sense such evidence is at the margins of opinion. Indeed it might come close to observation. In a
professional negligence case, an experienced lawyer might be called to give evidence that solicitors practising in the relevant area
of the law would ordinarily make inquiries about X before doing Y. Similarly an experienced medical practitioner in a medical negligence
case might give evidence as to whether it is or is not usual practice to conduct a certain kind of test before embarking on a particular
course of treatment.
11 This kind of distinction was drawn by Selway J in Gumana v Northern Territory (2005) 141 FCR 457. His Honour made the point that expert evidence is not limited to opinion evidence. He was there dealing with the
evidence of anthropologists in a native title case. He said that the description "expert evidence" had the potential to mislead (at
[155]):
"Expert" evidence is simply evidence given by someone who has a particular expertise. To the extent that "expert evidence" describes
any more limited category … it would seem to be a reference to what is sometimes called "forensic expert evidence" meaning
evidence given by an expert called solely for that purpose: see, eg the use of that term by Freckeltyon, Reddy and Selby in Australia
– Judicial Perspectives on Expert Evidence: An Empirical Study (1999), at 15.
Importantly he said (at [156]):
Much of the discussion about "expert" evidence would seem to assume that it is primarily or only "opinion" evidence. However, that
will depend upon the nature of the expert and the nature of the evidence. For example, where the evidence of an anthropologist is
the direct consequence of significant field work over a lengthy period, it may not be evidence of opinion at all. Rather, it may
be the direct evidence of the observations that the anthropologist has made. Similar evidence might be given by others who have made
similar observations …
12
13 The accommodation of expert testimony within the rubric of specialised knowledge is not quite so easy with the
social sciences such as economics and anthropology. In so saying it is important to recognise that these designations cover a variety
of sub-disciplines. They do not describe a single methodology. There are things that economists do involving quantitative analysis
and factual inferences that resemble the techniques of the hard sciences. There are other things they do which are evaluative or
taxonomical including the organisation and labelling of facts.
14 The mix of quantitative and qualitative functions is to be found in many disciplines. Recently astronomers announced
that Pluto is no longer a planet. This poses the question what happened to it? It didn ’t vanish. It was reclassified. The
identification of genus and species in botany involves similar kinds of judgments. Even in medicine, particularly psychiatric medicine,
the designation of conditions as disease or disorder inescapably involve social judgments reflected in an international diagnostic
manual. So schizophrenia is a disease. Being a psychopath is a disorder. Underpinning those classifications may be a barely discernible
judgment that one class of persons is sick, while the other class of persons is bad.
15 A class of economic testimony which may be regarded as falling comfortably into the core concept of specialised
knowledge was exemplified in discussion in Re Brand Name Prescription Drugs Anti-Trust 185 F 3d 781 (7th Cir 1999). Retail pharmacies brought action against manufacturers and wholesalers of brand name prescription drugs alleging
a price fixing conspiracy and in particular the denial of discounts to them. Chief Judge Posner in the 7th Circuit Court of Appeals
observed that there were two ways in which the plaintiffs might have been able to prove collusive conduct by the manufacturers. They
could have presented direct evidence by way of admissions or eye witness accounts that the manufacturers had agreed to collude. Alternatively
they could have presented:
… circumstantial evidence, economic in character, that their behaviour could better be explained on the hypothesis of collusion
than on the hypothesis that each was embarked on an individual rather than a concerted course of action – that each, in other
words, was merely exploiting the market power it had, rather than seeking to create or amplify such power through an agreement with
competitors not to compete.
16 Predictive statements about behaviour based on quantitative methods follow the form of the hard sciences. There
may, however, be a difficulty about testability. Karl Popper defined science by saying that a statement is scientific only if it
is open to the logical possibility of being found false. So scientific statements can be assessed by testing them. If there is no
way of testing the truth or falsity of a statement then it is non-scientific. Evaluative statements are not testable. Predictive
statements about market behaviour should in theory be testable. There may however be real practical difficulties in establishing
testability.
17 Economic evidence given in Australian Gas Light Company v ACCC [2003] FCA 1525; (2003) 137 FCR 317 was based upon structural econometric modelling. It underpinned the approach taken by the ACCC expert to the analysis of market power
in that case. In a paper published by Professor Wolak in the Handbook of Econometrics in 2003 he and his co-author, PC Reiss, observed
that economic theories deliver mathematical statements about the relationship between two variables. Such statements are often deterministic
and do not take into account the existence of what they called "noisy economic data". A second source of structure is added by the
applied researcher which is statistical sampling and other "stochastic" assumptions to specify how data on related variables were
generated. In this way deterministic models of economic behaviour can be transformed into stochastic econometric models. The term
"stochastic" here refers to a phenomenon which follows a probability distribution or a pattern amenable to statistical analysis but
is not able to be precisely predicted. Such models can be used to estimate unobservable economic parameters or behavioural responses
from non-experimental data. Relevant parameters include marginal costs, returns to scale, the price elasticity of demand and the
impact of a change in an exogenous variable on the amount demanded or on the amount supplied. An estimated structure of the market
can be used to predict what would happen if certain changes occur.
18 The question of the reliability of such models does not prevent the method the characterisation of the method
they adopt as "scientific". Sometimes however in dynamic or developing markets such as the semi-regulated electricity market that
was considered in that case, the market is so complex, the approach used so new in its application to that market and the data so
incomplete that predictions based on the modelling rest on a theoretical rather than factual foundation. And if the market itself
is evolving the predictions may be effectively untestable. Sometimes an historic review may determine whether a permitted acquisition
in fact resulted in a lessening of competition and whether, if it did, it was significant enough to characterise as "substantial"?
However even then the market variables may have changed independently of the acquisition. In the AGL case a joint study conducted after the event by Professor Joshua Gans of Melbourne University and Professor Michael Wolak, the principal
ACCC expert witness contended that there had been a significant increase in wholesale electricity prices associated with the acquisition:
Gans and Wolak, A Comparison of Ex Ante versus Ex Post Vertical Market Power: Evidence from the Electricity Supply Industry.
19 Beyond quantitative analysis economic witnesses offer judgments relevant to statutory criteria such as market
definition, the existence of a substantial degree of market power and the likelihood of a substantial lessening of competition in
particular circumstances. This aspect of economic testimony was discussed by Allsop J in ACCC v LiquorLand (Australia) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123. His Honour quoted Keyne’sdescription of economics as "… a method rather than a doctrine, an apparatus of the mind, a
technique of thinking, which helps its possessor to draw correct conclusions". He observed that often the point of the expert opinion
is to give a form or construct to the facts. He said:
It may appear to be an argument put by the witness. So it is. The discourse is not connected with the ascertainment of an identifiable
truth in which task the court is to be helped by the views of the expert in a specialised field. It is not, for example, the process
of ascertaining the nature of a chemical reaction or the existence of conditions suitable for combustion. The view or argument as
to the proper way to analyse facts in the world from the perspective of a social science is essentially argumentative. That does
not mean intellectual rigor, honesty and a willingness to engage in discourse are not required. But it does mean that it may be an
empty or meaningless statement to say that an expert should be criticised in this field for "putting an argument" as opposed to "giving
an opinion".
20 The nature of the judgments which the court is called upon to make in the application of provisions of Pt IV of the Trade Practices Act attracts testimony that is necessarily evaluative and purposive and may be supported by economic argument.
21 The concept of "market" in the Trade Practices Act is not defined except by limitation to markets in Australia and the inclusion of substitutable or competitive goods or services. (s 4E) The classic exposition by the Trade Practices Tribunal in Re Queensland Cooperative Milling Association Ltd (1976) 25 FLR 169 at 190:
… the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution,
at least in the long run, if given a sufficient price incentive. Inescapably it has both a descriptive and a purposive function.
It involves fact finding with evaluative and purposive selection. It describes a range of economic activities defined by reference
to particular economic functions.
The qualitative element of market definition was illustrated by the observations of Areeda P and Kaplow L, Antitrust Analysis (4th
ed, c 1988 Little, Brown) at 572:
A vast number of firms might have some actual or potential effect on a defendant’s behaviour, many of them however will not
have a significant effect and we attempt to exclude them from the relevant market in which we appraise a defendant’s power.
We try to include in the relevant market only those suppliers – of the same or related product in the same or related geographic
area – whose existence significantly restrains the defendant’s power. This process of inclusion and exclusion is spoken
of as market definition. So the definition process necessarily involves judgments about what is significant and what is not in the
relevant range of field of activities said to define a particular market. The economist’s judgment while it will have quantitative
elements is ultimately qualitative in character.
22 The same is true of "substantial lessening of competition". In Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53, the joint judgment of Gummow, Hayne and Heydon JJ accepted that the term "substantial" means "meaningful or relevant to the competitive
process". The statutory standard is functional rather than descriptive of some external reality to be ascertained like the state
of the weather. It provides a broadly stated instruction to the courts about the circumstances in which it should intervene against
the classes of anticompetitive conduct to which that test is applied. Where economic testimony is used to assist the court in forming
a view about the application of these criteria it will be inescapably argumentative in character.
23 There are analogies between the nature of the testimony given by economists relevant to these criteria and the
evidence given by anthropologists in native title cases. Applicants for native title determinations are required by current jurisprudence
to show that they are members of a society which was in existence at the time that the Crown asserted its sovereignty and that that
society continues to exist today. The concept of "society" was explained in Members of the Yorta Yorta Aboriginal Community v State of Victoria [2002] HCA 58; (2002) 214 CLR 422 at 425 thus:
In this context "society" is to be understood as a body of persons united in and by its acknowledgement and observance of a body
of law and customs.
24 It is unnecessary to go further into the jurisprudence of native title as expounded by the High Court to observe
that the definition of the relevant "society" in native title proceedings is very much a matter of drawing evaluative boundaries.
This is particularly so where very similar traditional laws and customs were observed by groups of Aboriginal people distributed
across substantial swathes of territory. In those cases the definition of the relevant society is a matter of identifying a boundary
not unlike the process of defining the limits of significant product substitutability in market definition.
25 In the Bardi Jawi native title case, Sampi v State of Western Australia [2005] FCA 777 the analogy between the function of the anthropologist and that of the economist was made. It was said:
Economic experts typically offer opinions about questions such as market definition relevant to the application of particular provisions
of the Trade Practices Act 1974 (Cth). Such opinion is by way of characterisation of primary evidence and is essentially argumentative in character albeit the characterisation
is informed by relevant expertise. An anthropologist … may offer an opinion on whether a particular group of people constitutes
a distinct or discrete society of persons. The nature of the taxonomical exercise is conceptually similar to that undertaken by the
economist.
26 Before further considering the position in Australia it is useful to undertake a brief consideration of the way
in which economic evidence has been treated in other jurisdictions and particularly in the United States.
Expert Economic Evidence in the USA, Canada and the United Kingdom
The United States
27 Under the r 402 of the Federal Rules of Evidence all "relevant" evidence is admissible in federal courts. Opinion
evidence is limited subject to an exception in favour of expert testimony. Prior to 1993 r 702 of the Federal Rules stated:
If scientific, technical or other specialised knowledge will assist the trier of fact to understand the evidence or to determine
a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in
the form of an opinion…
Before 1993 Courts in the United States applied a "general acceptance" test in determining whether, in particular, novel scientific
evidence could be admitted as expert testimony. This was based upon a 1923 decision Frye v United States 293 F 1013 (DC Cir 1923). An important trilogy of Supreme Court decisions, beginning in 1993, laid down a new approach to such evidence.
28 In the leading case of the trilogy, decided in 1993, Daubert v Merrell Dow Pharmaceuticals Inc, the Supreme Court held that the Fry test had been superseded by the Federal Rules. Daubert established as requirements for the admissibility of expert evidence that:
1. The expert must be qualified.
2. The methodology employed by the expert must be reliable.
3. The testimony must assist the trier of fact.
These requirements were reflected in an amended version of r 702. The reliability criterion by a consideration by trial courts of:
1. Whether the theory or technique had been tested.
2. Whether it had been subjected to peer review.
3. The rates of error in the technique and any standards controlling the technique’s operation;
and
4. Whether there is general acceptance of the theory or technique in the scientific community.
The court also acknowledged however that even admissible expert evidence could fail to meet the test of "sufficiency" in rr 50(a)
and 56 of the Federal Rules of Civil Procedure.
29 The second case in the trilogy was General Electric Co v Joiner [1997] USSC 88; 522 US 136 (1997). In that case a man suffering from lung cancer sued his former employer claiming that his disease had been promoted by workplace
exposure to chemical "PCB’s" and derivative "furans" and "dioxins". In opposition to a motion for summary judgment he relied
upon expert testimony that PCB’s, furans and dioxins can promote cancer and their opinion that his exposure to those chemicals
was likely to have been reasonable for his cancer. A District Court granted summary judgment saying that the expert testimony failed
to show a link between the exposure and the cancer. It did not rise above "subjective belief or unsupported speculation". The Court
of Appeals reversed the District Court.
30 The Supreme Court, applying what it held to be the correct standard of review, found that the District Court
had not erred in excluding expert testimony. It relied upon animal studies based on highly concentrated massive doses of PCB’s.
Nothing in either Daubert or the Federal Rules of Evidence required a District Court to admit opinion evidence connected to existing data only by the ipse dixit of the expert. While the Federal Rules of Evidence allowed District Courts to admit a broader range of scientific testimony post
Daubert than was admissible under Frye they left in place the "gatekeeper" role of the trial judge in screening such evidence. The respondent, Mr Joiner, failed to explain
how and why the experts could have extrapolated their expert opinions from seemingly far removed animal studies but chose to proceed
as if the only issue was whether animal studies could ever be a proper foundation for an expert’s opinion. The true issue was
whether the opinions of these experts was sufficiently supported by the animal studies on which they purported to rely. The respondent
claimed, invoking Daubert, that the focus must be solely on principles and methodology and not on the conclusions that they generate. However the Supreme Court
said that "conclusions and methodology are not entirely distinct from one another. Trained experts commonly extrapolate from existing
data. But nothing in either Daubert or the Federal Rules of Evidence required a District Court to admit opinion evidence connected to existing data only by the ipse dixit of the expert. A court might conclude that there was simply too great an analytical gap between the data and the opinion proffered.
31 It seems that some courts thought Daubert applied only to hard sciences such as biology and physics and not to the disciplines of economics and psychology. The third case
in the trilogy, Kumho Tyre Co v Carmichael concerned the evidence of a tyre failure analyst that a defect in the manufacture or design of a tyre that caused it to blow out resulting
in a vehicle accident and the death and injury of passengers in the vehicle. The Supreme Court held that the Daubert factors applied not only to scientific testimony but to all expert testimony. The Court held r 702 did not distinguish between "scientific"
knowledge and "technical" or other "specialised" knowledge but made clear that any such knowledge might become the subject of expert
testimony.
32 The Court referred to Judge Learned Hand’s paper and said:
Experts of all kinds tie observations to conclusions through the use of what Judge Learned Hand called "general truths derived from
… specialised experience". … And whether the specific expert testimony focuses upon specialised observations the specialised
translation of those observations into theory a specialised theory itself, or the application of such a theory in a particular case,
the expert’s testimony often will rest "upon an experience confessedly foreign in kind to [the jury’s] own.
33 There seems to have been a perception in the United States that Kumho increased the incidence and cost of challenges to the admissibility of economic evidence in anti-trust cases. A small study carried
out in 2001 and reported in the American Bar Association Journal examined 16 anti-trust cases in which economic experts were challenged
under Daubert and a judge wrote an opinion. In the first ten cases, which predated Kumho, expert testimony was held admissible. Of the next six, expert testimony was excluded in four including two decided by the Eighth
and Fifth Circuits. The Kumho decision was handed down in March 1999 immediately after the tenth case examined. The authors of the study suggested that this explained
the much higher incidence of exclusion of expert economic testimony. The sample size was small but suggestive of a trend.
34 Most of the reported post Daubert exclusions of economic expert evidence would not seem surprising to Australian practitioners. In Virginia Vermiculite Ltd v WR Grace & Co 98 F Supp 2d 729 (WDA 2000) a geological engineer who served as an advisor to energy companies was held unqualified to serve as the plaintiff’s expert
witness on market analyses in an anti-trust action brought against a vermiculite mining company by its competitor. The engineer had
performed non-antitrust market research analyses and testified in non-antitrust cases but lacked education and basic understanding
in economics. On the other hand, in Re Brand Name Prescription Drugs Litigation which was decided soon after Kumho, a District Court judge excluded the testimony of a Nobel Prize winning economist on the question whether price discrimination in
the prescription drug industry was related to market power. The decision was reversed in the Court of Appeal by Chief Judge Posner
who said that the real problem with the testimony was that it was irrelevant. He said "everyone knows" that manufacturers of brand
name prescription drugs engage in price discrimination showing that they have market power. The question was whether that owed anything
to collusion. On that the witness had virtually nothing to say. The trial judge however had erred in excluding his testimony on the
grounds that he had not studied the prescription drug industry in depth and had formulated his tentative opinion after working on
the case for only 40 hours. Chief Judge Posner said:
His opinion that there is price discrimination in the prescription drug industry is one that an economist of Lucas’s distinction
should have been able to reach in even less time.
35 In Bailey v Allgas Inc 284 F 3d 1237 (11th Cir 2002), the Court of Appeals held that an expert’s testimony was insufficient to establish that a distributor
had sufficient market power to recoup losses from allegedly discriminatory below cost pricing. The Court of Appeal referred to the
witness’s assessment of the relevant product market as "cursory and unclear". He had ignored instructive guidelines set forth
in the Court’s precedent. Even if the geographic market were correctly drawn, he failed to determine the relevant market share
for that particular geographic area. And even if that were right, the percentage share he calculated was insufficient as a matter
of law to constitute circumstantial evidence of a monopoly. His assessment of reasonable substitutes for liquid propane gas was also
cursory. He quickly dismissed alternative sources as reasonable substitutes based on the expense of installing or retro fitting heating
equipment. He had not conducted a survey of the homes in the geographic market or otherwise researched the area to determine the
percentage of houses already fitted for alternative heating sources.
36 United Food Mart Inc v Motiva Enterprises LLC 404 F Supp 2d 1344 (SD Fla 2005) involved a question whether the supplier of fuel to service station operators had charged discriminatory prices contrary
to the Florida Motor Fuel Marketing Practices Act. The defendant supplier moved for summary judgment on the basis that there was no evidence the discriminatory prices were in the one
geographic market which was required in order to find a violation under the law. The plaintiffs sought to establish that the stations
were within one market.
The Court held a Daubert hearing to consider the admissibility of the expert evidence. The proposed witness was an expert in consumer behaviour but not in
the "measurement of competition". He had done no work in the petroleum industry or work related to the retail marketing of gasoline.
The Court’s decision excluding his testimony however turned upon his failure to use the two preferred methods in the field
for measuring competition between products or services, namely cross price elasticity analysis and correlation analysis. The Court
said:
Instead, Dr Marmorstein merely visually observed the physical proximity of the Lakes Station to the two alleged competitors and performed
an analysis of the Lakes Station’s sales volume compared to the sales volume at the Lexymart Shell.
38 In Self v Equilom Enterprises Llc (2007) WL 188 0739 (ED Mo 2007) the testimony of an "industry expert" on competition among sites was excluded. He was held to be
unqualified and to have based his test on flawed methodology. The plaintiffs had conceded that they did not rely on his report for
"complicated antitrust issues such as defining relevant markets". Yet his report clearly purported to render an expert opinion defining
the relevant geographic market.
39 Generally the bases for challenges to economic testimony in US antitrust cases have been that:
1. The expert ignored facts that would undermine his or her conclusion or failed to distinguish between lawful and unlawful conduct.
2. The expert’s opinion was based on assumptions that were unsupported.
3. The expert’s theory contradicted the case theory of the proffering party.
4. The expert could not verify the reliability of his or her data.
5. The expert drew conclusions outside his or her area of expertise.
6. The expert failed to apply methodology properly.
For Australians some of these matters would go to weight and, in extremis, to admissibility or discretionary exclusion. If the conclusions
offered were outside the area of expertise of the expert, then that would go to admissibility.
40 The incidence of economic evidence in US antitrust cases has increased. The movement away from "per se" rules
to the "rule of reason" requires proof of anti-competitive effects. It therefore invites increased economic testimony. A recent example
is Leegin Creative Leather Products Inc v PSKS Inc 127 S Ct 2705 (2007). The Supreme Court reversed a Court of Appeals’ decision and overruled a 1911 case, Dr Miles Medical Co v John D Park & Sons Co [1911] USSC 50; 220 US 373 (1911), to hold that the rule of reason applied to vertical price agreements. The majority of the Court found that economic literature
showed that resale price maintenance could have pro-competitive effects. As a result of the Supreme Court’s decision the defendants
will no doubt be invoking economic expert testimony.
41 Another trend in antitrust law in the United States affecting economic evidence is the burden on those seeking
to prove antitrust violations by circumstantial evidence. Since the mid 1980s US courts have begun to limit the type and increase
the amount of proof needed to demonstrate illegal agreements. Where early jurisprudence tended to regard parallel pricing as suggestive
of collusion, this has not been so since the middle of the twentieth century. Conscious parallelism was described by the Supreme
Court in Brooke Group Ltd v Brown & Williamson Tobacco Corp [1993] USSC 105; 509 US 209 (1993) as:
The process, not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their
prices at a profit maximising, supra competitive level by recognising their shared economic interests and their interdependence with
respect to price and output decisions.
Plaintiffs were thereafter required to demonstrate "plus factors" evidencing agreement. Parallel pricing was insufficient to create
a presumption of collusion. The role of economic evidence has been enlarged by that requirement. In High Fructose Corn Syrup Antitrust Litigation [2002] USCA7 343; 295 F 3d 651 2000 (2002) Judge Posner described the two types of economic evidence relevant in such cases:
That the structure of the market was such as to make secret price fixing feasible (almost any market can be cartelised if the law
permits sellers to establish formal, overt mechanisms for colluding, such as exclusive sales agencies); and evidence that the market
behaved in a noncompetitive manner.
42 The conscious parallelism theory has been applied to limit the kinds of economic expert evidence which is admissible.
In Williamson Oil Company Inc v Philip Morris USA [2003] USCA11 314; 346 F 3d 1287 (11th Cir 2003) cigarette wholesalers alleged that the country’s largest cigarette manufacturers had conspired over seven years
to fix prices at unnaturally high levels. The conspiracy was allegedly achieved through arms-length "signalling". The District Court
found that price uniformity was due to "conscious parallelism" and that the plaintiffs had failed to demonstrate the plus factors.
Part of the economic testimony relied upon by the plaintiffs was excluded on the basis that it departed from the theory of conscious
parallelism by arguing that "certain aspects of conscious parallelism should be found to be anti-competitive". In affirming the District
Court’s summary judgment for the manufacturers, the 11th Circuit found no abuse of discretion in excluding the expert evidence.
The testimony did not distinguish between "legal" behaviour (conscious parallelism) and illegal behaviour (collusion). On that basis
the Circuit Court reasoned that the testimony failed the Daubert’s standard for evidence able to assist the trier of fact.
43 Also relevant to the use of economic evidence in the United States is the development of a higher summary judgment
standard in antitrust cases. The summary judgment principles applicable in the United States required that judgment be denied if
a jury or other fact finder could reasonably reach the non-moving party’s conclusion of law. They did not call for the Court
to decide whether the evidence made the conclusion more probable than not. However in Monsanto Company v Spray-Rite Service Corporation [1984] USSC 55; 465 US 752 (1984), the Supreme Court held that a plaintiff’s case for a vertical price fixing agreement which was then subject to a per
se rule could not be based on "highly ambiguous evidence". There had to be evidence tending to exclude the possibility that the manufacturer
and nonterminated distributors were acting independently. In Matsushita Electric Industrial Co Ltd v Zenith Radio Corporation 475 US 572 (1986), the Court held that the plausibility of the factual context of a plaintiff’s claims of antitrust conspiracy, ie whether
it made economic sense, was highly relevant at the summary judgment stage.
Implications for Australia – jury trials in criminal Cartel cases
44 It may be that some of the cases decided under the US approach to the summary judgment determination have resonances
for the test now applicable under s 31A of the Federal Court Act for summary disposition where a proceeding does not have "reasonable prospects of success".
45 It will be borne in mind however that the US summary judgment decisions have to do with the reception of expert
evidence for consideration by a jury. Questions of admissibility and sufficiency therefore loom large much earlier in the trial process
than in civil litigation involving trial by judge alone. In competition litigation in Australia, subject to case management considerations,
evidence may be received subject to relevance and the foundations of the testimony treated as a matter going to weight. It is important,
however, to have regard to the American jurisprudence because it may have a bearing upon the way in which Australian courts approach
the admissibility of economic testimony in jury trials of indictments concerning criminal cartels.
46 Even if criminal liability for cartel conduct in Australia were to be defined by the statutory equivalent of
a per se rule, evidence relevant to collusive conduct may be adduced. This will require careful jury management and instruction.
In that context a paper published through the AEI Brookings Centre for Regulatory Studies in October 2006 suggested an interesting
solution to the problem of solving battles of experts in court cases involving juries. The proposal was that lay juries should not
adjudicate conflicting expert testimony. The judge’s role should be expanded from admissibility gatekeeper to decision maker
in battles of experts. The authors recommended an amendment to Federal Rule of Civil Procedure 56 which permits a judge summarily
to resolve legal issues and matters where there is no role for the jury. The amendment would empower the Court to enter judgment
resolving a dispute among experts rather than submitting it to the jury.
47 The authors of the reform proposal argued that the role of the gatekeeper in collisions of expert testimony offers
judges a Hobson’s choice between permitting so called "experts" to present their testimony to the jury even where their theories,
reasonings and qualifications are suspect or, on the other hand, excluding the testimony by taking a strict view of the Daubert standard and risking reversal by appellate courts. They referred to Spirit Airlines, Inc v Northwest Airlines, Inc 431 F 3d 917 (6th Cir 2005), an antitrust case in which the defendant obtained summary judgment at trial. Expert testimony attempted to show that
Northwest had engaged in predatory pricing to drive Spirit out of the market. The trial court found that Spirit’s experts used
market definitions and cost allocations inconsistent with legal standards for evaluating predatory pricing claims. "Brute market
facts" indicated that Northwest fares did not fall below average costs. The Sixth Circuit Court of Appeals reversed, on the basis
that Spirit’s expert provided a reliable and reasonable analysis of the market with factual support. The jury could find that
price sensitive passengers made up a separate market for assessing predation and that Spirit had properly analysed cost price ratios.
The authors note that the Sixth Circuit did not consider how a lay jury would evaluate the conflicting expert testimony to determine
the ultimate issue.
48 The authors proposed that Rule 56, which permits judges to resolve questions of law, be amended by an addition
thus:
The purposes of this Rule, a question whose resolution depends upon conflicting or opposing expert testimony may be resolved as a
question of law.
49 The Seventh Amendment to the American Constitution guarantees trial by jury. In Australia, s 80 of the Constitution guarantees trial by jury for indictable offences against Commonwealth law. The proponents of the amendment to Rule 56 of the Federal
Civil Procedure Rules argue that the determination of conflicts between experts by judges would not conflict with that guarantee.
It is limited to "suits at common law" and the Supreme Court has viewed it as limited to causes of action tried at law at the time
of the nation’s founding or analogous to such causes of action. No such answer springs to mind in relation to s 80 of the Commonwealth
Constitution. There may be such an answer but ordinarily determination of factual matters going to liability is for the jury in criminal proceedings.
A law which would permit an Australian judge to determine matters of fact argued by expert witnesses would run the risk that it could
not stand against the constitutional guarantee of trial by jury in this country.
Expert Evidence in Canada and the United Kingdom – a brief reference
50 The leading case establishing principles for admissibility of expert evidence in Canada is R v Mohan [1994] 2 SCR 9. Most of the recent decisions lie in the area of criminal law. There are no recent substantial cases in commercial or competition
law. Competition law cases tend to be allocated to the Competition Tribunal whose composition, including economic experts, renders
concerns about admissibility questions less relevant.
51 The general Canadian law excludes opinion evidence other than that coming from expert witnesses. As in the United
States, the Supreme Court of Canada in Mohan enunciated a "gatekeeper" role for trial judges in relation to expert testimony and applied a test similar to that used in Daubert. The Court identified four criteria for the admission of expert evidence. They were relevance, necessity in assisting the trier of
fact, the absence of any exclusionary rule and a properly qualified expert. The evidence must be "necessary" in the sense that it
provides information "which is likely to be outside the experience and knowledge of a judge or jury". The Court was concerned about
usurping of the fact finder’s role stating:
Too liberal an approach could result in a trial becoming nothing more than a contest of experts with the trier of fact acting as
referee in deciding which expert to accept.
As to the expert’s qualifications the Court said only that the witness must be "shown to have acquired special or peculiar knowledge
through study or experience in respect of the matters on which he or she should undertake to testify".
52 In Freyberg v Fletcher Challenge Oil and Gas Inc (2005) ABCA 46, the Alberta Court of Appeal considered the Court’s gatekeeping role in the context of economic evidence and the criteria of
necessity. A landowner had terminated a lease between her and a lessee who had failed to drill for gas on the relevant land when
there was, in existence, an economic and profitable market for gas drilling. The trial judge acting on expert evidence held there
was no economic and profitable market for the gas. The Court of Appeal reversed that decision holding that the trial judge’s
finding of fact that an economic and profitable market did not exist based on "palpable and overriding errors". One of those errors
was the determination that the expert evidence met the criterion of necessity. The Court held that the lay evidence available to
decide the issue of whether there was an economic and profitable market for the gas was "virtually overwhelming".
53 Since the creation of the Competition Tribunal in Canada, economists have appeared there most frequently as experts
followed by accountants. Among economists the most frequently addressed issue has been market definition. The Tribunal has a mandate
to determine whether specific acts have led to a reduction in competition and this has brought in much economic expert evidence.
The use of the Tribunal has evidently reduced the opportunities for expert economic evidence in the courts.
54 Civil litigation in the United Kingdom is now governed by the Civil Procedure Rules which are subject to an overriding
objective. That objective requires the Court to ensure that all parties are on an equal footing, to save expense, and to deal with
the case before it in a way that is proportionate to the monetary value involved, its importance and complexity and the allocation
of court resources. The Court must seek to give effect to the overriding objective when it exercises a power under the Civil Procedure
Rules or interprets any legal rule. Rule 35.1 of the CPR provides:
Expert evidence should be restricted to that which is reasonably required to resolve the proceedings.
55 An expert is defined in Rule 35.2 as "an expert who has been instructed to give or prepare evidence for court
proceedings". No criteria for the competency of experts are set out in the Rules. This is a matter left to the common law. The Rules
set out the general duties of experts in civil litigation.
Expert testimony and the Evidence Act 1995 (Cth)
56 Section 76 of the Evidence Act 1995 (Cth) provides:
(1) Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.
(2) Subsection (1) does not apply to evidence of an opinion contained in a certificate or other document given or made under regulations
made under an Act, other than this Act, to the extent to which the regulations provide that the certificate or other document has
evidentiary effect.
57 Section 77 provides:
The opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for
a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed.
58 Section 78:
The opinion rule does not apply to evidence of an opinion expressed by a person if:
(a) the opinion is based on what the person saw, heard or otherwise perceived about a matter or event; and
(b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person’s perception of the
matter or event.
59 Section 79:
If a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply
to evidence of an opinion of that person that is wholly or substantially based on that knowledge.
60 The application of s 79 to anthropological expert testimony was considered by Sundberg J in Neowarra v Western Australia (No 1) [2003] FCA 1399; (2003) 134 FCR 208. The question was whether the common law "basis rule" enunciated by Heydon JA in Makita applied to expert testimony admitted pursuant to s 79 of the Evidence Act. As Sundberg J observed the conditions in that section for the non-application of the exclusionary rule in s 76 are that:
1. The person’s whose opinion is in question must have specialised knowledge.
2. The specialised knowledge must be based on the person’s training, study or experience.
3. The person’s opinion must be entirely or substantially based on that specialised knowledge.
His Honour referred to the 1985 Interim Report of the Law Reform Commission on its Evidence Reference which considered the status
of opinion evidence based on material not already admitted into evidence as "a matter of some controversy". In Ramsay v Watson [1961] HCA 65; (1961) 108 CLR 642, the High Court had expressed the view that the consequence of not proving the factual basis for an expert’s opinion was that
the opinion might be of "little or no value, for part of the basis of it has gone. Each case depends on its own facts". Blackburn
J in Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141, considered that the matter was one of weight rather than admissibility. That was in the context of anthropological evidence. Sundberg
J observed that the Law Reform Commission had decided not to include a basis rule in its draft legislation. It was concerned that
such a rule would make it impossible to have opinion evidence which had as a significant component the opinions or statements of
others:
This would preclude the tendering of evidence whose value is dependent upon material not before the Court and, therefore, difficult
for it to assess. While this would have its advantages, it would fail in its inflexibility to take account of the normal means by
which experts generally form their opinions – by means of reports of technicians and assistants, consultation with colleagues
and reliance on a host of extrinsic material and information that it would be an endless and unfruitful task with which to burden
the courts.
61 Absent a basis rule opinion evidence whose basis was not proved by admitted evidence could be itself admitted
with its weight to be left to the Tribunal of fact. Authorities establishing that the common law basis requirement is not imposed
by s 79 included Quick v Stoland Pty Ltd [1998] FCA 1200; (1998) 87 FCR 371 at 373-374; and Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 RPR 354 at [10]. Sundberg J nevertheless observed that absent a basis rule:
An expert should … differentiate between the facts on which the opinion is based and the opinion in question, so that it is
possible for the Court to determine whether the opinion is wholly or substantially based on the expert’s specialised knowledge
which in turn is based on training, study or experience.
He referred to HG v The Queen [1999] HCA 2; (1999) 197 CLR 414 at [39] (Gleeson CJ).
62 Sundberg J’s conclusions on basis and expert hearsay were summarised in his judgment at [39]:
. the opinion provisions of the Evidence Act do not incorporate a basis rule requiring the facts upon which an opinion or conclusion is based to be established by admissible
evidence;
. the weight to be accorded an opinion or conclusion that is founded on a fact that is not established
by admissible evidence may thereby be reduced;
. while the Act does not contain a basis rule in the sense described above, the fact that hearsay
material may lie behind facts ascribed or assumed does not spell inadmissibility; rather it goes to the weight to be accorded the
expert’s opinion or conclusion;
. an expert’s opinion that is based on hearsay is admissible under s 60 in proof of the fact intended to be asserted, though the weight to be accorded the opinion may be reduced by the hearsay quality
of the material, and the hearsay material or the opinion may be excluded under s 135 or 136; and
. remote hearsay is not admissible under s 60 in proof of the fact intended to be asserted.
63 The same considerations which Sundberg J applied to anthropological evidence in Neowarra and which I followed in Sampi are applicable to consideration of economic evidence in competition law cases. As a practical matter the more clearly the economic
opinion offered is related to established or undisputed primary facts, the greater the weight it will be given. The admissibility
of such evidence is subject to the general discretion conferred on the Court by s 135 to refuse to admit evidence if its probative value is substantially outweighed by the danger that it might be unfairly prejudicial
to a party, be misleading or confusing or cause or result in undue waste of time (s 135). There is also a general discretion under s 136 to limit the use to be made of evidence if there is a danger that a particular use of it might be unfairly prejudicial to a party
or be misleading or confusing.
Expert testimony and the application of statutes
64 An interesting and recent application of economic evidence to expose the economic theory underlying a particular
statute arose in Woodside Energy Ltd v Commissioner of Taxation [2006] FCA 1303; (2006) 233 ALR 710. Woodside was a joint venture participant in a petroleum project in the Timor Sea. In taxation returns for the year ended 30 June
2002 it claimed losses arising from hedging transactions which it said were incurred in relation to the sale of petroleum within
the meaning of s 24 of the Petroleum Resource Rent Tax Assessment Act 1987 (Cth). The Commissioner issued an assessment under the Act in September 2002 and subsequently disallowed an objection to the assessment
which sought the deduction of expenses incurred on the hedging transactions. There was a preliminary ruling which is the reported
decision on the admissibility of evidence from well known economist, Professor Ross Garnaut. The matter subsequently went to trial
and Woodside’s appeal was dismissed. The decision is under appeal to the Full Court. As I decided the case, and as it is under
appeal, my comments on it are limited to the descriptive. Nevertheless, it did raise an interesting question about the extent to
which the courts may be assisted by expert evidence in the application of statutory language and it may be that such questions will
arise again.
65 An important issue on the appeal was whether "assessable petroleum receipts" derived by Woodside from the joint
venture were to be calculated net of expenses incurred in hedging transactions intended to protect against price volatility in the
market for petroleum products. There was a list of deductible expenditures in the Act to be set off against assessable petroleum
receipts for the purpose of calculating the tax. However the definition of "assessable petroleum receipts" itself was based on "the
consideration receivable, less any expenses payable, by the person in relation to the sale" of the relevant product. The term "expenses
payable … in relation to the sale" was of importance in the case.
66 Professor Ross Garnaut was called by Woodside to give evidence of an "economic perspective" on what was conveyed
by the description of a tax as a "resource rent tax". He was asked to identify "from an economic perspective" the features and objectives
of such a tax distinguishing it from royalty or excise regimes. He was also asked about the relationship between the term "economic
rent" and the profit of a particular resource project in respect of which resource rent tax was payable. Against the background of
those questions he was asked to report on five specific questions in relation to the claimed hedging losses. Two of those questions
were in the following terms:
1. On the assumption that petroleum resource rent tax is intended to be a tax on "economic rent", would an economist make allowance
for amounts received and expenses incurred on the hedging activities undertaken by Woodside in relation to the Laminaria project
(as described in the Woodside affidavits) in measuring the amount upon which petroleum resource rent tax is to be levied in relation
to the Laminaria project?
2. Would an economist regard the expenses incurred by Woodside in relation to the hedging transactions described in the Woodside affidavits
as expenses payable in relation to the sale of petroleum produced from the Laminaria project?
67 In his evidence, which it was sought to tender, Professor Garnaut described how he and another colleague had developed
the concept of a resource rent tax in the 1970s as an instrument for the taxation of what he called "mineral rent". He described
a "resource rent tax" as one which sought to tax only the mineral rent and not the inputs necessary to generate it. Such a tax was
applied to economic rent because, if appropriately designed and applied, it would be economically "neutral". It would not cause decisions
to apply labour, capital and other resources to the project to differ in any way from decisions that would be taken in the absence
of taxation. The aim of the resource rent tax as he described it was the generation of revenue "without distorting business decisions
on the amount or composition of investment or production". Against this background he said that hedging the price of future sales
through derivative markets was indistinguishable in economic terms from forward sales. If hedges were put in place as part of decisions
on sales underlying investment and production decisions, the losses or gains from them could be treated as part of the proceeds of
sales. On this basis an economist would regard the expenses incurred by Woodside in relation to most of the hedging transactions
described in its affidavits as expenses payable in relation to the sale of petroleum produced for the Laminaria project.
68 The evidence was objected to by the Commissioner who contended that much of Professor Garnaut’s evidence
would involve a usurpation of the judicial function. The questions put to him were said to be directed to a statement of the criteria
for liability under the Act. Woodside on the other hand, submitted that Professor Garnaut’s evidence was relevant to understand
the mischief which the Act was intended to remedy. Reliance was placed on the admission of evidence of a similar kind in Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd [2002] WASCA 231; (2002) 25 WAR 511 and Visa International Service Association v Reserve Bank of Australia [2003] FCA 977; (2003) 131 FCR 300.
69 In Re Michael [2002] WASCA 231; 25 WAR 511, which concerned the application of a statutory scheme for third party access to a gas pipeline, Parker J in the Supreme Court of
Western Australia, referred to some of the terms of the relevant Act and the Code as being "in common use in that field of economics
which is concerned with competition policy, or more particularly with the regulation of essential infrastructure". He said in that
case:
As the subject matter is by nature conceptual there is no uniform, accepted and certain meaning, but there is a principle or theory,
the essential tenets of which are widely understood, though there need not be uniform acceptance of them. In my view, expert evidence
may relevantly and usefully inform the Court as to this specialised usage, of which the Court would otherwise be unaware, so that
the Court can determine whether the Act and Code is using particular words or phrases in their ordinary everyday usage, or in the
specialised usage among those versed in this field of economics.
70 A similar observation was made by Tamberlin J in the Visa case although his Honour agreed with Lindgren J in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79 that it is not for an expert to give evidence as to the application of a legislative provision as opposed to furnishing evidence
from the viewpoint of an economist with respect to what factors can or should be taken into consideration or ignored.
71 The Commissioner’s objection was overruled on the basis that Professor Garnaut’s evidence was "at
least arguably relevant". Particular reference was made to the term "expenses … in relation to the sale". Assuming that the
hedging losses could properly be called "expenses" a question would arise whether they were expenses "in relation to" the sale of
petroleum products. In that case I held that the relationship between claimed expenses and the sale of petroleum products could not
be the subject of a bright line definition covering all cases but must lie within the bounds of relevance to the statutory purpose.
If that purpose could be explained or elucidated by reference to a recognised economic mechanism to which the Act was intended to
give effect, then expert evidence about the operating principles of that mechanism could be received. It would not be material directly
concerned with the construction of the Act but might help to identify its purpose and thus inform the application of ambulatory terms
in it such as "in relation to".
72 In the event, in the final judgment in the case Professor Garnaut’s evidence was not relied upon as relevant: Woodside Energy Ltd v Commissioner of Taxation (No 2) [2007) FCA 1961. There was insufficient evidence in the extrinsic materials to suggest the terms of the Petroleum Resource Rent Tax Assessment Act were designed to give effect to Professor Garnaut’s model. The connection between the economic rent model which he proposed
and the language of the statute was found to be insufficient to allow his evidence to be a reliable guide to or influence upon, its
construction. The case is under appeal and so it is undesirable that I offer any further comment on it. It raised an interesting
question about the application of expert evidence to an understanding of the basis upon which any statute of a technical nature is
intended to operate. Given the complexity of contemporary revenue laws and other legislation designed on the basis of particular
economic or other models, the question of the admissibility of explanatory evidence may arise again. Explanatory evidence of this
kind may be said to move beyond the evaluative opinion evidence of the kind discussed earlier. It moves further into the realm of
argument. Nevertheless as noted at the very beginning of the paper, it has some very old antecedents.
Expert Testimony as submission – Order 10 r 1(2)(j) of the Federal Court Rules
73 In considering the somewhat grey area between evaluative opinion which may shade into argumentative opinion,
reference should be made in this context to O 10 of the Federal Court Rules which provides that the Court shall give such directions
with respect to the conduct of proceedings as it thinks proper and in O 10 r 1(2) provides:
Without prejudice to the generality of subrule (1) … the Court may –
…
(j) in proceedings in which a party seeks to rely on the opinion of a person involving a subject in which the person has specialist
qualifications, direct that all or part of such opinion be received by way of submission in such manner and form as the court may
think fit whether or not the opinion would be admissible as evidence.
74 The rule was expressly applied by Finn J in Randwick City Council v Minister for Environment [1998] FCA 1376. Extensive parts of the affidavit of an expert witness was held by his Honour to be inadmissible. As to other parts he directed that
they be received by way of written submission under O 10 r 1(2)(j). The facts informing the opinions of the expert witness in that
case were in large measure unidentified. His Honour found that the witness’ "evidence" was often no more than "advocacy". His
Honour found the witness to be partisan and said:
The circumspection that I have considered necessary to bring to bear in evaluating his evidence clearly affected directly the weight
I was prepared to give it. One clear manifestation of that circumspection was that I have directed under O 10 r 1(2)(j) that some
number of paragraphs of his affidavit be received as submission and not evidence.
75 Given that expert and economic and anthropological evidence may be admitted as such notwithstanding its inescapably
"argumentative" character, the occasions for the application of O 10 r 1(2)(j) are likely to be few and far between. Where that provision
has been applied it appears to have involved a judgment that the testimony proffered would be given little or no weight as evidence.
It may be, that in those circumstances, there is little or nothing to be gained by characterisation of expert testimony of this kind
as submission.
76 In a native title case Sampi v State of Western Australia [2005] FCA 777, I had occasion to reflect upon this general question in relation to anthropological evidence. The judgment acknowledged that there
is potentially some tension between the recognition that expert testimony may have the character of submission and the Practice Direction
relating to expert witnesses as it then stood which contemplated acceptance by the expert of a duty to the Court in providing opinion
evidence and rejected the proposition that the expert was simply a hired gun for the party calling him or her. That tension and associated
difficulty in the way of accepting expert testimony could arise where the opinion offered became advocacy for a particular outcome.
77 In the context of anthropological evidence, anthropologists dealing with indigenous people who are their primary
sources may develop a relationship of mutual trust with them. That can engender an expectation of support and advocacy for the people’s
claims and perhaps some sense of obligation on the part of the anthropologist. I said in Sampi:
This does not prevent the Court from receiving the evidence or entertaining the opinions advanced, but they will attract close scrutiny
against the primary evidence available to the Court and other expert witnesses who are unencumbered by any recent history of affiliation
with the people or involvement in their particular cause.
And:
… activity and the information invoked in aid of the case of the people for whom an anthropologist is called will detract from
the credibility of that person’s testimony and the value accorded to the opinions offered whether they be treated as to evidence
or submission. The Court can recognise the reality of the relationship that may develop between an anthropologist and his or her
clients and scrutinise the opinions accordingly. It will give greater credence to those anthropologists who show that they have used
their best endeavours to offer the Court a picture of the group or society concerned that takes into account all factors relevant
to the opinions being advanced. This includes factors which might indicate an adverse hypothesis. Inconsistency should not be glossed
over or omitted. It may be expected that when accounts of traditional law and custom are given by a range of individuals to an anthropologist
there will be variants of those accounts, differing levels of detail, incidences of forgetfulness or misunderstanding and inconsistency.
All of these things are to be expected in the acquisition of information relating to oral traditions.
78 What is required is a general common sense approach to the assessment of expert opinions albeit they may involve
matters of characterisation and a degree of argument to support that characterisation. The problem for an economic expert may be
less acute than for an anthropologist whose information is often received in a cultural context where there is an expectation of
mutual obligation. Allowing that an economic expert called by a particular party may advance an argument which is supportive of that
party’s case does not mean that the opinions advanced must not be honest and honestly held based on the expertise of the economist.
It does not mean that the witness is not obliged to acknowledge, where they exist, contrary arguments or hypotheses. That is not
just a matter of integrity. It is a matter that goes to the weight that will be accorded to that witnesses’ evidence. Every
expert witness owes his or her primary duty to the Court when giving testimony. That duty is satisfied if the witness adheres to
the standards of intellectual integrity demanded by his or her own discipline in so doing. That kind of "argumentative witness" is
entirely acceptable as a witness within the framework of the rules relating to expert evidence.
Impartiality and advocacy
79 The most recent version of the Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia
was issued by the Chief Justice on 6 June 2007. The Guidelines enunciate the general duty of expert witnesses to the Court and state
that an expert witness is not an advocate for a party even when giving testimony that is necessarily evaluative rather than inferential.
The paramount duty of the expert witness is to the Court and not to the person retaining the expert. The Guidelines draw a distinction
between advocacy and expert testimony. That line is not always easily drawn particularly when the testimony of the expert has an
evaluative character. The Explanatory Memorandum to the Guidelines recognises this reality when it observes:
Some expert evidence is necessarily evaluative in character and, to an extent, argumentative. Some evidence by economists about the
definition of the relevant market in competition law cases and evidence by anthropologists about the identification of a traditional
society for the purposes of native title applications may be of such a character.
80 The Court, of course, will discount that which it regards as mere advocacy. An evaluative opinion advanced in
a spirit of advocacy rather than independent judgment, is likely to be given little weight. Again, the Explanatory Memorandum to
the Guidelines makes the point:
An expert witness does not compromise objectivity by defending, forcefully if necessary, an opinion based on the experts specialised
knowledge which is genuinely held but may do so if the expert is, for example, unwilling to give consideration to alternative factual
premises or is unwilling, where appropriate, to acknowledge recognised differences of opinion or approach between experts in the
relevant discipline.
A person called as an expert witness who reads the Explanatory Memorandum and the Guidelines, should be able to acquire a reasonable
understanding of the difference between advocacy and the expression of an independent, albeit evaluation, opinion.
81 A practical difficulty may arise where the expert being called as a witness has also been involved in assisting
the party by whom he or she is called in the preparation of their case.
82 There is a distinction to be drawn between expert assistance and expert evidence. As Allsop J observed in Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171, expert assistance for the purpose of analysing and preparing a case and marshalling and formulating arguments is "legitimate, accepted
and well known ….". What then of the case in which a person who has been assisting a party in understanding technical issues
involved in the case is also called as an expert witness? There is no reason in principle why a person who has been advising a party
on matters within the person’s expertise is disqualified from giving evidence as an expert witness consistently with the Court’s
Guidelines. The evidence given by such a witness may be vulnerable if the witness has a personal commitment to advance the case of
the party calling him or her. That kind of commitment is fairly readily exposed. It comes out in the way in which the witness gives
his or her testimony. Features of such testimony include:
1. Treating as absolute or uncontestable eminently debatable propositions.
2. Rejecting the existence of obvious qualifications or areas of uncertainty in relation to his or
her opinions.
3. Treating the questions of cross-examining counsel with patent suspicion.
4. Treating the question of cross-examining counsel with contempt – eg "as any undergraduate
student in my course would know …".
5. Offering combative answers to questions.
6. Responding to questions in a way that is calculated to advance the case of the party calling the
witness and goes beyond what is necessary to answer the question.
7. Sending the judge a copy of his undergraduate text – which in one case that I heard came wrapped
in plastic accompanying final submissions. It is still wrapped in plastic.
83 The expert who assists a party in the preparation of a case by providing an understanding of the technical issues
relevant to the case should be capable of doing so in a way that maintains a suitable professional distance between the expert and
the party’s advisors. It is in the interests of the parties and their advisors to maintain that proper relationship, for without
it the advice which they are offered may become partial and therefore skewed and unreliable. If that basic approach is observed there
should be no need to have one expert behind the scenes and one expert in Court.
84 A particular issue which has been said to give rise to the need for a distinction between the expert who assists
a party and the expert who gives evidence in Court, arises in patent cases and is said to have emerged from the judgment of the Full
Court in Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd [2002] FCAFC 315; (2002) 56 IPR 248. The Full Court discussed evidentiary issues around the question of obviousness in patent litigation. Their Honours said that the
manner in which the evidence of some of the experts had been brought into existence suggested that relatively little weight should
be given to some of their evidence. Witnesses were provided with a copy of the patent. They were either provided with a large number
of other documents or found them in response to the task that was set. The Court said:
That is hardly calculated to result in objective evidence as to what the hypothetical uninventive but skilled worker would have done.
To give the patent to a prospective witness is tantamount to leading the witness.
85 In commenting on this decision, Allsop J observed in a paper given in 2005 to the Institute of Patent and Trade
Mark Attorneys:
Tyco also throws up the importance of the distinction between assistance and evidence to which I referred tin Evans Deakin. The same
witness can do both in some cases. There is no absolute bar. But in patent cases, if the matter is worthwhile, it may be necessary
to deal with an expert for assistance and a different expert for the evidence. If obviousness evidence is being brought in the Office
then it may be appropriate to formulate it in as close to admissible form as possible. This is especially so if some form of "blackbox"
evidence is to be led, wherein the patent is kept away from the expert for as long as possible.
His Honour suggested, in relation to Tyco, that those who wished to call an expert should consider with some precision what they wished in any particular case the expert to
say. He said:
If you do want to display or illuminate reality at an earlier point in time, Tyco requires you to think hard about how you do it.
86 Acknowledging the very real difficulty illuminated in relation to the question of obviousness in patent cases
by the Tyco decision and by the comments of Allsop J, it is to be hoped that it has not led to an overreaction in the sense that there is a general
need perceived to have the Court expert and some phantom expert in the background. It may be that this will arise where expert evidence
is to be called on obviousness. However, the question of the utility of expert evidence on that ultimate issue requires careful consideration
even though such evidence is not inadmissible.
Conclusion
87 Turning to the opening metaphor the expert witness who is true to his or her discipline is like a fine wine and
should be well accommodated by the old skins of the rules of evidence. As some of the cases referred to illustrate however new statutes
and greater complexity in litigation may raise new challenges. May I offer in conclusion the profound advice that in all such cases
first principles make the best starting point.
Matthew 9:14-17
Blackstone’s Commentaries Bk 4 at 388. There was a writ for the occasion known as the Writ de ventre inspiciendo – see
Bracton De Leg Lib II Fol 69, cited in Learned Hand – Historical and practical considerations regarding expert testimony (15
Harv Law R 1901-1902) at 40.
Bracton, De Leg Lib II Fol 69, cited in Learned Hand at 40.
Learned Hand, op cit at 42
Learned Hand, op cit at 43
Learned Hand, op cit at 43.
See Freckelton and Selby, Expert Evidence (Law Book Co, 2005) at 212 for a discussion on whether the basis rule is a rule of exclusion
or a matter of weight.
Wigmore J, Principles of Judicial Proof at 423.
I acknowledge the assistance of the Federal Court’s Director of Research and staff in the collection and review of materials
relevant to this section.
Hechler D, Federal Judges Applying Tougher Standards (The National Law Journal, 8 January 2002)
Eklund and Hughes, Challenging Expert Witness Testimony in Antitrust Cases: Lessons from Recent Rulings Applying Dauberet v Merrell Dow Chemicals Inc (2006, SMO 55 ALI-ABA 317,321); Zabin AP and Morris D, Economic Experts (2004, EX WII MA-CLE "Massachusetts Continuing Legal Education)
S-16-1
Werden GJ, "Economic Evidence on the Existence of Collusion: Reconciling Antitrust Law with Oligopoly Theory" (2004, 71 Antitrust LJ 719, 783).
Rein, Todd and Howell, Collusions of Expert Testimony: Why Rule 56 should be Amended (AEI Brookings Joint Centre for Regulatory Studies,
October 2006)
Paciocco DM and Stuesser L, The Law of Evidence (4th ed, Irwin Law Inc, 2005) 172, citing R v D (D) [2000] SCR 275 at [49].
Rosman F and Graham J, Expert Evidence in Competition Tribunal Proceedings" (1992) 20 Can Business LJ 406).
Guidelines for Expert Witnesses in Proceedings in theFederal Court of Australia
Practice Direction
This replaces the Practice Direction on Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia issued on
11 April 2007.
Practitioners should give a copy of the following guidelines to any witness they propose to retain for the purpose of preparing a
report or giving evidence in a proceeding as to an opinion held by the witness that is wholly or substantially based on the specialised
knowledge of the witness (see - Part 3.3 - Opinion of the Evidence Act 1995 (Cth)).
M.E.J. BLACK
Chief Justice
6 June 2007
Explanatory Memorandum
The guidelines are not intended to address all aspects of an expert witness’s duties, but are intended to facilitate the
admission of opinion evidence (footnote #1), and to assist experts to understand in general terms what the Court expects of them.
Additionally, it is hoped that the guidelines will assist individual expert witnesses to avoid the criticism that is sometimes made
(whether rightly or wrongly) that expert witnesses lack objectivity, or have coloured their evidence in favour of the party calling
them.
Ways by which an expert witness giving opinion evidence may avoid criticism of partiality include ensuring that the report, or other
statement of evidence:
(a) is clearly expressed and not argumentative in tone;
(b) is centrally concerned to express an opinion, upon a clearly defined question or questions, based
on the expert’s specialised knowledge;
(c) identifies with precision the factual premises upon which the opinion is based;
(d) explains the process of reasoning by which the expert reached the opinion expressed in the report;
(e) is confined to the area or areas of the expert’s specialised knowledge; and
(f) identifies any pre-existing relationship (such as that of treating medical practitioner or a firm’s
accountant) between the author of the report, or his or her firm, company etc, and a party to the litigation.
An expert is not disqualified from giving evidence by reason only of a pre-existing relationship with the party that proffers the
expert as a witness, but the nature of the pre-existing relationship should be disclosed. Where an expert has such a relationship
the expert may need to pay particular attention to the identification of the factual premises upon which the expert’s opinion
is based. The expert should make it clear whether, and to what extent, the opinion is based on the personal knowledge of the expert
(the factual basis for which might be required to be established by admissible evidence of the expert or another witness) derived
from the ongoing relationship rather than on factual premises or assumptions provided to the expert by way of instructions.
All experts need to be aware that if they participate to a significant degree in the process of formulating and preparing the case
of a party, they may find it difficult to maintain objectivity.
An expert witness does not compromise objectivity by defending, forcefully if necessary, an opinion based on the expert’s specialised
knowledge which is genuinely held but may do so if the expert is, for example, unwilling to give consideration to alternative factual
premises or is unwilling, where appropriate, to acknowledge recognised differences of opinion or approach between experts in the
relevant discipline.
Some expert evidence is necessarily evaluative in character and, to an extent, argumentative. Some evidence by economists about the
definition of the relevant market in competition law cases and evidence by anthropologists about the identification of a traditional
society for the purposes of native title applications may be of such a character. The Court has a discretion to treat essentially
argumentative evidence as submission, see Order 10 paragraph 1(2)(j).
The guidelines are, as their title indicates, no more than guidelines. Attempts to apply them literally in every case may prove unhelpful.
In some areas of specialised knowledge and in some circumstances (eg some aspects of economic "evidence" in competition law cases)
their literal interpretation may prove unworkable. The Court expects legal practitioners and experts to work together to ensure that
the guidelines are implemented in a practically sensible way which ensures that they achieve their intended purpose.
Guidelines
1. General Duty to the Court (footnote #2)
1.1 An expert witness has an overriding duty to assist the Court on matters relevant to the expert’s area of expertise.
1.2 An expert witness is not an advocate for a party even when giving testimony that is necessarily evaluative rather than inferential
(footnote #3).
1.3 An expert witness’s paramount duty is to the Court and not to the person retaining the expert.
2. The Form of the Expert Evidence (footnote #4)
2.1 An expert’s written report must give details of the expert’s qualifications and of the literature or other material
used in making the report.
2.2 All assumptions of fact made by the expert should be clearly and fully stated.
2.3 The report should identify and state the qualifications of each person who carried out any tests
or experiments upon which the expert relied in compiling the report.
2.4 Where several opinions are provided in the report, the expert should summarise them.
2.5 The expert should give the reasons for each opinion.
2.6 At the end of the report the expert should declare that "[the expert] has made all the inquiries that [the expert] believes are desirable and appropriate and that no matters of significance that [the expert] regards as relevant have, to [the expert’s] knowledge, been withheld from the Court."
2.7 There should be included in or attached to the report; (i) a statement of the questions or issues
that the expert was asked to address; (ii) the factual premises upon which the report proceeds; and (iii) the documents and other
materials that the expert has been instructed to consider.
2.8 If, after exchange of reports or at any other stage, an expert witness changes a material opinion,
having read another expert’s report or for any other reason, the change should be communicated in a timely manner (through
legal representatives) to each party to whom the expert witness’s report has been provided and, when appropriate, to the Court
(footnote #5).
2.9 If an expert’s opinion is not fully researched because the expert considers that insufficient
data are available, or for any other reason, this must be stated with an indication that the opinion is no more than a provisional
one. Where an expert witness who has prepared a report believes that it may be incomplete or inaccurate without some qualification,
that qualification must be stated in the report (footnote #5).
2.10 The expert should make it clear when a particular question or issue falls outside the relevant
field of expertise.
2.11 Where an expert’s report refers to photographs, plans, calculations, analyses, measurements,
survey reports or other extrinsic matter, these must be provided to the opposite party at the same time as the exchange of reports
(footnote #6).
3. Experts’ Conference
3.1 If experts retained by the parties meet at the direction of the Court, it would be improper for
an expert to be given, or to accept, instructions not to reach agreement. If, at a meeting directed by the Court, the experts cannot
reach agreement about matters of expert opinion, they should specify their reasons for being unable to do so.
footnote #1
As to the distinction between expert opinion evidence and expert assistance see Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 per Allsop J at [676].
footnote #2
See rule 35.3 Civil Procedure Rules (UK); see also Lord Woolf "Medics, Lawyers and the Courts" [1997]
16 CJQ 302 at 313.
footnote #3
See Sampi v State of Western Australia [2005] FCA 777 at [792]- [793], and ACCC v Liquorland and Woolworths [2006] FCA 826 at [836]- [842]
footnote #4
See rule 35.10 Civil Procedure Rules (UK) and Practice Direction 35 – Experts and Assessors (UK); HG v the Queen [1999] HCA 2; (1999) 197 CLR 414 per Gleeson CJ at [39]-[43]; Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463 (FC) at [17]- [23]
footnote #5
The "Ikarian Reefer" [1993] 20 FSR 563 at 565
footnote #6
The "Ikarian Reefer" [1993] 20 FSR 563 at 565-566. See also Ormrod "Scientific Evidence in Court" [1968] Crim LR 240.
