Expert reports: Makita and Idoport.

Evidence of expert opinion is one exception to the rule that opinion evidence is inadmissible (see s79 Evidence Act). In order for that expert opinion to be admissible, it must qualify as expert evidence under s79, which requires the following:

• the person called as an expert has specialised knowledge;
• that specialised knowledge is based on the person's training, study or experience; and
• the opinion of the person which is adduced in evidence is wholly or substantially based on that knowledge.

The most referenced consideration of s79 is the judgment of Heydon JA (as His Honour then was) in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. In Makita at the trial level, an employee was suing an employer for injuries resulting from slipping on the employer's stairs. The employee relied on an expert which opined that the tread on the stairs was slippery at the time of the accident. That opinion was based on tests performed more than 9 years after the accident on the stairs. Further, evidence was given that the stairs were used by the employee prior to the accident, and by others at all times, without incident. The Trial Judge admitted the report and, on appeal, the NSW Court of Appeal held that the Trial Judge had erred in accepting the evidence.

At [85] Heydon JA set out a summary of the rules for admissibility of expert evidence under s79, as follows:

In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v The Queen (at 428 [41]), on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise".

In Idoport Pty Ltd & Anor v NAB Ltd & Ors [2001] NSWSC 123 Einstein J considered the admissibility of expert opinion evidence under s79 and referred to extra curial commentary of Heydon JA (as His Honour then was) within a paper delivered at a seminar in 2000 dealing with aspects of the Evidence Act. The commentary, according to Einstein J, 'conveniently identifies and elucidates the relevant requirements under the following 7 headings' (at [10]):

1. There must be a field of specialised knowledge and the witness must identify it. 
2. The witness must have expertise in an aspect of that field, and must identify it. 
3. The opinion proffered must be substantially based on the expertise of the witness and the witness must identify it. 
4. Any factual assumptions underlying the witness's opinion must be clearly identified and articulated. 
5. Any factual observations made by the witness which underly the witness' opinion must be clearly identified and articulated, and the observations must have been sufficiently detailed to form a satisfactory basis for the opinion. 
6. If the witness relies on a combination of factual assumptions and factual observations, they must be identified. 
7. The witness must explain how the knowledge on which the witness is an expert applies to the facts assumed or observations made so as to produce the opinion propounded. 

Both Makita and Idoport are useful in that they provide a fulsome consideration of s79 and the requirements for admissibility. Also, they have handy summaries, which can act as a checklist for submissions on the admissibility of expert evidence.

The bank fee class action, stage 1: Andrews v ANZ Banking Group Limited [2011] FCA 1376

The matter of Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 was a hearing before Gordon J concerning the issue of whether the various fees and charges imposed by the ANZ bank on various customer defaults were capable of being characterised as penalties. The hearing was the first stage in a series of hearings designed to determine if the exception fees charged by the ANZ were unenforceable.

Her Honour set the scene about what was not in issue at [3]:

3 It is also important to identify what is not in issue.  ANZ accepted that in considering the law of penalties, the Exception Fees did not constitute a genuine pre-estimate of damage.  However, consideration of the quantum of the Exception Fees and, in particular, whether that Exception Fee was out of all proportion to the likely damage suffered by ANZ was deferred to a later hearing.  Next, these reasons for decision do not consider other accounts offered by ANZ or undertake some general enquiry into the practices of ANZ or any other bank.  They consider only the Separate Questions.  

That is, the question of whether the Exception Fees were all out of proportion to the loss was for a later date.

The plaintiff, being a representative plaintiff in a group proceeding, argued the following:

1. That the fees arose on breach of the contract between the ANZ and the customer, and by reason of that fact they were capable of being characterised as penal.
2. In the alternative, the law of penalties is capable of including amounts incurred on the happening of an event that does not constitute a breach of contract.

Her Honour concluded that the law of penalties is not capable of operating in the absence of breach (at [77] to [80]):

77 What the applicants sought to do was to construct an argument, based not only on old decisions but also the historical origins of the law of penalties, that the law of penalties is not confined to payments upon breach but extends to payments upon conditions or events lying within the area of obligation of the party required to make the payment.  That enterprise carried at least as much risk as that warned against by Mason and Wilson JJ in AMEV-UDC Finance Ltd at 183 and 186. 

78 The modern jurisdiction cannot be divorced from its origins in the wide dispensing power of the Court of Chancery in respect of oppressive bargains:  Meagher, Heydon and Leeming, at [18-095].  The law of penalties, confined (as it is) to payments for breach of contract, is a narrow exception to the general rule whereby the law seeks to preserve freedom of contract, allowing parties the widest freedom, consistent with other policy considerations, to agree upon the terms of their contract.  As stated in Ringrow at [31] and [32] in the joint judgment of Gleeson CJ and Gummow, Kirby, Hayne, Callinan and Heydon JJ: 

The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships ...  Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed.  That is why the law on penalties is, and is expressed to be, an exception from the general rule.  It is why it is expressed in exceptional language. 

See also Thomas JA in Bartercard Ltd v Myallhurst Pty Ltd [2000] QCA 445 (at [26]) that “[t]he surveillance of courts over contracts is not based upon any underlying approval or disapproval of incentives or disincentives, which are a natural part of commercial arrangements”. 

79 Courts have consistently rejected a jurisdiction in equity to interfere with contractual freedom on the generalised ground that the provision in question is harsh or constitutes a hard bargain:  see, by way of example, Campbell Discount at 614 per Viscount Simonds and at 626 per Lord Radcliffe; Export Credits Guarantee at 224 per Lord Roskill; Meagher, Heydon and Leeming, at [18-100].  Instead, courts have developed equitable and common law principles in particular, well recognised, circumstances to prevent contracts being used as a means of taking unfair advantage of persons in positions of vulnerability, particularly the principles relating to unconscionable conduct, undue influence and duress. 

80 Indeed, the parties agreed that equity had a continued role to play in a number of circumstances where the common law would otherwise operate harshly or unconscientiously.  In those circumstances, equity would operate remedially and apply its restitutionary principles to overcome the consequences of a party having paid a penalty.  For present purposes, it is neither necessary nor desirable to seek to classify that jurisdiction as concurrent or auxiliary:  see Meagher, Heydon and Leeming, at [1-095].  

Her Honour considered that late payment fees were capable of being characterised as penalties, as they were an instance of breach of the customer's contract with ANZ. However, Her Honour identified four other fees, specifically honour fees, dishonour fees, over limit fees and non-payment fees, as not being capable of being characterised as a penalty. These were not capable of being characterised as penal because they did not arise from a breach, but instead they arose from a request by a customer to advance funds.

VCAT must set out its reasons: Dimatos v Coombe & Ors [2011] VSC 619

The matter of Dimatos v Coombe & Ors [2011] VSC 619 was an appeal from VCAT to the Supreme Court of Victoria before Beach J. The matter in VCAT concerned an allegation by the applicant that the respondents had defectively serviced the applicant's Torana motor vehicle, causing loss and damage.

Beach J noted that although the judgment in VCAT was voluminous and consisted of 292 paragraphs, the 'path of reasoning' for making the particular findings was not apparent. Beach J noted that the VCAT judgment set out the evidence without reference to the issues, and then the VCAT judgment went on to make findings of fact based on the evidence without providing the reasons for these findings of fact.

At [20] Beach J set out a summary of the authorities concerning the statutory requirement in s117 VCAT Act 1998 for VCAT to give reasons:

20 Having made final orders dismissing the substantial parts of the appellant’s claims, the tribunal was required to give reasons.[2] Whilst the extent of the reasons in any case will depend upon the circumstances of the case, the reasons should identify the issues in dispute; deal with the substantial points which have been raised; include findings on material questions of fact; refer to the evidence or other material upon which those findings are based; and provide an intelligible explanation of the process of reasoning that has led the tribunal from the evidence to the findings and from the findings to the ultimate conclusion.[3] Failure to expose this path of reasoning is an error of law.[4] Further, as has been said on a number of occasions, in general, the mere recitation of evidence followed by a statement of findings, without commentary as to why the evidence is said to lead to the findings, is “about as good as useless”.[5]

Beach J held that the reasons in the matter were deficient as no path of reasoning has been exposed. Beach J held that whilst VCAT recited the evidence, little or no explanation was given as to why a particular piece of evidence, or all of the evidence, is said to lead to the critical findings leading to the final result (at [21]):

21 Unfortunately, the reasons in the present case are deficient. No path of reasoning has been exposed. The failure to expose a path of reasoning is, as I have said, an error of law. Accordingly, the appeal must be allowed, and the orders made below must be set aside. Whilst the judgment below contains a substantial recitation of the evidence given, little (if any) explanation has been given as to why any particular piece of evidence (or the evidence as a whole) is said to lead to the critical findings leading to the final result. Much of the present problem may have been avoided if there had been a concise statement of the issues in dispute (including the parameters of each dispute) at the commencement of the judgment with the evidence (conflicting or otherwise) then being analysed by reference to those issues. 

Employee v Contractor: Elazac Pty Ltd v Shirreff [2011] VSCA 405

The matter of Elazac Pty Ltd v Shirreff [2011] VSCA 405 (Elazac v Shirreff) was an appeal before the Court of Appeal of the Supreme Court of Victoria (Redlich and Mandie JJA, and Beach AJA). It was an appeal in respect of issues under the Occupational Health and Safety Act 1985. The point of interest that this article concerns is the discussion of whether or not the plaintiff was the defendant's employee. 

In Elazac v Shirreff, the plaintiff (Shirreff) fell down a lift well and sued the defendant (Elazac) claiming that the defendant was his employer. The defendant alleged that the plaintiff was a contractor, and denied liability on that basis. In the trial, Robson J found that the plaintiff was the defendant's employee and found that the defendant was liable for the plaintiff's injuries. The quantum was reduced to reflect contributory negligence. 

Some of the characteristics of the relationship between the plaintiff by the defendant were: 

• The plaintiff was in a business partnership with his wife since 1984 as an electrical contractor. 
• Mr Morgan, a representative of the defendant, requested the plaintiff do work at his various company addresses and his home. 
• The defendant, thrugh Mr Morgan, engaged the plaintiff as a project manager to manage the refurbishment of one of the defendant's buildings. 
• By the time the accident occurred, the plaintiff was working almost exclusively for the defendant. 
• When the plaintiff threatened to resign, he entered into a new contract with the defendant, set out in a file note. The contract provided for payment to the plaintiff's business, authorisation of certain expenses by Mr Morgan and gave the plaintiff a wage of $450 per day. The contract noted that the plaintiff had employees and allowed an hourly rate for these employees. 
• Invoices were rendered to the defendant charging out the labour of the plaintiff and his employees. 
• If further people were needed for the job, they were initially employed by the plaintiff and then transferred to the defendant. 
• Mr Morgan gave the plaintiff directions what to do on a daily basis. However the plaintiff was the one to decide how to perform a task and who was to perform it. 

Robson J found that the plaintiff was the defendant's employee for the following reasons: 

In doing so I have taken into account the totality of the relationship between Mr Shirreff and Elazac, and particularly that between Mr Morgan and Mr Shirreff. There are several factors that are of particular importance. I have considered the matter on a practical basis which takes into account how the parties conducted themselves, irrespective of the formal contract between them. In other words, I have considered substance over form. On a practical level Mr Morgan demanded and expected, and Mr Shirreff tacitly accepted, complete authority by Mr Morgan over Mr Shirreff’s activities. Mr Morgan gave him instructions on a daily basis and sometimes hourly. Mr Shirreff’s duties as project manager of the projects being undertaken by Mr Morgan at his home and at 401 and 411 Collins Street were not delegable by him but had to be personally performed by him. Mr Shirreff was remunerated for the time he spent on Mr Morgan’s projects but not on the basis of his output or the tasks he performed. True it is that Mr Shirreff had flexibility in the hours he worked, but they were required to average 8 hours per day. Mr Shirreff was primarily supervising the employees of Elazac who were themselves under the control of Elazac. I accept the plea of Mr Shirreff in his amended statement of claim that Mr Morgan exercised a high degree of control over Mr Shirreff.

The Court of Appeal disagreed with the characterisation of the relationship and held that the plaintiff was a contractor. The Court first set out the matters to be considered when faced with a question of whether an employment relationship exists (at [30] to [31]):

30 His Honour commenced this part of his judgment with a detailed and careful analysis of the relevant authorities.[5] Whilst earlier authorities often regarded ‘control’ as the determinative factor in deciding whether someone was an employee or an independent contractor, later authorities have recognised that control (or, more particularly, the right to exercise control) is only one of a number of possibly relevant factors (albeit an important one) in determining the issue. Modern authority is to the effect that it is the totality of the relationship between the parties which must be considered. Relevant factors in determining the nature of the relationship between a person who engages another to perform work and the person so engaged include:

(a) the degree of control which the former can exercise over the latter;

(b) whether what is being supplied is the work and skill of a person (contract of service) or the supply of equipment or its performance (contract for services);

(c) whether or not the person engaged can set their own hours of work;

(d) the method of payment (and, in particular, whether payment is determined by hours of service or output or production);

(e) whether or not income tax is deducted and holiday pay or long service leave or superannuation paid;

(f) whether or not the person engaged employs employees and/or conducts his business in partnership;

(g) whether or not there is a power to delegate (send someone else to perform the work); and

(h) whether or not the person engaged considered the relationship as one of independent contractor.

31 Further, whilst earlier authorities supported the proposition that if a person engaged had more technical or specialist skill than the person who engaged him, then the person engaged was more likely to be an independent contractor, more modern authority recognises that it is relatively commonplace to employ employees who have particular technical skills or expertise that are not possessed by those employing them. The fact that a person engaged to perform work has particular expertise no longer, of itself, provides any great support for a conclusion that that person is an independent contractor.

The Court of Appeal considered that an important matter was that the plaintiff had a high degre of control over what he did and the defendant did not have any control as to how a task was to be performed by the plaintiff (at [35]):

35 The issue of control falls to be considered not merely by reference to what control was actually exercised, but also by reference to the level of control which could be exercised. Undoubtedly, Mr Morgan did exercise a great deal of control as to when the performance of particular tasks should be performed. Clearly, when Mr Morgan wanted something done immediately then it had to be done immediately. However, the evidence does not disclose any basis for concluding that Mr Morgan was capable of exercising control (or did exercise control) over how a relevant task was to be performed. Whilst it can be accepted that Mr Morgan was very interested in particular jobs being undertaken and completed immediately following the giving of an instruction to do the work, there is no evidence that Mr Morgan took any interest in how the task was to be performed. Mr Morgan was only interested in work being performed to his satisfaction when he wanted it performed, rather than the mechanics of its performance.

However the most significant issue was that the plaintiff had his own employees, and the Court of Appeal said that because of this it would be 'unusual' if the plaintiff was actually an employee of the defendant (at [36] to [39]):

36 In our view, the most significant feature in relation to the issue of whether the plaintiff was an employee or contractor is the plaintiff’s employment of his own employees at the work sites at which he was required to perform work. Whilst it may not be absolutely inconsistent with a relationship of employer/employee that an alleged employee employs on site his or her own employees, in our view this would certainly be unusual.[8] Looking at the totality of the relationship between the plaintiff and the defendant, we have little doubt the plaintiff was a contractor and not an employee of the defendant. Not only did the plaintiff consider himself to be self-employed, everything he did in the course of his work suggested that this was so: he employed employees; his tax returns and financial documentation disclosed he was operating a business in partnership with his wife; he could determine who he employed and where they worked; he performed additional work (in working hours) for an organisation unrelated to the defendant (and sent his employees to work there from time to time); and finally, the defendant did not deduct taxation from the plaintiff’s pay and did not pay him holiday pay, sick leave, long service leave or superannuation.

37 In the plaintiff’s written submissions,[9] it was submitted that ‘it is conceptually possible that one man may work for another, at different times and undertaking different tasks, on the one hand under a contract for services, and on the other hand under a contract of service. Reliance was placed upon the decision of Barnes v Dawson.[10]

38 The facts in Barnes may be briefly stated as follows. The claimant, in partnership with his son, employed a third person to assist them with various kinds of rural work which they undertook and for which equipment belonging to the partnership was used. Accounts rendered by the partners for work done were based on a daily rate for each person involved and for equipment used, with adjustments for supplies and similar items received from the person for whom the work had been done. Whilst engaged on certain fencing work for the putative employer, the claimant was asked by the putative employer to assist him and some of his employees to brand and mark some calves. The claimant acceded to this request and, whilst engaged on this task, sustained injury. An account was rendered on the usual basis. The claimant later made application for workers’ compensation in respect of the injury, but this was dismissed.

39 In remitting the claimant’s claim for reconsideration, the Full Court of the Supreme Court of New South Wales acknowledged the possibility that a person performing work in the course of his or her business may become an employee for the purpose of performing some other specified task which was under the control, or the direction, of another. However, that is not this case. The evidence in this case discloses that the plaintiff was performing the tasks he was performing at the time of the accident as part of his overall agreement with the defendant. His Honour did not conclude (and there would have been no basis for concluding) that whilst the plaintiff was a contractor of the defendant during 2002, he became an employee for the purpose of fixing the lift on the afternoon of 25 June.

Elazac v Shirreff is useful as it summarises the modern authorities on what constitutes an employment relationship, and reiterates that control is a significant consideration when faced with a question of whether or not a relationship is employer-employee. It also points out that where an alleged employee employs his own employees to work on the alleged employer's tasks, then this is normally not indicative of an employment relationship between the alleged employee and the alleged employer.

Samsung Electronics Co. Limited v Apple Inc. [2011] FCAFC 156

The matter of Samsung Electronics Co. Limited v Apple Inc. [2011] FCAFC 156 was an appeal to the Full Court of the Federal Court of Australia (Dowsett, Foster and Yates JJ) on 30 November 2011 from the decision of Bennet J on 13 October 2011 to grant an injunction in favour of Apple concerning Samsung's Galaxy Tab 10.1 product. I published a post on the decision of Bennet J, which is here.

The appeal was completely successful, and it appears that Samsung may have a Merry Christmas in preference to Apple. However this may be short lived, as the High Court (Heydon J) granted a stay of the Full Court's decision.

The Full Court undertook an extensive analysis of the authorities and commentary on interlocutory injunctions between [52] and [74]. I have not extracted this as it is a very lengthy discussion by the Court.

The High Court granted a stay of the decision of the Full Court. The stay is in place until 9 December 2011, at which point the High Court has scheduled a hearing for special leave.