6.9 Considerations relating to expert's independence
333 One of Cresswell J's propositions in The "Ikarian Reefer", [1993] 2 Lloyd's Reports at 81, was that "expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to formal content by the exigencies of litigation [citing Whitehouse v Jordan [1981] 1 WLR 246, at 256 per Lord Wilberforce]". As noted earlier, Cresswell J's propositions appear to have been strongly influential upon the drafters of the Expert Witness Code of Conduct, to which Part 36 rule 13C of the Supreme Court Rules refers. The Code, paragraph 2, imposes on an expert witness an overriding duty to assist the court impartially. In paragraph 11, dealing with joint conferences and joint reports, the Code speaks of an expert witness exercising "independent, professional judgment". For the reasons given earlier in these reasons for judgment, neither Cresswell J's propositions nor the propositions in the Expert Witness Code are to be construed as rules of admissibility of expert opinion evidence, but instead, they form a code of conduct designed to improve the quality of expert opinion evidence.
334 According to the preponderance of Australian authority, the fact that an expert is aligned to the party engaging him or her, and biased or not independent, is not a bar to the admissibility of the expert's opinion evidence, though it may go to the weight of the evidence: JD Heydon, Cross on Evidence (looseleaf), para [29080]; S Odgers, Uniform Evidence Law (6th ed, 2004) para [1.3.4340]; Ritchie's Supreme Court Practice para [36.13C.4]; JD Heydon, "Comments on May LJ's Paper", Supreme Court of New South Wales Annual Conference, 22 August 2003, at pp 6-8 and 10-12; and generally, HD Sperling, "Expert Evidence: the Problem of Bias and Other Things", Supreme Court of New South Wales Annual Conference, 3 September 1999; JJ Spigelman, "Forensic Accounting in an Adversary System" (2003) 41 Law Society Journal 60. The reason, as explained by Pagone J in Fagenblat v Feingold Partners Pty Ltd [2001] VSC 454, at [8]-[9], is that the evidence of the witness can be tested in adversarial proceedings, and so the possibility that the witness may be biased does not infect the impartiality of the court. The ability of the court to give biased evidence little or no weight ensures that there is no inherent unfairness to the other party in admission of the evidence. Indeed, the presence of a risk of bias (unconscious or otherwise) is not of itself a reason to exclude evidence of an expert either on grounds of admissibility or in the exercise of discretion: Li v R (2003) 139 A Crim R 281, at [71] per Ipp JA, Whealy and Howie JJ; see also SmithKline Beecham (Australia) Pty Ltd v Chipman [2003] FCA 796 at [40] per Weinberg J; Jarrama Pty Ltd v Caltex Australia Petroleum Pty Ltd [2004] FCA 144, at [10] per Crennan J.
335 The structure and content of the present law for responding to "the problem of bias" in expert evidence, as Sperling J described in the conference paper to which I have referred, is controversial and arguably unsatisfactory, and at present it is under review: Law Reform Commission of New South Wales, Issues Paper: Expert Witnesses (IP 25, November 2004), especially Issues 2.1 and 2.2. But it is not the role of a judge sitting at first instance to anticipate the outcome of a reform process or to decline to apply the existing law simply because it may have been validly criticised.
336 In Fagenblat there was a partnership dispute between solicitors. An accountant, who had experience in the failure of partnership businesses, was called to give expert evidence. He had for many years prepared the financial statements and tax returns of the partnership and the majority of its members. He was also the brother-in-law of the plaintiff, whose share in the partnership was held in trust for his wife, the accountant's sister. This was not a case where the expert had been required to form an opinion on the basis that he or she would disregard information acquired during the course of his longstanding relationship with the parties. The question was simply whether the expert's relationship with the plaintiff gave rise to such an apprehension of bias that it would not be safe to allow him to give opinion evidence.
337 At first instance, Pagone J said (at [7]):
"An expert witness has a special and important role in judicial proceedings to assist the Court by providing objective and unbiased opinions about matters that bear upon the determination which the Court is called upon to make. The exclusion of an expert's evidence should only occur where the Court is satisfied that the evidence to be led by the expert is unsound and cannot provide probative material of value to the Court's task of determining the issues in the proceeding. The possibility of a witness having a bias in favour of a party (directly or indirectly) is undoubtedly a matter to take into account by a court when deciding what weight to give to the expert's evidence, but it is not a ground for the Court rejecting evidence that may be of assistance to the Court in reaching the correct result. It is for the Court to do justice between the parties and in doing so should properly take into account all matters which bear upon the ultimate issues to be decided."
338 Later his Honour said (at [9]):
"Experts do have duties to the Court to be independent. Those duties have some similarity to the duties owed by counsel conducting a case. The risk that such duties might be breached permits testing of the partiality of a witness so that the Court may assess the assistance that can be gained from the expert evidence which is given. The product of the expert should itself be 'the independent product of the expert, uninfluenced as to form or content by the exigencies of the litigation'. The reason for these duties, however, stems from the need to ensure that the evidence which is before the Court is useful in the sense of being probative and reliable. The fact of partiality goes to those issues rather than to admissibility. It is for the Court to assess the value of the evidence. It is easy to conceive of instances of expert evidence where partiality could have no conceivable impact upon the reliability of the expert evidence tendered."
339 On appeal (sub nom FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33), the Court of Appeal of the Supreme Court of Victoria agreed in substance with Pagone J's decision. Ormiston JA (with whom Chernov and Eames JJA agreed) noted that where a question is raised about the independence of an expert, the real issue relates to testimonial capacity or competence rather than to admissibility as such, saying (at [7]):
"Technically competence also goes to admissibility, but the issue is to be resolved by determining whether the witness can give expert evidence at all and by considering the desirability of that witness giving any opinion evidence …, not specific aspects of the evidence to be given."
340 His Honour observed (at [4]) that if the witness from whom it is sought to adduce expert opinion evidence is suitably qualified, then "there is no rule of exclusion … which would deny either its relevance or its admissibility in general". He distinguished between testimonial capacity and matters that may go to impeach the reliability of a witness's testimony by showing inadequate expertise or bias or interest (at [5]). He concluded that there was no basis in principle for excluding the evidence of the expert on the basis of alleged lack of independence, "whatever one might have said as to the wisdom of calling him as an expert in this action and whatever one may say as to the ultimate decision to prefer his evidence" (at [9]). He said that there is not and never has been "a basis for excluding evidence of the kind under consideration as incompetent or for any other reason" (at [10]). He provided a brief historical analysis of the case law dealing with circumstances in which a witness (expert or otherwise) might be held to be incompetent by virtue of interest (at [10]-[12]). He rejected the idea that there might be a principle of common law that would exclude as incompetent the evidence of a person otherwise qualified to give expert testimony, who was said to be affected by interest or bias (at [12]). He also rejected the contention, borrowed from the law of apprehended judicial bias, that expert evidence should be excluded where, in the perception of a fair-minded observer, the expert witness may not have applied an impartial and unprejudiced mind to the formation of his or her opinions (at [27]).
341 Fagenblat was a case about the common law. In Collins Thomson Pty Ltd v Clayton [2002] NSWSC 366 I followed Pagone J's judgment at first instance in a case to which s 79 of the Evidence Act applied. In that case an accountant who was the liquidator of a company that was one of the parties sought to give expert opinion evidence relating to the other party's proof of debt in the liquidation, and also relating to the company's asserted claim against that other party for breach of fiduciary duty. Again, Collins Thomson was not a case where the expert had previously been exposed to information subsequently to be disregarded for the purposes of giving expert opinion evidence. I followed Pagone J's statement of the law, treating the Expert Witness Code as a set of propositions about the expert's conduct and the quality of expert evidence rather than as rules going to admissibility. I said that considerations going to independence are weighty matters which may lead the court to exercise its discretion under s 135, or to attach little or no weight to the evidence in question, but lack of independence did not render the expert's evidence inadmissible per se.
342 A similar approach was subsequently taken by Campbell J in Kirch Communications Pty Ltd v Gene Engineering Pty Ltd [2002] NSWSC 485. Dealing specifically with expert accounting evidence, Allsop J said the Evans Deacon case, [2003] FCA at [676], that "there is no ethical reason why [expert evidence] cannot be given by the person providing assistance [in the litigation], as long as that person and the legal advisers understand and recognise the difference between the two tasks and keep them separate".
343 It appeared, for a while, that a different approach to the admissibility of opinion evidence by a biased expert had been taken in England. In Liverpool Roman Catholic Archdiocesan Trustees Inc v Goldberg (No 2) [2001] 1 WLR 2337, the question for determination related to the admissibility of evidence by Queen's Counsel with expertise in taxation matters. The defendant sought to rely on this expert evidence in answer to an action by the plaintiff for professional negligence with respect to the defendant's advice on the plaintiff's taxation affairs. The defendant was also Queen's Counsel, and in the same chambers as the expert, and they were good friends, having known each other for 28 years. The question was whether that relationship should disqualify the expert. Once again, it was not suggested that the expert had thereby obtained access to information which he would be required to exclude for the purpose of expressing his expert opinion.
344 In an interlocutory ruling, Neuberger J held that this connection alone was not sufficient to exclude the expert's evidence. However, at the final hearing Evans-Lombe J disagreed, holding that the witness was unable to fulfil his role as an expert witness because of his close relationship with the defendant. His Lordship's remarks were published as a "Practice Note", since the action was settled and it was agreed that the full judgment would not be handed down. He observed (at 2340):
"In my judgment, where it is demonstrated that there exists a relationship between the proposed expert and the party calling him which a reasonable observer might think was capable of affecting the views of the expert so as to make them unduly favourable to that party, his evidence should not be admitted, however unbiased the conclusions of the expert might probably be. The question is one of fact, namely the extent and nature of the relationship between the proposed witness and the party."
345 His Lordship relied on some observations of Lord Wilberforce in Whitehouse v Jordan, where Lord Wilberforce endorsed the statement of Cresswell J that it is necessary that expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to form and content by the exigencies of litigation. However, as Ormiston JA pointed out in Fagenblat at [16] (and I also noted in Collins Thomson at [31]), when Lord Wilberforce's observations are taken in context, it is plain that his Lordship was not intending to enunciate any rule of admissibility of evidence. He was in fact dealing with evidence that had been admitted, and the thrust of his remarks was to be critical of that evidence. Whitehouse v Jordan does not support Evans-Lombe J's observations about the admissibility of evidence, as Ormiston JA concluded in Fagenblat. Moreover, his Lordship's observations appear to be inconsistent with later remarks by the English Court Appeal in R (Factortame Ltd) v Secretary of State for Transport (No 8) [2002] 3 WLR 1104, at 1127 per Lord Phillips MR, speaking for the Court. The English law now appears to be the same as the Australian law.
346 In summary, the fact that the expert may have had a family, personal or business relationship with the party retaining him or her, of kind that might cause a reasonable bystander to apprehend or even expect a lack of impartiality in the expert's opinions, is not of itself a ground for determining that the expert lacks testimonial capacity or competency, or otherwise for holding that the expert's opinion evidence is inadmissible. The possibility remains that matters of his kind might influence the court to exercise its discretion to exclude the evidence under s 135, but such a matter would not, of itself, to cause the discretion to be exercised against admitting the evidence. It follows that there is no basis for holding inadmissible or excluding the Carter Report merely because PwC were retained to assist ASIC in its investigation before the proceeding was commenced and Mr Carter provided his report of 21 November, and Mr Carter's assistants at PwC continued to perform assignments for ASIC concurrently with Mr Carter preparing his Report for use in the proceeding.
347 There may, however, be additional factors that would make the evidence inadmissible or, at least, would cause the court to exclude it in the exercise of its discretion. For example, the court might exclude an expert's evidence if it appeared that the expert, having formed his or her opinions for another purpose, was not prepared to consider changing his or her mind for the purposes of giving evidence in court. But that is not the evidence in the present case (T 2643.41-2644.21).
348 One additional factor especially pertinent in the present case is that expert opinion evidence might be excluded if the expert, in the course of his or her prior relationship with the party who has retained him or her, has obtained information relevant to the formation of his or her expert opinion, which is not part of the identified body of information to which the expert is authorised to have regard in preparing the report. Here the problem is not lack of independence per se, but the fact that, in the course of acting in relationship with a party to the litigation in a non-independent way, the expert may have obtained information which is not appropriate or permissible to be used as a factual basis for expert opinions.
349 ASIC submitted that it is common, as well as being proper and understandable, that an expert will obtain additional information in dealing with his or her client, which is not included in the factual basis for the expert opinions. For example, it is proper and common for an expert to express views to his or her client about documents within the expert's field of specialised knowledge produced by another party on discovery, or about expert reports from another party, and the expert may sit in court and listen to evidence and provide explanations to the client of the evidence that is given, and even suggestions to counsel as to relevant questions that may be asked. I accept that there is a range of such things that the expert may do without providing ground for excluding his or her opinion evidence. This because, in engaging in such conduct, the expert does not raise any question as to whether his or her opinions are based wholly or substantially on his or her specialised knowledge. Where, however, the expert has obtained extraneous information in the course of another relationship with the client prior to reaching his or her opinions, and the information is relevant to the opinions, a question would seem to arise as to whether the expert has failed to set out the factual basis that the opinions and has therefore made it impossible for the court to be sure whether the opinions are based wholly or substantially on the expert knowledge.
350 The additional factor was not present in any of the cases about the independence of experts cited above. The researches of counsel have identified only three cases where the additional factor been given judicial consideration, namely McMartin v Newcastle Wallsend Coal Company Pty Ltd [2003] NSWIRComm 292, R v Kovats (Provincial Court of British Columbia, Judge D Pothecary, unreported, 10 November 2000), and Elliott v Ivey [1998] NSWSC 116.
351 McMartin was a prosecution under the Occupational Health and Safety Act 1983 (NSW), relating to a disastrous accident in a coal mine. The prosecution sought to rely on reports by a Mr Anderson, in which he expressed opinions leading to conclusions that the primary cause of the disaster was failure by the manager to conduct an adequate professional analysis of a hazard at the mine, and that a secondary cause of the disaster was a failure by the Department of Mineral Resources to deal effectively with an application for approval of the method of mining used at the site. Mr Anderson was at the relevant times a Senior Inspector of Coal Mines employed by the Department. He was involved in assessing the application for approval of the mining methods at the site. After the disaster occurred, there was a judicial inquiry under the Coal Mines Regulation Act 1982, and Mr Anderson was seconded from the Department to work with senior counsel assisting the inquiry. He was part of the team investigating a number of aspects of the accident and for that purpose, he had the powers of an Inspector conferred by s 60 of the Coal Mines Regulation Act. That section authorised him to compel a person to answer questions, but it provided that answers given under compulsion would not be admissible in evidence against the person. Some of the persons interviewed by Mr Anderson in the exercise of his powers under s 60 became defendants in the prosecution.
352 Staunton J, in the Industrial Relations Commission of New South Wales in Court Session, held that Mr Anderson's reports should be excluded from evidence, under s 137 of the Evidence Act (which requires the court in a criminal proceeding to refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the defendant). It appears that she would also have applied s 135. She held that Mr Anderson's expert opinion was tainted by the risk of impartiality and advocacy of his own and the Department's causes (at [52], [59]-[60]). Relevantly to the present case, she accepted a submission that the expert evidence was tainted by the information that Mr Anderson obtained from the defendants as an Inspector assisting the inquiry, information that could not be adduced in evidence against the defendants (at [66]). Mr Anderson accepted in cross-examination that he had relied on information and knowledge obtained from his role in the judicial inquiry to express the opinions contained in his reports; indeed, his experience in the inquiry was relied upon as a source of the specialised knowledge that qualified him to give expert opinion evidence.
353 According to her Honour, it was "not sensibly possible" for Mr Anderson to assert that the distilled knowledge that he relied upon to express his opinions did not come in part from information obtained by him in the exercise of his compulsory powers of investigation. She continued (at [75]):
"In my view, the perception is very strong that, in expressing the opinions that he has and relying as he does upon a body of knowledge gained from the judicial inquiry and his involvement in the inquiry, impinging in the way that it has upon the defendants before me, Mr Anderson has drawn upon information obtained from answers given by the defendants before me. In other words, it is simply not possible, in my view, for Mr Anderson to compartmentally excise from a distilled body of knowledge, precise answers to diverse questions in cross-examination or otherwise that, when taken together with all the other information gathered, forms the knowledge that he now relies upon to express the opinions that he does."
354 In Kovats the defendant was charged with possession for the purpose of trafficking heroin and cocaine. The prosecution relied on evidence by a police constable, who was an investigator in the street enforcement unit of the police. The constable testified as to the sources of information that led him to conduct surveillance of the defendant, and as to the defendants arrest in possession of drugs and associated paraphernalia such as aluminium foil and a crack pipe. Then the prosecution sought to adduce opinion evidence from the constable, with respect to the trafficking of cocaine and heroin, its packaging, methods of distribution, and the use of the associated paraphernalia. It was accepted that the constable was experienced and qualified to give such evidence. But the defendant objected on the grounds that the constable's opinion would inexorably be coloured by information that could not be proven in the trial, namely information supplied to the constable by confidential informants who would not be produced at the trial, that it would be "simply asking too much of him to separate and erase from his mind" the information he had received (for example, that the defendant was an active drug trafficker and therefore would be likely to have had possession of paraphernalia for the purpose of drug trafficking rather than for personal use). It was also contended that there would be a perception of bias because the constable seeking to be qualified as an expert was also the lead investigator.
355 After referring to Canadian authorities, the judge said (at [21]) that "in this case, where the single most important investigator, the lead investigator, is also the person called upon to be the impartial and independent and objective expert, in my view those roles are simply incompatible". He added (at [22]) that to ask the constable to disabuse his mind of extraneous matters was "asking more of this constable, or any other witness in this position, than can reasonably be expected of that witness to be done".
356 It may be that the approach taken by the courts of British Columbia to the role of juries is a little different from the approach taken in Australia. The judge said (at [21]) that while it was not uncommon for judges to be asked to disabuse their minds of certain matters, that is a task not often given to a jury, and when matters arise that the jury is not to know about, there may be mistrial. In Australia, though circumstances can arise in which a jury might need to be discharged, that step is reserved for an extreme case: R v Glennon (1992) 173 CLR 592, at 603 per Mason CJ and Toohey J. In my opinion, however, any difference in approach as to juries does not derogate from the force of the judge's reasoning about the incompatibility of the constable's two roles and the impossibility of asking him to disabuse his mind of extraneous matters.
357 One of the cases relied on by the judge in Kovats was Sebastian v Neufeld (1995) BCJ 1684, a decision of Preston J in the Supreme Court of British Columbia. The plaintiff was injured in a motor vehicle accident for which the defendant admitted liability, the issue being whether the plaintiff suffered a brain injury in the accident, and if so, the extent of the injury. Evidence was tendered by a psychologist, who listed as sources of information a number of medical reports and medical/legal reports of other doctors, and also some reasons for judgment in matrimonial proceedings between the plaintiff and her former husband. The other medical reports were not tended and the reasons for judgment in the matrimonial proceedings were inadmissible. Ruling that the psychologist's reports were inadmissible, Preston J said (at [14]):
"I am of the view that it is impossible to discern from the report[s] the extent to which [the psychologist] relied on matters which will not be in evidence before me."
358 Both McMartin and Kovats were criminal cases. In Fagenblat (at [18]), Ormiston JA said that the decision in Kovats went not to admissibility but to the discretion which exists in all criminal courts to exclude evidence on discretionary grounds, such that the present prejudicial nature of a biased expert's evidence might be seen to outweigh its probative value at [18]. In New South Wales, that discretion is codified in s 137 of the Evidence Act, a provision upon which Staunton J expressly relied. However, the statutory discretion to exclude evidence in civil cases, in s 135, while expressed in less mandatory terms, raises similar issues about the weighing of the probative value of the evidence against its prejudicial effect and, indeed, Staunton J appears to me to have been prepared to exercise her discretion under s 135, as well as or instead of s 137, to exclude the evidence. I regard these cases as giving me some real assistance, by analogy, in the exercise of my statutory discretion, though neither is binding upon me. They are not decisions about the strict admissibility of the evidence in question.
359 I think the analogy with McMartin is fairly strong. McMartin was in one respect a stronger case: Mr Anderson played a role in the very process that was of evidentiary importance in ultimately determining the defendant's culpability: see at [59], per Staunton J. However, in both that case in the present one, the witness had an extensive involvement in another investigatory process in which he was exposed to a substantial quantity of information, which he was then required to exclude from consideration in forming his expert opinions. In two other respects, the present case is a stronger one than McMartin: first, in the present case Mr Carter's involvement with ASIC included an involvement in the decision-making process for commencement of the proceeding in which he then was proffered as an expert witness; and secondly, in the present case the PwC team, but not Mr Carter personally, continued to have a role in assisting ASIC in connection with the proceeding, in circumstances where the arrangements to prevent the flow of information from them to him were neither adequate nor wholly effective.
360 The analogy between the present case and Kovats is a little less strong. In Kovats the expert witness was a police constable in the permanent service of the Crown, which was a party to the litigation, whereas Mr Carter is a forensic accountant available to be retained by any client, subject to conflicts (as he pointed out in his affidavit of 2 November 2004, para 8(b)). But in that case, like the present case, the witness had accumulated a great deal of information in an investigative capacity, which he would be required to exclude from his mind of the purpose of giving expert opinion evidence.
361 In my opinion Elliott v Ivey is not inconsistent with McMartin and Kovats, although a different conclusion was reached. Mr Ivey was an agricultural and management consultant. He was retained in 1994 by the New South Wales Rural Assistance Authority to advise concerning the Elliotts' farming business. He spoke with members of the Elliott family, inspected their property, was shown certain documents, and prepared a report that (inter alia) stated Mr Ivey's favourable impression about aspects of the management of the farm, which he sent to the Elliotts and to the Authority. During 1997 Mr Ivey prepared a report for the State Bank of New South Wales for the purposes of proceedings brought by the Bank against the Elliotts for debt and possession of mortgaged property. The report to the Bank contained Mr Ivey's opinion about the Elliotts' management ability. The Elliotts had filed a cross-claim arguing that they had acquired additional farming property with money borrowed from the Bank, in reliance on the Bank's encouragement and assurances of viability of the business, whereas the acquisition allegedly rendered the enterprise as a whole unviable. The question for Sperling J to decide was not whether to reject Mr Ivey's evidence. The Elliotts commenced a separate proceeding against Mr Ivey and the Bank, seeking injunctions to prevent Mr Ivey giving evidence for the Bank in the primary proceeding, and to prevent Mr Ivey disclosing confidential information to the Bank relating to their farming business. The issue was whether those injunctions should be granted.
362 His Honour declined to grant the injunctions. He assumed, without deciding, that an injunction would be available to restrain a breach of confidence, just as it is available to restrain a solicitor from acting against a previous client, if it is shown that there is a real and sensible possibility that mischief and prejudice would result if relief were not granted, and it is not necessary to show a reasonable probability of mischief and prejudice. But according to his Honour, the evidence showed that nothing seen or heard in 1994 concerning management influenced or might have influenced the views reached by Mr Ivey in 1997 concerning management ability. In the course of reaching that conclusion, his Honour contrasted the position of a solicitor, who is required to employ all the information at his or her disposal for the benefit of the client, to the position of expert who is required to express an opinion on a limited basis of stated assumptions, and he expressed his belief (set out above) about the capacity of a professional person to give an opinion based on an exclusionary set of assumptions.
363 Elliott v Ivey was much more straightforward case that the present one, and also more straightforward than the McMartin and Kovats cases. Mr Ivey's report was limited to opinions on two topics, namely whether the financial position of the Elliotts in their farming business would have been better if they had not purchased the additional property, and whether their management of the property contributed to their financial difficulty. His information about the Elliotts related to their farming business and he acquired his knowledge of it over a short period of time. In the present case, Mr Carter's opinions in November 2001 and May 2002 ranged over a much wider field of financial considerations, with respect to a much larger business enterprise, and involved Mr Carter and his team immersing themselves in the ASIC investigation and hence the excluded information for many months. Therefore the difficulty of segregating and excluding information is much more acute here. Moreover, Sperling J reached the conclusion that the information obtained in 1994 was essentially irrelevant to the questions addressed in 1997, which were different questions.
364 It was not necessary for Sperling J to consider, as the judges in McMartin and Kovats considered and as I must consider in this case, whether exposure to substantial quantities of later-to-be-excluded information over a period of time during the course of an investigation in which the expert has formed opinions, should prevent the expert from giving opinion evidence. One starts with Sperling J's view that a professional person can, as part of his or her stock in trade, give opinions after excluding information known to them, but there are limits to that capacity, and McMartin and Kovats provide some guidance as to what they are.
365 In the ultimate analysis, the principal question for me has been one of fact, namely whether to accept or reject Mr Carter's evidence, corroborated by Ms Reynolds, to the effect that he put the excluded materials out of his mind and re-formed his opinions without them. My finding, on the facts and inferences from the facts, that it is more likely than not that Mr Carter took into account information, not identified in Appendix B or otherwise in his Report, gleaned in the course of his other work for ASIC, means that the Carter Report does not comply with the requirements for admissibility set out in Makita. But an alternative conclusion, if the evidence were thought to be not strong enough to warrant that finding of fact, is that the risk of use of excluded material, in a manner and to an extent that cannot now be ascertained, was sufficiently high that the evidence should be excluded on discretionary grounds under s 135. Judicial statements made in other circumstances about the ability or propensity of people, including forensic accountants, to exclude relevant facts in making judgments may be of assistance by way of analogy, on the discretionary question.
366 ASIC's submissions relied on the proposition that a judge is able to make decisions upon the basis of identified material, notwithstanding having knowledge of other material not available for use (referring to cases on the disqualification of judges for apprehended bias, such as Johnson v Johnson (2000) 201 CLR 488 at [12]). They contended that the same principle applies to other professionals such as forensic accountants and, indeed, to non-professionals such as a jury instructed to disregard aspects of what they have seen or heard in court or outside the courtroom. They said that the law of legal professional privilege works on the premise that an expert is able to confine his or her deliberations to defined material notwithstanding having access to other knowledge, since the privilege is waived only in respect of materials used by the expert to form an opinion, and perhaps also materials considered by the expert for that purpose: Interchase Corp Ltd (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141, at 148-153, 156, per Pincus JA, de Jersey J agreeing, and 162 per Thomas J, de Jersey J agreeing; Filipowski v Island Maritime Ltd [2002] NSWLEC 177, at [22]-[23] per Lloyd J; Spassked Pty Ltd v Commissioner of Taxation (No 4) [2002] FCA 491, at [20] per Lindgren J.
367 It seems to me that the analogies invoked by ASIC are not directly on point. The problem here is not whether Mr Carter has, or is able to, exclude particular, identified information, or consider only particular, identified information. The problem arises because Mr Carter was exposed to and absorbed an enormous quantity of information over a period of months, relating to his understanding of the meaning and significance of documents, and then he was instructed to disregard substantially everything except the documents themselves. But by that time his understanding of the documents had been moulded by the material he was then required to disregard. That task is of different dimensions from the tasks of the judge and the member of a jury hypothesised by ASIC.
368 Counsel for the defendants invoked analogies from two other areas. They referred to the problem that arises out of impermissible use of material obtained on search warrant (see Grollo v Macaulay (1993) 45 FCR 336, at 352-3 per Jenkinson J), and the problem of a solicitor in possession of the confidential information of a former client excluding it from his or her mind while acting for a client with an adverse interest (D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118, at 122 per Bryson J, Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357, at 362-3; Carindale Country Club Estate Pty Ltd v Astill (1993) 42 FCR 307, at 313 per Drummond J, Pradhan v Eastside Day Surgery Pty Ltd [1999] SASC 256, at [52] per Bleby J; and Bolkiah v KPMG [1999] 2 AC 222, at 239 per Lord Millett; and see RSG Chester and ors, "Conflicts of Interest, Chinese Walls and the Changing Business of the Law", [2000] BLI Issue 2 35).
369 I regard a search warrant cases as fairly remote from the present question, but there are some interesting and useful observations in the cases about solicitors' and accountants' conflicts of interest, especially on the subject of arrangements to keep information from flowing from one part of a firm to another.
370 Where the issue is whether to restrain a solicitor (or a forensic accounting firm which has provided litigation support services, conceded in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 at 234 to be in the same position, relevantly, as a solicitor) from acting for a person with an interest adverse to a former client, the court takes the approach that it will intervene by injunction unless it is satisfied that there is no risk of disclosure of the former client's confidential information: Bolkiah, at 237 per Lord Millett. To put the proposition in positive terms, the court will intervene by injunction to restrain a solicitor from acting for a new client with an interest adverse to a former client if a reasonable observer, aware of the relevant facts, would think that there was a real, as opposed to a theoretical, possibility that confidential information given to the solicitor by the former client might be used by the solicitor to advance the interests of the new client to the detriment of the old client: Carindale Country Club Estate Pty Ltd v Astill, at 312 per Drummond J.
371 In assessing whether such a real possibility of misuse of information exists, courts have taken a sceptical approach to attempts to build Chinese walls or other barriers to information flows. In D & J Constructions Pty Ltd v Head, at 122, Bryson J said:
"… it is not realistic to place reliance on such arrangements in relation to people with opportunities for daily contact over long periods, as wordless communication can take place inadvertently and without explicit expression, by attitudes, facial expression or even by avoiding people one is accustomed to see, even by people who sincerely intend to conform to control".
372 That a sceptical approach to the curtailment of information flows between partners of a law firm is warranted, has been confirmed in the profession's own literature: RSG Chester and ors, op. cit., at 45, where the authors, who are members of Mcmillan Binch, Toronto, a large Canadian law firm, said "there is a strong inference that lawyers who work together share confidences" - an inference that must be equally available in the case of those who work in the same department of a large accounting firm.
373 In Bolkiah, where a former litigation support client of KPMG sought to restrain the firm from acting in an adverse interest because the firm possessed his confidential information, Lord Millett (with whom the other members of the House of Lords agreed) said (at 239):
"It is one thing, for example, to separate the insolvency, audit, taxation and forensic departments from one another and erect Chinese walls between them. Such departments often work from different offices and there may be relatively little movement of personnel between them. But it is quite another to attempt to place an information barrier between members all of them are drawn from the same department and have been accustomed to work with each other. I would expect this to be particularly difficult where the department concerned is engaged in the provision of litigation support services, and there is evidence to confirm this. Forensic accountancy is said to be an area in which new and unusual problems frequently arise and partners and managers are accustomed to share information and expertise. Furthermore, there is evidence that physical segregation is not necessarily adequate, especially where it is directed within a single department."
374 Perhaps an even more sceptical approach is taken of the ability of a single partner to avoid using the former client's information for the benefit the new client, where the information is personally known to him or her (Carindale Country Club, at 313 per Drummond J, who says it has long been recognised that a solicitor possessing such information "may still subconsciously draw" on it to the disadvantage of the former client).
375 One would expect a similarly sceptical approach to be taken to evidence that an expert has not personally taken into account, for the purposes of forming opinions and preparing a report, relevant information obtained by his or her partner or employee, especially where the partner or employee in possession of the information is in the same forensic department of the firm; and also to evidence that the expert has been able to exclude from his or her mind relevant and perhaps highly material information which the expert knows but is told to disregard.
376 The defendants urged me to apply, by analogy with the conflict of interest cases, the approach that I should exclude Mr Carter's evidence if there was a "real and sensible possibility" that Mr Carter had made use of the excluded information. Counsel drew an analogy between the position of an expert witness and the position of a solicitor, saying that in both cases there was the duty owed to the court, and there was an issue about preserving public confidence in the administration of justice (citing Murray v Macquarie Bank Ltd (1991) 33 FCR 46, at 49). That question does not arise when one is considering strict testimonial capacity, according to the judgment of Ormiston JA in the Fagenblat case. Nor is it the correct question to ask when one is considering admissibility. The relevant issue at that level is whether the Makita principles are satisfied, and in particular, whether the evidence is rendered inadmissible by the fact that the expert, taking into account excluded material, has to that extent failed to state the factual basis for the opinions expressed in the report.
377 Nevertheless it is relevant to consider the degree of risk that the excluded materials will influence the formation of opinions, when one is considering the exercise of the statutory discretion to exclude evidence conferred by s 135. Under that section, the question is whether the probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial, misleading or confusing, or cause or result in undue waste of time. The assessment of the degree of danger that evidence might be unfairly prejudicial, or misleading or confusing, seems to me to involve, in a case such as the present case, considering the degree of risk that the expert might have unwittingly relied on, been influenced by or taken into account material that has not been identified as part of the factual basis for the opinions he or she has expressed.
7. Application of these principles to the Carter Report
378 The defendants' attack on the Carter Report contains several components. Much attention was paid, in argument, to the question whether the Report adequately distinguished between facts and assumptions and opinions. For reasons I shall explain, my view is that the Report does not always provide an adequate basis for statements cast in the form of facts, but the deficiencies are not so endemic and widespread as to render the Report inadmissible on that basis alone. In my opinion, the Carter Report also survives the attack on some other fronts. But it is fatally flawed in the following ways:
· it is more likely than not that Mr Carter has not excluded from consideration, for the purpose of forming his opinions, information acquired during the investigation phase and by his assistants during performance of their assignments for ASIC concurrently with the drafting of the Report;
· consequently, the Carter Report does not identify adequately the factual basis for the opinions he has expressed, as required for admissibility by Makita;
· even if it had not been established on the evidence that Mr Carter took into account excluded information, there would be a substantial risk that this may have occurred, creating a danger that the evidence in the Carter Report might be unfairly prejudicial to the defendants or misleading and confusing, outweighing its probative value, with the result that the court's discretion to exclude the evidence under s 135 is enlivened;
· in the exercise of that discretion, taking into account all relevant matters, the Carter Report should be excluded from evidence as a whole.
379 I shall deal with the defendants' criticisms by reference to the application of the legal principles I have set out at 6.1-6.9 above, though the matters at 6.4 to 6.9 need to be addressed together.