ASIC v Vines

Supreme Court of NSW|2003-11-25|Before: Austin J, Hodgson J

CITATION : ASIC v Vines [2003] NSWSC 1095 HEARING DATE(S) : 18/11/03, 19/11/03, 20/11/03 JUDGMENT DATE : 25 November 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Expert evidence admissible, subject to paragraph by paragraph assessment.

CATCHWORDS : EVIDENCE - expert opinion evidence - experts give opinions on what a reasonably competent chief financial officer and reinsurance manager would do in the defendants' positions in stated circumstances - opinions based on multiple assumptions - principles as to admissibility under s 79 - whether evidence should be excluded under s 135 LEGISLATION CITED : Corporations Law s 232 Evidence Act 1995 (NSW) ss 75, 79, 135 Adler v ASIC (2003) 46 ACSR 504 Allstate Life Insurance Co v Australia and New Zealand Banking Group Limited (No 6) (1996) 137 ALR 138 Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 ASIC v Adler (No 1) (2002) 20 ACLC 222 Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645 Clark v Ryan (1960) 103 CLR 486 Dean-Willcocks v Commonwealth Bank of Australia (2003) 45 ACSR 564 Godfrey v New South Wales (No 1) [2003] NSWSC 160 HG v The Queen (1999) 197 CLR 414 Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 CASES CITED : MB v Protective Commissioner [2000] NSWSC 718 Midland Bank Trust Co Ltd v Hett Stubbs & Kemp [1979] 1 Ch 384 O'Brien v Gillespie (1996) 41 NSWLR 549 Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 Quick v Stoland (1998) 87 FCR 371 R v Bonython (1984) 38 SASR 45 R v GK (2001) 53 NSWLR 317 Rabelais Pty Ltd v Cameron (Supreme Court of New South Wales, Hodgson J, 8 February 1993, unreported, BC9302077) Re Action Waste Collections Pty Ltd [1981] VR 691 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 1PR 354 ULV Pty Ltd v Scott (1990) 19 NSWLR 190 Velevski v The Queen (2002) 76 ALJR 402 Australian Securities and Investments Commission (P) PARTIES : Geoffrey William Vines (D1) Francis Timothy Robertson (D2) Timothy John Henry Fox (D3) FILE NUMBER(S) : SC 3138/01 S D Robb QC with R Beech-Jones & E Collins (P) COUNSEL : B Oslington QC with G Seib (D1) D L Williams SC with M Fisher (D2) J W J Stevenson SC with L P Menzies (D3) Jan Redfern, Solicitor for Australian Securities and Investments Commission (P) SOLICITORS : Sparke Helmore (D1) Henry Davis York (D2) Gadens (D3)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3138/01 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V GEOFFREY WILLIAM VINES & 2 ORS JUDGMENT (Revised for typographical errors 27 November 2003) 1 HIS HONOUR: This is a civil penalty proceeding in which ASIC alleges that in 1998 each of the three defendants contravened s 232(4), and the third defendant contravened s 232(2), of the statutory company law, which was at the time the Corporations Law. The allegations relate to their respective roles, while employed within the GIO Group, in the preparation of the reinsurance component of the profit forecast in GIO's Part B Statement, issued in response to AMP's takeover bid in December 1998.

2 The applicable provisions are as follows: "232(2) An officer of a corporation shall at all times act honestly in the exercise of his or her powers and the discharge of the duties of his or her office." "232(4) In the exercise of his or her powers and the discharge of his or her duties, an officer of a corporation must exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation's circumstances."

3 The hearing has been continuing for more than a month. ASIC has presented all of its documentary and lay evidence, already a large quantity of evidence. It now wishes to read some expert opinion evidence dealing with the standard of competence of each of the defendants.

4 ASIC wishes to read three long affidavits, namely the affidavits of Andy John Hogendijk made on 29 June 2003, and the affidavits of Anthony de Vroome made on 19 and 17 June 2003. ASIC seeks to read the first in its case against the first defendant, Mr Vines; the second, in its case against the second defendant, Mr Robertson; and the third, in its case against the third defendant, Mr Fox. I have made orders under s 136 of the Evidence Act 1995 (NSW) limiting the use of the affidavits accordingly. Mr Hogendijk gives his opinion on the conduct of Mr Vines, by reference to the standard of a reasonably competent chief financial officer. Mr de Vroome gives his opinion on the conduct, respectively, of Mr Robertson and Mr Fox, by reference to the standard of a reasonably competent reinsurance manager.

5 The proposed evidence is indubitably, for the overwhelming part, opinion evidence. Section 76 of the Evidence Act is headed "the opinion rule". Subsection 76(1) states that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79 says: "If the 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."

6 The defendants urge me wholly to exclude the three affidavits from the evidence in the proceeding (except for some paragraphs in Mr de Vroome's affidavit dealing with Mr Fox). Broadly, three grounds have been advanced, though not all of them are relied upon by every defendant. First, it is contended that each of the three affidavits is inadmissible opinion evidence not falling within s 79. Secondly, it is contended that Mr Hogendijk's evidence is irrelevant because it addresses the wrong question. Thirdly, it is submitted that I should exclude the evidence under s 135 of the Evidence Act, on the discretionary ground that its probative value is substantially outweighed by the danger that the evidence might cause or result in undue waste of time.

7 I shall deal in this judgment with the first and third of these grounds. In order to minimise delay in proceeding with the trial, I shall leave the second more self-contained issue, raising principles of company law, to be dealt with in a separate judgment. Having considered that issue, I have indicated to the parties that Mr Vines' attack on Mr Hogendijk's affidavit on that ground is unsuccessful.

8 The present judgment relates solely to the question whether I should wholly or substantially exclude the affidavits from the evidence in the proceeding on grounds relating to s 79 and s 135. Since (for the reasons set out in this judgment) I have decided not to exclude the affidavits in their entirety, it will be necessary to hear further argument as to their admissibility, paragraph by paragraph.

9 The application of s 79 to opinion evidence contained in an affidavit depends upon whether: · the deponent has specialised knowledge based on his or her training, study or experience; and · the evidence is evidence of opinion of the deponent that is wholly or substantially based on that knowledge.

10 I shall begin by identifying some pertinent legal propositions concerning each of these two limbs, and then I shall assess the proposed evidence by reference to those propositions, referring to parts of the content of the evidence in the course of doing so. I shall give each of the legal propositions a number, to facilitate further references to them in the course of this judgment and during the argument about paragraph-by-paragraph admissibility. I shall use the neutral word "proposition" rather than "principle" or "rule", to allow for the possibility that some of the propositions that I shall identify may be no more than guidelines or rules of thumb arising out of the application of other propositions.

Specialised knowledge based on training, study or experience - legal propositions

11 The first proposition is, as Giles JA observed in Adler v ASIC (2003) 46 ACSR 504, 635 [629], that the phrase "specialised knowledge" is not restrictive. Thus, while specialised knowledge may be formally acquired by a course of training or study, the section also expressly encompasses specialised knowledge based on experience. Knowledge acquired by the experience of doing a job is capable of qualifying as specialised knowledge for the purposes of s 79, if it is sufficiently "specialised". In the Adler case, Santow J decided that the witness, who had embarked on a career of public and other company directorships from 1985 until the hearing in 2002, after a career as a chartered accountant, had precisely the kind of experience that would give him specialised knowledge of what a reasonably careful and diligent director of a company would do in particular circumstances: ASIC v Adler (No 1) (2002) 20 ACLC 222, 224-5 [13]. The Court of Appeal agreed: 46 ACSR at 636 [632], per Giles JA.

12 The second proposition is that "specialised experience" connotes something beyond the product of the observation of a non-participating onlooker, at any rate where the knowledge is about a standard of competence in doing a job that requires the exercise of judgment. Thus, Barrett J did not permit an accountant to give evidence of what an experienced and competent company director would do, on the basis of his dealings with and observation of company directors over a period of 40 years: Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645 (27 July 2001), a decision cited without disapproval by Giles JA in Adler (at 635-6 [630]).

Specialised knowledge and professional standards

13 The third proposition, as stated by Giles JA in Adler (at 635 [629]), is that "proper professional conduct in the sense of due care and obedience to customary practices and ethical rules" is a field of specialised knowledge. One should add, as pointed out by Hodgson CJ in Eq (as his Honour then was) in MB v Protective Commissioner [2000] NSWSC 718 (4 July 2000, BC200004097) at [9], that the ordinary training and experience of a professional may not be sufficient to justify admission of that person's opinion as to what a competent and careful professional would do in hypothetical circumstances that are out of the ordinary, and for that kind of opinion some additional and special qualification would be needed.

14 The fourth proposition articulates the test to be used to determine whether the witness has "specialised knowledge". In Clark v Ryan (1960) 103 CLR 486, at 491, Dixon CJ cited some notes by JW Smith to Carter v Boehm, 1 Smith LC, 7th ed (1876), p 577 where the author said: "On the one hand it appears to be admitted that the opinion of witnesses possessing peculiar skill is admissible where the subject-matter of inquiry is such that inexperienced persons are unlikely to prove capable of forming a correct judgment upon it without such assistance, in other words, when it so far partakes of the nature of a science as to require a course of previous habit, or study, in order to the attainment of a knowledge of it." Later, the author said: "While on the other hand, it does not seem to be contended that the opinions of witnesses can be received when the inquiry is into a subject-matter the nature of which is not such as to require any peculiar habits or study in order to qualify a man to understand it."

15 In Velevski v The Queen (2002) 76 ALJR 402, at 416 [82], Gaudron J applied Dixon CJ's test, regarding its as applicable under s 79. She added (echoing of view she had expressed in HG v The Queen (1999) 197 CLR 414 at [58]) that "specialised knowledge" imports knowledge of matters which "is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience" (citing R v Bonython (1984) 38 SASR 45 at 46-7 per King CJ). Gaudron J's judgment was a dissenting judgment, but Gummow and Callinan JJ (at [154]) recorded the appellant's contention that there had not been established a reliable body of knowledge and experience, based on the observation of wounds, which would enable a person to express an expert opinion whether particular wounds were self-inflicted, and they did not demur from the implication that s 79 requires that such a reliable body of knowledge and experience be shown.

16 There is an issue, discussed by Stephen Odgers, Uniform Evidence Law (5th ed, 2002) p 210-212 as to whether, and if so to what extent, the Court must make an assessment of the validity of scientific reasoning or methodology in the course of deciding whether expert opinion evidence of a scientist is admissible. It is not necessary for me to pursue this issue further in the present case, because the evidence is not scientific evidence in the relevant sense. There must, however, be a sufficient link between the opinion and the expertise, as noted in my 11th proposition.

Expert evidence of professional standards where the office is unique

17 I think there is another issue involved in "specialised knowledge", which follows on from but is not directly covered by Dixon CJ's analysis. Putting aside the present purposes s 232(2), my task is to decide, under s 232(4), whether each of the defendants exercised their powers and discharged their duties as executive officers of GIO Australia Holdings and/or GIO Insurance, with the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation's circumstances. That involves my making judgments as to questions of care and diligence. For reasons I shall explain later, it involves judgment as to competence as well. The task is not easy, because (apart from the sheer volume of evidence) the conduct and omissions complained of by ASIC relate to highly technical matters concerning the financial operations of the reinsurance division of GIO Insurance ("GIO Re"), including evidence going to actuarial matters and reinsurance practice.

18 Obviously it would be relevant for the Court to have evidence of what is the acceptable practice for person in the position of each defendant in that defendant's circumstances in GIO Re, if there is any identifiable professional standard or industry practice that can be brought to bear. Evidence of that kind is a typical form of expert opinion evidence. In terms of Dixon CJ's analysis, the subject-matter of inquiry, namely the standard of competence and diligence to be discharged by a person occupying an identified professional position, is such that inexperienced persons are unlikely to prove capable of forming a correct judgment upon it without the assistance of expert evidence.

19 Given the complexity of the judgments involved, it may also be of assistance for the Court to have evidence from appropriately qualified experts going beyond evidence of professional standards or industry practice, in the form of their opinions as to what a reasonably competent professional in the defendant's position would be expected to do. But the evidence I have in mind assumes that there is a field of professional endeavour shared by the defendant and the witness. If, for example, the board of directors of a company invented a special position of "financial troubleshooter" with defined responsibilities which were entirely novel and bore no similarity to the normal responsibilities of any established category of financial executive (such as the categories of chief financial officer or reinsurance manager), I find it hard to see how any expert evidence could be tendered as to what a reasonably competent person in that position would be expected to do. This is not because, in terms of Dixon CJ's analysis, "the inquiry is into a subject-matter the nature of which is not such as to require any peculiar habits or study in order to qualify a man to understand it". Rather (and this is my fifth proposition), it is because there is no general standard of professional diligence or competence to be applied because of the uniqueness of the office, and therefore no field of specialised knowledge is available to assist the Court to make its judgment. Putting the matter another way, the evidence of an expert professional (say, in my example, an experienced chief financial officer) about what a professional occupying the unique position would be expected to do could not be based on the professional's specialised knowledge.

Evidence of opinion wholly or substantially based on specialised knowledge - legal propositions

Expert evidence of general professional practices

20 My sixth proposition is that s 79 permits a professional expert such as a doctor or solicitor or accountant to give evidence about the content of general practices of professionals in his or her field, or to put it another way, evidence about what professionals generally do in stated circumstances: Midland Bank Trust Co Ltd v Hett Stubbs & Kemp [1979] 1 Ch 384,402. This may be no more than evidence of fact about professional practices or professional standards laid down by a professional institute or sanctioned by common usage, but frequently such evidence involves the expression of opinions. Outside the field of professional practices, an expert may give similar evidence about the content of industry practices.

Expert evidence of professional standards in recurring or typical circumstances

21 My seventh proposition is this. I think it is now well established that the section permits a professional to go beyond evidence of the content of general practices, by expressing an opinion about the practice of competent and careful professionals in specified circumstances which are recurring or typical: Rabelais Pty Ltd v Cameron (Supreme Court of New South Wales, Hodgson J, 8 February 1993, unreported, BC9302077); MB v Protective Commissioner. Thus, a conveyancer may give evidence as to the practice of a competent and careful conveyancer, at a specified stage in the completion of a conveyancing transaction, in responding to specified conduct of the other party which puts the case into a typical or recurring category, such that it can be said that a practice for dealing with it has emerged: see, for example, Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404, at 499 [380]. Such evidence more clearly involves an opinion, for it contains an element of evaluation or judgment.

Expert evidence of professional standards in specially defined circumstances

22 As Hodgson CJ in Eq pointed out in the MB case, the position is much more difficult where the evidence is not evidence of the general practice of competent and careful professionals in stated circumstances, but is evidence of what, in stated circumstances which are out of the ordinary and not amenable to observations about a developed practice, a competent and careful professional would be expected to do. In my opinion, the case law now establishes that such evidence is admissible under s 79. That is my eighth proposition.

23 Hodgson CJ in Eq considered the issue in Rabelais Pty Ltd v Cameron (8 February 1993, unreported, BC9302077), where he decided that expert evidence as to what a reasonably competent and careful solicitor would or should do in precisely specified circumstances was admissible. He referred to the opinion of Mr GJ Samuels (as he then was) in HH Glass (ed), Seminars on Evidence (1970) p 153-4, where Mr Samuels cited authority for the proposition that if a doctor is sued for professional negligence in tort and contract, an expert could not express any view as to whether the doctor had been negligent in tort, but could express an opinion on whether the implied contractual duty of care had been breached. Hodgson J regarded this reasoning as supporting the view that an expert who is a doctor or solicitor may give an opinion as to what a reasonably competent and careful doctor or solicitor would do in specified circumstances. (As far as I can see, there is no difference between evidence as to what such a person "would do" and what such a person "would be expected to do".)

24 In O'Brien v Gillespie (1996) 41 NSWLR 549 Levine J had to consider the admissibility of a report by a solicitor, who reviewed many documents listed in his affidavit, made stated assumptions, and then answered a series of questions framed in terms of what a competent and prudent solicitor would have done in the circumstances. After referring to Rabelais and other authorities, he concluded that the solicitor's report related to the essential matters of fact and law to be decided by the Court, and the report did nothing more than intrude upon the exercise of the judicial function (at 557).

25 It seems to me that, although there may be some difference of emphasis in the treatment of legal principles, O'Brien is distinguishable from Rabelais on the facts. In Rabelais the experts were solicitors who gave specific evidence as to the duty of a solicitor acting for a purchaser to advise the client in relation to finance. They all had extensive experience in conveyancing matters (see BC9302077 at 35). In O'Brien, Levine J observed (at 551) that the questions answered by the solicitor's report were "Dorothy Dix" questions and the answers and comments provided by the solicitor were "inevitable". He said that the solicitor's professional qualifications were, without intending disrespect, unremarkable, showing over the short time since his admission "the usual experience in litigation and conveyancing such a solicitor would gain, like the case of thousands of others" (at 551). He characterised the solicitor's evidence as "a series of questions in his capacity merely as one solicitor leading to expressions of opinion and comment upon the conduct of another solicitor". It is not surprising that the expert evidence was admitted in Rabelais and rejected in O'Brien.

26 To the extent that there is any difference between the cases in terms of legal principle, the weight of authority now favours Hodgson J's approach in Rabelais. Hodgson CJ in Eq returned to the issue in MB, noting (at [10]) that there may be some "residual disagreement" between his views and what was said in O'Brien, but reiterating his earlier opinion. Then Bryson J addressed the issue in Maronis Holdings (38 ACSR 499-500, [380]-[381]), noting that Hodgson CJ in Eq had adhered to his earlier view notwithstanding O'Brien, and recording that he was of the same view as Hodgson CJ in Eq. In Adler (20 ACLC at 224 [10]), Santow J quoted, evidently with approval, the passage from Bryson J's judgment in which he referred to the two judgments of Hodgson CJ in Eq and the O'Brien case. The Court of Appeal in Adler (46 ACSR at 634-6) did not comment on this issue. My conclusion is that the law is as stated by Hodgson CJ in Eq.

27 My ninth proposition is that, although there is no bar, as such, to the expert giving evidence about the ultimate issue having regard to s 80 of the Evidence Act, expert evidence directed to answering a question of law or fact that is directly before the Court for decision is inadmissible: see, before the commencement of the Evidence Act, ULV Pty Ltd v Scott (1990) 19 NSWLR 190, at 203-5 per Priestley JA. This proposition may be not so much a rule as an injunction to take particular care "when experts move close to the ultimate issue" (R v GK (2001) 53 NSWLR 317, 326-7; cited in Adler (46 ACSR at 633, [622], per Giles JA). The evidence is likely to be inadmissible not because it goes to the ultimate issue, but because it will not be wholly or substantially based on the expert's specialised knowledge, or it will be irrelevant: Allstate Life Insurance Co v Australia and New Zealand Banking Group Limited (No 6) (1996) 137 ALR 138 at 142 per Lindgren J).

28 The concern about giving evidence of the ultimate issue is manifested in two ways. First, it is said that the expert may not give evidence of the content and application of a legal standard, for these are matters for the judge. Thus, in the Midland Bank Trust case ([1979] Ch at 402) Oliver J said that evidence of the witness's view of what, as a matter of law, a solicitor's duty was in the particular circumstances of the case was inadmissible, "for that is the very question which is the court's function to decide". Contrast this with expert evidence about professional standards laid down by a professional institute or regularly practised. Evidence of the latter kind leaves it open to the Court to say that the standard is either too low or more exacting than reasonable skill and care requires: Rabelais, BC9302077 at 38 per Hodgson J.

29 Evidence as to what a common and careful professional would do in specified hypothetical circumstances is to be distinguished from evidence as to the application of the legal standard, because it remains open for the Court, after receiving such evidence, to reject the opinion or to decide that the opinion does not identify the appropriate measure of the duty: Rabelais, BC9302077 at 40 per Hodgson J. Separating out the legal standard, which is a matter for the Court, from the question what a competent and careful professional could be expected to do (which may be regarded as one of fact) may be a problem, but not an insuperable one: MB, at [7] per Hodgson CJ in Eq.

30 The other aspect of the "ultimate issue" proposition is that expert evidence will be inadmissible if it usurps the function of the trier of fact: Makita (52 NSWLR at [87] per Heydon JA). That was one of the problems with the expert evidence in Dean-Willcocks v Commonwealth Bank of Australia (2003) 45 ACSR 567. Some accountants who had specialised knowledge with respect to insolvency prepared a report expressing opinions as to whether the bank, alleged by the plaintiff to have received unfair preferences, knew or suspected that the company was insolvent at the times of payment, and whether a reasonable banker would have suspected insolvency. It was held that the report amounted to the kind of analysis and interpretation of documentary evidence that it would be open to counsel to present in final submissions (at 571, [27]; 572, [32]).

31 My tenth proposition is that evidence of an expert as to what he or she would do in the stated circumstances is inadmissible: Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735, at 738 per Young J; Maronis Holdings at 499 [380] per Bryson J. In the Midland Bank Trust case ([1979] 1 Ch at 402), Oliver J explained that "evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants" would be of little assistance to the court. This may be because it is not evidence based upon the expert's specialised knowledge.

32 Of course, in some cases there will be a fine line between evidence by a professional of what a reasonably competent and careful professional would do in specified circumstances, and evidence of what the witness would do in those circumstances. But there is a significant conceptual difference, because evidence of what a reasonably competent and careful professional would do requires the witness to take an objective view, in circumstances where his or her own standards might be higher or lower than the objective standard.

The requisite link between facts and specialised knowledge

33 My eleventh proposition relates to the linkage between the field of specialised knowledge of the expert and the assumed or proven facts. In Makita (52 NSWLR at [85], Heydon JA said: "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."

34 Sometimes it is unnecessary for the expert, in giving evidence, to spell out fully the links between his or her specialised knowledge and the opinion being expressed. As Giles JA remarked in Adler (46 ACSR at 636 [632]), a solicitor shown to have specialised knowledge of conveyancing may give opinion evidence of general conveyancing practice without needing to say more to connect the evidence with that field of knowledge, because the linkage is apparent from the nature of the specialised knowledge. However, a witness purporting to give expert evidence about investor behaviour (Allstate Life Insurance Co v Australia and New Zealand Banking Group Limited (No 6)) or the behaviour of prison escapees (Godfrey v New South Wales (No 1) [2003] NSWSC 160) may need to say substantially more in order to establish the linkage.

The evidentiary status of the facts upon which the expert relies

35 My twelfth proposition relates to the evidentiary status of facts upon which the expert witness relies for the purposes of his or her opinion. As Heydon JA pointed out in Makita, at [85], "so far as the opinion is based on facts 'observed' by the expert, they must be identified and admissibly approved 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".

36 The relationship between expert opinions and facts was explored by the Full Federal Court in Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313, at 350, where their Honours cited with approval a passage from Eggleston, Evidence, Proof & Probability (2nd ed), p 148. There the learned author points out that to a certain extent, an expert may be able to base his or her opinion on facts accumulated in the course of his or her training and experience, without it being necessary to prove every such fact. Thus, a valuer can base his or her opinion on knowledge of comparable sales of property accumulated from experience, newspaper reports and the like. If, however, the expert wishes to refer to a particular fact as a basis for his or her opinion (for example, where a valuer wishes to refer to the recent sale of the adjoining property), evidence of that fact must be given by someone who can depose to it. The expert may be in the position to give such factual evidence - if, for example, the fact relates to the rental value of premises assessed at an annual rental per square metre, a valuer may be able to give evidence of the area of the demised premises based on the measurements he has taken in the course of preparing the valuation report.

37 Gaudron J added to this analysis in Velevski (76 ALJR at 416 [82]-[83]), when she noted that an expert witness may have regard to matters of common knowledge in formulating his or her opinion. A similar point was made by Gummow and Callinan JJ (at [158]) where their Honours observed that it is frequently impossible to divorce observations and knowledge of everyday affairs and events from the body of purely specialised knowledge upon which the expert's opinion depends.

38 Consequently, part of the process of determining the admissibility of an expert's report is to distinguish carefully between opinions, assumed facts, and evidence of facts. The distinction between evidence of a fact and evidence of an opinion is not always easy to draw - for example, a statement that a company was insolvent at a particular date has been treated as a statement of belief in a conclusion of fact (Re Action Waste Collections Pty Ltd [1981] VR 691, 703 per Tadgell J), but it is probably better regarded as a statement of opinion, at any rate where the financial circumstances of the company are of any complexity (Quick v Stoland (1998) 87 FCR 371, 375 per Branson J).

39 Where the expert relies on assumptions, the need to identify them clearly was emphasised by Hodgson CJ in Eq in the MB case, at [8]. His Honour drew attention to the risk that the Court may determine the factual circumstances differently from what the expert had in mind. Therefore, unless the factual assumptions are articulated, it would be unfair to give the party against whom the evidence is tendered the task of teasing out in cross-examination all the circumstances that the witness had in mind.

The standard of proof for establishing the ingredients of s 79

40 My thirteenth proposition relates to the standard by which the Court is to decide whether the opinion is based on specialised knowledge. In Makita (52 NSWLR at [85]), Heydon JA said that the expert's evidence is inadmissible if the Court "cannot be sure" that the opinion is wholly or substantially based on the expert's specialised knowledge. His Honour should not be taken to have suggested that the party seeking to tender the expert's evidence must prove to the level of certainty that the expert opinion is based on his or her specialised knowledge. As Branson J said in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 1PR 354, at [14], the test is whether the Court is satisfied on the balance of probabilities that the opinion is based wholly or substantially on the expert's knowledge. The Court of Appeal of New South Wales agreed with this in Adler, 46 ACSR at 636 [631] per Giles JA.

41 My fourteenth proposition is that the opinion of an expert is not admissible if it amounts to nothing more than a submission. In Allstate Life Insurance Co (137 ALR at 142), Lindgren J referred to evidence that does not "rise higher than a submission". This was one of the problems with the experts' reports in Dean-Willcocks (see 45 ACSR at 571 [27] and 572 [32]). It is an application of a more general distinction between admissible evidence of facts and opinions, on the one hand, and mere argument or submission on the other.

42 Some of these propositions (especially the 9th, 10th, 11th, 12th and 14th propositions) are particularly difficult to apply in circumstances such as a rise in the present case. It is of assistance to look in some detail at the facts of Adler, where closely similar issues arose. In that case ASIC took proceedings to challenge the payment of $10 million by a subsidiary in the HIH group called HIHC to a company referred to as PEE, which was controlled by a director of HIH, Mr Adler. Santow J held that an affidavit by an experienced company director was admissible opinion evidence under s 79. The witness had been an audit partner in a large firm of accountants, and had subsequently embarked on a career of public and other company directorships, holding board positions in some large public companies.

43 The principal question and answer said by the defendant, unsuccessfully, to be inadmissible was: "Would a reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler have caused or procured the payment on 15 June 2000 of $10 million by HIHC to PEE? 4. My answer is no. 5. Mr Adler had a conflict of interest because he was to benefit from the transaction, at least by obtaining control of $10 million which he could use in any way he wanted. Also, there was a potential benefit from a 10 percent share of profits. 6. In my view, a reasonably careful and diligent director or officer of HIH or HIHC in Mr Adler's position would have taken the view that the proposed transaction was contrary to HIH and HIHC's interests, as it was to involve the payment of a large sum of money to company controlled by a director, for investment completely at the discretion of the director, without security and without adequate documentation or appropriate arrangements including arrangements as to interest and/or profit share. 7. At the very least, a reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler would in my view at least have sought approval of the proposed transaction from the Board of HIH and from its Investment Committee and would have made full disclosure of all of the proposed terms and the use to which the funds were to be put."

44 The defendant's complaint was that the witness had failed to relate his opinion to his expertise so as to enable the reader to identify whether the opinion was wholly or substantially based on specialised knowledge. It was said that the affidavit failed expressly to identify how the conclusions stated by the witness derived from his relevant experience. Santow J held (20 ACLC at 224-5 [13]) that it was self-evident, when one had regard to the witness's resume, that his experience was precisely the kind to make him familiar with what a reasonably careful and diligent director of the company would do in particular circumstances. In the Court of Appeal (46 ACSR at 636 [632]) Giles JA concluded that no error had been shown in Santow J's admission of the evidence.

Specialised knowledge and experience - Mr Hogendijk

45 Mr Vines was employed by an entity in the GIO Group as Chief Financial Officer, reporting to the managing director. He was required to perform services in that position for related bodies corporate as reasonably required by the board of directors. From about 21 July 1998 he was a director of GIO Insurance, the subsidiary that conducted (inter alia) the reinsurance business.

46 According to his defence, the responsibilities of Mr Vines included: · Consolidated capital and debt management of GIO Group; · The evaluation of capital spending proposals by business units within the Group; · The evaluation of new investment proposals by business units within the Group; · Mergers and acquisitions where those activities were not otherwise the responsibility of a particular business unit with in the Group; · Dealing with external auditors; · Acting as secretary to the Audit Committee of GIO Australia Holdings; · Liasing with the internal audit unit of the GIO Group, which unit reported to the managing director; · Interacting with third parties, including ratings agencies and broker analysts, in relation to financial matters on behalf of GIO Australia Holdings; · Taxation planning and compliance; · Reviewing the financial aspects of communications with shareholders of GIO Australia Holdings; · Reviewing and analysing financial data prepared by business units of the GIO Group. This included periodic management reporting, half-yearly financial reports and, from about July 1998, annual budgets and projections. Mr Vines says he did not prepare the data in respect of the relevant business units; · Managing GIO Australia Holdings accounting department (but not the accounts departments in each business unit).

47 He was a member of the due diligence committee established by the Board of Directors of GIO Australia Holdings in connection with the Part B Statement in response to AMP's takeover bid. He was responsible for co-ordinating and supporting directors on the due diligence committee in relation to the specific areas of responsibility allocated to them.

48 There may be an issue to be raised in due course as to whether Mr Vines was at relevant times an officer the purposes of s 232(4), and if he was, whether he was an officer of GIO Insurance or of GIO Australia Holdings or both. But that issue does not need to be addressed for the purpose of ruling on the admissibility of Mr Hogendijk's affidavit. Mr Hogendijk gives evidence with respect to the position of a CFO in a substantial corporate group.

49 Mr Hogendijk says he held the position of chief financial officer ("CFO") or an equivalent position from 1975 to 2001. After working in executive positions concerned with the financial operations of several commercial companies (including a period of over two years as CFO of John Fairfax Group Ltd), he worked for the Commonwealth Bank of Australia Ltd from 1991 and 1997 and for Suncorp-Metway Ltd from 1997 to 2001, in each case having the title of CFO. At both the Commonwealth Bank and Suncorp-Metway he was responsible for the Group's financial management and accounting policies, with direct responsibility for the Group treasury, financial and management accounting/reporting functions as well as group taxation and investor relations. He was a member of what he describes as "the Bank's Executive Committee" in each case. Although functions of the respective executive committees are not described, it is likely (as is typically the case) that each of these was a small committee comprising the chief executive officer and the other principal executive officers of the corporate group. At the Commonwealth Bank he was also chairman of the trustees of the staff superannuation trust, which held funds in excess of $5 billion, and he says he played "a key part in the complete privatisation of the bank effected in July 1996." He does not say whether that process involved participation in a due diligence committee.

50 His evidence is that he was responsible, in his respective positions as CFO, for ensuring that the company's financial statements complied with Australian Accounting Standards, for the preparation of financial accounts, financial forecasts and budgets, for the preparation of monthly accounts, and for tracking performance against a profit forecast. His responsibilities included advising the board of directors as to financial performance of the company and the impact of major events on that performance, investor relations and compliance with regulatory requirements, and he was involved in the preparation of the financial component of prospectuses and the valuation of business activities. He says that in carrying out these duties, he had extensive dealings and negotiations with auditors, audit committees, merchant bankers, internal and external actuaries, valuers and other experts.

51 Mr Hogendijk gives evidence that in his experience, while the role of a CFO of a substantial corporate group may vary from case the case, in a number of respects the CFO's role is common across corporate groups. He says that the CFO has special responsibility: · for various aspects of the financial operation of the Group, including in particular supervision of and responsibility for the preparation of accurate financial statements for the Group; · to ensure that the financial statements reflect and comply with Australian Accounting Standards, and to advise management and the board of directors that they do so; · to ensure that accurate information about the company's financial position is prepared and provided to management and the board of directors (including, I infer on the basis of Mr Hogendijk's own experience, the preparation of management accounts, budgets and profit forecasts as and when required, and the tracking of the Group's financial performance against those targets); · to ensure that information that is supplied to the stock exchange and the investment community is accurate and meaningful.

52 This may not be a fully comprehensive statement of the common core of responsibilities of CFOs. It seems that a CFO is typically responsible for management of the Group's exposure to financial risks of various kinds, including foreign currency and credit risks. Both at the Commonwealth Bank and at Suncorp-Metway, Mr Hogendijk was responsible for the Group Treasury function where (one presumes) financial risks of various kinds are managed, through derivative products and otherwise.

53 Mr Hogendijk proposes to give evidence, by reference to very lengthy assumptions and after having reviewed extensive documentary evidence, as to whether Mr Vines failed to act as would a competent CFO in the position Mr Vines acting reasonably in the circumstances. Counsel for Mr Vines submits that the field in which Mr Hogendijk expresses his opinion is not one of specialised knowledge. He says, in effect, that the title "CFO" does not designate any standard or recognised categories of responsibility, because the particular responsibilities of the office vary from case to case. The submission is in the territory of my first proposition. It also raises my fifth proposition, to the extent that it depends upon the assertion that the position occupied by Mr Vines was unique and not amenable to expert evidence of professional standards.

54 I disagree with counsel, on the basis of the evidence Mr Hogendijk will give, especially in paragraphs 96 and 97 of his affidavit. His evidence will identify a common set of responsibilities borne by CFOs, and will show that he occupied the office of CFO in several companies over a substantial period of time, and must therefore have acquired specialised knowledge about that common or core set of responsibilities. Mr Vines occupied a position also designated as CFO, and although it may emerge when all the evidence has been heard that his responsibilities were in fact, by arrangement with the board of directors, atypical in some ways, it is reasonable at this stage of the evidentiary case to proceed on the basis that he had at least many of the typical responsibilities of a CFO, and therefore that Mr Hogendijk has specialised knowledge which he can bring to bear on the question of the applicable professional standards. This case is similar to Adler, where Santow J held that the witness had specialised knowledge about relevant standards for company directors because he had considerable experience serving as a director of various companies.

55 Counsel places reliance on King CJ's observations in R v Bonython, adopted by Gaudron J in Velevski, to which I referred as part of my fourth proposition. It seems to me, however, that opinion evidence about the standard of care of a reasonably competent CFO, based on experience accumulated by the witness in working as a CFO for three companies over a period of more than 11 years, after previous experience in financial management, satisfies the requirement that there be a reliable body of experience. I do not take Gaudron J to mean, in the case where the specialised knowledge is based on experience, that it is necessary to identify some form of organisational structure governing the acquisition of experience, or some external recognition or accreditation of the experience. Provided Dixon CJ's test and other relevant propositions are satisfied, it need only appear from the experience of the witness, as it does in this case, that the experience relates to the responsibilities of an office holder whose position has certain core responsibilities. That, as I understand it, is the effect of Santow J's reasoning in Adler, accepted by the Court of Appeal.

56 Dixon CJ's test is satisfied in the case of Mr Hogendijk's evidence. To the extent that it may be relevant for the Court to form a view about the responsibilities of CFOs, or what a reasonably competent CFO would be expected to do in specified circumstances, the subject-matter of inquiry is such that an inexperienced person would be unlikely to prove capable of forming a correct judgment without assistance. The nature of the work of a CFO and the senior management structure of substantial corporate groups are complex matters, not readily understood without assistance.

57 Counsel also submits that the duty imposed upon an officer under the corporations legislation cannot be viewed in isolation from the particular circumstances of the corporation or the skill, experience, qualifications and particular responsibilities of the officer in question. These submissions are in part an invocation of the first aspect of the "ultimate issue" proposition (my ninth), and in part an appeal to my fourth proposition. I accept the submissions for the purposes of the present issue, but they do not lead to the conclusion that Mr Hogendijk lacks specialised knowledge relevant to the issues for determination. If, for example, the evidence establishes that Mr Vines was authorised by the board of directors to depart from one or more of the core responsibilities of a CFO while retaining the title, it may well be of assistance to the Court to have evidence as to what those core responsibilities are and how they would apply to Mr Vines' circumstances, as a step along the way to deciding whether the special arrangements implemented for Mr Vines affected the content of his statutory duty of reasonable care and diligence.

58 That, it seems to me, is the answer to the submission by counsel for Mr Vines that the evidence of Mr Murray and Mr McClintock as to the actual responsibilities of Mr Vines does not completely accord with the assertion of core responsibilities found in paragraphs 96 and 97 of Mr Hogendijk's affidavit. Part of my twelfth proposition emphasises the importance of the expert clearly articulating the assumptions upon which expert opinions are based. The more precise the articulated assumptions are, the greater the risk that the Court will reach findings of fact that are inconsistent with one or more assumptions.

59 At this stage in the trial, when the defendants have not gone into evidence or even indicated whether they will, it would be premature for me to make any finding as to any aspect of Mr Vines' role that might be controversial. If it turns out, when all the evidence has been heard, that arrangements have been made between Mr Vines and the GIO Group having the effect of abrogating in his case one or more of the core responsibilities of a CFO and casting those responsibilities on the executive director of GIO Insurance, I shall have to do my best to assess what parts of Mr Hogendijk's evidence, if any, remain helpful. An arguable discrepancy between Mr Hogendijk's view of the core responsibilities of a CFO and some evidence so far heard at the incomplete hearing of the case is not a sufficient ground for excluding Mr Hogendijk's affidavit completely.

60 Counsel for Mr Vines also submits that Mr Hogendijk has failed to make out that he has qualifications as a person with expertise in the field of responsibilities of CFOs. This raises the question of linkage between the expert's specialised knowledge and assumed facts, dealt with in my eleventh proposition. Again, I disagree with counsel. Mr Hogendijk was a CFO, consecutively, in three large corporate groups for a total period of over 11 years, after having had considerable earlier experience in corporate financial management.

61 In part, counsel's complaint is that Mr Hogendijk does not appear to have obtained CFO experience in respect of reinsurance or general insurance. I am not sure that this is factually true, for it may be that either or both the Commonwealth Bank and Suncorp-Metway had one or more general insurance subsidiaries for which the CFO had responsibility. But in any event, it is not necessary for the witness to have experience in a corporate group in the same line of business as the GIO Group in order to equip himself to express opinions about the standard of a reasonably competent CFO. The evidence relates to the core responsibilities to which Mr Hogendijk deposes in paragraphs 96 and 97 of his affidavit.

62 The position here is similar to the position of the expert witness in Adler. Santow J (at [5]) set out a list of some of the witness's directorships, none of which was in an insurance group comparable to HIH. Nevertheless his Honour found that the witness's experience was "precisely of the kind" to make him familiar with what a reasonably careful and diligent company director would do in particular circumstances, and that was sufficient (at [13]).

63 Mr Hogendijk gives evidence that Mr Vines' responsibilities as CFO were enhanced by his membership of the due diligence committee, his specific responsibility to co-ordinate and support other GIO Australia Holdings directors in relation to their areas of responsibility on the due diligence committee, and his role in providing and co-ordinating answers to the due diligence questionnaire and management sign-offs. Again counsel for Mr Vines raises the question of linkage addressed by my eleventh proposition, by submitting that Mr Hogendijk has not established any specialised knowledge of a kind that would equip him to give evidence concerning the enhanced responsibilities that arise out of these circumstances. I disagree. While Mr Hogendijk does not give evidence that he has participated personally in any due diligence process, his experience as a CFO of substantial corporate groups, responsible for providing reliable financial information to management and the board as and when required, would put him in a good position to give evidence as to the effect of the due diligence process (recorded in the documents which he read, which include various statements of responsibilities) would have on the responsibilities of a CFO as a matter of practice, and on the standards of competence and diligence to which a CFO would in those circumstances be subject.

Opinion wholly or substantially based on specialised knowledge - Mr Hogendijk

64 In paragraph 7 of his affidavit, Mr Hogendijk records that ASIC has asked him to answer the following "initial question": "On the basis of my experience as a CFO and my knowledge of the practices ordinarily adopted by a competent CFO, and the assumptions set out below, I have been asked to state my opinion as to whether [Mr Vines] failed to act in any way as would a competent CFO in the position of Mr Vines acting reasonably in the circumstances, and to state my reasons. For the sake of simplicity where I use the expression 'competent CFO' below, I mean to refer to the conduct of a competent CFO in the position of Mr Vines acting reasonably in the circumstances."

65 After setting out his lengthy and detailed assumptions (which do not include particular aspects of Mr Schneider's evidence), Mr Hogendijk proceeds to give many opinions, generally expressed by reference to the concept of a "competent CFO" as defined above. He deals with the general responsibility of a CFO, and the significance of Mr Vines' membership of the due diligence committee and his signing of a due diligence questionnaire. He deals with the CFO's responsibility to ensure that staff members under his supervision provide accurate and meaningful financial information after due inquiry, and the CFO's responsibility to ensure that projected profits are based on appropriate facts and reasonable and properly verified material assumptions. He explains the level of involvement expected of a CFO in the preparation of a profit forecast.

66 He then deals with specific aspects of the evidence, expressing his views as to the proper response of a competent CFO when confronted with that evidence. This leads him to express views as to the matters that a competent CFO would regard as significant and would see as placing a profit forecast in doubt, and the circumstances in which a competent CFO would initiate detailed discussions with appropriate management staff and make inquiries to ensure a reliable assessment of loss.

67 Mr Hogendijk expresses views as to: · the weight that a competent CFO would give to the opinions of the internal actuary, · the extent to which a competent CFO would have required detailed justification from the executive director of the reinsurance division of the executive director's written opinion, · how a competent CFO would react when faced with a serious disparity of opinions within the management team and involving the group's auditors, · whether a competent CFO would permit the company to enter into a retrocession agreement of the kind made by GIO Insurance with American Re without advice from APRA and the auditor, · whether a competent CFO would have relied on such an agreement in view of the inconsistent advice of various accountants, · whether a competent CFO would have disclosed differences of opinion between senior members of the management team in responding to the due diligence questionnaire, · whether a competent CFO would have permitted publication of a misleading media release concerning the profitability of the reinsurance division, · whether a competent CFO would have fully explained to the board of directors the issues with respect to the retrocession agreement, · whether a competent CFO would have advised the due diligence committee without qualification of management's conclusion with respect to claims experience, and the disparity of views within the management team, · whether a competent CFO would question statements made by the executive director of the reinsurance division at a meeting with the external auditors just before the conclusion of the profit forecast, · whether a competent CFO would accept the letter of representation signed by senior management, and would have relied upon it to give management sign-off of the due diligence process, · whether a competent CFO would have continuing obligations after the issuing of the Part B Statement.

68 At paragraphs 203ff of his affidavit, Mr Hogendijk reconsiders the initial question after making additional assumptions with respect to aspects of Mr Schneider's evidence of his dealings with Mr Vines. He expresses opinions as to what a competent CFO would do in light of the additional assumptions.

69 As a general matter, what strikes me about Mr Hogendijk's opinions is that, while they focus upon specific assumed facts and circumstances affecting Mr Vines at the relevant time, they are carefully expressed in terms of what a competent CFO would have done in Mr Vines' position. Occasionally the evidence falls within my sixth and seventh propositions, but typically and repeatedly Mr Hogendijk gives evidence of the kind referred to in my eighth proposition. For the reasons I have given, relevant evidence expressed in that way is admissible under s 79, provided that all of the other requirements of the section are satisfied.

70 Mr Hogendijk defines the initial question in terms of whether Mr Vines failed to meet the requisite standard, rather than in terms simply of what a professional person meeting the requisite standard would do in the circumstances. The evidence that was held admissible in the MB case and the others I have discussed was expressed in terms of what a reasonably competent and careful professional would be expected to do in specified circumstances. Those cases did not deal with the admissibility of an opinion that a defendant failed to meet such a standard. It seems to me that if an expert is permitted to give evidence as to what a reasonably competent and careful professional would do in specific circumstances applicable to a defendant, it is not objectionable for the expert to express his or her conclusions in terms of whether the defendant, placed in those circumstances, failed to meet the professional standard, provided that the facts as to what the defendant actually did are either assumed, or are uncontroversial. In my opinion, Mr Hogendijk's formulation of the "initial question" in this manner did not take him outside the MB line of authority. I also note that generally speaking, in the body of his affidavit Mr Hogendijk confined himself to expressions of opinion as to what a reasonably competent professional in Mr Vines' position and circumstances would do, and did not by and large directly assert failure by Mr Vines to meet appropriate standards.

71 Mr Hogendijk's affidavit may go beyond the decided cases in another respect. The standard that he articulates relates to a competent CFO in the position of Mr Vines. In my opinion focus on the position of Mr Vines does not take Mr Hogendijk's opinion evidence outside the scope of the decided cases and render it inadmissible. I take the reference to Mr Vines' position as a reference to his position as the CFO of the GIO Group, confronted by the facts and circumstances assumed in the affidavit. That is essentially the same kind of question as was under consideration in the MB case.

72 It does not seem to me, again as a general matter, that Mr Hogendijk's affidavit falls foul of either aspect of the "ultimate issue" proposition (my ninth proposition). His opinions about what a competent CFO in Mr Vines' position acting reasonably in the circumstances would do, upon detailed assumptions, do not in terms seek to apply the legal standard set by s 232(4). If it turns out that Mr Hogendijk's assumptions correspond with my findings of fact, I shall be able to take his opinions as relevant evidence of what is expected of a CFO by the standards of competency operating in practice. I may form the view that the CFO standard to which he deposes is too high, or alternatively too low, to be of any assistance to me in applying the statutory standard.

73 By and large, Mr Hogendijk does not set out to give factual evidence or to make factual inferences that would usurp the function of the trier of fact. Nor, in my opinion, could his affidavit be described as no more than a series of submissions. It is not like the evidence that I held to be inadmissible in Dean-Willcocks, where the expert offered the kind of analysis and drew the kind of conclusions that are typically the subject of counsel's final submissions at the end of a hearing, and the Court's reasons for decision.

74 In terms of my tenth proposition, Mr Hogendijk's evidence does not purport to be a series of opinions as to what he would have done if he were in the same position as Mr Vines. I acknowledge that sometimes evidence formally expressed in an objective matter may be shown to be really evidence giving the expert's subjective opinion of what he or she would have done in the same circumstances, coated with a veneer of objectivity. It is conceivable that an affidavit might be so structured that the veneer falls away and the true basis of the opinions is revealed, as soon as one carefully analyses the reasoning process set out in the affidavit - but rather more likely that such a conclusion, if it is drawn, emerges through cross-examination. In this case, I find no general indication in Mr Hogendijk's affidavit that he has sought to clothe his subjective opinions as to what he would have done in Mr Vines' circumstances in the language of the "competent CFO" standard.

75 As to my twelfth proposition, Mr Hogendijk meticulously sets out the assumptions upon which his opinions are expressed. The affidavit is drafted with sufficient clarity that expressions of opinion are not likely to be confused with assertions or assumptions of fact. There are some occasions when Mr Hogendijk has made inferences of a factual nature from the assumed facts, in the course of explaining his reasons for a particular opinion. It is not impermissible for a witness to do so, as long as the inferred facts are clearly identified in the reasoning process, and the inferences do not take the form of or become an exercise in their own right, rather than as a step in the reasoning process that supports the opinions.

76 As to my eleventh proposition, the specific linkage between Mr Hogendijk's field of specialised knowledge and the assumed facts, for the purposes of the numerous opinions expressed in the affidavit, is not always fully articulated. But generally speaking, the linkage is apparent from the nature of the specialised knowledge (to adopt the analysis of Giles JA in Adler (46 ACSR at 636 [632])). Mr Hogendijk's experience is as a chief financial officer; he gives evidence of what a competent CFO in the position of Mr Vines would do, acting reasonably in the circumstances; and he states his reasons. I think this is enough, overall, to establish the linkage.

77 It follows that, upon the application of my sixth to fourteenth propositions, there is no basis for reaching the general conclusion that the opinions expressed in Mr Hogendijk's affidavit are not wholly or substantially based on his specialised knowledge. This is not to say that every one of the multitude of opinions contained in his 232 paragraphs is beyond challenge by reference to one or more of my propositions. That is the matter for assessment at the next stage of a hearing.

78 Counsel for Mr Vines has referred to some specific expressions of opinion, not for the purpose of arguing that they are individually inadmissible but so as to convince me that there are problems about particular opinions which are symptomatic of more general difficulties. For the most part, the specific instances are said to be cases where Mr Hogendijk has made incorrect assumptions or assumptions failing to address some important matter of fact about which the Court has heard evidence.

79 Thus, one of the documents in evidence is a memorandum by Mr Robertson dated 4 November 1998, addressed to Mr Vines, in which he considered the performance of GIO Re in the first quarter of the 1999 financial year. It presented an optimistic view. Mr Hogendijk deals with Mr Robertson's 4 November memorandum at paragraphs 110 to 122. He expresses the opinion at paragraph 119 that a competent CFO would not have regarded Mr Robertson's response in his 4 November memorandum as providing any reliable support for the view that the $80 million profit forecast could reasonably be maintained, or for discounting concerns that had earlier been expressed by Mr Schneider, PwC and PwC Securities. In paragraph 120 he says that a competent CFO faced with a serious apparent disparity of views between Mr Schneider in Mr Robertson would not have ignored Mr Schneider's views without seeking advice from an independent actuary.

80 Counsel for Mr Vines refers to some oral evidence to the effect that there was a meeting after the due diligence committee meeting on 4 November, involving the three defendants, one or two directors of GIO Australia Holdings, and PwC personnel, the outcome which was said to be that the difference of opinion between Mr Schneider and Mr Robertson as to the maintenance of the forecasts was to be resolved between Mr Robertson, Mr Fox and Mr Schneider. Then there was a meeting of those three people. Mr McClintock of PwC Securities gave evidence that according to his understanding, after that meeting the remaining bone of contention was the effect on the forecast of Hurricane Georges.

81 Counsel says that Mr Hogendijk has assumed that the difference of opinion between Mr Schneider and Mr Robertson was not brought to the attention of PwC, and therefore says that Mr Vines failed to meet the standard of a competent CFO because, inter alia, he did not notify PwC of the disagreement. At paragraph 122 Mr Hogendijk says that a competent CFO would not have forwarded the 4 November memorandum to PwC without alerting them to the views of the internal actuary, Mr Schneider. But, says counsel, this overlooks the fact that PwC were by then well aware of the disparity and attended the meetings where arrangements were made to address the problem.

82 This is another example of the perils of a judge assessing the admissibility of expert evidence based on assumptions, by reference to whether the assumptions are supported by part of the evidence in an incomplete trial. If it appeared that the expert's assumptions were generally and seriously inaccurate, so that any probative value they may have would be outweighed by the danger that the evidence might be misleading or confusing or cause or result in an undue waste of time, the Court would be able to exclude the evidence as a whole under s 135. But that is not the present case. At most, some paragraphs may need to be excluded under s 135 in consequence of a specific assessment of their probative value in light of the evidence. I shall hear further argument as to whether that should be done.

83 In his supplementary submissions, counsel for Mr Vines sought to identify numerous other occasions upon which Mr Hogendijk's assumptions were contrary to the weight of evidence so far adduced at the trial. I have considered these additional examples. In my opinion they do not vary the analysis put forward in the previous paragraph.

Specialised knowledge and experience - Mr de Vroome

84 Mr Robertson was an executive director of GIO Insurance at all relevant times until about 5 November 1998. He was not a member of the due diligence committee. In his position as executive director he was responsible for preparing business plans for GIO Insurance, including a reinsurance business plan; and he was responsible for preparing and presenting the divisional profit forecast. He was a member of the management committee for GIO Re, which presented quarterly reports to the GIO Insurance board. After 5 November 1998 he continued to have a role with respect to the profit forecast for GIO Re, though his exact responsibilities need not be determined for the purposes of the present judgment. Mr Schneider gave evidence that Mr Robertson was his immediate superior, and that he reported to Mr Robertson until Mr Robertson was replaced by Mr Fox.

85 Mr Fox replaced Mr Robertson as an executive director of GIO Insurance in November 1998. He commenced work on about 5 November 1998 and was appointed a director of GIO Insurance on 25 November 1998. He was not a member of the due diligence committee. He became a member of the management committee for GIO Re, chairing meetings of the committee on 25 November and 16 December 1998. He had responsibility for preparation and presentation of the divisional profit forecast. In his defence Mr Fox contends that it was agreed prior to his appointment that he would not play a role in relation to the GIO response to the AMP takeover bid, and that he would take over Mr Robertson's responsibilities for the financial operations of GIO Insurance after six months. These matters may be controversial. Mr Schneider gave evidence that he commenced to report directly to Mr Fox from early November 1998 while continuing to have conversations with Mr Robertson.

86 Mr de Vroome is currently a consultant to the reinsurance and insurance industries. From 1985 until he retired in August 2001, he worked for NRMA Insurance Ltd, where he held the position of National Reinsurance Manager. Prior that time, he held various positions in insurance and reinsurance companies, working as an underwriter and in a managerial position in reinsurance.

87 He says that over a period of 40 years he has acquired substantial experience in negotiating and settling reinsurance contracts; as an underwriter and subsequent as a reinsurance manager he has had substantial exposure to various categories of general insurance including marine portfolios and property catastrophe portfolios; during his employment with NRMA he was responsible for the aviation and space book of business. He says he has been responsible for advising on the retrocession needs of reinsurers, and that he has negotiated the terms of inwards reinsurance with other Insurance, and has drafted placement slips recording those terms. He says he has also had significant involvement in the production of the financial results of a reinsurance company, including assessment of the level of IBNR claims and making provision for outstanding claims. He has liaised with the internal and external actuaries to determine appropriate provisions to maintain into the future. For many years he had responsibility for establishing budgets or forecasts. At NRMA he was responsible for production of monthly management accounts for provision to the company's board of directors. He met with the company's auditors and consultant actuaries as part of this reporting process.

88 In his curriculum vitae, Mr de Vroome gives a description of his work for NRMA Insurance over the period from 1985 to 2001. He explains that he was appointed reinsurance manager in 1985 to develop the "International Reinsurance Assumed portfolio", and to design and arrange the reinsurance protections for the group. Although his title changed a number of times during that period, he retained those functions, while the size of the enterprise grew substantially. During his final few years he was appointed national reinsurance manager, responsible as such for the protections of all group companies.

89 He says that when he joined the company, the premium income of the portfolio was approximately $250,000, a figure which grew to $250 million at its peak. As the group grew and its exposure to catastrophe loss increased, reinsurance arrangements became larger and more complex, and in his final year protection to $1 billion was purchased.

90 Mr de Vroome says he was responsible for the total operation of the Reinsurance Department of NRMA Insurance, encompassing underwriting, claims, accounting and the overall result. He says that his responsibility required close liaison with senior management, internal and external auditors, and consultant actuaries, for the purpose of determining operational results and setting claims reserves. He also had regular discussions with the auditors and APRA (formerly the Insurance and Superannuation Commissioner) with respect to reinsurance. Initially all reserving was done by him on a case-by-case basis, but as the portfolio grew, reserving models were developed by the auditors and actuaries in conjunction with him.

91 There are some differences between the role of executive director occupied first by Mr Robertson and then by Mr Fox, and Mr de Vroome's position as national reinsurance manager of NRMA Insurance. It appears that the reinsurance business of NRMA Insurance was at all times substantially smaller than GIO Re's business in 1998 - according to counsel for Mr Robertson, less than one-third in terms of premium income at its peak. Mr de Vroome was apparently not a director of NRMA Insurance. Nevertheless it appears to me probable, on the evidence contained in Mr de Vroome's affidavit and the documentary and other evidence about the roles of Mr Robertson and Mr Fox adduced so far at the hearing, that there are fairly close functional similarities between the two roles. The executive director of GIO Insurance and the national reinsurance manager of NRMA Insurance were each responsible for managing the reinsurance department of their respective organisations. In both cases, they were required to liaise closely with senior management, auditors and actuaries. They were responsible for business planning and forecasting.

92 Counsel for Mr Robertson submitted that on the basis of Mr de Vroome's evidence, his position was more junior than the position of Mr Robertson. He submitted that in terms of GIO Insurance's organisational structure, Mr de Vroome's position would have been more senior than Mr Schneider's but less senior and more "hands-on" than Mr Robertson's position. I do not believe that the evidence presently before me supports that conclusion. No doubt the significance of Mr de Vroome's position grew within NRMA as the business expanded, but the evidence does not warrant an inference that the managerial responsibilities in the reinsurance business of the national reinsurance manager of NRMA Insurance were significantly different from the management responsibilities in reinsurance of the executive director in charge of GIO Re. It is true that the executive director of GIO Insurance was a member of the GIO Insurance board of directors, whereas Mr de Vroome does not say that he was a director of any of the NRMA companies. The significance of this distinction is qualified, however, by the fact that the board of GIO Insurance was a subsidiary board. Neither Mr Robertson nor Mr Fox was a member of the parent board. While membership of the GIO Insurance board was an added responsibility for the executive officer in charge of managing the businesses of GIO Insurance, it did not signify such a difference in role and responsibilities as to disqualify the reinsurance manager of a broadly comparable business from giving expert evidence of professional standards pertaining to a position of which both were examples.

93 In my opinion Mr de Vroome's affidavit provides a foundation for the view that he has specialised knowledge of the standards of competence and diligence to be expected of a reinsurance manager of a substantial reinsurance business, based on his experience in working as a reinsurance manager for about 16 years with NRMA Insurance, together with his overall experience working in the reinsurance industry for about 40 years. His position at NRMA is sufficiently comparable with the positions of Mr Robertson and Mr Fox respectively at GIO to equip him to give evidence about the standards of competence and diligence of a reinsurance manager in the position of those two defendants.

94 Counsel for Mr Robertson submitted that Mr de Vroome's evidence should be rejected because he does not say that he had any wide experience of what other competent reinsurance managers would do by way of practice. It is true that he did not say so. If he did, he would run the risk of attracting my second proposition, about the evidence of on-lookers. But any difficulty that may have been presented if he had no other experience as a reinsurance manager than at NRMA is overcome by his evidence that he was assistant general manager at Victory Reinsurance, and that as a director and senior underwriter at Intercontinental Reinsurance he was responsible for the overall operation of the Assumed Reinsurance portfolio. Considered as a whole, and noting in particular these components, his experience of 40 years in the insurance and reinsurance industries gave him an adequate basis for forming opinions as to proper professional standards for a reinsurance manager.

95 In my opinion the Adler case is a fairly close analogy, because there as here the evidence related to professional standards and was based upon experience over a long period of time. It falls within my first and third propositions. As far as my fourth proposition is concerned, the evidence is given by a person possessing peculiar skill, in circumstances where the subject-manner of inquiry is such that experienced persons are unlikely to prove capable of forming a correct judgment without such assistance. This is especially so where the evidence relates to professional standards in a highly technical field of operation such as the management of a reinsurance business.

96 For the reasons I gave with respect to Mr Hogendijk, evidence of this nature is capable of being a reliable body of experience without there being an external organisational structure or system of recognition. Mr de Vroome's experience in the role of reinsurance manager of a substantial business provides an objectively identifiable corpus satisfying the requirement that there be a reliable body of experience of the relevant subject matter.

97 In terms of my fifth proposition, given the similarity between the positions occupied by Mr de Vroome on the one hand, and Mr Robertson and Mr Fox on the other, this is not a case where the position held by those defendants was so novel as to prevent the Court from regarding Mr de Vroome as a person having specialised knowledge of applicable professional standards.

98 Mr de Vroome does not say that he was ever a member of a due diligence committee conducting investigations with respect to a public disclosure document that would be relied on by the investment community. I shall assume for present purposes that he was not. In my opinion, however, lack of experience with respect to a due diligence exercise does not disqualify him from expressing expert opinions about professional standards applicable to the preparation of financial projections in respect of such an exercise. He has substantial experience in preparing financial information including profit forecasts for a reinsurance business. The fact that the GIO Re component of the Part B profit forecast was prepared in the context of a response to a takeover bid does not make the exercise of preparing it so different that Mr de Vroome's experience concerning professional standards involved in preparing financial information in other contexts is an insufficient basis for him to express expert opinions.

Opinion wholly or substantially based on specialised knowledge - Mr de Vroome

99 In his affidavit concerning Mr Robertson, Mr de Vroome expresses opinions about five actions of Mr Robertson, namely: (a) writing the memorandum dated 4 November 1998 to Mr Vines; (b) answering the due diligence questionnaire and completing the senior management sign-off on 10 November 1998; (c) participating in a meeting with Mr Fox and Mr Vines and representatives of PwC. Securities on 7 December 1998; (d) signing a "representation letter" on 7 December 1998; (e) signing the management sign-off letter on 7 December 1998.

100 In his affidavit concerning Mr Fox, Mr de Vroome expresses opinions about three actions of Mr Fox, namely: (a) participating in a meeting with Mr Robertson and Mr Vines and representatives of PwC Securities on 7 December 1998; (b) signing a "representation letter" on 7 December 1998; (c) signing a management sign-off letter on 7 December 1998. He also considers the approach that would have been adopted by a competent reinsurance manager who occupied the position of Mr Fox and who was required in November 1998 to consider the terms of a reinsurance/retrocession slip between GIO Re and American Reinsurance Company to determine whether it was appropriate for GIO Re to enter into that contract.

101 Although different actions are the subject of the opinions in the two affidavits, the questions about those actions are framed in the same way. In each of the two affidavits, Mr de Vroome expresses opinions in answer to the following question: "On the basis of my experience as a reinsurance manager, and my knowledge of the practices ordinarily adopted by competent reinsurance managers, were the actions of [Mr Robertson/Mr Fox identified above] within the range of conduct reasonably appropriate for a competent reinsurance manager in the circumstances, and if not, in what respects?" He explains that he uses the expression "competent reinsurance manager" to refer to the conduct of a competent senior reinsurance manager in the position of Mr Robertson or Mr Fox (respectively) acting reasonably in the circumstances.

102 Having regard to my sixth and seventh propositions, and particularly my eighth proposition, it seems to me that the question posed for Mr de Vroome in this way is an appropriate question to be asked in order to adduce admissible expert opinion evidence with respect to a professional standard. It is cast in a form similar to the expert evidence under consideration in the MB case, Maronis Holdings and Rabelais, and in particular, the expert evidence held admissible in Adler. It does not suffer from the obvious vices apparent in the expert evidence in O'Brien.

103 Counsel for Mr Robertson complained that Mr de Vroome's evidence is not tied to identifiable practices and procedures adopted by competent reinsurance managers. That is so, although it may be that some implications about practices could be drawn from the evidence. But that only means that the evidence does not fall into the categories identified in my sixth and seventh propositions, and therefore needs to be assessed in terms of my eighth proposition. As I have said, the preponderance of authority is that evidence directed towards what a competent professional would do in specified circumstances and on stated assumptions is admissible if it is relevant and satisfies the other requirements of the section.

104 The question is not directed towards the legal standards raised by s 232(2) and s 232(4), which speak in terms of acting honestly and exercising the degree of care and diligence that a reasonable person in a like position would exercise in the corporation's circumstances. An expert's opinion given in answer to such a question leaves room for the Court to apply the legal standards, and in doing so to decide whether (if the expert's assumptions are made out by the evidence and his or her inferences are consistent with the evidence) the standard of competence applied by the expert is too high or too low. Although the question is not expressed in terms of the statutory standards, an expert's perception of whether the defendant's conduct was within the range of conduct reasonably appropriate for a competent reinsurance manager in the defendant's position is, in my opinion, relevant to the statutory issue under s 232(4). In principle (while recognising the difficulties that will arise in assessing the utility of evidence based on assumptions and inferences which will almost certainly be out of step with the Court's factual findings at the end of the trial), expert evidence in answer to the question is likely to be of assistance to the Court when it applies the legal standard under that subsection.

105 As with Mr Hogendijk, Mr de Vroome sets out in each affidavit a fairly lengthy list of the assumptions he has made for the purposes of expressing his opinions. There is a set of common assumptions set out in both affidavits, and then a set of particular assumptions directed, respectively, to the position of Mr Robertson and the position of Mr Fox. As with Mr Hogendijk, additional assumptions are made in each affidavit, basically to account for Mr Schneider's evidence.

106 Mr de Vroome's opinions with respect to Mr Robertson are directed to the five actions to which I have referred. It is instructive to look closely at his opinions concerning Mr Robertson's conduct in writing the 4 November memorandum.

107 Mr de Vroome says a competent reinsurance manager in Mr Robertson's position would have understood that various listed matters were relevant to the degree of care and attention he should take in preparing the memorandum. The listed matters included such things as that PwC Securities had raised concerns about the maintainability of the $80 million profit forecast in light of the first quarter highlights, and there was a likelihood that Mr Vines might pass the memorandum on to the board of directors and PwC Securities. Mr de Vroome says that in these circumstances any competent reinsurance manager would have exercised a high level of care and attention to the preparation of the memorandum, and would have appreciated that it was necessary for the document to be balanced, comprehensive and based on the available evidence.

108 Mr de Vroome then asserts, on the basis of the assumptions that he has been asked to make, that Mr Robertson had important information available to him at the time he prepared the memorandum, and he lists that information. He says that by 4 November 1998, a competent reinsurance manager in Mr Robertson's position would have appreciated that actual claims may have been received which might bear upon the likely development of total claims. He says it is elementary that a competent reinsurance manager would have made inquiries to find out the amount of the claims received.

109 According to Mr de Vroome, if Mr Robertson had checked GIO Re's claims experience to 31 October 1998, he would have been aware of certain matters contained in the documentary evidence. After setting out the summary of the memorandum, Mr de Vroome says that a competent reinsurance manager would have appreciated that those statements implied that on the information known to him, and based on available evidence, maintenance of the $25 million reserve for Hurricane Georges was justified.

110 This leads Mr de Vroome to examine the evidence relating to Hurricane Georges. In the course of doing so, he observes that any competent reinsurance manager would know that the losses suffered by individual reinsurers as a result of substantial catastrophes develop relatively slowly, and it is often a matter of years before the final exposure can be determined. He turns attention to the catastrophe book, saying that a competent reinsurance manager in Mr Robertson's position would have analysed the effect of the shortfall in profit from the catastrophe book on the full year forecast. He reviews evidence concerning the space results, expressing the opinion that a competent reinsurance manager in Mr Robertson's position could not expect the shortfall in profit to be made up in the remaining three quarters.

111 He makes a factual assessment of other components of the profit forecast, dealing with retrocession costs and profit commission, saying that in each case a competent reinsurance manager would not have made the statements on those matters that Mr Robertson made in the 4 November memorandum. He says a competent reinsurance manager would have disclosed that a change in interest rates would reduce the profit forecast substantially.

112 His overall conclusion is that on the basis of the first quarter results known to Mr Robertson as at 4 November 1998, a competent reinsurance manager would not have confirmed the $80 million forecast in the manner in which he did, but rather, would have concluded that the forecast was in serious doubt.

113 It is fair to say that Mr de Vroome takes a similar approach to his assessment of the other actions of Mr Robertson and the actions of Mr Fox. An important component of his reasoning is to look at the documentary evidence in the light of the assumptions, and to apply his expertise to draw inferences from that material. His analysis of the catastrophe book at paragraphs 104-114, and of space results at paragraphs 115-120, are illustrations of the many occasions upon which Mr de Vroome is able to draw inferences, including inferences as to the probability of events (see, for example, paragraph 113) which he then uses as the basis for his conclusions.

114 The case law considered under my twelfth proposition recognises the legitimacy of this process of inferring facts. In my opinion the process is capable of being of real assistance of the Court, but there are obvious and serious dangers in it. Assistance may be provided because, lacking expertise in reinsurance, the Court may not appreciate the significance of matters disclosed by the documentary evidence or in the assumptions (to the extent that they are made good at the hearing) that are evident to a person having the technical experience of Mr de Vroome. The dangers include the risk that, in the process of teasing out the implications of the evidence for the purpose of expressing expert opinions, Mr de Vroome might have made further assumptions not fully articulated, or may have engaged fact-finding going beyond his province as an expert witness (the second aspect of my ninth proposition).

115 Viewing the two affidavits as a whole, I have formed the opinion that there is from time to time a tendency for Mr de Vroome to make additional assumptions not fully articulated and perhaps not appropriate (and therefore contrary to my twelfth proposition), and also a tendency for him to step into the role of fact-finding in a way that goes beyond his province as an expert witness (contrary to my ninth proposition).

116 As to implied additional assumptions, counsel for Mr Robertson and for Mr Fox drew attention to a great many matters upon which assumptions may have been made. To take just one example, Mr de Vroome's evidence about Mr Robertson's memorandum of 4 November 1998 might seem to assume something about Mr Robertson's perception of the capabilities of those reporting to him. A reasonably competent reinsurance manager in Mr Robertson's position might not have acted in the way Mr de Vroome sets out, after receiving information from a subordinate, if that person regarded the subordinate as incompetent or prone to error.

117 It seems to me probable that this assumption has been made but not articulated. Subject to any argument that may take place in the paragraph-by-paragraph analysis, I am inclined to think that many other "presumptions of regularity" (as to such things as the reliability of information, modelling processes and perhaps even the contract by contract analysis) have been made by Mr de Vroome. That is hardly surprising and is not necessarily open to objection. When the evidence is complex, the assumptions that need to be identified are the material or significant assumptions. There will always be other implied assumptions. For example, evidence about what a reasonably competent professional would do in stated circumstances assumes that the hypothetical professional has no inhibiting health problems and is free enough from other commitments to act in the manner prescribed. It is open to the defendant to raise such matters in answer to the expert's opinion evidence.

118 In saying this, I do not mean to trivialise the difficulty that implied assumptions raise. My point is that to a degree, implied assumptions are inevitable when expert evidence is given of the kind ASIC relies on here. My impression of Mr de Vroome's affidavits is that some care has been taken to identify and articulate the material assumptions, in difficult circumstances. I do not regard the probable presence of implied assumptions, of the kinds identified by counsel in submissions, as a sufficient basis for excluding the evidence on a wholesale basis. To the extent that material assumptions have been made but not articulated, particular paragraphs or sentences may be objectionable. For example, there appear to be occasions upon which Mr de Vroome may have assumed (or inferred from the documents) something material, such as that Mr Robertson or Mr Fox had seen a particular document, where it can be said that there is no basis for the assumption, even at this stage of the hearing.

119 As to Mr de Vroome's fact-finding, counsel for Mr Fox took me in some detail to the terms of the affidavits, sufficiently to persuade me (subject to debate paragraph by paragraph) that Mr de Vroome probably has gone too far from time to time. I criticised similar expert evidence in the Dean-Willcocks case, 45 ACSR at 573 [40], when I referred to "an analysis of the evidence concerning selected questions, of the kind that might be expected of counsel in submissions or the Court in reasons for judgment". I have reached this view while bearing in mind that the making and articulation of inferences from assumed or proved facts is a legitimate part of the expert's reasoning process.

120 I shall not rule on any particular instances that this stage, but (subject to further consideration in the paragraph by paragraph analysis) the analysis at paragraphs 91-94 of Mr de Vroome's affidavit concerning Mr Fox seems to go beyond what would be needed for a conclusion about the standard of a competent reinsurance manager - in the course of which the expert might have given attention to apparent discrepancies between Mr Fox's statement and other evidence - and to amount to a positive "finding" by the witness that Mr Fox's statement is incorrect. I have reached the conclusion, however, that the defects of these kinds in the two affidavits are not so endemic or widespread that I should rule the affidavits to be wholly or substantially inadmissible. 121 Finally, considering the affidavits as a whole, I do not take the view that Mr de Vroome's opinions are disguised opinions about what he personally would do in stated circumstances. The reasoning that he employs is, in my opinion, objective reasoning generated by his idea of what a reasonably competent reinsurance manager would do in the stated circumstances. Discretionary exclusion under s 135

122 Section 135 of the Evidence Act empowers the Court to refuse to admit evidence "if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time."

123 Section 135 has been considered from time to time in the cases on expert evidence (for example, Quick v Stoland 87 FCR at 378 per Branson J; Dean-Willcocks, 45 ACSR at 573 [38]), but there is no general principle to be extracted from the cases, and it is probably undesirable to place any judicial gloss on the clear discretionary language of the section.

124 Counsel for the defendants seek to invoke all three branches of s 135. They strongly urge on me that the probative value of the evidence of Mr Hogendijk and Mr de Vroome will be slight, compared with the enormous amount of time that will be taken in considering the admissibility of their affidavits paragraph by paragraph, and then in cross-examination. They estimate that the process will consume about two weeks of the time allocated for the hearing in this case. The prospect of competing expert evidence has been mentioned.

125 Each of the witnesses has made a large number of assumptions. For example, Mr de Vroome has made 23 general and 49 particular assumptions in his affidavit concerning Mr Robertson, and in that affidavit he subsequently adds an additional 8 assumptions. The other affidavits are similarly structured.

126 Necessarily their evidence, if admissible, will be given on the basis of material comprising less than the whole of the material that will be before the Court at the conclusion of the trial. For example, it appears that the experts did not have regard to the transcripts of the s 19 examinations of various persons. Their affidavits, prepared some time ago, necessarily could not take into account evidence emerging in cross-examination at the hearing, or any evidence that may be tendered on behalf of the defendants. That is inevitably the case, in the normal course, but it is open to the Court to apply s 135 if it forms the view that the discrepancy between the assumed facts and the evidence emerging or likely to emerge at the trial is so great that the expert's evidence will be of minimal value (see Dean-Willcocks at 569 [21], [41]).

127 The Court's decision whether to reject the whole or a substantial part of an expert's report under s 135, or to consider the report paragraph by paragraph, is obviously a matter of judgment and degree. In the Dean-Willcocks case I was persuaded to exclude the evidence entirely, not only because it would be necessary to review the reports closely so as to determine whether evidence not considered by the authors would affect their opinions, but also because in very large part, the reports were an analysis of such evidence as was presented to the experts, of a kind typically undertaken by counsel and ultimately the Court. Here, in contrast, a substantial portion of the evidence goes to technical and complex matters and has a potential to be useful that I cannot exclude at this stage.

128 If the facts found to have been proven at the end of the trial do not correspond with all of the assumptions made by the expert, then the value of the expert opinion will be lessened or eliminated, unless the witness gives oral evidence as to how variations upon the assumptions would affect his opinions. As previously mentioned, counsel for the defendants have drawn attention to some discrepancies between the assumptions and the facts that have emerged so far at the hearing. My view is that, while one can imagine circumstances in which such discrepancies would be so clear and overwhelming as to justify the exercise of the discretion under s 135, we are nowhere near that point in the present case.

129 It is said that to allow the evidence of ASIC's experts to be read in circumstances where it is now clear that important factual assumptions made by the experts were wrong, is to place the defendants in an unfair position. They will be required to decide whether to cross-examine the experts to seek their opinions on facts not included in the assumptions but established during ASIC's evidentiary case. By their cross-examination, counsel for the defendants might inadvertently cure what would otherwise be fatally flawed evidence. I realise that is a difficulty, but it seems to me an inevitable one, once one accepts the proposition that expert evidence prepared before the hearing may be given upon the basis of a large number of assumptions. I cannot see any particular unfairness in the present case other than what is entailed in that process.

130 There is a substantial risk, by the time the trial is over, that the assistance to the Court that is in principle available, when expert evidence is proffered about a professional standard of competency in a technical area and in complex circumstances, may evaporate. It may evaporate because, when all the facts (including the defendants' evidence, if tendered) are before the Court, the true issues may not be the ones about which the experts have given opinions. It may evaporate because the experts' opinions are based on an assumed substratum of facts that has collapsed. It may evaporate because the true facts turn out to be much more complex than the facts upon which the evidence of the experts have been given.

131 Essentially, the defendants ask me to conclude that it is sufficiently likely that nothing of any significant utility will emerge from the process, that I should put it to an end in limine. I have decided, however, that in this case such a conclusion would be based on speculation on my part, which would be unwarranted in the circumstances currently before the Court. Tempting though the prospect of shortening the trial may be, it would be inappropriate to exercise my discretion under s 135 in the manner proposed.

132 The affidavit of Mr Hogendijk, and the two affidavits of Mr de Vroome, are not generally inadmissible, and should not be excluded under s 135. It will now be necessary to consider their admissibility, paragraph by paragraph.

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Evidence Act 1995(NSW)ss 75, 79, 135

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