Ruling on objections to evidence
439 Before finally ruling upon the parties' objections to evidence, it is necessary to remind oneself that the proceeding before the Court is an application for judicial review, brought under s 5 of the ADJR Act, and s 39B of the Judiciary Act. At common law, judicial review is restricted to grounds which either directly allege error of law, or which amount to error of law. The common law has always been unwilling to engage in judicial review for error of fact, unless the fact is jurisdictional. Jurisdictional facts are comparatively rare.
440 Historically, the position at common law was that judicial review could not be invoked for error of fact. The position today is less clear, with the High Court now seemingly recognising review for extremely irrational or illogical fact-finding processes: see Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 198 ALR 59.
441 In Bond, at 341, Mason CJ observed, in relation to "judicial review":
"The expression "judicial review", when applied to the traditional review functions of the superior courts in our system of justice, exercisable by means of the prerogative writs and the grant of declaratory relief and injunction, ordinarily does not extend to findings of fact as such. To expose all findings of fact, or the generality of them, to judicial review would expose the steps in administrative decision-making to comprehensive review by the courts and thus bring about a radical change in the relationship between the executive and judicial branches of government. Amongst other things, such a change would bring in its train difficult questions concerning the extent to which the courts should take account of policy considerations when reviewing the making of findings of fact and the drawing of inferences of fact."
442 Ordinarily, there would be no reason, in a case involving judicial review, for any evidence to be placed before the Court, apart from evidence of what was before the decision-maker at the time of the relevant decision.
443 In M Aronson, B Dyer and M Groves, Judicial Review of Administrative Action (3rd ed, 2004) ("Aronson"), the learned authors observe at 225-6:
"Applications for judicial review can, of course, be long and involved, but extreme irrationality or illogicality would have to be obvious. If the Federal Court's experience in the last decade or so is anything to go by, judicial review matters are usually dealt with courteously but at fairly high speed. The courts can do this because the evidence is usually nearly formal, proving the record or stated reasons, or concentrating on a particular aspect of the impugned process in which natural justice is alleged to have been breached. The typical merits review in the AAT will spend the bulk of its time on the evidence, which sometimes seems to go on interminably, and which is inevitably led de novo."
444 However, neither side approached this case in anything like the manner described above. Rather, each side tendered a substantial body of material, and called a number of witnesses, to give evidence in support of its case.
445 It will be recalled that the ACT, in its decision in the authorisation case, was highly critical of the banks for their failure to call any evidence, apart from that of one fairly insignificant player, in answer to the substantial body of evidence led on behalf of the merchants. Perhaps in response to those criticisms the RBA led copious evidence from three economists, Professor Katz, Professor Farrell and Dr Fitzgerald in answer to the expert evidence led on behalf of the applicants, namely that of Mr Gove and Dr Williams. Much of the evidence led on both sides was objected to, and it is necessary at this point therefore to rule upon its admissibility.
446 A few general remarks are in order. Section 55 of the Evidence Act provides that the evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect the assessment of the probability of the existence of a fact in issue in the proceeding. Section 56 provides that, except as otherwise provided by the Act, evidence that is relevant in a proceeding is admissible in the proceeding, and evidence that is not relevant in the proceeding is not admissible. Section 59 provides an exception to this rule by excluding hearsay. Section 76 provides another exception. It 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. However, this is subject to s 79 which provides as follows:
"If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."
447 The expression "specialised knowledge" is not defined in the Act. However, it has been extensively considered, as too as been the cognate expression "training, study or experience". In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 ("Makita") Heydon JA said, at [85]:
"In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded."
448 The authorities suggest that an expert should differentiate between the factual assumptions on which an opinion is based, and the opinion itself. It should be possible to discern, from the expert's report, that the opinion is wholly or substantially based on the witness's expert knowledge: H G v The Queen (1999) 197 CLR 414 at [39] per Gleeson CJ. In addition, the reasoning must be exposed, so that it is clear how the expertise of the witness has been applied to the facts assumed or observed so as to produce the opinion. Otherwise, the Court is not in a position to follow the opinion, or be satisfied as to how it was reached. In other words, the Court must be given sufficient assistance to enable it to evaluate the validity of the expert's opinion: Makita at [59].
449 One problem that constantly recurs in relation to expert evidence is the failure of a party reliant upon an expert opinion to prove the facts that are assumed by the expert as the basis for the opinion. There has been some debate about whether the expert's opinion itself is admissible in such circumstances. In Makita, Heydon JA, considered that it would be sufficient for the expert to state explicitly the assumptions as to fact on which the opinion was based. If other admissible evidence established that the matters assumed were "sufficiently like" the matters established to render the opinion of the expert of any value, though they might not correspond with complete precision, the opinion would nonetheless be admissible.
450 In Australian Securities and Investments Commission v Rich [2005] NSWCA 152, the New South Wales Court of Appeal held that the fact that an expert's opinion is based on facts that are assumed, and not proved, at the time the expert gives evidence is no reason to exclude the evidence at that stage. The assumed facts may be proved later, by other evidence. Indeed, the Court went further, and said that the fact that the expert's opinion was at one time, or even still is, reinforced by undisclosed facts and reasoning processes was not relevant to its admissibility, though it might go to weight. See also Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 per Branson J ("Red Bull") and Quick v Stoland Pty Ltd (1998) 87 FCR 371 at 373-4.
451 In a recent paper, "Expert Evidence" (2005) 7 The Judicial Review 329, Justice Frank Marks of the Industrial Relations Commission of New South Wales observed that since Makita it had become common practice for parties to object to the tender of expert reports on the basis that the underlying assumptions had not been separately proved. The practical difficulties in determining this issue at the point at which an expert is called should not be underestimated. In Red Bull, Branson J expressed strong reservations regarding the correctness of the approach favoured in Makita. Her Honour was concerned that such an approach would interrupt the smooth running of trials involving expert evidence when ordinarily the better course would be to explore matters of this kind at the end of the trial in the context of the weight to be attributed to the evidence.
452 It has been noted that there is a danger, in complex litigation, that the parties and their legal advisers may "shop" for experts, seeking to overwhelm the court or the other party with the sheer volume, or intricacy, of expert evidence. There is also, inevitably, the risk of bias, conscious or otherwise, on the part of experts, though this is not of itself a reason for excluding their evidence. This matter is often addressed by rules of court, or practice notes.
453 It must be remembered that s 135 of the Evidence Act provides that the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that it might be misleading or confusing, or cause or result in undue waste of time. Section 136 provides that the Court may limit the use to be made of evidence if there is a danger that it might be misleading or confusing. These statutory discretions apply to both civil and criminal cases.
454 Dealing firstly with the RBA's objections to the evidence led on behalf of the applicants, I accept that, ordinarily, material not before the decision-maker at the time of the making of the decision will not be admissible in proceedings for judicial review.
455 This matter was comprehensively discussed in Attorney-General for the Northern Territory v Minister for Aboriginal Affairs where Lockhart J said at 539-40:
"The admissibility of evidence not before the decision-maker depends upon the grounds of review on which the applicant relies before the Court. In the case of some grounds of review (for example, if the decision-maker failed to take into account a relevant consideration) (s 5(2)(b) of the Judicial Review Act) or took into account an irrelevant consideration (s 5(2)(a)) it is difficult to see the relevance of material not before the decision-maker. Other grounds of review (for example, unreasonable exercise of the power (s 5(2)(g)) will generally, lead to the evidence consisting primarily of the material before the decision-maker.
Where the ground relied upon is error of law (s 5(1)(f)) the trend of judicial opinion is that the evidence before the Court is confined to the material before the decision-maker: Attorney-General (NT) v Minister for Aboriginal Affairs (unreported, Federal Court of Australia, Wilson J, No G235 of 1988, 3 August 1988), p 13; Ruangrong v Minister for Immigration and Ethnic Affairs (unreported, Federal Court of Australia, Davies J, 29 March 1988), p 7.
The primary ground of attack upon the first respondent's decision in this case is "that the decision was not authorised by the enactment in pursuance of which it was purported to be made": s 5(1)(d) of the Judicial Review Act.
The determination of whether an action taken falls within the power conferred will often centre on issues of statutory interpretation. The court's task in such a case is essentially that of resolving a legal question, and, where that is the extent of the issue, there will ordinarily be no necessity for adducing material which was not before the decision-maker. Where however there is a question of mixed fact and law, that is, where there is an issue both of statutory interpretation and the requisite factual situation which will bring the statute into operation, there may be a need to adduce additional material. That evidence would be directed to establishing that on the true facts of the case, regardless of the material that was actually before the decision-maker the decision made was one which could not have been lawfully made. In this case the applicants seek to establish that the true fact of the matter is that certain roads within the relevant area were in fact public roads within the meaning of s 11(3) and could not therefore lawfully be included within a grant of land under the Act. In my opinion it is open to the applicant to establish that ground by adducing evidence which was not before the first respondent when he made his decision."
456 This passage was cited with approval in McCormack v Commissioner of Taxationby Sackville J at [38]-[40]:
"As Lockhart J's analysis indicates, the admissibility of evidence on an application for judicial review of an administrative decision will depend on the ground of review and the circumstances of the case. It has been held, for example, that evidence may be admitted where it supports a claim that the applicant has been denied procedural fairness (Percerep v Minister for Immigration and Multicultural Affairs (1998) 86 FCR 483 (Weinberg J)); or that the decision-maker lacked jurisdiction to make the decision because jurisdiction was dependent on an actual state of facts which did not exist (Queensland v Wyvill (1989) 25 FCR 512 at 519-520 per Pincus J, reversed on other grounds in Attorney-General (Cth) v Queensland (1990) 25 FCR 125); or that the decision-maker based the decision on a finding of a particular fact which did not exist (Curragh Queensland Mining Ltd v Daniel (1992) 34 FCR 212 at 224 per Black CJ).
Evidence tendered in support of the ground specified in s 5(1)(d) of the ADJR Act (that the decision was not authorised by the relevant enactment) may or may not be admissible, depending on the issue in the case and the nature of the proffered evidence. In my opinion, the evidence of the partners as to the extent of their involvement in tax planning arrangements was not relevant to any legal issue in the present case. The evidence might have been relevant if the applicants had relied on other grounds of review. (I am not, of course, suggesting that the applicants could or should have done so.) If it had been suggested, for example, that each partner's recent active involvement in tax planning arrangements was a jurisdictional fact, evidence might have been adduced to show that the facts, objectively viewed, were otherwise. The evidence also might have been relevant to a claim that the decision-maker had information before her that should have caused her to make further inquiries about the alleged tax planning activities of the partners: cf Luu v Renevier (1989) 91 ALR 39. Neither of these claims was advanced on behalf of the applicants.
In substance, the only significance of the evidence of the partners' involvement in tax planning activities was that it cast doubt on the accuracy of one of the factual findings made by the decision-maker in the course of reaching her decisions. This does not suffice to make the evidence admissible on an application for judicial review of the decision. Even if it were a ground of review that the material before the decision-maker was insufficient to justify the finding that each partner was one of "the more aggressive partners of E & Y in Sydney", the evidence, since it did not concern material that was before the decision-maker, did not establish or tend to establish that that was the case. In my view, the evidence was not admissible."
457 It should be noted that neither Lockhart J nor Sackville J considered whether it would be open to a party seeking to affirm a decision impugned on the basis of Wednesburyunreasonableness to rely upon expert evidence, tendered to show that the decision was in fact entirely reasonable. In principle, albeit with some reluctance (having regard to the additional time and costs taken up with such evidence), I can see no reason why, in an appropriate case, such evidence should not be admitted.
458 Wednesburyunreasonableness is, in some respects, simply a variant of the ground that a decision-maker lacked jurisdiction to make the decision because jurisdiction was dependent on an actual state of facts that did not exist, or that the decision-maker based the decision on a finding of a particular fact that did not exist. If additional evidence is available, in cases reliant upon such grounds, there is no reason in principle why such evidence should not also be admissible where the ground is couched in terms of unreasonableness.
459 That is not to say that the tender of such evidence should be encouraged. Nor is there any basis for a conclusion that it can be admitted as of right. As Sackville J correctly observed, everything depends upon the grounds of review, and the circumstances of the case.
460 When it is put that a body, such as the RBA, acted irrationally, and not in accordance with sound economic principles, the fact that experts in "payment systems" and regulatory theory say that they would have arrived at the same decision must be probative, at least as regards that issue. What is "sauce for the goose, is sauce for the gander". It follows that evidence by experts that the decision to designate was taken in disregard of fundamental, and quite basic economic principles, must equally be admissible as bearing upon the same issue. I therefore reject the RBA's general objections to the evidence of Mr Gove and Dr Williams.
461 I also reject the RBA's numerous objections of a specific nature to the evidence of these witnesses.
462 In relation to Dr Williams, the RBA referred to Seven Cable Television, previously discussed at [278]-[280]. The RBA also referred to the Visa case, previously discussed at [281].
463 The RBA submitted that s 8 of the PSR Act, which provides that considerations of efficiency and competitiveness must be taken into account when determining, for the purposes of that Act, whether particular action would be in, or contrary to, the "public interest", gives primacy to the RBA's opinion regarding such matters. Accordingly, it submitted, Dr Williams' opinion as to whether the RBA's approach was consistent with the principles of economic efficiency was entirely irrelevant, and therefore inadmissible.
464 The RBA submitted that Mr Gove's report raised even more acute problems of admissibility. It was submitted that the report contained a plethora of legal contentions, a number of them based upon fundamental misconceptions. For example, Mr Gove was said to have assumed, implicitly at least, that the RBA was somehow "required" to take various matters that he identified into account. In truth, that assumption was unwarranted. In addition, it was submitted that Mr Gove's report contained much that was purely speculative, and that it went into areas that travelled far beyond his field of expertise.
465 I am not persuaded by any of these contentions.
466 I have some difficulty with aspects of Mr Gove's report. It is true that he has made certain assumptions about what the RBA was, and was not, required to take into account. A number of those assumptions may have been misplaced. However, in my view, these matters, all of which were brought out in cross-examination, go to weight, and not admissibility.
467 With regard to Dr Williams, I consider that his report sets out, in a helpful manner, the analysis that a highly reputable economist might adopt when considering the meaning of terms such as "efficient" and "competitive" in the context of the PSR Act. The perspective of an economist was certainly one that the PSB was entitled, and perhaps required, to bring to bear when determining whether to designate EFTPOS as a payment system under that Act. Indeed, it seems clear from the Statement that the PSB did approach the question of designation largely from an economic perspective. Of course, s 8 provides, in terms, that the RBA "may have regard to other matters that it considers are relevant" (though it is not required to do so). Nonetheless, in the context of a challenge to the Decision based in part upon Wednesburyunreasonableness, Dr Williams' opinions are, in my view, relevant and admissible.
468 The RBA also objected to Mr Lembit's survey report. It submitted that the report was irrelevant because it post-dated the Decision, and contained information that was not before the decision-maker at the time the Decision was made. It also submitted that Mr Lembit did not have the relevant expertise, in accordance with the requirements of s 79 of the Evidence Act, to express views about questions of statistical significance. Finally, it objected to substantial parts of the report on the basis that they were hearsay: Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313 at 360.
469 In my view, Mr Lembit's evidence was admissible. Any criticisms that were levelled at the survey should be regarded as going to weight, rather than admissibility.
470 Turning then to the applicants' objections to the evidence of the experts called on behalf of the RBA, I reject the general submission that virtually the whole of that evidence was irrelevant. I also reject the more specific contention that those parts of that evidence that encompass underlying assumptions that are not made sufficiently explicit, or in relation to which there is no evidence in the proceeding to support them, should be excluded.
471 In an application for judicial review that is based in part at least upon Wednesbury unreasonableness, it is difficult to see how the party seeking to support the decision can be prevented from leading evidence from appropriately qualified experts to rebut that claim. I have already indicated that, in a case of this kind, experts can express opinions regarding the meaning which technical terms, such as "efficient" and "competitive", have among economists. That seems to me to accord with the principles laid down by the High Court in Agfa-Gevaert. It also accords with the approach adopted by Tamberlin J in the Visa case.
472 I am satisfied that the evidence given by Professor Katz is admissible in this proceeding, because it assists in understanding the meaning which these terms have for economists. Professor Katz's evidence is also admissible on the basis that it is substantially relevant to the RBA's defence to the applicant's claim that the Decision was unreasonable, in the Wednesbury sense. The same may be said of the evidence given by Dr Fitzgerald. In my view, both Professor Katz and Dr Fitzgerald set out with sufficient clarity the factual assumptions that lay behind their respective opinions. Moreover, there was sufficient evidence, from other sources, to render those assumptions realistic, and at least, in some measure, accurate. Where such evidence is lacking, the deficiency goes to weight, and not to admissibility.
473 I am unable to accept the applicants' contention that the evidence of Professor Katz and Dr Fitzgerald should be excluded because neither was qualified to comment upon any of the matters that might reasonably fall within the expression "the public interest" in s 11 of the PSR Act. It is plain from the context in which that expression is used that it does not bear its ordinary, open-textured or rhetorical meaning. Rather, it is used in a somewhat special sense which embodies, in part, at least some of the principles of welfare economics. Both Professor Katz and Dr Fitzgerald are amply qualified to express opinions about "efficiency", in the economic sense in which that term is used.
474 I am also unable to accept the applicants' contention that the RBA's experts were asked the wrong question by its solicitors, and that this renders the evidence inadmissible. I accept that the instructions could have been expressed more felicitously, and the experts' attention drawn more clearly to the issue of designation, rather than the determination of a standard. However, this seems to me to be a matter of weight, rather than admissibility, and does not warrant the exclusion of the evidence.
475 The position regarding Professor Farrell's report is somewhat more complex. Much of what he had to say involved an explanation of the various methods, and analysis that he undertook to determine whether, in his opinion, designating EFTPOS, and reducing the interchange fee, would promote "efficiency". In effect, Professor Farrell carried out his own assessment of that question, using techniques, including a "coalitional approach", that he described as "alternatives" to those adopted by the RBA. He justified that course by contending that, in reality, the PSB had implicitly used those techniques.
476 In my opinion, Professor Farrell's "coalitional approach" bore little, if any, relationship to the actual reasoning adopted by the PSB. That does not, of itself, render it inadmissible. A challenge to a decision based upon Wednesbury unreasonableness, or on a "no evidence" ground, could, in some cases, be rebutted by showing that the decision might have been arrived at, or supported, by some means other than the reasoning actually employed.
477 However, there are sound reasons for limiting the admissibility of evidence of this type. The more far removed the theory proffered to support the decision is from the actual reasoning employed by the decision-maker, the more likely it is that judicial review will degenerate into the kind of interminable excursus into merits review that Aronson comments upon. Of course, much will depend upon how coherent, and comprehensible, the alternative reasoning happens to be, as well as how far removed it is from the actual reasoning that is impugned.
478 In the present case, I can see no justification for embarking upon a detailed consideration of Professor Farrell's "coalitional approach" when that theory has little, if anything, to do with the reasoning embodied in the Statement. That is particularly so when one has regard to the sheer complexity, and difficulty associated with comprehending the alternative theory, a matter to which I shall next turn.
479 The applicants objected to the admissibility of a ninety-two page attachment to an earlier report prepared by Professor Farrell in April 2003, at the time the RBA was considering designation of the credit card system. That report embodied the evidence-in-chief given by Professor Farrell in the Visa case. In my view, it was utterly irrelevant to the present proceeding, and should not have been tendered.
480 If I am wrong in holding that Professor Farrell's evidence was insufficiently relevant to warrant admissibility, I would nonetheless exclude that evidence in the exercise of my discretion. I would do so pursuant to s 135 of the Evidence Act, on the basis that, read as a whole, it is confusing. Having attempted, I believe assiduously, to understand the gist of Professor Farrell's evidence, as set out in his various reports, I regret to say that I cannot make a great deal of sense of considerable parts of that evidence.
481 Two illustrations of the difficulty in comprehending Professor Farrell's evidence will suffice. Under the heading "Strict Allocative Efficiency", at 5 of "Technical Appendix A", Professor Farrell observes:
"For strict allocative efficiency, the cardholder should choose payment system A over B if and only if:
where b1ch represents marginal net cardholders benefits, RC represents marginal resource cost."
482 I have only the vaguest notion of what this means.
483 Under the heading "The Ramsey Problem" in "Attachment B-1" to "Appendix B", Professor Farrell purports to provide a "solution" to that problem in the following terms:
"Assume for simplicity that:
where F is a fixed cost of production, c1 is the marginal cost of debit card services and c2 is the marginal cost of all the other services supplied by the bank. The first-order conditions of the standard Ramsay problem described above can be written as follows:
Where λ is the marginal utility of income (ie, the Lagrange multiplier associated with the budget constraint (1)) and µ is the consumers' marginal disutility of the bank's required profit (ie, the Lagrange multiplier associated with the profit constraint (3)).
Assumer for simplicity that preferences are quasi-linear, ie, U(x1, x2, x3) is of the form µ(x1, x2) + x3. This implies λ=1 and no income effects, ie, the Marshallian demand functions, D1(p1, p2) and D2(p2, p1), are identical to the Hicksian demand functions. It then follows from Slutsky symmetry that:
We can thus rewrite (5) as follows:
"
484 Once again, this means nothing to me. In making that observation, I do not intend to cast any doubts upon Professor Farrell's technical expertise. Plainly, I am in no position to do so. To be fair, the mathematical formulae set out above were in technical appendices. Perhaps Professor Farrell assumed that any judge hearing a matter of this kind would be able to understand material presented in this manner. If so, he was mistaken, at least as far as I am concerned.
485 I regret to say that evidence presented to a court in this form is likely to be unhelpful, and really should not be adduced. The technical appendices provide a significant part of the rationale for Professor Farrell's conclusions, which are themselves not altogether easy to follow. Having regard to the difficulty that I have in understanding Professor Farrell's reasoning, I propose to exclude his evidence in-chief in its entirety. I am prepared, however, to have regard to those parts of his evidence, under cross-examination, that I was able to understand.
486 The criticisms levelled by the applicants at Professor Katz and Dr Fitzgerald were somewhat narrower in scope, and in my opinion, unwarranted. I found Dr Fitzgerald, in particular, to be a highly intelligent and thoroughly competent expert witness, with a sound grasp of economic theory and practice. He also understood Australian economic conditions, in a way that that neither Professor Katz, nor Professor Farrell, could possibly hope to emulate. I will therefore receive the evidence of Professor Katz and Dr Fitzgerald, treating any of the numerous, but minor, criticisms legitimately levelled at that evidence as going to weight, rather than admissibility.
487 Finally, having ruled that the evidence of Mr Lembit was admissible, it must follow that the evidence of Professor Dunsmuir, in rebuttal, is also admissible.