Sherwood v Commonwealth Bank of Australia

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION NSD 811 of 2010

JUDGE: REEVES J DATEs: 10 APRIL 2013, 7 may 2013, 9 may 2013, 17 july 2013 PLACE: BRISBANE

REASONS FOR JUDGMENT (corrected from the transcript) 1 These proceedings are representative proceedings brought under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) against the Commonwealth Bank of Australia (the Commonwealth Bank) and Colonial First State Investments Ltd. Two couples, Mr and Mrs Sherwood and Mr and Mrs McArdle, are the lead applicants. For convenience, I will refer to the applicants and group members collectively as the Sherwoods (except where it is necessary to refer to Mr and Mrs Sherwood or Mr and Mrs McArdle separately as a couple). For the same reason, I will refer to the Commonwealth Bank and Colonial First State Investments Ltd collectively as the Commonwealth Bank. 2 In the course of the hearing of these proceedings, I have been required to decide a number of interlocutory applications and to make a number of evidentiary rulings. It was my usual practice to give ex tempore reasons for my decisions on these applications and rulings and to publish those reasons subsequently corrected from the transcript, if one of the parties sought a set of published reasons, or if I considered the particular decision warranted that course being taken. These reasons relate to five such decisions. They were: (a) a joint application to separate the issues raised by the Commonwealth Bank in its defence and cross-claim, and contested in the Sherwoods' reply and defence to the cross-claim, from the issues to be determined at the trial of these proceedings (the separate question application); (b) what became, in effect, two applications by the Sherwoods to amend their statement of claim to expand the unconscionable conduct claims made by them (the amendment applications); (c) an application by the Sherwoods to rely on expert evidence from Mr Neil Kendall (the expert evidence application); (d) an objection to the admission of paragraph 224 of the statement of agreed facts for Mr and Mrs Abdy (the Abdy ruling); and (e) various objections to the admission of the transcripts of the examinations of Mr Edward Tait (the Tait ruling).

BACKGROUND 3 The allegations made by the Sherwoods against the Commonwealth Bank relate to its conduct in connection with a company named Storm Financial Limited (Storm). From the late 1990s until late 2008, Storm conducted a financial planning business providing financial advice to customers in North Queensland and various other parts of Australia. During this period, Storm developed an approach - described in these proceedings as the Storm Model - whereby it advised its customers to access the capital base they had accumulated (usually, but not always, by borrowing against the equity in their homes) and in most cases, but not all, to leverage or gear the funds so accessed by way of a margin loan, so that they could then invest the combined sum in the Australian share market, usually using Storm-badged index funds. 4 The Sherwoods were clients of Storm and they had acted on its advice to take out an investment home loan, or loans, and a margin loan, or loans, with the Commonwealth Bank. 5 The claims the Sherwoods have made against the Commonwealth Bank fall into five broad categories, as follows: (a) that it jointly operated an unregistered managed investment scheme with Storm, in contravention of the Corporations Act 2001 (Cth) (the Corporations Act), or alternatively, it was "knowingly concerned" in Storm's contravention of the Corporations Act by operating an unregistered managed investment scheme; (b) that it engaged in misleading or deceptive conduct in contravention of the Australian Securities and Investments Act 2001 (Cth) (the ASIC Act) and the Trade Practices Act 1974 (Cth) (the TPA); (c) that it breached express or implied terms of its contracts with the Sherwoods, many of which involve the incorporation of provisions of the Code of Banking Practice; (d) that it acted unconscionably in contravention of the ASIC Act and the TPA; (e) that it was a "linked credit provider" to Storm, as that expression is defined in s 73 of the TPA, and is therefore liable for Storm's alleged misrepresentations, breaches of implied warranties and breaches of contract. 6 By way of relief the Sherwoods have sought, among other orders, an order that the Commonwealth Bank pay damages to them.

The separate question APPLICATION 7 Turning to the first decision, as noted above (at [2(a)]), the separate question application was an application made jointly by the parties to separate the issues raised by the Commonwealth Bank's defence and cross-claim and the Sherwoods' reply to the defence (and later their defence to the cross-claim) from the other issues in these proceedings and to have that issue determined after the trial of these proceedings concludes. By the time submissions had concluded on this application, it was the eleventh day of the trial. At that stage, the trial was set to continue for approximately four to five weeks. As the procedural history set out under the expert evidence application below discloses, the trial ultimately proceeded much longer than that. However, that was not anticipated at the time this separate question application was heard. 8 The particular issue that is the subject of this application first came to the fore when the Sherwoods filed their amended reply to the Commonwealth Bank's amended defence and cross-claim. That document was filed on the Friday afternoon before the trial commenced on 4 March 2013. Furthermore, it was filed about 10 business days beyond the deadline of 19 February 2013 set by my orders of 12 February 2013. In it (at paragraph 38), the Sherwoods pleaded that the Commonwealth Bank was not entitled to the set off it had raised in its defence in relation to Mr and Mrs McArdle's home loan because it had breached an express term of their home loan contract. The alleged express term was to the effect that the Commonwealth Bank would exercise the care and skill of a diligent and prudent banker in selecting and applying its credit assessment method and in forming an opinion about Mr and Mrs McArdle's ability to repay the monies it lent to them. The Sherwoods claimed that term was imported into their home loan contract by virtue of the provisions of the Code of Banking Practice. 9 On the first day of the trial, Mr Finch SC, for the Commonwealth Bank, claimed that this plea in the Sherwoods' amended reply raised a new issue in the proceedings. At that time, the parties mistakenly thought that these issues, raised by the Commonwealth Bank's defence and cross-claim, were not to be dealt with at this trial, but were to be determined at a later stage of these proceedings. Acting on this mistaken assumption, it was therefore proposed, by consent, that this issue would also be deferred to that later stage of these proceedings. This mistake became apparent about 10 days into the trial. As a consequence, the parties proposed, by consent, that this issue alone should be deferred to a later stage of these proceedings. It was this proposal that led to this separate question application. 10 Ordinarily an application for orders where both parties consent should result in those orders being made. This proposition is, of course, subject to the qualification that making those orders does not offend some basic principle. In this case, I consider the proposed consent orders do just that. Trial is the process whereby the judicial system in this country resolves the disputed issues of fact and law that have been raised between the parties in proceedings before a court. To achieve this, the parties to a dispute are generally required to ensure that the whole of the controversy between them is incorporated in the one set of proceedings or, put negatively, to avoid causing a multiplicity of proceedings before the courts. A concomitant of that approach is that, generally, the whole of the matters in controversy between the parties to a dispute is resolved at the one trial. 11 There are, of course, exceptions to the latter. They include that, in certain circumstances, trials may be held of separate questions or issues within the one set of proceedings. However, as Kirby and Callinan JJ remarked in Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 at [168]: The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap. 12 This approach of having one trial of all the issues in dispute between the parties to a set of proceedings achieves a number of things. They include avoiding the unnecessary prolongation of court proceedings, thereby avoiding the continuing stress and uncertainty that litigation inevitably causes to the parties; excluding the opportunity for a litigant who is dissatisfied with the outcome at an earlier stage of proceedings to expand the areas of controversy at a later stage to attempt to redress that dissatisfaction; and avoiding conflicting findings of fact being made on similar issues at different stages of proceedings. As a consequence of these and many other similar considerations, subject to questions of prejudice, this approach is usually the most just, inexpensive, quick and efficient way of disposing of proceedings before a court. That is, of course, the overarching purpose of civil litigation in this Court, which is reflected in Pt VB of the Federal Court Act. 13 The caveat I have expressed, "subject to questions of prejudice", refers, among other things, to the prejudice that may be caused to one of the parties to the proceedings if, in the particular circumstances, all the issues in dispute were to be considered at the one trial. This links with the considerations of delay, expense and the waste of public resources that underlie the overarching purpose prescribed in Pt VB and the considerations that are discussed in the High Court's decision in Aon Risk Services Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon). 14 However, in this particular application, no such questions of prejudice arise. That is so because during submissions Mr Finch informed me that, based on the limited inquiries that he had been able to make in the short time available to him, he was unable to point to any such prejudice. He informed me that the particular issue that is raised in his client's amended defence and cross-claim, and contested in the Sherwoods' amended reply, can be addressed by his client during the course of this trial if reasonable accommodations are made to allow it to, for example, deliver further witness statements outside the timetable set by the trial programming orders made on 23 September 2011. Given the circumstances in which this application has been made, those sorts of reasonable accommodations will, of course, be afforded. 15 At this point, it is appropriate to note some pertinent features of the issue (see at [8] above) that is at the heart of this application. First, a similar issue is already raised in the Sherwoods' fourth further amended statement of claim (the statement of claim) in relation to Mr and Mrs Sherwood's home loans. Secondly, relative to the many issues that are alive in these proceedings, on its face, this issue is quite limited in its scope - whether the alleged term exists and, if so, whether it was breached. Thirdly, the Sherwoods' amended reply has confined the area of the factual dispute involved in the issue to two documents and to a specific circumstance, viz the calculation of Mr and Mrs McArdle's financial commitments at the time that their home loan contract was entered into. 16 Given all these features, I consider it would be an affront to basic principle to hive this quite confined issue off as a separate issue and have it, alone, determined at some later stage of these proceedings. Conversely, I consider the most just and efficient course is to have this issue determined at this trial as a part of all the many issues in dispute between the parties to these proceedings. This necessarily means I refuse to make the consent orders sought by the parties.

THE AMENDMENT APPLICATIONS 17 Turning to the second decision, as outlined above (see at [2(b)]), the amendment applications seek to expand the unconscionable conduct claims the Sherwoods have made against the Commonwealth Bank. Submissions on these amendment applications concluded at the same time as the submissions on the separate question application, that is the eleventh day of the trial of these proceedings (see [7] above). 18 The two applications to amend are made in the alternative. The primary application has three components to it. First, the Sherwoods seek to expand the period to which their unconscionable conduct claims relate by about eight years. That is proposed to be achieved by amending the commencing date of the apposite period from: "after March 2007" to: "the year 1999". Secondly, they seek to include five new transactions that were allegedly affected by the Commonwealth Bank's unconscionable conduct: four relating to Mr and Mrs Sherwood and one relating to Mr and Mrs McArdle. Finally, they seek to amend the common questions to be determined in these proceedings under Pt IVA of the Federal Court Act to include a question that reflects their amended unconscionable conduct claims as expanded by the first two components above. 19 If allowed, these various amendments would therefore significantly expand the period to which the Sherwoods' unconscionable conduct claims relate and at the same time introduce five new transactions for consideration at this trial. Among other things, that would require the Commonwealth Bank's legal advisers to thoroughly investigate each of those five new transactions and the circumstances surrounding them. As I indicated during debate about this primary amendment application, because of these factors I have formed the firm view that if these amendments were to be allowed they would so significantly extend the scope of the Sherwoods' unconscionable conduct claims that fairness would dictate that the Commonwealth Bank should be granted an adjournment of the trial to properly investigate them and to prepare its case in response to them. 20 At this point, it is convenient to mention that, in an attempt to counter the Commonwealth Bank's submission about the extent to which these amendments expanded the Sherwoods' case in these proceedings, and therefore necessitated any adjournment of this trial, Mr Dubler SC, counsel for the Sherwoods, submitted that throughout these proceedings, the Sherwoods' linked credit provider claims (see [5(e)] above) have raised for consideration the Commonwealth Bank's conduct in the whole of the period since June 2000. Taking into account this background, Mr Dubler submitted, the eight year extension of the time period effected by these amendments was therefore much less significant than it might appear to be on its face. While this may be so insofar as the time period itself is concerned, in my view, it is not valid to make such a comparison between these two kinds of claim. In the first place, the unconscionable conduct claims focus on the Commonwealth Bank's conduct whereas the linked credit provider claims focus on Storm's conduct. And secondly, the unconscionable conduct claims are directed to questions of fairness as between the Sherwoods and the Commonwealth Bank whereas the linked credit provider claims primarily relate to the terms of the various contracts entered into between the Sherwoods and Storm. For these reasons, the issues that arise in relation to the Sherwoods' unconscionable conduct claims are so fundamentally different to those that arise on their linked credit provider claims that I do not consider the existence of the latter claims throughout these proceedings serves to remove or reduce the prejudice the Commonwealth Bank will suffer if these amendments were to be allowed. 21 My firm view about the need to adjourn this trial if this primary application were granted led inexorably to the considerations discussed by the High Court in Aon. It also brought to the fore the overriding purpose of civil litigation as stated in Pt VB of the Federal Court Act (discussed briefly above at [12]-[13]). An important consideration discussed in Aon (see Aon at [102]-[103]) is whether a satisfactory explanation has been offered for a late application to amend like this one. In this instance, the explanation offered was that the Sherwoods' legal advisers have only recently concluded that these claims were available and should be pursued. That explanation has been offered against the background of the complexity and size of these proceedings. In this respect, it is worth noting that these proceedings involve numerous individual transactions stretching over a relatively long period of time, dozens of witnesses and many thousands of documents. The Sherwoods also relied on the fact that there was a change in their senior counsel in November 2012, about four months before this trial began. This meant that the incoming senior counsel were pre-occupied familiarising themselves with the case and preparing for this trial. While I accept this explanation, it calls for a consideration of the other matters discussed in Aon. Some of those considerations are discussed at [51]-[55] below, others include the following: (a) a just outcome in an amendment application requires account to be taken of other litigants, not just the parties to the proceedings in question: at [95]; (b) speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings: at [98]; (c) the extent of the delay and associated costs together with the prejudice shown and that which might reasonably be assumed to follow is to be weighed against the grant of permission to a party to alter its case: at [102]; (d) the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion: at [102]; (e) much may depend upon the point the litigation has reached relative to a trial. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates: at [102]. 22 With these considerations in mind, I consider these aspects of these applications are significant. First, these proceedings have been closely case managed throughout the relatively long period leading up to this trial and considerable public resources have been devoted to them and to the allocation of the current trial dates. In that respect, it is worth adding that this trial presently involves approximately six to eight weeks of hearings in total. Secondly, the adjournment of this trial will mean that the remaining hearing days that are currently allocated for this trial will have to be vacated. That will, of course, result in a significant loss of public resources. It will also result in those trial dates being lost to other litigants, many months delay occurring in these proceedings while fresh trial dates are found and a significant increase in costs for all the parties concerned. Taking into account these considerations and the others discussed during the hearing of these applications, I do not consider it is in the interests of justice to allow the Sherwoods to make the amendments sought by their primary application. 23 In the event that their primary amendment application was unsuccessful, the Sherwoods put forward two alternative positions. The first was that the primary amendments to expand the unconscionable conduct claims should at least be allowed in relation to the group members' claims. As I understand it, that would mean the group members' claims would extend to the period commencing from the year 1999 and to all the transactions that were made between the Commonwealth Bank and any of the group members over that period (excluding those involving Mr and Mrs Sherwood and Mr and Mrs McArdle). This would also require amendments to be made to the common questions that are presently before the Court. 24 Significantly, in submissions on this first alternative position, Mr Dubler accepted that this is the first time in these proceedings that any unconscionable conduct claims have been advanced on behalf of the group members, extending before March 2007. It necessarily follows, in my view, that the inclusion in this trial of these expanded unconscionable conduct claims, even if they are limited to the group members' claims, will raise the same sorts of considerations as I have mentioned above in rejecting the Sherwoods' primary amendment application. I might add that it is difficult to see how appropriate common questions could be drafted in relation to these claims when the lead applicants' application to introduce them has already been rejected. For these reasons, I reject the Sherwoods' first alternative position. 25 The Sherwoods' second alternative position was that amendments ought be allowed to introduce a discrete unconscionable conduct claim in relation to what I will refer to as the "McArdle Home Loan Agreement". That agreement was made in or about March 2007 and is defined in paragraph 52J of the Sherwoods' statement of claim. This amendment involves the insertion of the words "McArdle Home Loan Agreement" and "McArdle Home Loan Advance" at various paragraphs of the statement of claim, including paragraphs 155, 157 and 167. In response to this second alternative position, Mr Finch informed me he will be able to accommodate this amendment, provided that reasonable accommodations are made during the course of the trial similar to those mentioned above (see at [14] above). In those circumstances, I will grant the Sherwoods leave to make the amendments involved in this second alternative position.

THE EXPERT EVIDENCE APPLICATION 26 Turning to the third decision, as outlined above (at [2(c)]), the applicants have applied for leave to rely upon certain expert financial planning evidence from Mr Neil Kendall. Mr Kendall's proposed evidence is contained in a report that was served on the Commonwealth Bank on 1 May 2013: the twenty-second day of the trial of these proceedings. The submissions regarding Mr Kendall's evidence were completed on the twenty-sixth day of the trial. By that time, Mr and Mrs Sherwood and Mr and Mrs McArdle had completed their evidence. I will return to the significance of this fact later in these reasons. 27 The Sherwoods require leave to rely upon Mr Kendall's evidence because the often-extended timetable for the service of such expert evidence under the trial programming orders made in these proceedings expired more than three months ago. The history to those trial programming orders, specifically as they relate to expert evidence, is particularly pertinent to this application, so it is appropriate to briefly set it out. 28 The first set of orders dealing with the service of all witness evidence, including expert witness evidence, was made on 23 September 2011. Those orders required that the Sherwoods were to file affidavits, or outlines of evidence, in respect of any witness they proposed to call at the trial of these proceedings by 13 April 2012. The Commonwealth Bank was required to do likewise in relation to their witnesses by 6 July 2012. 29 In time, it became clear that the Sherwoods sought to rely upon two kinds of expert evidence to support their claim for damages (see [6] above): expert accounting evidence from Mr Andrew Perkins from the firm of Williams Hall Chadwick and expert financial planning evidence from Adjunct Professor McMaster. The Commonwealth Bank elected not to retain a financial planning expert, but sought to adduce expert accounting evidence from Mr Tony Samuel of Sapere Forensic. 30 By the end of August 2012, among other extensions of time granted to both parties, the Sherwoods had obtained two extensions for the service of their expert accounting evidence and one extension for the service of their expert financial planning evidence. The Commonwealth Bank was also granted an extension for the service of their expert accounting evidence. 31 These proceedings and two other sets of proceedings variously involving the Australian Securities and Investments Commission (ASIC), Mrs Tracey Richards as the lead applicant, the Bank of Queensland and Macquarie Bank Limited (Macquarie Bank) were originally set down for trial to commence in September 2012. However, when the Commonwealth Bank reached a settlement of its dispute with ASIC in those combined proceedings, these proceedings were separated from them and the trial dates for these proceedings were moved back to March 2013. This did not affect the trial of the remainder of those combined proceedings. That trial began in late September 2012 and continued through the latter part of 2012 and into February 2013. 32 Those combined proceedings included representative proceedings by Mrs Richards against Macquarie Bank. Mrs Richards is represented by the same firm of solicitors as the Sherwoods in these proceedings. However, different counsel have appeared at the respective trials of the two sets of proceedings. At about the same time as these proceedings were separated from the combined proceedings, the accounting experts for the parties in these proceedings were ordered to confer and produce a joint report. Both parties subsequently sought an extension of time for the production of that joint report. 33 On 10 December 2012, Professor McMaster gave evidence for the applicant in the trial of the representative proceedings against Macquarie Bank mentioned above. In the course of his cross-examination, Professor McMaster was forced to make a number of concessions about the inaccuracy of some of the calculations contained in his report. That culminated in him being given leave to amend his report overnight. He did that and his cross-examination was completed on the following day. 34 These proceedings were listed for pre-trial directions some days after Professor McMaster had completed his evidence in the combined proceedings. At that directions hearing, the Sherwoods sought leave to file supplementary reports from each of Mr Perkins and Professor McMaster. Mr Finch objected to that leave being granted. In the course of submissions on that application, I had the following exchange with Mr Lo Surdo SC, who appeared as counsel for the Sherwoods: HIS HONOUR: In order 1(c) of your short minutes, you refer generally to a financial planning expert without identifying Professor McMaster as that person. Was that deliberate? MR LO SURDO: Your Honour, the intention at this stage is that it be a supplementary report from Adjunct Professor McMaster. If that changes, we will certainly take the necessary steps. 35 Since the trial of these proceedings was not then due to commence until early March 2013, I concluded that allowing the Sherwoods leave to file those reports would not unduly interfere with the efficient case management of these proceedings. Accordingly, I allowed the Sherwoods until 28 January 2013 to file any further expert reports they wished to. I also allowed the Commonwealth Bank a corresponding extension until 21 February 2013 and I made orders for a further joint conference of the accounting experts. 36 Professor McMaster's further report was served one day late, on 29 January 2013. The trial of these proceedings commenced on 4 March 2013. 37 During the course of opening submissions for the Sherwoods, Mr Dubler made a number of references to Professor McMaster's report. Then, on the second day of his opening submissions, Mr Dubler informed me that the Sherwoods had engaged a second financial planning expert. Mr Finch informed me that he had first received notice of this development earlier that morning. Mr Dubler stated that he expected the new expert's report to be available in mid-April and that he was not sure what use they would make of it, specifically whether he would make an application to replace, or supplement, Professor McMaster's evidence with it. 38 Mr Finch opposed the course proposed by Mr Dubler and sought to have me make a guillotine order preventing any such expert's report being relied upon at the trial of these proceedings. Mr Finch expressed concern that his client would be disadvantaged if the Sherwoods were to obtain leave to replace, or supplement, Professor McMaster's evidence after he had already cross-examined the principal applicants on the basis of the views expressed in his reports. 39 Mr Dubler submitted that neither party could, at that stage, properly address me on Mr Finch's application for a guillotine order because it was not then known whether or not the proposed expert's report would be used and, if so, how. Given that Mr Dubler was not actually making an application to rely on this proposed expert's report and was merely informing me of his intention to obtain that report, I did not consider it was appropriate for me to make a guillotine order of the kind sought by Mr Finch. 40 Nonetheless, I consider at least two things were clear to everyone as a result of that exchange. First, Mr Finch made it clear that he intended to proceed to conduct the cross-examination of the four lead applicants based on the statements contained in their affidavits of evidence that had, by that time, long since been served. In particular, he pointed to their statements that they had read and adopted specific parts of Professor McMaster's reports. Secondly, the Sherwoods had made a deliberate forensic decision to proceed with the trial on the basis of the reports of Professor McMaster that had already been served and to leave any decision whether to seek leave to call replacement or supplementary evidence from another financial planning expert, to a later time of their choosing. 41 The trial proceeded and, as I have already noted, all four lead applicants gave their evidence and were cross-examined at quite some length by Mr Finch. 42 In the meantime, the question of this further expert evidence lay dormant until last Wednesday, 1 May, when the Sherwoods served the report of Mr Kendall on the Commonwealth Bank. At the same time, they filed the present application seeking leave to call evidence from him. 43 In submissions, I was referred to a number of authorities. However, with the exception of one of them, viz Williams v Commonwealth Bank of Australia Ltd (unreported, Tamberlin J, 5 May 1995) (Williams), I did not find those authorities to be of much assistance to me. That was so essentially because they dealt with very different situations to the present one and/or were decisions of courts that did not operate a docket system, as this Court does. Williams is of assistance because it is a decision of this Court that dealt with a not dissimilar situation. There, Tamberlin J allowed the applicant to call further expert evidence on the seventh day of a trial, which had at that stage only been fixed to last for about that period. However, his Honour ordered the applicants to pay the costs thrown away on an indemnity basis. It is worth noting that this decision was delivered in 1995, about one and a half decades before the seminal High Court decision of Aon. Aon is the most obvious and authoritative source of the relevant principles in dealing with this application. 44 Before examining those principles it is useful to briefly discuss the High Court decision of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; [1997] HCA 1 (JL Holdings), which preceded Aon. The situation that arose in JL Holdings was very different to both Aon and the current application. There, the application (to amend the defence) was made well before trial, indeed, about six months, and involved an issue that could not have been avoided at the trial. Nonetheless, that decision was interpreted by the courts as placing more emphasis on the injustice of shutting a party out from pursuing an arguable claim or defence in proceedings and placing less emphasis on case management considerations when dealing with applications of the present kind. 45 In Aon, French CJ observed (at [30]), after quoting from JL Holdings: It might be thought a truism that "case management principles" should not supplant the objective of doing justice between the parties according to law. Accepting that proposition, JL Holdings cannot be taken as authority for the view that waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants, should not be taken into account in the exercise of interlocutory discretions of the kind conferred by r 502. 46 Rule 502 was the applicable rule of the Australian Capital Territory Supreme Court in issue in Aon. 47 His Honour continued (at [30]): Also to be considered is the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification, whether they be for adjournment, for amendments giving rise to adjournment, or for vacation of fixed trial dates resulting in the resetting of interlocutory processes. 48 The joint decision of Gummow, Hayne, Crennan, Kiefel and Bell JJ contains similar observations (at [98]). Their Honours also rejected a costs order as the universal panacea for the prejudice suffered by the opposite party, observing (at [99]): In the past it has more readily been assumed that an order for the costs occasioned by the amendment would overcome injustice to the amending party's opponent. In Cropper v Smith Bowen LJ described an order for costs as a panacea that heals all. ... The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment. (Footnotes omitted) 49 Their Honours went on to refer to what they described as the strain that litigation imposes upon litigants as an important factor that could not be addressed by a costs order. Lest it be thought that that consideration does not apply to corporate entities like the Commonwealth Bank in these proceedings - one of the world's largest banks - their Honours made the following remarks (at [101]): In Ketteman, Lord Griffiths recognised, as did the plurality in JL Holdings, that personal litigants are likely to feel the strain more than business corporations or commercial persons. So much may be accepted. But it should not be thought that corporations are not subject to pressures imposed by litigation. A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. (Footnotes omitted) 50 These excerpts from Aon emphasise that the paramount consideration in an application of this kind is ensuring that justice is done between the parties, that is, both fairness for the party wishing to pursue a particular course and the corresponding fairness to the party who is resisting that course being taken. As between the parties, these considerations essentially go to prejudice and where it should fall in the particular circumstances of the application at hand. In this application, that requires me to balance the corresponding prejudices that may flow to the Sherwoods and to the Commonwealth Bank, depending on whether the Sherwoods are allowed to rely upon the evidence of Mr Kendall. Before doing that, it is worth emphasising the other considerations identified in Aon that are external to the interests of the parties to the particular litigation in question. Those include the importance of case management considerations, the public interest in the efficient use of public resources, avoiding undue delays in litigation, and avoiding the stress and uncertainty that is inevitably engendered by such delays. 51 I will deal with the prejudice that will likely be occasioned to the Commonwealth Bank first, assuming this application were to be granted. Mr Finch submitted that the Commonwealth Bank's prejudice is such that it cannot be cured by time in the usual way, that is, by an adjournment with costs. He submitted that he had tailored the cross-examination of the four lead applicants, as he said he would at the outset of this trial (see at [40] above), based upon the specific parts of Professor McMaster's reports that were adopted by them in their affidavits that had earlier been served. At paragraph 33 of his written submissions, Mr Finch set out a detailed summary of the approach he had taken in that cross-examination. It is not necessary to set out that summary in these reasons, but I consider it is generally accurate. 52 Whilst I accept the accuracy of that summary, I do not accept Mr Finch's submissions that this particular prejudice cannot be cured by an adjournment with costs. I consider it can be assuaged, if not cured, by requiring the lead applicants to submit themselves to further cross-examination based upon the new or additional matters contained in Mr Kendall's report. It is true, as Mr Finch submits, that this further cross-examination could fall both ways, viz it may provide an opportunity for some of the lead applicants to attempt to overcome any perceived deficiencies in their evidence now that they have had a chance to leave the witness box and discuss their evidence with their lawyers and others. However, if such an attempt were to be made, I consider it would be fraught. That is so because it is likely to be quite obvious and therefore likely to undermine the credibility of the witness concerned. 53 For these reasons, I consider that this particular aspect of the Commonwealth Bank's prejudice can be addressed by requiring the lead applicants to be called for further cross-examination. However, that effectively means this trial would have to be adjourned to allow Mr Finch sufficient time to analyse the contents of Mr Kendall's report and prepare his further cross-examination of the lead applicants. In that process, he will most probably need to obtain advice from a financial planning expert and consider whether his clients now wish to seek to call their own financial planning expert. As I mentioned above at [29], the Commonwealth Bank has thus far proceeded on the basis that they do not wish to adduce evidence from a financial planning expert. 54 As to the period of such an adjournment, Mr Finch says that he should be allowed at least the same amount of time as the Sherwoods' lawyers have had to obtain and consider the report from Mr Kendall. That is, about two months: from 27 February, when they first decided that they should obtain that report, to 1 May, when Mr Kendall's report was served. In my view, this two month period is too generous. That is so because the process that Mr Finch proposes to carry out of consulting with an appropriate expert and undertaking the other preparations I have mentioned above at [53] will occur during an adjournment of this trial rather than while the trial is continuing, as has largely been the case with the Sherwoods' lawyers. Therefore, if he is to be allowed a period which is not interrupted by having to attend to the daily exigencies of the trial, I consider a period of about four weeks is closer to the mark as a fair period for any such adjournment. 55 The other aspect that calls for consideration in assessing the Commonwealth Bank's prejudice in the event of an adjournment is the utility of any associated order for costs. The Sherwoods, through their counsel, advised me this morning that they would submit to an order for the costs thrown away by the late introduction of Mr Kendall's evidence. However, Mr Dubler submitted that indemnity costs should not be ordered and he also opposed the other costs order sought by Mr Finch, viz that costs be taxed and payable forthwith. 56 Rather than decide whether to make those orders, I consider that the most efficient and practical approach is to proceed to assess the efficacy of any associated costs order on the basis proposed by the Sherwoods, that is, that I would only make the usual order for party and party costs thrown away by the late introduction of Mr Kendall's evidence. On that basis, there is a number of matters that combine to significantly reduce whatever panacea may be offered to the Commonwealth Bank by such an order for costs. 57 First, if the order were limited to the usual costs thrown away by the adjournment, that order is, in my view, likely to give rise to the inevitable argument about how much of the Commonwealth Bank's costs were attributable to the late introduction of Mr Kendall's evidence. Secondly, there will be the fact that a party and party costs order usually only covers about 60-70% of the non-defaulting party's costs. Thirdly, I know from other evidence before me that Mr and Mrs McArdle have no assets available to meet such an order for costs and, whilst Mr and Mrs Sherwood are in a better financial position, there is no way of knowing what their financial position may be some years hence when, on the Sherwoods' position, this costs order would most likely be enforced. Finally, as mentioned in Aon (see at [48]-[49] above), no order for costs can remove the stress and anxiety associated with the prolongation of these proceedings. 58 In summary, because of these considerations, an order for costs in the form proposed by the Sherwoods will not, in my view, offer a sufficient panacea to the Commonwealth Bank if this trial were to be adjourned. 59 I will now turn to consider what prejudice is likely to flow to the Sherwoods if the application to rely upon Mr Kendall's evidence is refused. The first point to be made about that prejudice is that Mr Dubler quite properly conceded in submissions that the evidence of Mr Kendall could not be described as being of fundamental importance to the success of the Sherwoods' case. With his written submissions, Mr Dubler provided a schedule comparing the differences between the two sets of experts' reports - that is, Mr Kendall's report and Professor McMaster's various reports. Having examined that schedule, I consider that it demonstrates that there is no significant difference between the evidence these two expert witnesses propose to give. 60 Whilst Mr Dubler submitted that Mr Kendall addresses some issues, such as lifestyle cash, that Professor McMaster does not address and he also uses some different terminology, I do not consider these differences are of such importance or significance that they justify a completely new expert being introduced into this case at this stage. I am left with the clear impression, after hearing the oral submissions on this application, that the Sherwoods' position can largely be reduced to this proposition: they consider that Mr Kendall will be a better witness for them, that is, he will be better able to articulate their case. 61 That is not, of course, the essential role of an expert witness, as Mr Dubler readily conceded. The primary role of an expert witness is to assist the judge to understand evidence about a field of endeavour or study with which he or she may not be familiar. Nothing has been put before me to show that Professor McMaster will not be able to fulfil that role. I include in this, although it is really irrelevant to this case, the calculation errors that he was forced to concede in his evidence in the proceedings against Macquarie Bank (see [33] above). On that aspect, I am assured by Mr Dubler that the Sherwoods are not aware of any such calculation errors in the three reports of Professor McMaster that have been served in these proceedings. 62 Finally, there is the Sherwoods' deliberate forensic choice I discussed above (see at [40]), namely to proceed to rely upon Professor McMaster as their expert witness from the service of the last of his reports in late January 2013 throughout the months leading up to this trial, throughout the opening submissions and then throughout this trial until last Wednesday, when this application was eventually made. 63 In Aon, French CJ made the following observations about that sort of approach (at [24]): Another factor which relates to the interests of the parties but transcends them is the waste of public resources and the inefficiency occasioned by the need to revisit interlocutory processes, vacate trial dates, or adjourn trials either because of non-compliance with court timetables or, as in this case, because of a late and deliberate tactical change by one party in the direction of its conduct of the litigation. 64 Whilst the application in that case related to a significant amendment to the pleadings, given the stage to which this trial has proceeded, I consider the application is likely to have the same impact in these proceedings even though it is of a different nature. 65 To sum up on this question, I do not consider the Sherwoods will suffer any irremediable prejudice if I refuse their application. They will have the evidence of Professor McMaster, whom they have been content to rely upon throughout the course of these proceedings and up until last Wednesday. Conversely, they cannot claim the evidence of Mr Kendall is so important that it is likely to affect their prospects of success in these proceedings. There is also the significant factor that this application is inextricably linked to a deliberate forensic choice made by the Sherwoods. 66 On the other side, I consider an adjournment with an order for costs of the kind proposed by the Sherwoods will not provide sufficient amelioration of the prejudice the Commonwealth Bank will suffer. Nor will it remove the continuing strain that is presented by these proceedings. The flip side of the deliberate forensic choice made by the Sherwoods (above) is that the Commonwealth Bank has devoted considerable time and effort pursuing an approach to the cross-examination of the lead applicants based upon their reliance on parts of Professor McMaster's reports. The Commonwealth Bank should not, without good reason, be deprived of whatever benefit it considers it has gained from that approach. 67 Finally, overshadowing the countering prejudice that is likely to be suffered by the parties to these proceedings is the broader public interest considerations discussed in Aon. In this regard, taking into account the various contingencies involved, I have concluded that, if I allow the Commonwealth Bank an adjournment of this trial for about four weeks, six to eight days of precious hearing time will be lost and the trial of these proceedings is unlikely to be completed until early September 2013. That is about three months later than is currently planned. That will mean the hearing dates that have been allocated to these proceedings will be lost, not only to the parties, but also to other litigants awaiting their dates; there will therefore be a consequent waste of the limited public resources that are made available to the court system; and there will be a delay of some months in the finalisation of these proceedings. All of this will occur in a proceeding that has been closely case managed throughout to endeavour to avoid these sorts of consequences. Accordingly, I do not consider it is in the public interest to adjourn this trial. 68 For these reasons, I refuse the Sherwoods leave to rely upon the expert evidence of Mr Kendall.

THE ABDY RULING 69 I turn now to the fourth decision identified above (at [2(d)]): the Abdy ruling. In the interests of the efficient conduct of the trial of these proceedings, a large amount of evidence has been tendered in the form of agreed statements of fact, that is, statements that the Sherwoods and the Commonwealth Bank have agreed represent the testimony of those witnesses. In addition, a small number of witnesses have given oral testimony. 70 The Commonwealth Bank has objected to paragraph 224 of Mr and Mrs Abdy's (the Abdys) statement of agreed facts. Its sole ground of objection is relevance. That paragraph relates to Mr Raymond Abdy, the Abdys' son, who is fully dependent on his parents after suffering a brain injury. The Sherwoods submitted that paragraph 224 is relevant to what has come to be described as the "consumer issue". 71 That issue is raised by s 12BC of the ASIC Act, particularly subsection (3), which requires the Sherwoods to establish that the various margin loans that are in contention in these proceedings were "of a kind ordinarily acquired for personal, domestic or household use". Section 12BC(4) provides that, unless the contrary is proven, it is presumed that a person was a consumer. 72 Paragraph 224 recounts a conversation between Ms Frawley, the Abdys' financial adviser at Storm, and Mrs Abdy in February 2005 where, among other things, Mrs Abdy told Ms Frawley that Raymond had been selected to represent Australia in the Cerebral Palsy World Championship Games to be held in July 2005 in the United States of America. Mrs Abdy told Ms Frawley that she proposed to travel with Raymond and she therefore needed to withdraw a sum of approximately $5,000 to $10,000 from her Storm investments for that purpose. The succeeding paragraphs go on to describe a withdrawal of a lesser sum, viz $3,000, which, as I understand it, it is accepted was in part used for the purposes of this trip. 73 Mr Dubler, for the Sherwoods, submitted that the subjective purpose of the use of these funds was relevant to the consumer issue, relying upon my decision in the related representative proceedings against Macquarie Bank (see at [31]-[32] above): Richards v Macquarie Bank Limited (No 3) [2012] FCA 1523 (Richards). In Richards, Macquarie Bank objected, on the ground of relevance, to several paragraphs of the statement of agreed facts for Mr and Mrs Ensor. Like the Abdys, the Ensors were clients of Storm. The same consumer issue arose in those proceedings as arises here (see [71] above). The pertinent question in Richards was whether the paragraphs in question in the Ensors' statement of agreed facts were relevant to that issue. At [7] of Richards, I described the content of those paragraphs as follows: Paragraphs 1 to 4 of the Ensors' agreed statement set out their personal circumstances, including matters such as: their age, marital status, dependants, education levels, employment history (including their incomes), the financial position before they became customers of Storm and the nature of their superannuation investments. 74 I concluded (at [13] of Richards) that, taking into account the relatively low threshold for relevance set by s 55 of the Evidence Act 1995 (Cth) (the Evidence Act), there was a sufficient logical connection between that evidence and the consumer issue. 75 For the Commonwealth Bank, Mr Payne SC submitted that the evidence of Mrs Abdy's subjective purpose for the monies was not relevant to the consumer issue. He relied upon two decisions: Bunnings Group Limited v Laminex Group Limited (2006) 153 FCR 479; [2006] FCA 682 (Bunnings) at [113]-[114] and Leveraged Equities Limited v Goodridge (2011) 191 FCR 71; [2011] FCAFC 3 (Goodridge FC) at [416]. 76 In Bunnings, Young J considered whether certain industrial foil products were goods of a kind ordinarily acquired for personal, domestic or household use or consumption. That expression was relevant because it was used in s 74A of the TPA (since repealed) and that provision was in issue in that case. His Honour stated (at [113]-[114]): [113] Having regard to the whole of the evidence, I am satisfied that the products are goods of a kind ordinarily acquired for personal, domestic or household use or consumption within the meaning of s 74A(2)(a). In reaching this conclusion, I have taken into account the differences in marketing, price, attributes and ordinary use of the products by end users upon which the respondent relies. I have also taken into account the common features and applications of reflective foil laminates and white-faced foil laminates. In my opinion, the proper characterisation of the products must give due weight to the three essential properties of the products. They are and were acquired and used in building constructions because they possess those essential properties. To classify the products narrowly on the basis of the particular feature that the foil face is coated with polypropylene would give undue weight to this single facet or characteristic of the particular products, and would misapply the statutory phrase. [114] In my opinion, the special features relied upon by the respondent do not mean that white-faced and other decorative foil laminates are goods of a kind different from reflective foil laminates. Rather, it indicates that white-faced and other decorative foil laminates are a product variant, amongst many different product variants, of standard reflective foil laminates. Nor can it be said that white-faced or decorative foil laminates are the only reflective foil laminates that function as a form of internal roof or wall lining. Both uncoated reflective foil laminates and white-faced foil laminates are and were commonly left exposed to view in commercial and industrial buildings as the only form of roof or wall lining. The relevant difference between the two variations is that if there are special needs for washability, corrosion resistance, light reflectivity, or simply a desire to present a more finished appearance, white-faced foil laminates can provide those extra features at an additional cost. 77 In my view, these paragraphs are not directed to the purpose of the purchase of the goods in question, but rather involve an assessment of the essential characteristics of the goods themselves. While that assessment may be based on objective factors, I do not consider that provides support for Mr Payne's submission that the subjective purpose involved in purchasing particular goods or services is not relevant to the consumer issue. 78 The decision in Goodridge FC is, at least on this aspect, quite brief. It is necessary to outline the preceding paragraph to that relied upon by Mr Payne (see at [75] above) to give some context to the conclusions that are reached in that paragraph. In those two paragraphs, Jacobson J, with whom Finkelstein and Stone JJ agreed, stated: [415] His Honour [the trial judge] held that the conduct of Leveraged Equities in requiring Mr Goodridge to meet the deadlines set in the margin calls of 23 February 2009 was an unconscientious insistence upon its rights: see at [207]-[208]. He found that this contravened s 12CB of the ASIC Act. [416] There are two short answers to this. First, s 12CB applies only to financial services of a kind ordinarily acquired for personal, domestic or household use: see s 12CB(5). Mr Goodridge acknowledged when he entered into the LSA that the funds would be applied wholly or predominantly for business or investment purposes. His evidence that the funds were invested for the purpose of providing for his retirement was not relevant to the question of whether s 12CB was engaged. 79 Mr Goodridge's acknowledgment (see the second sentence of [416] above) appears to be identified much earlier in the decision. At [84], Jacobson J said: The application [for the margin loan] included an acknowledgment by Mr Goodridge that the loan provided pursuant to the application would: "be applied wholly or predominantly for business or investment purposes." 80 On its face, it is difficult to be certain why this acknowledgement demonstrated error on the part of the trial judge. However, when one goes to the trial judge's reasons, it appears to arise from the fact that his Honour made no mention of this acknowledgment by Mr Goodridge in his consideration of the evidence bearing on the purpose of Mr Goodridge's investment. The evidence of that purpose is described in the trial judge's reasons (Goodridge v Macquarie Bank Limited (2010) 265 ALR 170; [2010] FCA 67 (Goodridge TJ) at [201]) as follows: Mr Goodridge's purpose in acquiring, through his margin loan, and holding the MCW Trust units was to provide a source of income for his retirement which he considered would have tax advantages. He thought that they were the best stock to hold in the circumstances of the global financial crisis for this long term personal objective. 81 The trial judge's conclusion on this question of purpose was (at [209] of Goodridge TJ) as follows: There is no evidence other than Mr Goodridge's evidence of his purpose for which margin loans of the kind here are ordinarily acquired within the meaning of s 12CB(5). 82 Thus, the reference to "Mr Goodridge's evidence of his purpose" (in [209] above) appears to relate back to the evidence summarised at [201] of Goodridge TJ. Taking this background into account, it therefore appears that the error identified at [416] of Goodridge FC was the failure of the trial judge when assessing the evidence going to the purpose of Mr Goodridge's investment to make any mention of the acknowledgement he had signed when he made his application for the margin loan, viz that the proceeds of the loan were to be used for business or investment purposes. If this is so, I do not consider this error has any bearing upon the question whether a person's subjective purpose for goods or services is relevant to this consumer issue. Furthermore, even if this conclusion is not correct, I do not consider Jacobson J said anything at [416] of Goodridge FC which would support the exclusion of evidence about a person's subjective purpose. To the contrary, the fact that Mr Goodridge's signed acknowledgment, which was self-evidently a statement about his subjective purpose for the margin loan, is identified in that paragraph as being relevant to this question supports the proposition that one's subjective purpose is a pertinent consideration. 83 It is also worth noting that, later in Goodridge TJ, the trial judge went on to refer to a decision which tends to support this proposition. That decision was Begbie v State Bank of New South Wales (1994) ATPR 41-288 at 41,898 (Begbie), where Drummond J observed in relation to s 52A(5) of the TPA - which contained the same qualifier as appears in s 74A of the TPA and s 12BC(3) of the ASIC Act - that: … it is in my view necessary to have regard not just to the activity, here the provision of loan funds, but also to the purpose that activity is intended, in the particular case, to serve. Only then can the true nature of the services in connection with which it is said the respondent has acted unconscionably be identified and a proper answer given to the question posed by s 52A(5). 84 Taking into account the relatively low threshold set by the definition of relevance in s 55 of the Evidence Act, I therefore consider the evidence of Mrs Abdy's subjective purpose for the funds that she wished to withdraw from her Storm investments is logically connected with the consumer issue, in the sense that it could affect the probabilities of the existence of that fact in issue. This conclusion is, of course, subject to the qualification that it is not meant to express a view either way as to whether that evidence will ultimately go to establish that fact. 85 For those reasons, I rule that paragraph 224 of Mr and Mrs Abdy's statement of agreed facts is admissible.

THE TAIT RULING 86 Finally, I turn to the fifth decision identified above (at [2(e)]): the Tait ruling. The Commonwealth Bank has objected to the tender of eight extracts from the transcripts of the examinations of Mr Edward Tait conducted by an examiner appointed by ASIC under s 19 of the ASIC Act. 87 Mr Tait was employed by the Commonwealth Bank between 2006 and April 2009 as the Executive General Manager, Private Client Services. His s 19 examinations occurred in mid to late 2009 after he had left his employment with the Commonwealth Bank. 88 There is a dispute about the precise nature of Mr Tait's role at the Commonwealth Bank. Mr Hollo SC, for the Commonwealth Bank, informed me from the Bar table that Mr Tait's management responsibilities involved Colonial Geared Investments (CGI), the Private Bank and CommBank (all of which are sections of the Commonwealth Bank). Exhibit A on the voire dire is a press release dated 2011 from Credit Suisse (Australia) Limited announcing that Mr Tait would be commencing employment with that company and describing his experience in the banking industry. Exhibit B on the voire dire demonstrates that Mr Tait was directly involved with margin lending at CGI. I do not consider I need to resolve this dispute, for the reasons that will follow. 89 There are eight extracts to which the Commonwealth Bank has objected. They are items 1, 2, 4, 5, 15 and 17 of the transcript of Mr Tait's s 19 examination conducted on 28 August 2009, and items 3 and 4 of the transcript of his examination conducted on 1 September 2009. Each of these items relates to the suitability of margin loans for Storm clients and/or the Storm Model more generally. For ease of reference, all eight items are set out in Schedule A to these reasons. 90 The Commonwealth Bank objected to each of these extracts on two grounds. Both objections are based on the premise, not disputed by the Sherwoods, that the extracts have to satisfy s 77 of the ASIC Act to be admitted into evidence. That section deals with the admissibility of evidence obtained during examinations conducted under s 19 of the ASIC Act. It provides: Where direct evidence by a person (the absent witness) of a matter would be admissible in a proceeding, a statement that the absent witness made at an examination of the absent witness and that tends to establish that matter is admissible in the proceeding as evidence of that matter: (a) if it appears to the court or tribunal that: (i) the absent witness is dead or is unfit, because of physical or mental incapacity, to attend as a witness; or (ii) the absent witness is outside the State or Territory in which the proceeding is being heard and it is not reasonably practicable to secure his or her attendance; or (iii) all reasonable steps have been taken to find the absent witness but he or she cannot be found; or (b) if it does not so appear to the court or tribunal - unless another party to the proceeding requires the party tendering evidence of the statement to call the absent witness as a witness in the proceeding and the tendering party does not so call the absent witness. 91 The Commonwealth Bank submitted that each of these extracts was inadmissible because: (a) it was not "admissible in the proceeding[s]" as provided for in s 77(1) of the ASIC Act as it contains opinion evidence that is inadmissible under s 76(1) of the Evidence Act; and (b) since it is opinion evidence, it is not "direct evidence" within the terms of s 77(1) of the ASIC Act. 92 Section 76(1) provides: Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. 93 The Sherwoods provided three responses to the first of these two grounds of objection (in (a) at [91] above). They are: (a) some of the extracts contain statements of fact, not opinion, and therefore are not caught by s 76(1) of the Evidence Act; (b) in relation to the others, the exception contained in s 78 of the Evidence Act applies; or (c) in the alternative, the exception contained in s 79 of the Evidence Act applies. 94 I will deal with these responses in order. As to the first response ([93(a)] above), the Sherwoods identified two statements in the eight extracts that they submitted contained statements of fact rather than opinion. The first statement was item 1 of the transcript of the examination conducted on 28 August 2009. It is contained in Schedule A, but since it is quite short, it is convenient to set it out in full. It is as follows: Q. It is going to be the exceptional case of a retiree who would qualify for suitability for investment into a margin loan situation, would it not? A. Privilege. Yes. 95 While it is of no moment in this ruling, it is worth recording that the word "privilege" at the beginning of the answer above (and throughout Schedule A) is intended to record that Mr Tait claimed privilege under s 68 of the ASIC Act before giving that answer. 96 The second statement occurs within item 3 of the transcript of the examination conducted on 1 September 2009. That item is also short so it is convenient to set it out in full below. It relates to a meeting that Mr Tait had with Mr Emmanuel Cassimatis, one of the founders of Storm, in late 2008. After stating that he considered Mr Cassimatis was "delusional" and "someone that really didn't know what he was doing", neither of which statements the Sherwoods contend to be statements of fact, the following exchange occurred: Q. In particular, what was it that he said that gave you that impression? A. Privilege. It was the sort of clients that he sort of said were geared to the extent that they were, that is what I didn't understand. That's what I thought was extraordinary. 97 In my view, neither of these statements is a statement of fact. Essentially, I agree with Mr Hollo's submission that neither is founded on any "quantitative proposition" that may permit it to be characterised as a statement of fact. That expression comes from the Full Court's decision in La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299; [2011] FCAFC 4. In that case (at [44]-[47]), a witness' evidence about the average number of loan applications rejected per day was held to be a statement of fact. Neither of Mr Tait's statements falls into that category. 98 I turn then to the second response, the reliance upon s 78 of the Evidence Act. That section provides: The opinion rule does not apply to evidence of an opinion expressed by a person if: (a) the opinion is based on what the person saw, heard or otherwise perceived about a matter or event; and (b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person's perception of the matter or event. 99 There is a number of reasons why I do not consider this exception applies to any of these eight extracts. First, a number of the extracts concern hypothetical propositions that were put to Mr Tait which are not, on their face, based on what he "saw, heard or otherwise perceived". I refer specifically to items 1, 2, 4 and 5 of the transcript of the examination conducted on 28 August 2009. Plainly those statements do not meet the requirements for admissibility under s 78(a), that is they are not based on what Mr Tait saw, heard or otherwise perceived about a matter or event. 100 Secondly, the remarks about Mr Cassimatis being "delusional" and not knowing what he was doing, contained in item 3 of the transcript of the examination conducted on 1 September 2009, are not necessary to understand Mr Tait's perception of any particular matter or event. Even if they were, I do not consider those remarks are relevant to any issue I have to decide in these proceedings. 101 Thirdly, as to the remainder of the items, the Sherwoods submitted that the "matter or event" for the purpose of s 78(a) is "whether for certain people margin loans are appropriate, suitable and work, or do such loans end in disaster for some people because they were never appropriate for them to begin with". I do not consider this is a matter that Mr Tait addresses in any of the eight extracts such that it could be said that he "saw, heard or otherwise perceived" anything about it. 102 However, it is conceivable that two of the extracts, namely item 3 of the transcript of the examination conducted on 1 September 2009 and item 15 of the transcript of the examination conducted on 28 August 2009, could be said to relate to a matter or event about which Mr Tait could have formed an opinion based on what he "saw, heard or otherwise perceived". That event is Mr Tait's meeting with Mr Cassimatis in late 2008. Those two items are contained in Schedule A to these reasons and since they are quite lengthy, I will not set them out here. 103 Even accepting, without deciding, that is so and, as a consequence, those two items satisfy s 78(a) of the Evidence Act, I do not consider either of them satisfies s 78(b). That is, I do not consider they provide evidence that is necessary to give an adequate account or understanding of Mr Tait's perception of that meeting. Specifically, I do not consider the statements that Mr Cassimatis did not know what he was doing, that Storm clients were unsuitable for the Storm Model, or that Storm clients were geared to an extraordinary extent, constitute evidence of this kind. 104 Because it was discussed by both counsel in submissions, it is worth adding that I also do not consider any of these statements to be "a single impression made by induction from a number of others", as described by the High Court in Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 6 (Lithgow City Council), nor a situation where the facts from which Mr Tait received an impression are "too evanescent in their nature to be recollected or are too complicated to be separated and distinctly narrated" (see Lithgow City Council at [46] quoting Cornell v Green (1823) 10 Serge & Rawle 14 at 16). This is so because the statements offend the qualification that was expressed by the High Court immediately after these descriptions of the sorts of impressions that may be admissible as such. That qualification was as follows: But the "impression" which the witness received must be based on a "fact" which the witness perceived - as Gibson J said, "the facts from which the witness received an impression", or as Loomis J said, "the subject matter … precisely as it appeared to the witness at the time". 105 This is no indication anywhere in any of Mr Tait's statements as to what facts, or subject matter they may have been based on. 106 For these reasons, I reject the Sherwoods' reliance upon s 78 of the Evidence Act. 107 Turning to the third response: the Sherwoods' reliance on the exception contained in s 79 of the Evidence Act. Section 79(1) provides: If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of the person's opinion that is wholly or substantially based on that knowledge. 108 This is commonly referred to as the opinion exception to the exclusionary provisions of s 76(1) of the Evidence Act. It is clear from the terms of s 79(1) that for evidence to be admissible under this exception, in addition to meeting the general relevance requirements of s 55 of the Evidence Act, it must establish at least three things: first, that the person had specialised knowledge; secondly, that the specialised knowledge was based on that person's training, study or experience; and, thirdly, that the opinion the person has expressed is wholly or substantially based on that specialised knowledge. 109 The provisions of s 79(1) of the Evidence Act have been discussed in numerous authorities, too many to mention. However, of particular importance for present purposes are the following decisions that were mentioned in submissions: Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd (2000) 120 FCR 146, [2000] FCA 1463; Seven Network Ltd v News Ltd (No 14) [2006] FCA 500; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 and Dasreef v Hawchar (2011) 243 CLR 588; [2011] HCA 21 (Dasreef). To ensure that the principles expressed in s 79(1) of the Evidence Act and in these authorities are adhered to, r 23 of the Federal Court Rules 2011 and Practice Note CM7 prescribe certain procedures that have to be followed when an expert witness proposes to give evidence in this Court. 110 The Sherwoods submitted that Mr Tait's broad banking experience gave him the requisite specialised knowledge and that his opinion was plainly, wholly or substantially, based on that knowledge. However, in oral submissions, Mr Dubler conceded that Mr Tait's evidence at item 2 of the transcript of the examination conducted on 28 August 2009 could not be said to stem from his specialised knowledge. 111 As to the balance of the extracts, Mr Dubler particularly relied upon the statement of the High Court in Dasreef at [37], where French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ stated that: … it remains useful to record that it is ordinarily the case, as Heydon JA said in Makita, that "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". The way in which s 79(1) is drafted necessarily makes the description of these requirements very long. But that is not to say that the requirements cannot be met in many, perhaps most, cases very quickly and easily. That a specialist medical practitioner expressing a diagnostic opinion in his or her relevant field of specialisation is applying "specialised knowledge" based on his or her "training, study or experience", being an opinion "wholly or substantially based" on that "specialised knowledge", will require little explicit articulation or amplification once the witness has described his or her qualifications and experience, and has identified the subject matter about which the opinion is proffered. (Footnotes omitted) 112 Mr Dubler likened Mr Tait's evidence to that of the specialist medical practitioner referred to in the above paragraph. Specifically, Mr Dubler submitted that Mr Tait's evidence and expertise was such that it required little explicit articulation or amplification to satisfy the requirements of s 79. 113 Mr Hollo submitted that Mr Tait's evidence could not satisfy s 79, as it did not identify the facts or factual assumptions upon which the opinion was based, nor his reasoning process. Instead, the Commonwealth Bank submitted, Mr Tait was simply agreeing with general propositions put to him by the examiner or giving broad impressions in circumstances where he was unable to give specific examples. Further, the Commonwealth Bank submitted that the extracts in question did not establish that Mr Tait had any specialised knowledge of the subject upon which he was expressing his opinion, namely the suitability for margin loans, or the suitability of the Storm Model generally. It contended that "broad banking knowledge" was simply insufficient to meet these prerequisites. 114 I do not consider that Mr Tait's evidence satisfies the requirements of s 79 of the Evidence Act. I therefore essentially agree with the general thrust of Mr Hollo's submissions. At no point during any of the extracts in question did Mr Tait explain why he had reached a particular view, or what facts, assumed or observed, the various views he expressed were based on. Further, on numerous occasions Mr Tait used words such as "in my mind" and "personally", but he did not go on to describe what reasoning process he employed to reach the conclusions he then proceeded to state. Without knowing what his reasoning process was, it is not possible to determine whether Mr Tait based his conclusions on his experience in the banking industry, or on his personal preferences regarding loans and investments, or on some other entirely extrinsic factor. Further, it is to be noted that, in another section of the transcript of his examination of 1 September 2009, Mr Tait made the following important reservation about his qualifications to express an opinion on these matters. He stated: Firstly, I'm not a licensed or - I wasn't at that time a licensed financial adviser, so I'm not sure I'm actually qualified to make the call as to what is or isn't suitable. 115 Finally, I do not accept Mr Dubler's submission that Mr Tait's evidence is akin to the example of the specialist medical practitioner given by the High Court in Dasreef. Broad banking experience is not, in my view, akin to a medical specialty, and the suitability of financial advice or loans provided to a customer by a bank, or financial adviser, is not akin to a medical diagnosis. 116 Before leaving this third response, I would add this. Even if I had been persuaded Mr Tait's evidence satisfied s 79, I would have excluded the evidence using my discretion under s 135 of the Evidence Act. In my view, Mr Tait's evidence contains so many broad and unparticularised statements, and the basis for them is so unclear that, if they were to be admitted, they would be likely to lead to confusion and ambiguity during this trial and therefore cause delay and additional costs. For example, it is not clear what Mr Tait means by the word "suitability", which is the critical expression used by him in most of the extracts. At one extreme, he could consider something to be suitable only if it achieved the best financial outcome. At the other extreme, he could consider something to be suitable if a person could afford it without entering bankruptcy. 117 For these reasons, I reject the Sherwoods' reliance upon s 79 of the Evidence Act. 118 I do not therefore consider that any of the three responses the Sherwoods have made to the Commonwealth Bank's objections to the admissibility of the eight extracts from Mr Tait's s 19 examinations can be accepted. It follows that I consider the Commonwealth Bank's objections are valid. It follows further that the eight extracts concerned are inadmissible because they offend the exclusionary rule contained in s 76(1) of the Evidence Act. 119 Having reached this conclusion, I do not need to determine the Commonwealth Bank's alternative submission (see [91(b)] above) that s 77 of the ASIC Act only applies to direct evidence and does therefore not extend to opinion evidence. I certify that the preceding one hundred and nineteen (119) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Associate: Dated: 4 November 2013 Schedule A Transcript of Edward Tait dated 28.08.09 Item 1 Q. It is going to be the exceptional case of a retiree who would qualify for suitability for investment into a margin loan situation, would it not? A. Privilege. Yes. Item 2 Q. As a matter of your experience, if you like, where somebody has an income of under $250,000, you would doubt whether they would be suitable for a margin loan product? A. Privilege. If I was an adviser I would probably not be looking to assist in providing a margin loan, but that's a personal view, not a view of -- Q. It's a measure of risk, isn't it? I'll withdraw that. From the point of view of the financial adviser, if we take the $250,000 threshold, going below that involves greater degrees of risk about suitability. Is that the way you'd put it? A. Privilege. I think that's an elegant way of describing it, yes. Item 4 A. … with the benefit of hindsight, understanding more about their operating model would have given us the benefit of the sorts of pressures that occurred in extreme market circumstances. Q. What particular feature of their operating model are you referring to? A. Privilege. The suitability of the client - of their client - I'm sorry. Q. In particular which aspects of suitability are you referring to? A. Privilege. Suitability in the sense that gearing or taking out margin loans does not suit everybody. Q. It certainly doesn't suit retirees, does it? A. Privilege. It certainly doesn't. Item 5 Q. Let's test a little bit. Somebody who is on a PAYE income of $25,000 a year would that sort of person be suitable for margin lending, would you expect? A. Privilege. No. Q. If someone was earning $250,000 a year annual income would that sort of person be someone you'd expect to be potentially suitable for margin lending? A. Privilege. Possibly. Probably. Probably. Q. Probably. There are obviously other factors which come into play. If we then had to choose an income level or band, if you like, between $25,000 and $250,000, where would you suggest we might be looking? A. Privilege. Personally, $250,000. Item 15 Q. If you look at the terms of the letter, in the heading preamble Mr Cassimatis refers to the fact that there was a three-hour meeting with yourself, Ed Tait, and the CBA team; correct? A. Privilege. Yes. Q. And that was the correct statement of the position, was it? A. Privilege. I didn't think it lasted three hours but it says three hours. Q. You wouldn't deny that it was three hours? A. Privilege. No. No. Q. What Mr Cassimatis has indicated is that there was a "greater understanding of the retail bank debt levels and dependence on the client portfolios". Do you see that? A. Privilege. Yes. Q. That again was a correct summary of what had occurred at the meeting so far as the CBA representatives were concerned? A. Privilege. Yes. Q. It is therefore at that point, namely, the meeting on 4 December 2008, that I think, as you previously said, the two arms of the pincer came together? A. Privilege. Correct. Q. In point number three in that letter on the second page Mr Cassimatis refers to, "There was discussion about the Storm model with Ed", namely yourself: correct? A. Privilege. Yes. Q. Do you recollect having a discussion about the Storm model with Mr Cassimatis at that time? A. Privilege. Yes. Q. To some extent that discussion didn't involve telling you anything new because you had been exposed to this back in 2006? A. Privilege. There were some new things in it. Q. What were the new things that were disclosed to you? A. Privilege. As I recall, he talked more about the wealth creation model that could essentially be applied to just about everybody. That was new to me. Q. What did you say to that? A. Privilege. Well, personally, I thought that this man was - well, from the discussion I had with him, which is obviously referring to this discussion of the model. I mean I realised then that this man was delusional. Q. Why do you say he was delusional? A. Privilege. I realised that I was dealing with someone that really didn't know what he was doing. Q. In what respect? A. Privilege. From a risk management perspective and understanding what financial advice is all about. Q. In particular, what was it that he said that gave you that impression? A. Privilege. It was the sort of clients that he sort of said were geared to the extent that they were, that is what I didn't understand. That's what I thought was extraordinary. Q. What was it about the sort of clients? I'm sorry, I'm just trying to drill down into your thought process here. A. Privilege. That these were clients in my mind that were completely unsuitable for the sort of model that they applied. Q. In particular, can you give the characteristics that made them unsuitable? A. Privilege. I don't think he gave me any specific examples. I think we discussed those earlier in the piece. It was more the realisation that he really believed in what he was doing. Q. When you say he really believed - A. Privilege. And I don't agree with what he was doing. Q. What is it about what he was doing that you don't agree with? I just need to go from generalities to specifics. A. Privilege. It's about the suitability of the clients that they have advised for a gearing strategy, the sort of clients that they have. Q. Does suitability to your mind include retirees of the type that were being attracted to the Storm model? A. Privilege. That and others I'd imagine. Yes. Q. You obviously had the view that the clients that Storm was attracting were unsuitable? A. Privilege. That's correct. Q. What I'm trying to identify is what your frame of reference was to determine suitability that led you to the conclusion that the clients he was attracting were unsuitable.? A. Privilege. He was talking about the fact that the situation was a bigger situation. I mean, it would seem to me prima facie there were clients there that shouldn't have been in the gearing strategies that they were. It's as simple as that. Q. Is that a function of age, is that a function of employment status, is it a function of income level, is it a function of - A. Privilege. It could be a lot of those things. Q. - financial sophistication? What were the things that operated on your mind at that time? A. Privilege. Again, we didn't look at the specifics of each client, but I'm saying from the conversations I was sort of picking out from him that there was a sense from him that there seemed to be no real qualification, if you like, for clients that they had in this gearing strategy. Q. Mr Tait, unfortunately, you have to answer this question which is about specifics and I appreciate that you're giving terms in generalities and concepts, but in your mind at this time, as you have said, the clients that he was applying this model to were unsuitable and I want to know what the frame of reference was that informed your view of suitability? A. Privilege. It was picked up through the conversation. There was no specific account I don't think - what we actually saw - that sort of said to me it is a 66-year-old retiree with one leg earning $30,000 a year, or anything like that. I can't be specific. What I can say is that from the sort of conversation I had with him I got the impression - and it wasn't specific - I got the overall impression that the sort of clients that they had in this gearing situation were in general inappropriate. Now, if you want me to give you a lesson on what is appropriate and not appropriate, I can't do that, but I'm just simply saying he didn't specifically give any name, serial number, pension card number or whatever. I'm just saying that there was a sense, a broad sense, not a specific sense, that this company was providing advice for people who weren't suitable for that sort of advice. Q. I'm not asking for a lesson, but I am asking for your frame of reference as to what you considered to be suitable and unsuitable. You can take as long as you like to answer because people will differ about this and it is important to understand what your frame of reference is, as it was at this time when you formed that belief. A. … However, from someone who has been around for many years, one would say that from his conversations the sort of clients in terms of their financial position, they seemed unsuitable from simply having the financial wherewithal to be there; that's all I could say. Q. Did the financial wherewithal concern, for example, serviceability? A. Privilege. We never discussed the specifics of the financial wherewithal. Q. Financial wherewithal, as you would understand it, on the general level can be assessed by reference to ownership of assets and ownership of income streams. Income streams relate to serviceability. A. Privilege. That's correct. Q. In terms of financial wherewithal was it the level of assets that were owned by these people or was it - in forming an impression at the time about a lack of financial wherewithal, to what extent was that informed by asset ownership or by income and serviceability issues? A. Privilege. There was no specific example we had to make that call, so I can't - in that discussion that I formed that view. You're asking me to do something I can't really do. What I can say again is that in some of the examples we looked at in the three hour meeting it became clearer and clearer. If you like, that they didn't have the financial wherewithal, if I can describe it that way. Without knowing what he actually said, that's the impression I got. Item 17 Q. Was the lack of financial wherewithal that you're referring to a lack of ability to get themselves out of the problem that they were facing? A. Privilege. I think probably a combination of both. One was that there seemed to me an obvious circumstance where there seemed to be clients that weren't suitable. Secondly, it seemed to me that there had been a sense that there was a certain degree of inactivity of getting their - or acting appropriately in handling their clients' affairs. Transcript of Edward Tait dated 1.09.09 Item 3 Re meeting on 4.12.08 with Emmanuel Cassimatis A. Privilege. Well, personally, I thought that this man was - well, from the discussion I had with him, which is obviously referring to this discussion of the model, I mean I realised then that this man was delusional. Q. Why do you say he was delusional? A. Privilege. I realised that I was dealing with someone that really didn't know what he was doing. Q. In what respect? A. Privilege. From a risk management perspective and understanding what financial advice is all about. Q. In particular, what was it that he said that gave you that impression? A. Privilege. It was the sort of clients that he sort of said were geared to the extent that they were, that is what I didn't understand. That's what I thought was extraordinary. Q. What was it about the sort of clients? I'm sorry. I'm just trying to drill down into your thought process here. A. Privilege. That these were clients in my mind that were completely unsuitable for the sort of model that they applied. Item 4 Re meeting on 4.12.08 with Emmanuel Cassimatis Q. Does suitability to your mind include retirees of the type that were being attracted to the Storm model? A. Privilege. That and others I'd imagine, yes. Q. You obviously had the view that the clients that Storm was attracting were unsuitable? A. Privilege. That's correct.