Temwell Pty Ltd v DKGR Holdings Pty Ltd

(a) Mr Hansen 4 In his earliest affidavit sworn 30 January 2003, Mr Hansen outlined his background as an engineer and noted his work until 1998 for VeriFone which "eventually became the largest supplier of EFTPOS terminals in Europe and the world." As Managing Director of VeriFone in Australia he made contact with DDS and Elbaum first in relation to the supply of pinpads for the MTD2000 and later for the possible supply by DDS of mobile terminals to VeriFone. After leaving VeriFone, Mr Hansen joined with others to establish the business of GemWare Technology LLC ("GemWare") in supplying EFTPOS terminals. He then had further discussions with DDS which led to GemWare's becoming a distributor of the MTD3000. The distribution agreement contained a sales forecast of 60,000 units over three years but imposed no minimum purchase obligation on GemWare. The rest of this first affidavit of Hansen details efforts made by GemWare to build up a distribution network and explains why he tried to achieve actual sales of the MTD3000. He concluded that, by early 2000, the MTD3000 technology was "now outdated and over priced." In the same affidavit he disputes certain factual assertions by Elbaum in his affidavit of 26 July 2002 and by David Conn in an affidavit also sworn 26 July 2002 which has been filed on behalf of Temwell. 5 I do not regard this first affidavit as commingling expert evidence with evidence of primary facts based on Mr Hansen's personal observations and direct experience with DDS. Therefore, consistently with the observations from my earlier ruling of 2 September 2003 quoted at [2] above, there is no occasion for disentangling from the presumptively privileged communications in Category 2 those that refer to the formation or expression of any expert opinion. 6 In his affidavit of 12 April 2003, this deponent purports to comment on an affidavit of Mr Rayner, who, Hansen says, "makes certain assumptions in relation to the market for mobile EFTPOS devices." Hansen then describes certain features of what he calls "the EFTPOS market" at March 2000. That evidence is essentially descriptive but expresses views about leadership in the technology, "current trends" and a cost advantage deriving from the fact that "it is generally cheaper to adapt an existing Application from one terminal type to another rather than re-writing it." 7 In paragraph 12 of the affidavit of 12 April 2003, Mr Hansen has deposed to the proprietary and "off the shelf" tools of which an "Application Development Environment" typically consists. In the next section of the same affidavit, the same deponent comments on various features of the Transaction Documents and, as I perceive it, the way in which the treatment in those documents of Application Software was inconsistent with usage in the EFTPOS terminal industry. In the same context, Mr Hansen expresses his disagreement with the opinion of Dr Goldschlager that the Application Software and the [PIMPOS] Operating System were "related programs". Dr Goldschlager was concededly an expert witness who has given evidence on behalf of Temwell. 8 In the final section of his affidavit of 12 April 2003, Mr Hansen deposes to the value of application software generally and says that, in his experience, application software programmes are supplied cheaply by suppliers who look to make their profits from terminal sales. 9 In his further affidavit sworn 29 July 2003, Mr Hansen refers to certain evidence of Mr Goldstein whose "mixed fact and opinion" evidence has been described in the extract reproduced at [2] above. In some paragraphs, Mr Hansen expresses disagreement, and in others agreement, with Mr Goldstein. In particular, Hansen disagrees, apparently as a matter of usage in the industry, that PIMPOS 2 could be described as a "modification or enhancement" of PIMPOS 1. Evidence of usage of the same phrase in relation to other aspects of the technology is given later in the same affidavit. 10 In another section of the affidavit of 29 July 2003, Mr Hansen expresses his opinion of what influences the "longevity" of EFTPOS terminal technology. In respect of some of those matters he disagrees with opinions expressed by Mr Goldstein. In the final section of his affidavit of 29 July 2003, Mr Hansen deals with the cost of "re-writing" the Application Software, expressing his disagreement at various points with Mr Goldstein but not venturing a money amount as an estimate of the cost of re-writing. In my view, the two later affidavits by Mr Hansen are directed principally to matters of expert opinion. To that extent they constitute an implied waiver of privilege in communications conveying a "brief or instructions" to Mr Hansen; see Principle 4 distilled by Lindgren J in Australian Securities and Investment Commission v Southcorp Ltd [2003] FCA 804 at [21]. 11 I therefore consider that there should be disclosed to the solicitors for Temwell copies of all documents in Category 2 which are referable to those paragraphs or parts of paragraphs in Mr Hansen's affidavits sworn respectively on 12 April 2003 and 29 July 2003 containing expressions of expert opinion. If the legal advisors to the mCom respondents are uncertain about whether a particular document or part of a document is made discoverable by this ruling, I shall inspect the document for myself to resolve the issue as was done, for example, for the purposes of my ruling of 9 September 2003; [2003] FCA 948.

(b) Mr Ivry 12 This witness has academic qualifications and significant practical experience in information technology. He was commissioned in February 2000 to conduct, in conjunction with Mr Goldstein, a "technical due diligence" of DDS and its products. He has exhibited to his first affidavit, affirmed on 23 August 2002, a written report which he prepared in discharge of that commission. In his first affidavit, he expands on aspects of the written report and deposes to having returned to Australia after the business of DDS had been acquired by mCom Aust. He purports, in the light of observations made in the course of those later visits, to explain delays in the development of the MTD3000 and the consequential inability of mCom Aust to achieve significant sales of the product, particularly in Israel and South Africa. He also observes that "from late 2000 the Temwell litigation paralysed the whole operation." 13 In paragraph 10 of his first affidavit, Mr Ivry notes that, in May 2001, he carried out a detailed assessment and investigation of the expense and likely time required to have the Application and OSE layers of the MTD3000 re-written by persons outside mCom Aust who had not previously worked for DDS. It was anticipated, he says, that such re-writing would have improved the product and he also perceived it as necessary to avoid any suggestion by Temwell that the process would infringe the intellectual property which it claimed to have in the software for the MTD3000. In the course of those investigations he received a quotation from an Indian company, KPIT Infosystems Ltd, for US$69,966 to document the Application and OSE layers. His total budget for the project, including testing, management fees, travel and a contingency provision was US$198,000. 14 Although Mr Ivry's first affidavit contained some expressions of expert opinion, I consider that the facts or assumptions on which that opinion has been based are purportedly established by the deponent's own observations and are sufficiently set out in the body of the affidavit or one or other of the exhibits to it. In this respect, this first affidavit differs from those parts of Mr Goldstein's evidence which consisted of expressions of expert opinion and as to which I said, at [10] of my ruling of 2 September 2003 ([2003] FCA 930); 'No formal report has been provided by Mr Goldstein covering the matters which I have just identified as those on which he has given expert evidence. Nor has he set out in his affidavit or elsewhere, except by inference, his instructions or the facts, matters and assumptions upon which his opinions have been based or the documents or other materials which he has been asked to consider. In those circumstances, Counsel for the respondents would normally be entitled to access to all notes, memoranda and successive drafts of Mr Goldstein's affidavit in order to explore what instructions he was given and the extent to which his opinions have been formulated independently of Temwell and its advisers. See Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 QR 141.' 15 Accordingly, I decline to require production to Temwell's legal advisers of documents in Category 2 referable to Mr Ivry's first affidavit. 16 In his second affidavit, affirmed 29 July 2003, Mr Ivry directed evidence in response to the affidavit sworn 6 June 2003 by Mr Goldstein and that sworn 16 June 2003 by Dr Goldschlager. Some of the paragraphs directed to Mr Goldstein's evidence deposed to work which they had undertaken together in conducting the "technical due diligence" for the DDS business and related matters. For the reasons already explained in relation to Mr Ivry's first affidavit, I do not consider that there has been an implied waiver of privilege in respect of communications in the Category 2 documents which are referable to those paragraphs of Mr Ivry's second affidavit. 17 In paragraph 15 of his second affidavit, Mr Ivry has deposed; 'I refer to paragraph 21. I examined the hardware and design of the MTD3000, and understood that the Pimpos Operating system was designed to implement high security as required by the banks. The combination of the hardware and the PimpOS operated system provided the necessary security to meet debit and credit transaction requirements. I agree with Mr Goldstein in paragraph 22 that alternative application software could be created to run the MTD3000.' 18 That paragraph, it is true, contains expressions of expert opinion but it purports to be based on Mr Ivry's observations at the time of his "due diligence" investigation and expresses agreement with an opinion expressed by Mr Goldstein. In those circumstances, I do not consider that there are unstated assumptions which require exploration in cross-examination resorting to communications of the kind described in Category 2. 19 Under the heading "Longevity of the MTD Software and Hardware", Mr Ivry's second affidavit deals with several aspects of Mr Goldstein's evidence. Some of those later paragraphs are tendentious in form, being directed to qualifying or rebutting certain parts of Mr Goldstein's evidence which he gave after having been enlisted as an expert witness. Similarly, Mr Ivry has directed paragraphs 26 to 29 of his second affidavit to the affidavits respectively sworn by Dr Goldschlager on 16 June and 5 March 2003. The bulk of paragraph 26 goes to matters of fact which Mr Ivry observed, or in which he was involved, early in March 2000. However, paragraph 27 expresses a general opinion about the longevity of software and paragraph 29 appears to argue, on the basis of expert knowledge of industry usage, that, contrary to Dr Goldschlager's contention, intellectual property in application software cannot carry with it a corresponding interest in the operating system without which the relevant application software cannot be used. 20 Although they are argumentative, I consider that these parts of Mr Ivry's evidence attract the operation of the principles adverted to at [10] above. I therefore rule that there should be disclosed to Temwell's legal advisors those communications in Category 2 which are referable to any of paragraphs 21, 23, 27 or 29 of Mr Ivry's affidavit sworn 29 July 2003. As with the ruling given above in respect of Mr Hansen's evidence, I shall resolve, by inspecting for myself any document relevant to the parts of Mr Ivry's second affidavit which I have just identified, in respect of which an issue may arise between the parties as to the application of this ruling. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Dated: 21 November 2003 Counsel for the Applicant Mr C D Golvan SC with Mr W Rothnie and Cross Respondents:

Solicitors for the Applicant Meerkin & Apel and Cross Respondents:

Counsel for the mCom Respondents Mr J L Sher QC with Mr J Delany SC and Cross-Claimants:

Solicitors for the mCom Respondents Minter Ellison and Cross-Claimants:

Date of Hearing: 10 November 2003

Date of Ruling: 21 November 2003