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[2014] FCA 1409
Federal Court of Australia
2014-12-09
Finkelstein J, Gleeson J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 The applicant ("Unilever") has objected to evidence proposed to be given by Dr Heng (Harry) Cai to the effect that hydrogen peroxide included in the respondent's ("Revlon") Mitchum Clinical products ("the products") is encapsulated and in a stabilised form, in the absence of the production of the patent application for a method or methods used to ensure the stability of hydrogen peroxide in those products ("the method"). The objection is based on s 135(a) of the Evidence Act 1995 (Cth) ("Act"), which provides that the Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party. 2 Revlon has provided some information to support Dr Cai's evidence as to the manner in which hydrogen peroxide is included in the products. That material comprises: (1) a description of certain matters in a document entitled Confidential Exhibit MDT7; (2) Confidential Exhibit HC2; (3) Confidential Exhibit HC23; and (4) Revlon's confirmation of the accuracy of the assumptions stated in paragraph [78] of Professor David William Thornthwaite's affidavit sworn 26 August 2014. 3 I note the submission by senior counsel for Revlon, Mr Hall SC, that on his instructions Confidential Exhibit MDT7 to the affidavit of Dr Michael Traudt sworn 28 May 2014 contains the full universe of information concerning the method. However, in my view, having regard to the opacity of that material, without the patent application, the Court's ability to evaluate the claims of encapsulation and stability are seriously limited. 4 Revlon has not sought to tender the patent application, even on the basis that access to it be restricted to Unilever's external legal advisers and independent expert Dr Easton. Although the patent application is not a document of Revlon, it is not clear that Revlon would be unable to procure it for tender in these proceedings if it chose to do so. 5 Revlon sought to rely on statements made by Finkelstein J in La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 ("La Trobe"). That case involved an appeal from a decision to admit unsubstantiated evidence of a lender's senior manager about what the lender would have done with certain funds if that money had not been lent on the basis of an overvaluation. Finkelstein J said at [62]-[63]: [62] …An appeal court may only interfere with a judge's discretionary decision consistently with the principles in House v The King (1936) 55 CLR 499; see also Collaroy Services Beach Club Ltd v Haywood [2007] NSWCA 21 at [49]. In my view, there has not been any error demonstrated in the judge's exercise of his discretion that would justify overturning his decision. To the contrary, if I were to consider the matter afresh, I would admit the evidence. Too much, in my view, is nowadays made of the need to have at hand every piece of information imaginable to enable effective cross-examination to take place. Perhaps there are a handful of cases where the discretion to refuse evidence should be exercised. But that can hardly be so here where the evidence is straightforward and could easily be challenged if untrue. [63] It must also be remembered that to exclude evidence under s 135, there must be compelling circumstances for the exclusion. The discretion should only be exercised where the prejudice substantially outweighs the probative value of the evidence, for only then will the admission of the evidence cause "unfair prejudice". 6 His Honour went on to say at [69]-[70]: [69] In my view, the cases upon which Mr Riordan relied are far removed from the present case. It is important that Mr Gidman's evidence be read as a whole and in context. He testified as to various matters regarding the opportunities for La Trobe to invest in alternative mortgage-backed loans at the time it lent money to Jet, the terms on which such loans might have been made, and the fact that opportunities were foregone as a result of lending to Jet. The evidence has clear limitations, which both Mr Gidman and counsel for La Trobe frankly conceded. Some of the evidence could not be substantiated through documents, particularly in relation to loan rejections. Some of the evidence was not as specific as it might have been, such as when Mr Gidman could not recall particular instances of loans that were rejected. [70] But there is nothing particularly unusual about Mr Gidman's evidence. It is no different to any other evidence commonly given in the absence of documentary evidence and without perfect recollection. Counsel for Hay could have responded in a variety of ways. For example, he might have challenged the credibility of Mr Gidman in cross-examination, if such a course were warranted. He might have asked questions of Mr Gidman about ambiguities in his evidence or about any inconsistencies between his evidence and other available evidence. Alternatively counsel could have chosen not to cross-examine Mr Gidman at all, and submit that La Trobe had not discharged its onus of proof. Indeed, this is, in effect, what happened at trial, with only limited questions being asked to confirm that Mr Gidman could not recall specific loan applications that had been rejected. 7 In my view, that is a very different case from the present one. Here, the subject matter is particularly complex and contentious. In my view, the case is more analogous to the case referred to by Finkelstein J at [68], in which Sackville J limited the use of evidence under s 136. Revlon also referred me to the Court of Appeal decision in Dyldam Developments Pty Ltd v Jones [2008] NSWCA 56. I reviewed that case, but did not find that it assisted beyond reminding me of the steps required to be taken in applying s 135.
Consideration 8 "Probative value" of evidence is defined in the dictionary to the Act to mean the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue. 9 In this case, the probative value of the evidence is difficult to assess. Its weight is necessarily reduced by the failure to support it with the patent application, which should contain the best explanation of the method. On the other hand, as evidence of the inventor, the evidence does have a significant degree of probative value. 10 As to the danger of unfair prejudice to Unilever flowing from the evidence, in my view, that unfair prejudice is to some extent of the kind identified by Finkelstein J in La Trobe at [72]. There is a risk that Dr Cai might give unanticipated evidence under cross-examination, which senior counsel for Unilever, Mr Cobden SC, would have no reasonable opportunity to test. However, more fundamentally, the unfair prejudice is in being required to cross-examine the inventor on a topic of great specialisation and complexity without a clear and precise statement of what is entailed in the method, which is fundamental to Revlon's claims that are in issue in these proceedings. 11 In my view, the danger that the evidence might be unfairly prejudicial to Unilever in those circumstances is obvious and substantial. Revlon has today proposed to address this by making available the patent application to named individuals on confidentiality terms, and on the basis that the objections to evidence of the kind on which I am now ruling are withdrawn. That offer was not been accepted by Unilever on the basis that it would require Unilever to withdraw its objection without examining the patent application. 12 In my opinion, having regard to the time at which the offer was made, the terms on which it was made and the proximity of the cross-examination of Dr Cai, scheduled to commence either late this afternoon or tomorrow morning, I think that it was not unreasonable for Unilever to refuse Revlon's offer. Although I am prepared to accept that the probative value of the evidence is significant, in my view, the danger of unfair prejudice to Unilever if the evidence were admitted substantially outweighs that probative value.
Conclusion 13 In those circumstances, having regard in particular to the consumer protection nature of the proceedings and despite the fact that the case is being litigated between trade competitors, I will refuse to admit the evidence. In exercising my discretion in this matter, I take into account the offer made by Revlon which, in my opinion, was not unreasonably refused. I also take into account that it appears that Revlon has made a deliberate forensic choice in this matter to provide limited evidence. Accordingly, I reject the evidence. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.
Unilever Australia Ltd
Revlon Australia Pty Ltd