Idoport Pty Limited v National Australia Bank Limited and 8 Ors; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited and.. - [2001] NSWSC 995

No judgment structure available for this case.

CITATION: Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited & Ors [45] [2001] NSWSC 995

FILE NUMBER(S): SC 50113/98; 50026/99; 3991/00

HEARING DATE(S): 16/10/01, 17/10/01, 18/10/01, 24/10/01, 25/10/01

JUDGMENT DATE:
9 November 2001

PARTIES :

Idoport Pty Limited (Plaintiff)
National Australia Bank Limited (Defendant)
Donald Robert Argus (Defendant)

JUDGMENT OF: Einstein J

COUNSEL : Mr JJ Garnsey QC, Mr R Titterton (Plaintiff)
Mr J Sackar QC, Mr J Halley (Defendants)

SOLICITORS: Withnell Hetherington (Plaintiff)
Freehills (Defendants)

CATCHWORDS: Evidence Act (1995) - Evidence - Admissibility - Opinion evidence - Expert opinion - Principles - Specialised knowledge - By directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, section 79 requires that the opinion be presented in a form which makes it possible to answer that question - Transparency of reasoning process - Opinion proffered must be shown to be substantially based on expertise of witness and witness must identify it - Witness must explain how the knowledge on which the witness is an expert applies to the facts assumed or observations made so as to produce the opinion propounded - necessity for expert to articulate principal tenets that need to be understood to follow the methods used by him and the reasons which he suggests point to a particular conclusion - Necessity for experts evidence to furnish trial judge with the necessary scientific criteria for testing the accuracy of conclusions - Trial judge must be placed in a position where he/she enabled to form their own independent judgment by applying the criteria furnished to the facts proved.

LEGISLATION CITED: Evidence Act 1995 ss56, 57, 76, 79,
135 (a) (b) (c)

CASES CITED: Commonwealth of Australia v McLean (1996) 41 NSWLR 389
Gordon (Bankrupt) Official Trustee in Bankruptcy v Pike (No 1) (unreported, Federal Court of Australia, 1 September 1995
HG v R (1999) 197 CLR 414
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305
Ordukaya v Hicks [2000] NSWCA 180
R v Accused [1989] 1 NZLR 714
R v C (1993) 60 SASR 467
R v F (1995) 83 A CRIM. R 502
R v G (1997) 42 NSWLR 451
Smith v The Queen [(2001) 75 ALJR 1398
Tante v Roth (unreported, NSWSC, 28 November 1986
Wentworth v Wentworth (unreported NSWSC, 17 April 1997 at 12

DECISION: Similarity and equivalence opinions of Mr Maconochie to be rejected as failing to satisfy the criteria stipulated in s79 Evidence Act 1995 criteria requiring reasoning processes to be made transparent in a number of areas outlined in judgment [2001] NSWSC 123. Supplementary evidence of Mr Maconochie to be allowed in so far as it makes transparent his use of the word "functionality" when dealing with his opinions as to the functionality of Ausmaq Service and Bank Services. Supplementary evidence of Mr Maconochie to be allowed in so far as dealing with the appropriate methodology and reasoning by which to establish similarity or equivalence of functionality in respect of different Services. Supplementary evidence of Mr Maconochie to be allowed in so far as it makes transparent his use of the words "similar and equivalent functionality" when dealing with his comparative opinions. Short minutes of order to be brought in.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION – COMMERCIAL LIST

9 November 2001
Einstein J

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

Judgment on Mr Maconochie's supplementary evidence

1 A judgment was handed down ([2001] NSWSC 123) dealing with questions relating to whether or not Mr Maconochie had been shown by his training, study or experience to have acquired specialised knowledge, wholly or substantially, on the basis of which to be in a position to express expert opinions, within the meaning of section 79 of the Evidence Act 1995.

2 The section of the judgment dealing with opinions as to the functionality of Ausmaq and as to the functionality of the Bank Services is to be found in paragraphs 115 - 165. Broadly, the Courts holdings were that by his training, study or experience Mr Maconochie had demonstrated that he had acquired specialised knowledge on which to base his opinions as to the functionality of the Ausmaq Service and as to the functionality of the Bank's Services. Clearly, the reasons require to be read for a fuller explanation of the holdings.

3 The judgment in paragraphs 166 and following then dealt with Mr Maconochie’s having by his training, study or experience, been shown to have acquired specialised knowledge on the basis of which to permit him to express opinions as to the relevant comparison between the functionality of the Ausmaq Service and of the Bank Services. The holding was that he had been shown by his training, study or experience to have acquired the necessary specialised knowledge on which to base, wholly or substantially, opinions as to the comparison between the functionality of the Ausmaq Service and the functionality of the Bank Services. Here again the reasons require to be read for a fuller explanation.

4 Paragraphs 173 - 199 of the judgment outlined a number of areas in respect of which the holding was that it was necessary for Mr Maconochie’s statements to be supplemented, essentially by making transparent what were his premises, what were the assumptions which he took into account and what were his reasoning processes. The Court granted leave for that form of supplementation and reserved rulings in respect of the areas where further evidence was to be given.

5 The matter presently before the Court concerns whether, and if so to what extent, Mr Maconochie, in his further statement of 11 September 2001, which purports to overcome the admissibility problems in these areas, has in fact succeeded in making transparent what were his premises, what were the assumptions which he took into account and what were his reasoning processes.

The Principles

6 In the recent Court of Appeal decision, Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (delivered on 4 September 2001), Heydon JA had occasion to examine a number of relevant principles concerned with the adducing of expert opinion evidence. Generally the earlier judgment dealing with Mr Maconochie’s expertise [paragraphs 10 and following] had treated with the same principles, drawing heavily from an extra-curial paper delivered by Justice Heydon.

7 Makita serves to summarise a number of authorities which, albeit often overlapping, generally support the following particular propositions:

(1) the duty of expert witnesses is to furnish the court with the necessary scientific criteria for testing the accuracy of their conclusions, so as to enable the court to form its own independent judgment by the application of these criteria to the facts proved in evidence;

(2) scientific opinion evidence, if intelligible, convincing and tested, becomes a factor for consideration along with the whole of the other evidence in the case;

(3) the bare ipse dixit of a scientist/expert, however eminent, upon the issue in controversy, will normally carry little weight, for it cannot be tested by cross-examination nor independently appraised - [the parties having " invoked the decision of a judicial tribunal and not an oracular pronouncement by an expert "];

(4) the importance that the expert’s reports identify the criteria by reference to which the court can test the quality of the expert's opinions;

(5) that examining the substance of an opinion cannot be done without the court knowing what are the essential integers underlying the opinion;

(6) the importance of the court being placed in a position to test the validity of the process by which an opinion has been formed so as to be in a position to adjudicate upon the value and cogency of the opinion evidence;

(7) the hallmarks of unreliable science and the not-so-qualified expert, being the inability to articulate the principal tenets that need to be understood, or to describe in ordinary language, the methods used and the reasons that point to a particular conclusion;

(8) the crucial significance of the expert revealing the whole of the manner in which the appropriate information utilised by the expert was dealt with in arriving at the formation of the expert's conclusions;

(9) that expert opinion evidence is to be judged like any other evidence: it must be comprehensible and reach conclusions that are rationally based; the process of inference that leads to the conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them; and

8 Ultimately Heydon JA at paragraph 85 summarised the principles in the following overarching way:

“ In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of " training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (

).

9 Heydon JA at paragraph 87 asked, after querying whether it could be said that the relevant expert’s report went beyond a series of oracular pronouncements:

“Does it usurp the function of the trier of fact? More vitally, did it furnish the trial judge with the necessary scientific criteria for testing the accuracy of the conclusions? Did it enable him to form his own independent judgment by applying the criteria furnished to the facts proved? Was it intelligible, convincing and tested? Did it go beyond a bare ipsa dixit? Did it contain within itself materials which could have convinced the trial judge of its fundamental soundness?”

10 The admissibility of any expert evidence ultimately falls to be determined against the principles identified above.

The Maconochie Expertise Judgment

11 Mr Maconochie’s original analysis of equivalent and similar functionality was undertaken in his second and third statements. In his second statement dated 20 November 1998 (“Maconochie 2” or Mr Maconochie’s “Second Statement”), Mr Maconochie sought to determine whether each of the Gateway Service, FX Autodealing, Margin Lending and Remote Wealth Services were services of equivalent or similar functionality to the AUSMAQ Service. In his statement dated 30 April 1999 (“Maconochie 3” or Mr Maconochie’s “Third Statement”), Mr Maconochie sought to determine whether each of the Maple Leaf and Independence One services provided services of equivalent or similar functionality to the AUSMAQ Service.

12 Mr Maconochie used the same approach to undertake the functionality analysis in Maconochie 2 and Maconochie 3. In essence, his approach involved the preparation of two tables, the first, Table 1, described as a “vision and strategy comparison”, and the second, Table 2, described as a “functionality comparison”.

13 The judgment made plain that the Court was not persuaded that the exercise undertaken by Mr Maconochie in Maconochie 2 and Maconochie 3 demonstrated sufficient transparency of reasoning to permit the Court to be satisfied that the opinions that he expressed were wholly or substantially based upon the specialised knowledge that the Court had found Mr Maconochie possessed. The judgment dealt with these issues on a number of occasions including:

“The problem as I see it is the complete lack of transparency in relation to the process engaged in when Mr Maconochie simply asserts first, that he has read certain discovered materials which were identified, (and which deal with the Bank Services in some way), and second, the functionality of the Bank Services is X, Y and Z…”.

(See paragraph 161)

14 The holding was that there was a lack of transparency in relation to the process engaged in by Mr Maconochie, and that:

“This matter requires to be corrected in terms of the adducing, if that can be done, of supplementary evidence in admissible form to expose this process. The exercise will require to make plain just what the reasoning processes were in Mr Maconochie coming to the conclusions which he did from the documents which he read. The sections of the documents referred to in relation to the opinions expressed will have to be specified with far greater particularity. I am disposed to grant leave to permit that exercise to occur.”

(See paragraph 173)

15 The Court in the Maconochie expertise judgment accepted as correct a submission from the defendants that Mr Maconochie had failed to define what he meant by the term “functionality” in the analysis that he undertook in Maconochie 2 and Maconochie 3:

“It is apparent that Mr Maconochie has sought to give a definition of the word "functionality” in relation to the Ausmaq Service. That definition is to be found in paragraph 5.2 of his second statement of 20 November 1998. He does not however anywhere in his statements state what definition he gives of the word "functionality" per se when used in relation to other subject matter

and most particularly, when used in relation to the Bank Services. Mr Sackar QC at transcript page 5598 put the matter as follows, using by way of example some of the items to be found in Mr Maconochie's definition of "functionality in relation to the Ausmaq Service" [statement paragraph 5.2]:

“‘functionality’, it is clear from his own definition, either means business objectives or functions in the sense of things that they are intending to do, like provide an electronic platform and [engaging] in real-time or on-line activities operating multiple taxes currency environments…".

Whilst the Court might be in a position to guess that Mr Maconochie uses the word ‘functionality’ generally in the sense that Mr Sackar suggested, this is not a situation in which the Court is required to speculate about the matter. It will be necessary for Mr Maconochie by supplementary evidence to make perfectly plain in which sense he uses the word ‘functionality’. I am disposed to permit him to so supplement his evidence for this purpose.”

(See paragraphs 175 and 176)

16 The Court also accepted as correct a submission from the defendants that Mr Maconochie had not made clear what he meant when he used the words “equivalent or similar functionality”. A number of suggested notions were advanced by the defendants ranging from “substitutability” or of “exact or identical correspondence”. The judgment included the following:

“Whatever was the approach taken by Mr Maconochie in using those words [equivalent or similar functionality], in my view it will be necessary for him to attend to this matter in supplementing his evidence in order to make his reasoning processes apparent.”

(See paragraph 177)

17 The relationship between the vision and strategy comparison undertaken in Table 1 of Maconochie 2 and Maconochie 3 and the functionality comparison undertaken in Table 2 of Maconochie 2 and Maconochie 3 was analysed in the Judgment. The Court concluded that:

“As Mr Maconochie well might have concluded, but the court cannot be certain, the notion of vision and strategy in his privately known and undisclosed definition of ‘functionality’, the court is unable to discern what was the reasoning process which he engaged in when he carried out his comparison of the functionality of the Ausmaq Service and the Bank Services or how it is that the notion (or notions) of ‘vision’ and ‘strategy’, play any, and if so, what, part in the analysis which he claims to have carried out. These are matters which required to be clearly spelled out in a supplementary statement before being admitted into evidence so that the reasoning processes can be understood. Absent this occurring the Court cannot be satisfied that the opinions sought to be expressed are wholly or substantially based upon the specialised knowledge”.

(See paragraph 181)

18 A significant focus of the defendants’ attack on the exercise undertaken by Mr Maconochie in compiling Tables 1 and 2 in Maconochie 2 and Maconochie 3 was the process by which he came to identify the categories and sub-categories in those tables. Particular emphasis was given, both in the defendants’ submissions and in the judgment to the process by which Mr Maconochie appeared to draw inferences as to functionality from bank documents that he had inspected for the purposes of undertaking the functionality analysis:

“The inferences which he drew from the documents which he inspected require to be stated in order to be understood. And to the extent the documents are said to have expressly identified the characteristics of the Bank Services which Mr Maconochie then sets out in his Statement, this can also be made clear in a supplementary statement. I am disposed to permit that exercise at this time in these proceedings so that the Court may assess whether the reasoning process is made transparent to satisfy the Court of the requisite connection between the opinions and the specialised knowledge on which the opinions are to be seen to be wholly or substantially based.”

(See paragraph 187)

19 A further criticism made by the Defendants of the tables, was the extent to which items of functionality were identified in imprecise terms. The Court did not accept that the tables viewed as a whole were so imprecise or ambiguous as to be meaningless but held that in a number of instances it was necessary for Mr Maconochie to expose precisely what he meant in relation to his use of eight particular terms in the tables. (See paragraph 189)

20 The principal attack by the defendants on the tables was summarised by the Court in the Judgment in these terms:

“The essence of the defendants’ submission is that a glance at the explanation of and the detail of the tables which Mr Maconochie sets out in his relevant Statements shows that there simply is no intellectual rigour; that ex facie the Court can discern that Mr Maconochie has engaged in inference upon inference and on subjective evaluation which is not only lacking in transparency but is untestable. The defendants point out that there are many hundreds of boxes in the tables and submit the tables are meaningless and lacking in transparency to the extent that the more one inspects the tables and the reasoning of Mr Maconochie expressly set out in his statements and dealing with the tables, the more difficulties one is able to point to in terms of lack of transparency in terms of such methodology, if any, as may have been adopted.”

(See paragraph 191)

21 The judgment summarised the Court’s approach to the objections taken by the defendants to the analysis undertaken by Mr Maconochie in Maconochie 2 and Maconochie 3 in these terms:

“In the result the court has identified above a number of specific areas in respect of which leave is granted to the plaintiffs to supplement Mr Maconochie’s statements essentially by making transparent what were his premises, what were assumptions and what were his reasoning processes. Once the supplementary statements or evidence to achieve this has been bought forward and dealt with it will be possible for the court to complete the exercise of adjudicating upon whether or not Mr Maconochie’s opinions can be shown to have been wholly or substantially based upon his specialised knowledge. Until that occurs the Tables to which I have referred and which appear in the Second and Third statements will not be allowed, and the ruling in respect of them will remain reserved. Likewise, until that occurs, the conclusions in the Second and Third statements based upon the Tables will not be allowed and the ruling in respect of them will remain reserved”.

(See paragraph 199)

22 The Court dealt on a preliminary basis with the defendants’ submission in relation to s135 of the Evidence Act in paragraphs 201 and 203 of the Judgment:

“I have closely considered the detailed submissions put by the defendants seeking to have the court exercise one or more of the section 135 discretions to refuse to admit into evidence large sections of Mr Maconochie’s statements in which he seeks to express so-called expert opinions or on which he seeks to base so-called expert opinions. If the plaintiffs, notwithstanding the leave granted to supplement Mr Maconochie’s statements, prove unable to cure the specific problems which I have identified in relation to sections of the statements then in most instances those sections of the statements will simply be rejected as having failed in the manner explained above, to satisfy s.79 in respect of failure to expose assumptions and transparency of reasoning processes. In that circumstance and as foreshadowed in the Directions on Admissibility, I propose to make also plain that if my ruling be incorrect, then the court would have utilised its powers under s.135 to refuse to admit such evidence. If however the plaintiffs pursuant to the leave granted to supplement the statements, are able to cure the specific problems which I have identified in relation to the relevant sections of the statements, then I would anticipate that the defendants may formally seek to again press their submissions seeking to have the court utilise section 135(a), (b) and/or (c) to refuse to admit those sections into evidence. The defendants may wish to raise additional section 135 submissions going more particularly to the manner in which the plaintiffs come forward with supplementary evidence from Mr Maconochie to cure the above described problems. The proper course in that circumstance is simply to reserve on the section 135 issue until after the plaintiffs have come forward with their supplementary evidence. This will enable the defendants to further consider their position and leave the section 135 issue for determination following any further attack on the supplementary evidence.”

(See paragraph 203)

Orders of 5 April 2001

23 Pursuant to Orders dated 5 April 2001, the plaintiffs were directed to supplement Mr Maconochie’s evidence in relation to the following specific matters arising from the judgment:

(a) making plain the sense in which Mr Maconochie used the term “functionality” in relation to subject matter other than the AUSMAQ Service in his second and third statements (see paragraph 176 of the Judgment);

(b) stating what part, if any, the notions of “vision” and “strategy” played in Mr Maconochie’s analysis of functionality in his second and third statements (paragraph 181 of the Judgment);

(c) making clear what inferences Mr Maconochie seeks to draw from the NAB’s discovered documents relating to the Bank Services in his second and third statements (paragraph 187 of the Judgment);

(d) exposing the process whereby Mr Maconochie arrived at assumptions as to the functionality of the Bank Services in his second and third statements (paragraphs 173 and 199 of the Judgment);

(e) identifying the documents and the relevant parts thereof which expressly identify the characteristics of the Bank Services Mr Maconochie relied upon in his second and third statements and to what extent they do this (paragraph 173 of the Judgment);

(f) giving precise definitions for the terms used in the functionality tables in Mr Maconochie’s second and third statements, identified in paragraph 189 of the Judgment;

(g) making clear the process of reasoning by which Mr Maconochie identified the functionality of the Bank Services in the tables in his second and third statements as a result of his consideration of the Bank Services’ documents (paragraph 187 of the Judgment);

(h) making plain what Mr Maconochie meant by and how he used the words “similar and equivalent functionality” in the context of the comparison between AUSMAQ and the Bank Services undertaken in his second and third statements (paragraph 177 of the judgment); and

(i) otherwise supplementing Mr Maconochie’s second and third statements in order to make his reasoning process apparent (paragraphs 183, 184, 173 and 199 of the Judgment).
Mr Maconochie’s response to the Judgment

24 By a letter from Withnell Hetherington dated 9 July 2001, Mr Maconochie was invited to supplement his expert evidence in accordance with the leave granted in the Judgment. The Orders and specific sections of the Judgment in which the Court had identified deficiencies in the analysis provided by Mr Maconochie were extracted and provided to Mr Maconochie in the WH Letter.

25 In response to the WH Letter, Mr Maconochie prepared a 73 page statement dated 11 September 2001 with four annexures (the “Revised Functionality Statement”) and three supporting volumes of documents on which he made numerous annotations (the “supporting volumes”). The Revised Functionality Statement and Annexures A and B have been marked MFI P240(1), Annexures C and D have been marked MFI P240(2), and the three volumes of the supporting volumes were marked MFI P240(3) to (5) respectively.

26

Set out below is a table prepared by the defendants, summarising the manner in which Mr Maconochie responded to the specific issues raised in the agreed Short Minutes:

Table A

No. Issue Paras. Pages

1. Making plain the sense in which Mr Maconochie used the term “functionality” in relation to subject matter other than the AUSMAQ Service in his second and third statements. 8-13 5-9

2. Concerning what part, if any, the notions of ‘vision’ and ‘strategy’ play in Mr Maconochie’s analysis of functionality in his second and third statements. 14-37 10-27

3. Making clear what inferences Mr Maconochie seeks to draw [from] the National’s discovered documents relating to the Bank Services in his second and third statements. 38-58 27-37

4. Exposing the process whereby Mr Maconochie arrived at assumptions as to the functionality of the Bank Services in his second and third statements. 59-60 38

5. Identifying the documents and the relevant parts thereof which expressly identified the characteristics of the Bank Services Mr Maconochie relied on in his second and third statements and to what extent they do this. 61-65 38-42

6. Giving precise definitions for the terms used in the functionality tables in his second and third statements identified in paragraph 189 of the Judgment. 80 65-73

7. Making clear the process of reasoning by which Mr Maconochie identified the functionality of the Bank Services in the tables in his second and third statements as a result of his consideration of the Bank Services documents. Not specifically included. Not specifically included.

8. Making plain what Mr Maconochie meant by and how he used the words “similar and equivalent functionality” in the context of the comparison between AUSMAQ and the Bank Services undertaken in his second and third statements. 66-79 43-64

9. Otherwise supplementing Mr Maconochie’s second and third statements in order to make his reasoning process apparent. Nil. Nil.

The defendants’ case

27 The defendants submit that notwithstanding the apparent industry engaged in by Mr Maconochie in responding to the letter from Withnell Hetherington dated 9 July 2001, Mr Maconochie has failed to adequately address the deficiencies in his functionality analysis which were identified in the Maconochie expertise judgment.

28 The defendants submit that a close analysis of the Revised Functionality Statement and the supporting volumes highlights:

(a) the extent to which there is a “disconnect” between Mr Maconochie’s explanation in the Revised Functionality Statement of the methodology that he has employed and his more detailed analysis contained in the supporting volumes;

(b) the failure by Mr Maconochie in the Revised Functionality Statement or the supporting volumes to explain critical aspects of the methodology that he employed;

(c) the extent to which the Revised Functionality Statement and the supporting volumes are either opaque and untestable, and do not in substance extend beyond a word association exercise;
(d) a lack of disclosure as to any utilisation of specialised knowledge.

29 The defendants submit that at a minimum, Mr Maconochie would have to explain each of the following matters in order to make his reasoning process transparent:

(a) the process by which he identified relevant bank documents to be analysed, in particular how he satisfied himself that the selection was sufficiently comprehensive to enable him to undertake an analysis of the functionality of each of the Bank Services – i.e. Why did he select those documents ?;

(b) the process by which he came to select individual categories in order to satisfy himself that the selection was, to use his terminology, both collectively exhaustive and mutually exclusive – i.e. How did he select the categories ?;

(c) the process by which he was able to compare the relative importance of each item of functionality that he identified – i.e. How did he weight relative importance ?;

(d) a precise definition of the terms that he employed for the purpose of identifying the functionality of the Bank Services, and in undertaking a comparison between the functionality of each of the Bank Services and the functionality of the AUSMAQ Service – What do his terms really mean ?;

(e) to the extent that Mr Maconochie relied upon bank documents to identify the functionality of the Bank Services, the particular inferences that he sought to draw from particular parts of the documents and, more significantly – i.e. How did he draw the inferences ?;

(f) most significantly, present his analysis in such a manner as to make transparent an application of specialised knowledge – i.e. What specialised knowledge did he really use ?

Issue 1: Definition of functionality

30 In paragraphs 175-177 of the Maconochie expertise judgment, the Court held that Mr Maconochie had failed to explain his understanding of the term “functionality” when used in relation to subject matter other than Ausmaq; and most particularly when used in relation to the Bank Services. The Court was not prepared to speculate as to whether Mr Maconochie had used the term generally so as to apply to all Services and therefore required him to clarify his position via supplementary evidence.

31 Mr Maconochie devoted some six pages of the Revised Functionality Statement (paragraphs 8-13) to this question and commenced by explaining his use of this term in relation to the Ausmaq Service within his Second and Third Statements. His analysis appears to involve the following propositions:

(a) the term “functionality” indicates the totality or aggregation of all functions or features of the Service (paragraph 11.1);

(b) the term “functionality” also involves making a functional description of the Service; that is an enumeration of the specification, or special and separate account of, the individual and essential qualities, capabilities and capacities of the Service (paragraph 11.1);

(c) the term “function” refers to the natural, specified or apparently intended action, object or purpose of the Service (paragraph 11.2); and
(d) the term “function” includes features such as aspects, attributes, characteristics, facets, factors, hallmarks, marks, peculiarities, points, properties, qualities, traits and any intended property or behaviour of the service (paragraph 11.2).

32 Mr Maconochie goes on to explain that he had used the terms functionality and function as described above in relation to Bank Services as well as the Ausmaq Service (paragraph 11.3).

33 His use of these terms in relation to the Ausmaq and Bank Services and his comparison of functionality between them involve the following propositions:

(a) one determines the function or feature of a service through an examination of what the service is designed, specified or apparently intended to do achieve and perform (paragraph 12.1);

(b) the functions or features of a service are revealed when one ascertains the “Business Objectives” and “Business Purpose” of the service (paragraph 12.2);

34 The defendants’ submissions are critical of the distinction drawn by Mr Maconochie between the “what” and the “why” on one hand, and the “means” or the “how” on the other. They submit that this distinction does not provide any real explanation of how Mr Maconochie came to select his categories of functionality and seeks to excuse him from failing to analyse the means by which a service operates in the real world.

35 The defendants further submit that Mr Maconochie has, without much utility, set out to include as many words in the English language as possible to define his use of this term. The submission is that his description is repetitive and set at such a high level as to provide little assistance to the Court in understanding exactly what Mr Maconochie is intending to convey (T13926).

36 The defendants also submit that his definition contains a number of inconsistencies including his application of the words “features” and “functions”. The defendants submit that whilst Mr Maconochie described features as a subset of functions in paragraph 11.2, he later refers to these notions as a disjunctive and on equal footing in 12.1 and 12.2 (T13927-T13929; T14044).

37 In response to this, the plaintiff submits that Mr Maconochie does not actually describe feature as a “subset” of function but rather says the terms can be used interchangeably. The plaintiff submits that Mr Maconochie includes this explanation within his evidence in order to acknowledge the reference made by Mr Macpherson to the term “features” within his analysis (T14327).

38 In my view, the defendants’ criticisms of Mr Maconochie’s explanation in relation to this issue are without substance. Mr Maconochie provides a comprehensive analysis of his use of the term functionality in relation to the Ausmaq Service, and then (as required by paragraph 176 of the Maconochie expertise judgment) makes clear his intended application of this description to his use of the term in relation to the Bank Services. Mr Maconochie’s rather wordy description does not, to my mind, detract from explanation he seeks to convey.

39 The distinction drawn by Mr Maconochie between the “what” and the “why” and the “means” or the “how” may or may not provide the Court with much useful assistance in seeking to understand his use of this term. There is however sufficient detail and clarity within the remainder of the description to provide the Court with enough detail in understanding what Mr Maconochie intended when he used the term functionality. Furthermore and in light of this, I see little importance in the alleged inconsistency between Mr Maconochie’s use of the words “function” and “feature”.

Issue 2: Relevance of the notions “vision” and “strategy”

40 The short description of issue 2 in the table set out earlier does not do justice to the range of matters dealt with by Mr Maconochie under this heading nor to the range of matters dealt with by the submissions of both parties.

a) Clarity of methodology and identification of functions and categories

41 Paragraph 181 of the Maconochie expertise judgment required Mr Maconochie to clarify the part played by the notions “vision” and “strategy” in his analysis of the comparison of functionality between the Ausmaq and Bank Services.

42 Paragraphs 14 to 37 of the Revised Functionality Statement set out Mr Maconochie’s supplementary evidence in relation to this issue. He begins with the following definitional propositions:

(a) the term “vision” refers to a class of features and functions (as previously defined) that articulate or describe the perception of the “Business objectives” and “Business purposes” of a service in relation to its actual (as realised) or intended future development (paragraph 16.1);

(b) the term “strategy” refers to certain functions and features (as previously defined) that articulate or describe the actual (as realised) or intended future role of a service as the case may be in relation to the promoter and its plans and conduct (paragraph 16.2); and

43 Mr Maconochie also makes the following points in relation to Tables 1 and 2:

(a) Tables 1 listed 9 categories of functions or features, 33 sub-headings and 71 individual features or functions of vision and strategy and their implementations (existing or intended) for each Service (paragraph 17.1);

(b) by depicting Tables 1 and 2 separately, Mr Maconochie was distinguishing between the business objectives and purpose functions and features on one hand, and other functions or features on the other (paragraph 21);

(c) Tables 1 and 2 enumerate functions relating to the categories of business objectives, purpose, key features, products, target market and customer segments and distribution channel (paragraph 26);

(d) Tables 1 focussed primarily on the high level function category of business objectives, whereas Tables 2 focussed more on the function categories of products and key features (paragraph 26); and

(i) each relevant function of each service to be compared was represented;

(ii) each function was selected on a discrete and mutually exclusive basis, that is no two functions were the same and there was no overlap between them;

(iii) each function category (or group) was selected so that each function could only appear in one category and there was no overlap between categories (or groups);

(iv) each function of each service could be placed into one of the chosen categories on the same basis; and

44 Mr Maconochie also described the process of compiling Tables 1 whereby he:

(a) engaged in an iterative process by reading the documents identified in his Second and Third statements and identifying functions from characteristics of their general subject matter (paragraph 28);

(b) re-read the documents in the context of a template of the Market Participants (dealers, customers and product suppliers) (paragraph 29);

(c) re-read the documents again in the context of the stakeholders (the promoter, staff and investors) (paragraph 29);

(d) expanded his template to include overall business objectives (couched in the terms vision and strategy in the documents relating to the Bank Services) (paragraphs 30 and 30.1); and

45 Mr Maconochie illustrates the method he used to identify Business objectives and Business purposes through the example of Internet grocery shopping treated with by Mr Macpherson (see Macpherson statement, 29/2/00, paragraph 4.1.9(a)):

“For example, in terms of ‘vision and strategy’, I could state the business objectives and purpose of an Internet Grocery Service as follows:

The proposed Internet Grocery Shopping Service will implement the (our organisation’s)

strategy

“to improve customer loyalty and retention and to reduce costs by reducing in store traffic.” And the (our organisation’s)

vision

“to provide increased access and convenience for customers”.”

46 The defendants submit that Mr Maconochie fails to make his reasoning process transparent in relation to this issue because his definitional explanations of “vision” and “strategy” are no more useful than dictionary definitions (T13935).

47 The further submission is that Mr Maconochie’s description of his compilation of Tables 1 does not clarify the methodology he undertook in identifying and categorising documents (T13950).

48 A further submission put forward by the defendants is that the Court also has to be satisfied that the categories were identified at an appropriate level; which ought not be too high nor too low a level. They contend that:

“The methodology which Mr Maconochie employed to identify individual categories of functionality in the AUSMAQ Service and each of the Bank Services is a critical aspect of the functionality analysis that he has purported to undertake. Unless the tribunal of fact is satisfied that the identification of individual categories was the product of a rigorous, testable and objective approach, it could place no weight on any subsequent comparison undertaken by the expert. If relevant categories were excluded or if it was not possible to effectively distinguish between categories, the results of any comparison exercise would provide no assistance to the court.”

49 In light of this, the defendants submit that Mr Maconochie’s analysis of his selection of functions and categories in Tables 1 and 2 fails to adequately specify why and how he did this, what were his selection criteria, whether the selection was complete and why this method was chosen over any alternative proposal (T13935-T13937; T13954).

50 The further contention is that Mr Maconochie provides inconsistent accounts of his methodology in this regard. In Maconochie 2, Mr Maconochie is said to have explained that he identified categories and sub-categories by reference to Ausmaq documents and his understanding of the Ausmaq Service. Having identified these categories and sub-categories, he explains that he turned to the Bank documents to determine whether each of the Bank Services had functionality that could be described as similar or equivalent to the categories and sub-categories of the Ausmaq Service.

51 In paragraphs 28-30 of his Revised Functionality Statement, Mr Maconochie is then said to have described an iterative exercise whereby he identified categories and sub-categories by reference to documents in relation to both the Ausmaq and Bank Services.

52 The defendants submit that neither of these inconsistent explanations provides an adequately transparent explanation of the process which he undertook in identifying the functionality categories.

53 In response to this, the plaintiff submits that the iterative process involved Mr Maconochie identifying functions and then determining whether they applied to the Services described in the documents. During the process of reading and re-reading the documents, Mr Maconochie may have identified further function categories which could be added to the list when assessing other documents. The plaintiff submits that in this way, Mr Maconochie was able to attain a “template” whereby he could compare like with like. It is submitted that this is a transparent methodology which relies on iteration and reiteration, and in that respect, is the same process used by Mr Macpherson although the categories are different (T14338).

54 To my mind there is considerable substance in the defendants’ submission that Mr Maconochie has given entirely inconsistent accounts of the methodology which he originally employed in using documents to select the functions to be found in Tables 1 and 2.

55 A careful reading of the first bullet point in paragraph 8.2 of his second statement shows that he then asserted that the functions in Table 2 were based on his knowledge

"of the Ausmaq Service, the business plans for NMG and Ausmaq and the documents referred to in this statement and included in the Production Specification".

56 I cannot accept that a proper reading of the third bullet point in paragraph 8.2 of his first statement which describes the compilation of Table 1 can be taken to suggest that in that exercise he did otherwise than rely upon his knowledge of the Ausmaq Service, the business plans and strategy for NMG and Ausmaq and the Ausmaq documents elsewhere referred to in his statement. Special importance requires to be attached to use of the word "then" in the second sentence of the third bullet point in paragraph 8.2 of his first statement:

"I

then

reviewed the documents that described [the relevant NAB Services] and identified the strategy or objectives that were similar or equivalent to the Ausmaq Service, notating them with a "Y quote in the above-mentioned Table 1".

57 By contrast, in purporting to describe the methodology that Mr Maconochie had used in creating Tables 1, paragraph 28 of the Revised Functionality Statement describes an iterative process whereby he now suggests that in originally creating Tables 1, he had utilised inter alia a number of Bank documents. And in like fashion, para 30.4 of the Revised Functionality Statement indicates that in similar fashion, he had identified the functions shown in Tables 2. I read those words "in similar fashion" to refer back to paragraphs 27, 28 and 29 of the Revised Functionality Statement. If I be wrong in this reading this is yet a further ambiguity which remains unresolved.

58 The short result is that Mr Maconochie's conflicting accounts of how he used documents in his original selection of the functions and function categories in Tables 1 and 2 means that the Court simply cannot understand what that process was. Both of the purported explanations cannot be correct, and the Court is therefore left in the dark as to the reality of what methodology was adopted by Mr Maconochie in that regard. I shall refer to this difficulty as “the function selection disconnect” issue/problem.

59 I am not persuaded however by the defendants’ submissions relating to the definition applied by Mr Maconochie to the terms “vision” and “strategy”. In my view, subject to the function select disconnect issue, Mr Maconochie has provided a sufficiently clear explanation of his use of these terms and the conceptual role they played in the distinction between Tables 1 and 2. The supplementary evidence explaining his use of these terms thereby properly articulates in ordinary language these principal tenets which underlie his final opinion on this matter.

60 Mr Maconochie explains these notions and their relevance in paragraphs 21 and 26 with reference to a set of six function categories not previously applied by him; ie business objectives, purpose, key features, products, target market and customer segments and distribution channel. Here again, subject to the function select disconnect issue, by introducing these new categories, Mr Maconochie is able to clearly explain the reasoning process said to have been applied by him in separating Tables 1 and 2 according to distinct function categories.

61 In relation to the defendants’ submissions as to the methodology employed by Mr Maconochie in identifying categories of functionality [ie presently turning a blind eye to the function disconnect problem of what documents Mr Maconochie used in choosing the function categories, considering his reasoning process as to how he conceptually chose the function categories], in my view Mr Maconochie has described his reasoning process in a satisfactory manner. To my mind, but again subject to the function select disconnect issue, paragraph 32 of the Revised Functionality Statement provides a comprehensible account of the method adopted in selecting the functions and organising them in the Tables according to the categories. Mr Maconochie’s methodology followed a logical selection process from which, subject to the function select disconnect issue, the Court can readily identify the methods employed by Mr Maconochie in arriving at his conclusions.

62 In addition, paragraphs 28 to 30 of the Statement seem to me to articulate the process undertaken by Mr Maconochie in identifying function categories. The problem reposes in the Court’s inability to be clear as to which documents were resorted to in the exercise. Mr Maconochie apparently read and re-read certain documents; reconsidering them each time with different contexts in mind. In this way, Mr Maconochie asserts that he was able to direct his mind toward multiple issues and concepts in locating evidence of functionality within the documents. But for the function select disconnect issue, this comprehensive and iterative process would make it implicitly obvious that the selection process was complete and careful. Mr Maconochie, but for the function select disconnect issue, thereby appears to reveal the selection process applied and the manner in which the information was utilised in arriving at conclusions in a satisfactory manner.

63 In the circumstances where I accept that the process undertaken by Mr Maconochie was sound and comprehensive (as described in the previous paragraph), it is clearly unnecessary for Mr Maconochie to specify why this particular process was chosen over any alternative methodology. To my mind, it would be unreasonable to require Mr Maconochie to analyse the potentially infinite number of alternative procedures. It may well be true that other methodologies could have been successfully utilised. However, but again subject to the endemic function select disconnect issue, in circumstances where the process applied by Mr Maconochie satisfactorily reveals his reasoning process, this exercise is clearly unnecessary.

b) Reorganisation and consolidation of Tables 1 and 2

64 In paragraphs 33 to 37, Mr Maconochie explains the process by which he consolidated Tables 1 and 2 (in the form of Appendix C, MFI P240(2)) for the purpose of supplementing his evidence. He explains:

(a) that the functions and groups of functions in Tables 1 and 2 represent the complete set of functions used to describe the Services (paragraph 33);

(b) that in supplementing his evidence, he consolidated and regrouped these functions and groups into 6 categories: business objectives, purpose, key features, products, targets (markets and customers) and distribution (access by customer) channel (paragraph 34);

“…the consolidation and regrouping as I have done makes no difference to the results. As a general principle, in my opinion, whether a service can properly be compared to another for the purposes of making a comparison of similarity or equivalence is independent of the format of the functions that describe the service so long as the principles I have set out in paragraph 32 above are observed.” (paragraph 35); and

65 Subject to their submissions summarised below, the defendants’ first submission in relation to this issue is that all that Mr Maconochie has achieved is a mere reorganisation of the items in Tables 1 and 2 in attempting to fit them into the six new categories. In other words, whilst Tables 1 and 2 were originally divided between “Vision and Strategy” on the one hand and “Functionality” on the other, Appendix C consolidates the items in both tables. Mr Sackar QC submitted:

“All he’s done, effectively, is to reshuffle the pack of cards and move either items or categories of functionality out of the old table1/table2 context, into the six categories.”

66 The defendants contend that this reshuffling process is “entirely inexplicable and illogical given the nature of the task that Mr Maconochie was asked to undertake”. They contend that Mr Maconochie does not clarify the basis or criteria for this reorganisation and does not therefore satisfy the supplementation criteria (paragraph 6.3 MFI D235(1)).

67 The plaintiff submits that the role of Mr Maconochie’s supplementary statement is to support the conclusions and explain the methodology applied in the Second and Third Statements rather than to repeat the conclusions. In doing so, Mr Maconochie is said to have repeated the functional categories used in Tables 1 and 2 in a rearranged form by reference to Mr Macpherson’s categories, in an attempt to relate the categories for the benefit of the Court. The plaintiff submits that upon close inspection, the rearrangement of functional categories in Appendix C can be reconciled with Tables 1 and 2 and contains no additional items (T14069).

68 The defendants’ second submission in this area is that contrary to Mr Maconochie’s explanation that the items in Tables 1 were essentially encompassed by the “Business objectives” and “Business purposes” categories (see paragraph 16), some items from Tables 1 can be located under other category headings in the consolidated version in Appendix C (T14034 and following).

69 For example, sub-category 2.2 in Table 1 described as “As an Intermediary (“retailer/wholesaler”)” with functions (a) to (e) below it are all included in Appendix C under the “Target Market” category rather than the “Business objectives” or “Purpose” categories (see lines 274-279, pages 293-298, Appendix C) (T13946).

70 They submit that in the absence of any explanation as to why this inconsistency exists, the selection process and methodology undertaken by Mr Maconochie lacks transparency and cannot be properly understood (T13946). They contend that despite Mr Maconochie’s assertion in paragraph 35 that the regrouping of items makes no difference to the results, the process he has undertaken involves a shift in reasoning and is more than a matter of simple reformatting (T13955).

71 A third submission put forward by the defendants is that 23 items of the items listed in Appendix C simply do not appear in the original Tables 1 and 2 (the number of items was originally cited by the defendants as 15, but later determined to be 23). They rely on this inconsistency by arguing that the methodology applied by Mr Maconochie in compiling the Revised Functionality Statement is unclear and opaque. They further contend that this discrepancy disproves Mr Maconochie’s claim that the consolidation of functions into Appendix C made no difference to the results (MFI D235(1), paragraphs 6.6, 7.1; T14036; T14456).

72 In reply, the plaintiff submits that upon proper examination, the items alleged to be missing from Tables 1 and 2 are actually represented in Tables 1 and 2 and provide detailed justifications (see MFI P257) for each item. One such explanation was that some of the extra items were headings that were merely intended to describe the items listed below it, all of which items were represented in Tables 1 and 2. For example, line 212 is said to be a description “patently intended to describe the classes of products listed below it’ as listed in items 213 to 224 (MFI P257; T14371).

73 In reply to this, the defendants submit that the explanations proffered in MFI P257 are “virtual incomprehensible” and “inaccurate”. They submit that if the extra items were in fact mere subsets of other items, their inclusion constitutes overlap within the table; contrary to Mr Maconochie’s explanation of mutual exclusivity (T14036; T14456).

74 The defendants further submit that upon examination of Appendix C, the documents listed in respect of these extra items in are in some cases different to those listed in respect of the items they are supposed to describe, indicating that they are in fact discrete topics and not mere headings or descriptions. For example, the first three document numbers referred to for item 212 in Appendix C are:

“011.003

014.001

014.002”.

75 A fourth and final submission put forward by the defendants on this topic is that despite Mr Maconochie’s claim in paragraph 32 that the items of functionality were chosen on a mutually exclusive basis, there are places within Appendix C where a departure from this methodology is evident.

76 The defendants support this proposition by pointing to an example found within items 286 and 287 of Appendix C; both described as “communications media”. The defendants submit that this duplication is not the result of one item representing a heading or description of the other, nor is it a mere typographical error. They support this by pointing to a number of differences between the cross-referenced documents associated with these two items in Appendix C. Some of these differences are said to be:

“(a) a reference in JMG Doc 600 in Communications Media in line 287 at page 015.256, but no such reference in Communications Media (line 286);

(b) JMG Doc 606 is relied upon for Communications media (line 286) but not for Communications Media (line 287);

(c) JMG Doc 605 is relied upon for Communications Media (Line 287) but not for Communications Media (line 286).”

77 The defendants submit that the number of differences between the documents listed for each item are too great in number to suggest a mere oversight. They submit that this example represents a departure from the methodology said to be employed by Mr Maconochie in selecting functions and avoiding overlap, and consequently prevents the Court from understanding the methodology employed by him as an expert witness (T14038-T14041; MFI D235(1), paragraph 10.2).

78 In response to this, the plaintiff submits that item 287 was an unintended duplication of 286 due to the computer compilation of the Tables. The plaintiff submits that the references in one apply equally to the other and the duplication does not affect the application of Mr Maconochie’s methodology or results. The submission is that the matter lacks substance and cannot be properly based following a correct and proper reading of Appendix C and the rest of Mr Maconochie’s supplementary evidence (MFI P253, paragraph 9.4(a); T14335).

79 Whilst it may seem somewhat difficult to differentiate between the problems thrown up by the first and second of the defendants’ submissions the short distinction is as follows:

(a) the first submission is critical of the alleged “re-shuffling” process undertaken by Mr Maconochie in compiling Appendix C and his alleged failure to clarify the basis upon which this task was undertaken; whereas

(b) the second submission is critical of the alleged inaccuracy of Mr Maconochie’s explanation of the relationship between Tables 1 and Appendix C.

80 It is convenient to begin by dealing with the second of the defendants’ submissions [see paragraph 68]. I accept this submission as of substance and recognise the apparent discrepancy within Mr Maconochie’s explanation as to the connection between the functions listed in Tables 1 and the consolidated version in Appendix C.

81 The “vision” and “strategy” functions that originated from Tables 1 were said by Mr Maconochie to be associated with the “Business objectives” and “Purpose” categories in Appendix C, as distinct from those in Tables 2 which dealt with other categories. However, some of the functions originating from Tables 1 are associated with a number of categories other than “Business objectives” and “Purpose” within the consolidated table in Appendix C.

82 Overall, 66 out of the 123 categories, sub-headings and functions originating from Table 1 of Maconochie 2 are listed under categories other than “Business objectives” and “Purpose” in Appendix C. This figure represents more than 53% of the total items in Table 1.

83 In these circumstances, the first of the defendants’ submissions [see paragraph 65] is also made out. Mr Maconochie apparently consolidated the functions in Tables 1 and 2 in an attempt to provide the Court with an understanding of the relationship and differences between Tables 1 and 2. In circumstances where less than half of the items in Tables 1 are actually associated with the “Business objectives” and “Purpose” categories, the explanation proffered by Mr Maconochie as to the significance of the consolidation process is simply not able to be understood.

84 Accepting as I do that this issue has not been satisfactorily addressed by Mr Maconochie, there is no real need for the Court to address the third and fourth of the defendants’ submissions in relation to this matter. I will say however that considered in isolation, the mere evidence of the extra 23 items and examples of duplication amongst the items does not in itself render Mr Maconochie’s reasoning process opaque or unclear in any meaningful way, but would rather seem to me to go to weight.

Issues 3, 4, 5 and 7: Identification of documents, inferences drawn and assumptions made and process of reasoning

85 Paragraph 187 of the expertise judgment required Mr Maconochie to clarify the inferences which he drew from the documents inspected and the extent which these documents are said to have expressly identified the characteristics of the Bank Services.

86 Paragraph 173 of the judgment required Mr Maconochie to specify the sections of the documents referred to with greater particularity in order expose the process by which he identified the functionality of the Bank Services.

87 Paragraph 199 of the judgment required Mr Maconochie to make transparent what were his premises, assumptions and reasoning processes.

88 Paragraphs 38-65 of the Revised Functionality Statement deal with these four issues. Issue 7 is not specifically dealt with, however Mr Maconochie has included information which could be arguably conceived as a partial answer to this issue in the answers to issues 3, 4 and 5.

89 In the Revised Functionality Statement, Mr Maconochie specifies:

(a) the Bank documents referred to in compiling Tables 1 and 2 in apparent answer to Issue 3 (paragraphs 40, 42 and 44); and

90 Mr Maconochie also sets out the assumptions made by Mr Macpherson as used in his compilation of Table 3 (Appendix D) (paragraph 46).

91 In paragraphs 48 and 63 of the Revised Functionality Statement, Mr Maconochie states that he identified, selected and enumerated functions of the Ausmaq and Bank Services from the documents listed in paragraphs 40, 42 and 44 and 62 respectively according to the principles described by him in paragraph 32. He also refers to the process applied by him in enumerating the functions as previously described by him in paragraphs 26-48.

92 Mr Maconochie further described the process undertaken by him in relation to the functions of the Ausmaq and Bank Services as follows:

(a) the functions located within the documents were not necessarily in any particular order and their descriptions sometimes appeared almost randomly on a page (paragraphs 50, 65);

(b) Mr Maconochie conducted a manual word search of each document in order to organise the functions described in them into the format applied in Tables 1 and 2 (paragraphs 50, 65);

(c) upon examination of the document, Mr Maconochie concluded that different authors may have used different terminology to describe what he understood to be the same function; in dealing with this:

(i) he (in some cases) inferred from the words and context that there was a reasonable likeness to a function described in the Tables;

“…it reasonably appeared to lie in the spectrum ranging from a likeness in appearance or character or nature at one extreme, to equality of value, meaning or effect at the other.”

93 Mr Maconochie explains that he expressly identified references to the functions of the Ausmaq and Bank Services on each page of the documents by underlining the word or sentence and marking it with the corresponding function row number in Appendix C. As a result, Appendix C indicates the page numbers of each Ausmaq and Bank document for each function of each Service (paragraphs 55, 58, 65).

94 On my understanding, Mr Maconochie engaged in the following exercise for the purposes of supplementing his evidence; he:

(a) allocated a specific number to each item of functionality listed in Appendix C (which items are said to originate from Tables 1 and 2); there are 393 items listed in Appendix C however only 347 of these items refer to a listed function (T14330);

(b) collated the documents which he claims to have relied upon for the purposes of Maconochie 2 and 3 and those relied upon by Mr Macpherson into 3 folders;

(c) marked-up the relevant pages of these documents by use of handwritten numbers representing individual items of functionality; and

95 Mr Maconochie explains that the documents referred to in paragraphs 40, 42, 44 and 62 are together the “premises” that he relied upon in determining the functionality of the Ausmaq and Bank Services set out in Tables 1 and 2 and Appendix C. He defines the term “premise” as:

“…a statement or statements in relation to a service as the case may be that is assumed to be true, to which a reasoning process can be applied and from which conclusions can be drawn.”

96 The first submission put forward by the defendants in relation to these issues concerns the alleged failure on Mr Maconochie’s behalf, to explain the basis upon which he selected Bank documents for analysis. They submit that this constitutes a significant omission in his clarification of the methodology employed. For instance, some of the documents analysed by Mr Maconochie are said to be draft documents; eg 015.096 (which commences at 015.083), is marked with the words, “Draft Version 0.1”. The defendants contend that in the absence of any explanation in relation to this, the Court must infer that inappropriate material was relied upon for the purposes of the functionality comparison (T14056).

97 The defendants point out that a very substantial number of documents relating to the Bank Services were discovered by the defendants filling some 37 volumes of the Courtbook. Their submission is that in the absence of any explanation from Mr Maconochie, one could infer that other documents with additional information relevant to the functional categories were not considered by him. (MFI D235(1), paragraphs 4.1, 4.6; T13957).

98 The defendants submit that Mr Maconochie has only referred to 41 documents in Appendix C (see MFI 214). In their submission, only 30 of these documents relate to Bank Services; and of those 30, only 17 appear to have been used by Mr Maconochie in completing the exercise. The defendants put this forward on the basis that only 17 documents relating to the Bank Services bear written notations by Mr Maconochie, and in the absence of any explanation, one can infer that the other 13 Bank documents (with no written notation) played no part in the analysis (MFI D235(1), paragraph 4.3; T13992).

99 Following this logic, MFI D214 contains only the 25 documents relating to Bank Services that bear written notation (some of the documents were used more than once). The defendants contend that this collection of documents is the only volume relevant for the purposes of considering Mr Maconochie’s methodology, and that MFI P240(3), (4) and (5) are otiose as a result (T13997-T13999).

100 The defendants submit that Mr Maconochie’s failure to specify why this particular number of documents and no more were referred to renders his analysis of the methodology unclear. The submission is that even if Mr Maconochie was able to accurately identify functionality from the documents he selected, the exercise would be of no value unless the Court was satisfied that all relevant documents had been considered and all irrelevant documents had been excluded (MFI D235(1), paragraph 4.7; T13992).

101 The plaintiff replies to this first submission by submitting that the documents referred to by Mr Maconochie in paragraphs 38-44 constituted the documents available to him in 1998 and 1999 upon which the evidence in his Second and Third Statements was based. The submission is that the defendants did not give discovery of any other documents arguably relevant to the issue of equivalent or similar functionality until long after Mr Maconochie’s Second and Third Statements were completed and filed. Moreover, Mr Maconochie is said to have referred to the possible need to consider further documents following the completion of discovery (see Maconochie 2, paragraph 1.3 Maconochie 3, paragraphs 1.2, 8.3) (MFI P253, paragraphs 19, 22).

102 The plaintiff submits that Mr Maconochie is prepared to state that all of the documents listed (except for those which on their face were generated by or for JMG) were provided to him by Mr Meikle before he compiled Maconochie 2 and 3 and were, to the best of his knowledge, the only documents provided at that time. In paragraph 8.2.6 of Maconochie 3 ( a similar passage is included at paragraph 8.2 of Maconochie 2) and he states:

“In respect of Table 1…and Table 2…made reference to the following source documents indicated in respect of each of the (two and four) NAB services…which are documents produced by or for NAB and provided to me by NMG.”

103 The plaintiff also submits that it is unreasonable to expect Mr Maconochie to have considered all discovered documents for the purposes of his supplementary evidence and that this is not what was required by the Court’s rulings in the Expertise judgment. It submits that Mr Maconochie has complied with all of the requirements listed in Makita and that while he was expected to deal with matters arising from documents that caused him to change his opinion, the authorities and the NSW Supreme Court’s Expert Code do not require an expert to exhaustively investigate all documents which may or may not be relevant. Instead, clauses 5,6 and 7 of the Code require Mr Maconochie to clarify which materials were considered, what assumptions were made and the basis for his reasoning, methodology and opinion (MFI P253, paragraph 22; T14377; T14383).

104 The plaintiff submits that the proposition that other important documents could have been considered, or that too few or inadequate documents were relied upon does not destroy the basis for Mr Maconochie’s opinion and is ultimately a question of weight and a matter for cross-examination (MFI P253, paragraph 29.5; T14377; T14383)

105 The plaintiff also submits that Mr Maconochie’s reliance upon assumptions as to the content of Bank Services put forward by Mr Macpherson goes a long way towards meeting any allegations that inadequate and out-of-date material were used (MFI P253, paragraph 22; T14343).

106 The defendants’ second submission is that Mr Maconochie provides inconsistent accounts of the documents referred to in Maconochie 2 and 3, as opposed to Appendix C. They suggest the following as examples:

(a) document JMG0337 is identified in Maconochie 2, and documents JMG0903 and JMG0908 are identified in Maconochie 3 yet none of these documents appear in Appendix C; and

107 In reply, the plaintiff explains these discrepancies in the following way:

(a) JMG0337 was omitted in error, however the functionality of the Gateway Service as disclosed by this document is said to be disclosed by other documents in Appendix C;

(b) JMG0903 was omitted because it repeats the functionality described in JMG0902 which is referred to in Appendix C;

(c) JMG0908 was omitted because it added nothing to the existing Ausmaq documents referred to in Appendix C; and

108 The defendants’ third submission is that whilst at a superficial level, it may appear as though Mr Maconochie has undertaken a precise and comprehensive analysis in answer to this issue, the Court should not mistake “industry and volume for value and precision”. The submission is that Mr Maconochie’s reasoning process lacks transparency and that there is no discernible application of specialised knowledge to enable Mr Maconochie to draw these inferences MFI D235(1), paragraph 9.3).

109 In this context, the defendants submit that despite the seemingly careful way in which Mr Maconochie has marked-up the documents by reference to the items of functionality numbered 1 to 347, it is often impossible to determine which part of the document, paragraph and sentence Mr Maconochie is referring to (T14050).

110 For example, the defendants point to a passage in document PLF 015.018 which reads:

“

Traders

Traders seek higher profits from the leveraging of positions. They often seek smaller mid cap growth stocks, and seek to anticipate market movements. They are relatively heavy transactors, and their average annual debit balances are lower. They seek quick and accurate transaction completion, and aren’t as price sensitive as investors.”.

“Immediate access on demand – no waiting – demonstrable that Customer is ‘King’”.

111 The defendants submit that the cross-reference to item 107 does not clarify the particular sentences or words within this passage that correlate to this function.

112 Another of the many examples thrown up by the defendants is the following passage in 09039 (MFI D214, tab 5):

“There remains a window of opportunity for entry from a credible international financial services company that creates more than “me too positioning”.

113 The submission is that in the absence of any criteria to guide the reader, any attempt to determine any rational connection between the parts of the documents relied upon and the functions identified ultimately turns upon one’s personal interpretation and amounts to pure speculation or guesswork. Furthermore, the individual function categories selected by Mr Maconochie are said to be typically far more precise than the words used in the Bank documents. The defendants submit that this high-level explanation does not provide a reasonable or reasoned explanation as to the reasoning process applied by Mr Maconochie (T14052; T14053; T14059; MFI D235(1), paragraph 9.3).

114 The defendants further submit that Mr Maconochie has engaged in a “mechanistic process of word association” in attempting to link words from the documents with the functions listed in Appendix C. They submit that the process lacks intellectual rigour in that Mr Maconochie does not assess the document in its proper context, and rather plucks random words or sentences from the document and aligns them to multiple functions. The defendants submit that this process of word association does not amplify any methodology which indicates the application of expertise (T13879; T13901; T13958; T14057; MFI D235(1), paragraph 9.5).

115 The defendants also point out that multiple function categories (sometimes as many as 100) are sometimes allocated to single phrases, sentences or paragraphs within the cross-referenced documents and that it is therefore impossible in these cases to determine any connection between the passages and the functions. For example, the second paragraph on 015.019 reads:

“While clients will be able to use any broker to place buy and sell orders, the service and speed of execution when using a broker that uses the Shares system will be second to none, as reservation of available funds will be automated.”

116 Another example is the passage in JMG0902 (MFI D214, Tab 5, 09038) which reads:

“The opportunity is to create an integrated direct financial services platform offering international business people unmatched customer value through access to financial services at any place and time through the convenience and tools of the internet, personal digital assistants and modern communication devices.”

117 The defendants submit that these multiple function references also demonstrate conflicting explanations of the methodology employed by Mr Maconochie. The defendants submit that contrary to Mr Maconochie’s stated intention in paragraph 32 to select mutually exclusive functions, the annotation of multiple function items to single passages gives rise to the suggestion that there is indeed overlap between the functions. They submit that this serves:

“…to highlight the lack of any transparency in the reasoning process, the absence of any testable scientific method and the inherently subjective nature of the exercise Mr Maconochie has purported to undertake and present to this Court as an exercise which should be admitted pursuant to s 79 of the Evidence Act.”

“a service or function of a service that ‘is an alignment with the unbundled operational model of the NAB’s ‘New Business Model - ‘NBM’ and strategically aligned to Wealth Management - taking a balance sheet approach to the customer and maximising the strategic value of information [PLF.015.315] and which focus on the ‘new retailing paradigm’ [PLF.015.361]”

149 Mr Maconochie adopted this as his understanding of this phrase. He used it to describe a function in the “Business objectives” group of functions in Appendices C and D and previously in Tables 1 and intended it to mean:

“a business objective that is fulfilled by function of a service that permits a customer to consolidate their financial services (as I have defined elsewhere and referred to as Products in paragraph (h) below).

h) Means of protecting and enhancing ‘share of wallet’ of preferred customers

150 Mr Maconochie gave evidence that this phrase was frequently used by the Bank in documentation relating to Bank services (for example JMG0900, PLF.015.033 and PLF.015.336/343). He understood the phrase to mean:

“a share of a business or service of the

target market

segments of the

overall target market

in

financial services

(that ism covering the

Products

of Assets, Payments, Risk, Debt, Parallel and stock markets), in which the customers (as one of the Market Participants) in target customer segments participate”

151 He used the conjunctive phrase, “means of protecting” in relation to the business objective of a service, and in particular here in relation to the function “share of wallet”. Mr Maconochie adopted “share of wallet” as a phrase which describes a function in the “Business objectives” group of functions in Appendices C and D and previously in Tables 1 (paragraph 80(h)).

152 The defendants submit that in each case, Mr Maconochie essentially:

(a) asserts that the term is a phrase used by the Bank in documents relating to Bank Services; and

153 The defendants submit that Mr Maconochie’s attempts to identify the Bank documents as the source of these terms is inconsistent with the explanation provided in Maconochie 2 and 3 where he stated that individual function categories were identified by him by reference to his understanding of the Ausmaq Service (MFI D235(1), paragraphs 11.3, 5.12)

154 The defendants submit that the inutility of the attempted clarification is revealed in MFI D213 which consolidates the references relied upon by Mr Maconochie in asserting these terms (or functional categories). They submit that whilst Mr Maconochie has listed the documents referred to for each item in Appendix C and has inserted handwritten page-number references on each of the pages, there are many instances in which it is impossible to determine which part of the document, paragraph and sentence the numbers actually refer to (paragraph MFI D235(1), paragraph 11.4; T14049).

155 For example, one handwritten annotation on page 015.018 (MFI D213, Tab 1) reads “132-148”, clearly including function number 134 or “value (‘best of breed’ value/worth)”; the first of the items described by Mr Maconochie in paragraph 80(a). In line with their submissions as to the identification of documents as discussed above, the defendants submit that it is entirely unclear which parts of the document the term is supposed to refer to. They submit that these references highlight the “opaque and untestable” nature of the identification exercise said to have been undertaken by Mr Maconochie (paragraph MFI D235(1), paragraph 11.4; T14049; T14052).

156 A further submission put forward by the defendants involves Mr Maconochie’s explanation of the term, “Trust (low risk, peace of mind) opportunities” in paragraph 80(b) which he describes as the quality of:

“professionalism and ethics in all our actions in relation to the provision of the service as the case may be.”

“Ethical (honest, trustworthy, transparent, accountable)”

157 The defendants also submit that the definitions provided by Mr Maconochie are obscure and difficult to understand. They submit that whilst Mr Maconochie indicates the source of the definitions (usually from Bank documents) he does not explain what use he made of them, his analysis or why he chose these words as opposed to any other words in the documents. The submission is that whilst Mr Maconochie has literally performed the task set for him by the Court, his explanations do not assist and do not expose his reasoning process (T13966).

158 In response, the plaintiff submits that these criticisms are without substance and that there is no ambiguity or circularity present within Mr Maconochie’s statement. The plaintiff submits that even if the defendants’ criticisms did have any substance, they are questions of weight (MFI P253, paragraph 42.2).

159 In my view, the exercise undertaken by Mr Maconochie in seeking to clarify what he meant by the terms identified in paragraph 189 of the judgment goes a considerable distance towards achieving that clarification. The problems which however remain in relation to the exercise are those referred to in paragraphs 153-155 above.

160 The “function select disconnect” issue (as described by the defendants in

paragraph 153) is otherwise dealt with above in this judgment; as is the unsatisfactory cross-referencing exercise undertaken by Mr Maconochie (as described by the defendants in paragraphs 154 and 155).

Issue 8: Meaning of “similar and equivalent functionality”

161 Paragraph 177 of the Maconochie expertise judgment required Mr Maconochie to supplement his evidence in order to make clear the approach take by him in using the words, “equivalent or similar functionality”.

162 Paragraphs 66 to 79 of the Revised Functionality Statement set out Mr Maconochie’s supplementary evidence in relation to this issue. He begins with the following definitional propositions:

(a) “equivalent” indicates the sense of equality of value, equality, meaning or effect of a discrete function or feature and the functionality of a service when compared to the discrete features and functions and functionality of the Ausmaq Service; the term refers to the individual and totality or aggregation of the functions or features of a service, as the functionality of that service; (paragraph 67);

(b) “similar” refers to alikeness in appearance or character or nature of a discrete function or feature and the functionality of a service when compared to the discrete features and functions and functionality of the Ausmaq Service; the term refers to the individual and totality or aggregation of the functions or features of a service, as the functionality of that service; (paragraph 68);

163 Mr Maconochie explains that his functionality comparison rested on the premise that both the Bank and Ausmaq Services were accurately described on a common basis according to the principles recorded by him in paragraph 32 of the Revised Functionality Statement. As long as this process was followed, the services could be compared on the same basis. In other words:

“at the significant…level of measurement of “equivalent or similar”…at the level of individual functions, at the category level of functions, at the group level of functions

and

in aggregate to enable inferences to be drawn as to the interrelationships between groups of functions and thereby to allow a proper comparison to be made of the Bank services to the level of significance…permissible within the resolution of “equivalent or similar” functionality of a Bank service…to the Ausmaq Service.”

164 According to Mr Maconochie, the implementation of the processes described by him in the Statement allowed each service to be described within the ‘spectrum template’ of equivalent or similar functions or features (paragraph 70).

165 Mr Maconochie understood the terms, “significance in the mathematical sense” and “resolution in the measurement sense” to mean:

“the degree of coarseness or fineness of measurement of representation of a parameter; in the context of this and my previous Second and Third Statements the parameter being of function or feature.”

166 Mr Maconochie identified and classified any individual function or feature in the functional description of a service according to the “coarse resolution” of equivalent or similar which he describes as:

“ the resolution of ‘

equivalent or similar’

that is across a descriptive spectrum ranging from alikeness in appearance or character or nature at one end of the spectrum, to equality of value, equality, meaning or effect at the other…compared for example to a resolution of just ‘

equivalent’

”

167 According to Mr Maconochie, the resolution of “equivalent or similar” in relation to the functions or features in Tables 1 and 2 (and consequently the functionality of a service) is at the “yes/no” level of resolution (paragraph 74).

168 Mr Maconochie then explains his references to the:

(a) “yes/no” conclusions (paragraph 75);
(b) “not applicable” conclusions (paragraph 76); and
(c) “unknown” conclusions (paragraph 77)

169 In relation to the “weighting” of functions, categories and groups of functions, Mr Maconochie comes to the conclusion that in determining that a Service is “equivalent or similar” to the Ausmaq Service, it is only necessary to show that either:

(a) the “Business objectives” and “Purpose” and “Target Markets” and “Customer segments” functions in aggregate are “equivalent or similar”; or

170 He states that according to his understanding of the Consulting Agreement, this was an appropriate methodology to apply in order to establish the presence of “equivalent or similar” functionality in respect of the Bank and Ausmaq Services (paragraph 79).

171 The defendants submit that the definitional explanation provided by Mr Maconochie in relation to the term, “equivalent or similar” in paragraph 69 is tantamount to a dictionary definition and represents no application of expertise (T13960).

172 The defendants further submit that Mr Maconochie has read other materials which are critical of his analysis on the basis that he does not undertake a “weightings exercise”. In other words, in his Second and Third statements, Mr Maconochie proceeded on the basis that the items he selected were of equal weight and he did not assess and categorise according to relative importance. The defendants submit that in response to this, Mr Maconochie goes into “self-defence mode” in paragraph 79 and attempts to argue why such an exercise is unnecessary (T13961; T14444).

173 The defendants submit that the explanation proffered by Mr Maconochie in paragraph 79 does not tell the reader why and how he selected these functions. Furthermore, they submit that his assertion that by grouping functions together, the weighting exercise became unnecessary does not make any sense. The defendants submit that this is no more than an analysis of logic which does not equate to an expert analysis (T13962).

174 The defendants submit that in his Second and Third Statements, Mr Maconochie purports to perform a calculation which results in percentages, however these percentages are merely an application by way of fractions of the number of “yeses” and “ticks” included in the Tables so that the conclusion as to equivalence or similarity is affirmative. They submit however that the reader does not know how to test whether something should have been a “yes” as opposed to a “no” or an “unknown” in the first place. They submit that this is not the application of true expertise (T14045).

175 In response, the plaintiff agrees that unlike Mr Macpherson, Mr Maconochie did not carry out a weighting exercise for the purposes of his functionality comparison. Mr Macpherson identified functions according to a methodology and then determined which functions were more important and weighed them against each other. This is a subjective exercise. In this way, in determining equivalent or similar functionality, he was able to pay appropriate regard to more important or vital functions as against less significant ones (T14372).

176 By contrast, the plaintiff explains that Mr Maconochie considered each function on equal footing and at the end came to a comparison of overlap. He considers this to be a satisfactory method of comparison because the initial exercise of selecting functions is in itself said to be a qualitative exercise. Furthermore, the exercise of weighing the functions is a subjective process which is a matter of value judgment as to what functions are more significant than others (T14373).

177 In my view the Revised Functionality Statement clarifies the matters required to be clarified by the judgment paragraph 177. In essence the defendants’ submissions go to weight and not admissibility.

Issue 9: sundry transparencies of reasoning

178 There is nothing which particularly calls for further reasons in relation to this issue.

Ultimate Holding

How the issue first arose

179 As is plain from paragraph 197 of the earlier judgment in the initial examination of Tables 1 and 2, I became conscious of the specific defects in those Tables.

180 Although holding that:

(1) in a number of specific areas it was necessary for Mr Maconochie to make transparent what were his reasoning process and to clarify a number of ambiguities in relation to the Tables; and

(2) it was necessary for Mr Maconochie to expose quite clearly how he went about stepping from his reading the Bank documents into identifying what he asserts was the functionality of the Bank Services dealt with in those documents,

faux science

“There is a narrow line, in the case such as the present, between on the one hand, a holding that opinion is inadmissible as being seen to lack the necessary scientific rigour and/or by reason of being riddled with lack of transparency and/or by reason of lack of identification of the premises considered by the expert, and on the other hand, a view that the very subject matter/comparison under consideration and in respect of which opinions are sought to be expressed maybe so subjective or so lacking of precision or definition as to make a court especially cautious not to peremptorily dismiss a bona fide attempt by a person with specialised knowledge as to functionality from being held to be qualified under section 79 to be able to express opinions by way of comparative functionality."

The proper analysis of the Further Supplementary Statement

181 The very careful testing of Mr Maconochie's Revised Functionality Statement has now provided an occasion for the closest of examinations as to whether notwithstanding the narrow line referred to above, and notwithstanding Mr Maconochie having been given every opportunity to attend to the matter, he has ultimately simply failed to furnish the Court with the necessary scientific criteria for testing the accuracy of his conclusions so as to enable the Court to form its own independent judgment by the application of these criteria to the facts proved in evidence.

182 The matter is one of clear importance to the plaintiff’s similarity or equivalence cases and bearing in mind the narrow line referred to above, the court would not lightly in these proceedings, reject the evidence as not complying with section 79 or pursuant to the discretion conferred upon the court by section 135 (a), (b) or (c).

183 However at the end of the day, the crucial requirement of scientific rigour when examining an expert opinions is pervasive [cf R v G (1997) 42 NSWLR 451 at 459 per Mason P; R v F (1995) 83 A CRIM. R 502 at 509; R v C (1993) 60 SASR 467; R v Accused [1989] 1 NZLR 714 at 720]. As Gleeson CJ pointed out in HG v R (1999) 197 CLR 414 at paragraph 44:

"Experts who venture 'opinions' (sometimes merely their own inference of fact) outside their field of specialised knowledge, may invest those opinions with a spurious appearance of authority, and legitimate processes of fact-finding may be subverted"

184 In that context, the expert 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. As Justice Hayden pointed out in Makita, if all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the experts specialised knowledge. If the Court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, is of diminished weight. An attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R, is based on "a combination of speculation, inference, personal and second-hand views …., and a process of reasoning which went well beyond the field of expertise" (at [41]).

Lack of transparency in reasoning processes concerning the similarity and equivalent functionality exercise

185 The earlier reasons serve to clearly explain the Court's findings in relation to this very important issue. There is considerable substance in the defendants’ submissions that the reason why the cross-references are quintessentially a matter for the court to understand presently and not later, is because they are the building blocks which underpin Mr Maconochie's ultimate conclusions of similarity or equivalence. The Court's holding in relation to this form of lack of transparency appears in the reasons at paragraph 132.

The failure to explain the derivation of the methodology originally employed in using the documents to select the functions to be found in Tables 1 and 2

186 The earlier reasons have explained this form of problem. The Court, for reasons earlier given, has not been furnished with sufficient criteria and material to be in a position to understand the methodology employed in using the documents to select the Table 1 and 2 functions. There is a very great divide between on the one hand, a methodology which derived those functions from Ausmaq Service related documents alone, and on the other hand, a methodology which derived those functions from a combination of Ausmaq related and Bank Service documents. The Court cannot follow which of the entirely inconsistent explanations is correct.

Reorganisation and Consolidation of Tables 1 and 2

187 The reasons above (principally paragraphs 64, 68, 79 – 81; 65, 66, 82, 83), throw up the lack of transparency in Mr Maconochie’s explanation as to the significance of the process or reorganising and consolidating Tables 1 and 2 in relation to:

(i) the analysis of the connection between items in Tables 1 and items in Appendix C; and

(ii) the explanation of the reorganisation and consolidation process involved in compiling Appendix C

Ultimate result

188 As explained in the initial judgment on Expertise at paragraph 201, I have seen it as appropriate to approach lack of transparency in reasoning processes as going to one of the section 79 criteria, that is to the necessity for the plaintiff to establish that the particular opinions sought to be expressed are wholly or substantially based upon specialised knowledge. For the reasons given, above the plaintiff has at a number of levels failed to make this proposition good in terms of Mr Maconochie's similarity or equivalence opinions which are therefore to be rejected as failing to satisfy section 79. The close examination of his Revised Functionality Statement and of the ancillary charts and tables forming the appendices to the statement, simply points up that for all the paragraphs, sentences and words in the statement which seek so very carefully to furnish the Court with criteria enabling evaluation of the validity of his conclusions, the exercise fails. This is not to say that at no time was one able to discern any reasoning processes. The earlier reasons for judgment serve to outline the reasoning processes which are now made transparent. The problem lies in the high significance of those areas where lack of transparency remains.

189 Ultimately taken in banc, the Revised Functionality Statement read as a whole, for all its complexity, simply does not make the basis of the opinions identified in these reasons, explicit. Industry and volume must not be mistaken for precision. The bare ipse dixit of Mr Maconochie can neither be tested nor appraised by the Court. The complex of problematic explanations, inferences and conclusions set out in the statement make it impossible for the Court to admit the equivalence and similarity comparison opinions in Maconochie 2 and 3 based upon Tables 1 and 2 into evidence. Likewise Tables 1 and 2 must be rejected.

190 The failure to demonstrate relevant reasoning process means that the Court simply cannot follow the opinions or be satisfied as to how they were reached. Hence the Court cannot be satisfied that Mr Maconochie has demonstrated that his opinions are wholly or substantially based on his specialised knowledge. The rejection of the evidence is mandated by section 76 of the Act on the basis that the criteria stipulated for in section 79 are not satisfied. Further it is clearly arguable that the failure to demonstrate a relevant reasoning process requires the evidence to be rejected because it is simply not relevant or more to the point, shown necessarily to be relevant. As Gleeson CJ, Gaudron, Gummow and HayneJJ made plain in Smith v The Queen [(2001) 75 ALJR 1398 [at paragraphs 6 and 7] the first question to arise in relation to any issue about the reception of evidence is whether the evidence is relevant:

“Evidence is relevant or it is not. If the evidence is not relevant, no further question arises about its admissibility. Irrelevant evidence may not be received. Only if the evidence is relevant do questions about its admissibility arise. These propositions are fundamental to the law of evidence and well settled. They reflect two axioms propounded by Thayer and adopted by Wigmore:

"None but facts having rational probative value are admissible,"

"All facts having rational probative value are admissible, unless some specific rule forbids."

191 If I be wrong in the above holding, then it seems clear to me that this evidence requires to be rejected pursuant to section 135 of the Evidence Act. The matters referred to in the reasons above going to the lack of transparency in reasoning, justify exclusion of this evidence for the reason that the probative value of the evidence is substantially outweighed by the danger that:

(1) the evidence/ opinion might be unfairly prejudicial to the defendants [section 135 (a)];

(2) the evidence/ opinion might be misleading or confusing [section 135 (b)]; or

(3) the evidence/opinion might cause or result in undue waste of time [section 136 (c)].

192 Clearly unfair prejudice may arise from procedural considerations: Ordukaya v Hicks [2000] NSWCA 180 per Mason P at 4-7.[Cf Gordon (Bankrupt) Official Trustee in Bankruptcy v Pike (No 1) (unreported, Federal Court of Australia, Beaumont J, 1 September 1995; Commonwealth of Australia v McLean (1996) 41 NSWLR 389; Wentworth v Wentworth (unreported NSWSC, 17 April 1997 per Santow at 12]. The defendants should not be placed in a situation in which they would be required to cross-examine where the lack of transparency of reasoning processes is of this order. The probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendants.

193 Clearly the evidence is at the least confusing and likely is also misleading. This again by reason of the lack of transparency of reasoning processes. The words ‘confusion’ and ‘misleading’ ought not be given an unduly narrow construction. Hence the probative value of the evidence is substantially outweighed by the danger that the evidence might be misleading or confusing.

194 Clearly the evidence might cause or result in undue waste of time and for the same reasons. An inordinate amount of time would require to be spent during cross-examination in first clarifying what were the reasoning processes, before the cross-examiner was able to commence testing the opinions. As McLelland CJ in Eq. held in Tante v Roth (unreported, NSWSC, 28 November 1986), section 135 (c) "requires a balance between the probative value of the evidence and the prospect of undue waste of time which may be involved in its being admitted". Hence the probative value of the evidence is substantially outweighed by the danger that the evidence might cause or result in undue waste of time.

Overall rulings as to admissibility

195 Clearly, the equivalence and similarity comparison opinions in Maconochie 2 and 3 based upon Tables 1 and 2 and the Tables themselves are to be rejected for the reasons given above. However, to my mind, paragraphs 11 - 13 of the Revised Functionality Statement should be allowed for the reason that Mr Maconochie has been held to have specialised knowledge, whether wholly or substantially, on the basis upon which to be in a position to express opinions as to the functionality of the Ausmaq Service and as to the functionality of the Bank Services in question (Maconochie Expertise judgment, paragraphs 157 and 165).

196 Likewise, paragraphs 67, 68 and the first and second sentences of paragraph 69 of the Revised Functionality Statement which set out Mr Maconochie’s opinions as to the meaning of the words, “equivalent or similar functionality” in the context of the comparison between the Ausmaq and Bank Services continue to have relevance; Mr Maconochie having been held to have specialised knowledge on which to base, wholly or substantially, opinions as to functionality comparisons (Maconochie expertise judgment, paragraph 172).

197 A question arises as to whether consistently with the above reasons all or part of paragraph 79 of the Revised Functionality Statement should be allowed. Clearly paragraph 79 to a considerable extent is a summary of Mr Maconochie's opinions as to the appropriate methodology and reasoning by which in his view, to establish similarity or equivalence of functionality in respect of different services. Equally clearly, for the reasons earlier given so much of paragraph 79 as purports to give the actual reasoning which Mr Maconochie now says he used in formulating Tables 1 and 2 in his Second and Third Statements or says he used in compiling Appendix C to his Revised Functionality Statement cannot be allowed. In short for the reasons given in the judgment, whilst Mr Maconochie's opinions explaining appropriate methodology by which functionality comparisons may be carried out may be allowed if satisfying transparency of reasoning processes, his important next step of having sought to apply that methodology in a tangible fashion fails for lack of transparency of reasoning processes.

198 In my view for the reasons given in paragraph 197, paragraph 79 may be allowed subject to the deletion of the following:

· the words "then on the reasoning I used in formulating Tables 1 and 2 in my Second and Third Statements and have further elaborated on in this statement" and the words "understood and" - from the 1st sentence of the first bullet point;

· the words "understood and " and “ intended to" - from the 2nd sentence of these bullet point;

· the words "(although on my reasoning I can be considered to have done more)” - from the 1st sentence of the third bullet point; and

· the words "and which I used in my second and third statements" - from the fifth bullet point.

199 With reference to the six categories [summarised in these reasons at paragraph 64(b)], a careful reading of the Revised Functionality Statement discloses that whilst Mr Maconochie refers to the six categories and states that he used them in compiling Appendix C [see paragraphs 26 and 34 of the Revised Functionality Statement], he only provides any real detail as to the meaning of two of these categories (those being “Business Objectives” and “Purpose”), for the purpose of explaining what part the notions of vision and strategy played in his analysis of functionality in his Second and Third Statements [see paragraphs 16.1, 21, 26]. Nevertheless, as I see it, the remaining 4 categories may not require further elucidation as at this purely conceptual level, they may be read by reference to their plain English meaning.

Summary of issues and rulings

200 Clearly the matters the subject of this judgment are complex in the extreme. To assist the reader, the Court has shortly summarised the issues and rulings in a table Appendix "A" to the judgment. The reasons are far more complex than the shorthand and necessarily oversimplified attempt to tabulate the results and it is the reasons which represent the effective judgment. Whilst appendix A records the plaintiff’s success on a number of items, the reasons given in the judgment make plain the very great significance of the areas where the defendants have succeeded in manner and to an extent as in my view to mandate the ultimate holding.

Short Minutes of Order

201 The parties are required to bring in short minutes of order to reflect the above reasons.

Corrigendum

I certify that paragraphs 1 – 201 To deal with a typographical error by

are a true copy of the reasons removing the words “when dealing with”

for judgment herein of the where first appearing in the penultimate

Hon. Justice Einstein sentence of the decision paragraph on the
given on 9 November 2001 coversheet.

___________________ ___________________
Susan Piggott Susan Piggott
Associate Associate

9 November 2001 12 November 2001

Appendix “A”

Summary of issues and rulings

Issue number
Issue/Allegation Description

Plaintiff generally succeeds
Defendants generally succeeds Rulings (paragraph numbers)

1
Explanation of use of the word, “functionality” in relation to subject matter other than the Ausmaq Service
38-39

2
Explanation of part played by notions of “vision” and “strategy”:

a) Clarity of methodology and identification of functions and categories

i) Explanation of methodology originally employed in using documents to select functions (“the functions selection disconnect” issue/problem)
54-58

ii) Explanation of terms “vision” and “strategy”
59-60

iii) Explanation of methodology employed in identifying categories of functionality (how he chose the categories as opposed to what documents were used)
61-62

iv) Analysis of choice of methodology over other methodologies
63

b) Reorganisation and consolidation of Tables 1 and 2

i) Explanation of re-organisation and consolidation process involved in compiling Appendix C
83

ii) Analysis of connection between items in Tables 1 and items in Appendix C
80-82

iii) Allegation that 23 function items appear in Appendix C but not Tables 1 and 2
84

iv) Allegation that some function items are duplicated in Appendix C
84

3, 4 5 and 7
Identifying:
- what inferences were drawn from NAB’s discovered documents;
- process by which assumptions were arrived at as to functionality of Bank Services;
- documents and parts thereof which identified characteristics of Bank Services; and
- process of reasoning

a) Explanation as to basis for which documents were chosen / allegation that a limited number of documents were examined
129-130

b) Identification of documents referred to / allegation of inconsistencies between Maconochie 2 and 3 and Appendix C
131

c) Allegation that it is impossible to determine which parts of the documents are being referred to (cross-referencing and word association problems)
132

6
Providing precise definitions for certain terms used in Tables 1 and 2
See paragraph 159

159-160

8
Explaining use of the words, “similar and equivalent functionality” in context of comparison between Ausmaq and Bank Services
177

Last Modified: 06/13/2002

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Citations

Idoport Pty Limited v National Australia Bank Limited and 8 Ors; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited and.. [2001] NSWSC 995

Most Recent Citation

Coral Rose Jardine v Sonja Vaughan (No 2) [2013] ACTSC 283

Cases Citing This Decision

3

NM Rural Enterprises Pty Ltd v Rimanui Farms Limited [2010] NSWSC 945

NM Rural Enterprises Pty Ltd v Rimanui Farms Limited [2010] NSWSC 921

Coral Rose Jardine v Sonja Vaughan (No 2) [2013] ACTSC 283

Cases Cited

7

Statutory Material Cited

2

Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 123

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

Adams v R [2018] NSWCCA 303

CITATION:	Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited & Ors [45] [2001] NSWSC 995
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
HEARING DATE(S):	16/10/01, 17/10/01, 18/10/01, 24/10/01, 25/10/01
JUDGMENT DATE:	9 November 2001
PARTIES :	Idoport Pty Limited (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr JJ Garnsey QC, Mr R Titterton (Plaintiff) Mr J Sackar QC, Mr J Halley (Defendants)
SOLICITORS:	Withnell Hetherington (Plaintiff) Freehills (Defendants)
CATCHWORDS:	Evidence Act (1995) - Evidence - Admissibility - Opinion evidence - Expert opinion - Principles - Specialised knowledge - By directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, section 79 requires that the opinion be presented in a form which makes it possible to answer that question - Transparency of reasoning process - Opinion proffered must be shown to be substantially based on expertise of witness and witness must identify it - Witness must explain how the knowledge on which the witness is an expert applies to the facts assumed or observations made so as to produce the opinion propounded - necessity for expert to articulate principal tenets that need to be understood to follow the methods used by him and the reasons which he suggests point to a particular conclusion - Necessity for experts evidence to furnish trial judge with the necessary scientific criteria for testing the accuracy of conclusions - Trial judge must be placed in a position where he/she enabled to form their own independent judgment by applying the criteria furnished to the facts proved.
LEGISLATION CITED:	Evidence Act 1995 ss56, 57, 76, 79, 135 (a) (b) (c)
CASES CITED:	Commonwealth of Australia v McLean (1996) 41 NSWLR 389 Gordon (Bankrupt) Official Trustee in Bankruptcy v Pike (No 1) (unreported, Federal Court of Australia, 1 September 1995 HG v R (1999) 197 CLR 414 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 Ordukaya v Hicks [2000] NSWCA 180 R v Accused [1989] 1 NZLR 714 R v C (1993) 60 SASR 467 R v F (1995) 83 A CRIM. R 502 R v G (1997) 42 NSWLR 451 Smith v The Queen [(2001) 75 ALJR 1398 Tante v Roth (unreported, NSWSC, 28 November 1986 Wentworth v Wentworth (unreported NSWSC, 17 April 1997 at 12
DECISION:	Similarity and equivalence opinions of Mr Maconochie to be rejected as failing to satisfy the criteria stipulated in s79 Evidence Act 1995 criteria requiring reasoning processes to be made transparent in a number of areas outlined in judgment [2001] NSWSC 123. Supplementary evidence of Mr Maconochie to be allowed in so far as it makes transparent his use of the word "functionality" when dealing with his opinions as to the functionality of Ausmaq Service and Bank Services. Supplementary evidence of Mr Maconochie to be allowed in so far as dealing with the appropriate methodology and reasoning by which to establish similarity or equivalence of functionality in respect of different Services. Supplementary evidence of Mr Maconochie to be allowed in so far as it makes transparent his use of the words "similar and equivalent functionality" when dealing with his comparative opinions. Short minutes of order to be brought in.

*No.*	*Issue*	*Paras.*	*Pages*
1.	Making plain the sense in which Mr Maconochie used the term “functionality” in relation to subject matter other than the AUSMAQ Service in his second and third statements.	8-13	5-9
2.	Concerning what part, if any, the notions of ‘vision’ and ‘strategy’ play in Mr Maconochie’s analysis of functionality in his second and third statements.	14-37	10-27
3.	Making clear what inferences Mr Maconochie seeks to draw [from] the National’s discovered documents relating to the Bank Services in his second and third statements.	38-58	27-37
4.	Exposing the process whereby Mr Maconochie arrived at assumptions as to the functionality of the Bank Services in his second and third statements.	59-60	38
5.	Identifying the documents and the relevant parts thereof which expressly identified the characteristics of the Bank Services Mr Maconochie relied on in his second and third statements and to what extent they do this.	61-65	38-42
6.	Giving precise definitions for the terms used in the functionality tables in his second and third statements identified in paragraph 189 of the Judgment.	80	65-73
7.	Making clear the process of reasoning by which Mr Maconochie identified the functionality of the Bank Services in the tables in his second and third statements as a result of his consideration of the Bank Services documents.	Not specifically included.	Not specifically included.
8.	Making plain what Mr Maconochie meant by and how he used the words “similar and equivalent functionality” in the context of the comparison between AUSMAQ and the Bank Services undertaken in his second and third statements.	66-79	43-64
9.	Otherwise supplementing Mr Maconochie’s second and third statements in order to make his reasoning process apparent.	Nil.	Nil.

Issue number	Issue/Allegation Description	Plaintiff generally succeeds	Defendants generally succeeds	Rulings (paragraph numbers)
1	Explanation of use of the word, “functionality” in relation to subject matter other than the Ausmaq Service	38-39
2	Explanation of part played by notions of “vision” and “strategy”:
a) Clarity of methodology and identification of functions and categories
i) Explanation of methodology originally employed in using documents to select functions (“the functions selection disconnect” issue/problem)	54-58
ii) Explanation of terms “vision” and “strategy”	59-60
iii) Explanation of methodology employed in identifying categories of functionality (how he chose the categories as opposed to what documents were used)	61-62
iv) Analysis of choice of methodology over other methodologies	63
b) Reorganisation and consolidation of Tables 1 and 2
i) Explanation of re-organisation and consolidation process involved in compiling Appendix C	83
ii) Analysis of connection between items in Tables 1 and items in Appendix C	80-82
iii) Allegation that 23 function items appear in Appendix C but not Tables 1 and 2	84
iv) Allegation that some function items are duplicated in Appendix C	84
3, 4 5 and 7	Identifying: - what inferences were drawn from NAB’s discovered documents; - process by which assumptions were arrived at as to functionality of Bank Services; - documents and parts thereof which identified characteristics of Bank Services; and - process of reasoning
a) Explanation as to basis for which documents were chosen / allegation that a limited number of documents were examined	129-130
b) Identification of documents referred to / allegation of inconsistencies between Maconochie 2 and 3 and Appendix C	131
c) Allegation that it is impossible to determine which parts of the documents are being referred to (cross-referencing and word association problems)	132
6	Providing precise definitions for certain terms used in Tables 1 and 2	See paragraph 159	159-160
8	Explaining use of the words, “similar and equivalent functionality” in context of comparison between Ausmaq and Bank Services	177