Idoport Pty Ltd and Anor v National Australia Bank Ltd and 8 Ors; Idoport Pty Ltd v Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Ltd [19]
[2001] NSWSC 246
•10 April 2001
CITATION: Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors; Idoport Pty Ltd v Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Ltd [19] [2001] NSWSC 246 FILE NUMBER(S): SC 50113/98; 50026/99; 3991/00 HEARING DATE(S): 27/02/01, 28/02/01, 21/3/01, 22/3/01, 26/3/01, 28/3/01, 2/4/01, 3/4/01 JUDGMENT DATE:
10 April 2001PARTIES :
Idoport Pty Ltd (Plaintiff)
Market Holdings Pty Ltd (Plaintiff)
National Australia Bank Ltd (Defendant)
Donald Robert Argus (Defendant)JUDGMENT OF: Einstein J
COUNSEL : JJ Garnsey QC, R Alkadamani (Plaintiffs)
JA Halley (Defendants)SOLICITORS: Withnell Hetherington (Plaintiffs)
Freehills (Defendants)CATCHWORDS: Evidence Act (1995) - Evidence - Admissibility - Opinion evidence - Expert opinion - Section 79 - Specialised knowledge - Whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience LEGISLATION CITED: Evidence Act 1995 (NSW) CASES CITED: Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 123 DECISION: Mr Martin held to have demonstrated by his training, study or experience that he has acquired specialised knowledge on which to base, whether wholly or substantially, his opinions: as to the degree of difficulty and effort necessary to customise Ausmaq from a systems/IT perspective to enable it to operate effectively in financial services markets in countries other than Australia and New Zealand (category D1.1); relating to design, specification, formulation and functionality of computer systems and software in relation to languages other than English and French (category D1.2); from an IT or systems perspective relating to the functionality of a Master Trust (category D3.1); relating to a comparison of the Ausmaq Service and a Master Trust related to his technical expertise at the level of business strategy and objectives (category D4.1); relating to the features of commercially available internet banking packages and the possibility of interfacing Ausmaq with these packages (category D5.1); from an IT or systems perspective in relation to a program designed to achieve a shift from a branch based retail banking service to a customer focused, globally integrated service including: ATM and EFTPOS services, Customer Response Centres including IVR and internet banking (category D6.1); as to a comparison between development times and required levels of design and programming skill for strict real-time process control systems and 4th Generation Programming Languages (category D9.1); in reply to Professor Thomas (paragraph 195); and as to how dividend reinvestment could be effected in the Ausmaq system. Leave reserved to the plaintiffs to supplement Mr Martin’s evidence in relation to a number of matters relevant to questions of admissibility of certain opinions particularly going to whether the Ausmaq Service as it existed in the Ausmaq system at particular dates could have been enhanced, modified or added to, if necessary, so that the Bank Services had or would have had equivalent or similar functionality to the Ausmaq Service.
Page Paragraph
The Defendants’ Template and forms of challenge……………….......................2 6
Opinions as to Customisation
(“The offshore customisation issue”)[Defendants category D1.1]
......................3 11
Opinions on functionality comparisons……………………………....................9 21
Opinions on customisation &c. in relation to languages
other than English and French [Defendants category D1.2]
………...................9 22
Disparate objections…………………………………………………...................10 23
Relevant Training, Study or Experience
………………………….......................10 24
Pont Data
……………………………………………………………......................12 32
Telstra CSSC - the FINE project………………………………….. 23 70
General
……………………………………………………………… 24 74
Returning to the defendants submissions –
Off shore customisation-category D1.
1…………………………… 28 75
Holding as to opinions on offshore customisation-category D1.1.. 30 76
Holding-Defendants category D1.2…………………………………....................35 88
Further examination of the functionality comparison issue………..................35 89
Specialised knowledge in relation to Master Fund-Defendants
categories D3, D4
……………………………………………………. 42 109
IT/Systems perspective
…………………………………………….. 42 109
Market perspective
…………………………………………………. 44 113
Specialised knowledge relating to Internet banking
services -Defendants’ category D5
………………………………… 45 115
Opinions in relation to retail banking distribution channels D6… 47 121
Opinion relating to regulatory environment [D8/D8.1]………….. 49 127
Page Paragraph
Opinion relation to strict real-time process control
systems [D9/D9.1]
……………………………………………………....................49 128
Opinion - Paragraph 195, Mr Martin’s reply to
Professor Thomas
………………………………………………….. 49 129
Opinion - Defendants’ category D11………………………………. 49 130
Opinions - Paragraphs 641, 646 of Martin’s
statement of 27 June 2000
………………………………………….. 50 133
Breadth, Depth and Currency…………………………………….. 50 136
Schedule of Rulings - D91, D92, D93……………………………… 51 137
Further Submissions……………………………………………….. 51 138
APPENDICES
Appendix “A” - Particular paragraphs of Mr Martin’s statements of 10 July 2000 and 27 June 2000 [subject to rulings as to matters of form] reproduced as MFI D67.
Appendix “B” - Mr Martin’s statement of 21 February 2001 [subject to rulings as to form]
Appendix “C” - Plaintiffs’ Template MFI P107
Appendix “D” - Defendants’ Template MFI D83
Appendix “E” - Court’s rulings correlated to MFI D91
Appendix “F” - Court’s rulings correlated to MFI D92
Appendix “G” - Court’s rulings correlated to MFI D93
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LIST
EINSTEIN J
10 April 2001
50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS
50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS
3991/00 IDOPORT PTY LIMITED (“JMG”) v NATIONAL AUSTRALIA BANK
1 The plaintiffs seek to read in their respective cases, sixteen statements covering in excess of 1000 pages made by Mr Brian Martin. This judgment deals with the issue of challenges to the expertise of Mr Martin.
2 In Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 123 (judgment delivered on 21 March 2001), the court dealt with the relevant principles applicable in relation to the admissibility of expert evidence sought to be adduced from Mr Maconochie pursuant to section 79 of the Evidence Act 1995. It is not necessary to revisit that examination of those principles.
3 With some differences of approach the parties have generally dealt with the question of the expertise of Mr Martin in a similar manner to the manner in which they approached that question as related to the expertise of Mr Maconochie.
4 The evidence identifying Mr Martin's claimed relevant training, study or experience admitted into evidence for the purpose of the decision is to be found in
- (a) Particular paragraphs of Mr Martin's statements of 10 July 2000 and 27 June 2000 [subject to rulings as to matters of form reproduced as MFI D67 appended to this judgment as Appendix “A” and to be regarded as part of the Judgment].
- (b) Mr Martin’s statement of 21 February 2001 [subject to rulings as to form]. The statement is reproduced as Appendix “B” as part of this judgment.
- (c) Mr Martin’s statement of 3 April 2001.
(d) His additional oral evidence. [see transcript p 6254 and following].
5 As before both parties produced templates in an attempt to crystallise the issues. The plaintiffs template was marked for identification as MFI P107. The defendants template was marked for identification as MFI D83. The templates are respectively reproduced as Appendices “C” and “D” to this judgment.
The Defendants’ Template and forms of challenge
6 On this occasion the aim of the defendants template has not been to seek to capture each of the opinions which the witness has expressed and to allocate those to a particular category of specialised knowledge. The defendants in relation to Mr Martin, conceded that "on any view, he has very detailed technical knowledge in relation to certain matters" [transcript p 7065] and for that reason put forward a template which only dealt with those opinions sought to be expressed by Mr Martin in respect of which opinions the defendants assert that he had not demonstrated the requisite specialised knowledge based on his training, study or experience.
7 This assertion that Mr Martin lacked specialised knowledge represents the first form of challenge to sections of the statement. The defendants address in respect of this challenge took the court carefully through the defendants template and is also summarised in the defendants schedule MFI D84 (iv).
8 The second form of challenge was the assertion that, admitting for the purpose of the application that Mr Martin might have specialised knowledge, the defendants took objection to opinions on the basis that the opinions did not disclose the relevant factual basis upon which they were expressed or that there are was no sufficient reasoning process. In effect this form of challenge was a combination of what had been referred to as the C1 to C5 objections as dealt with in relation to the challenge to Mr Maconochie's expertise. The defendants address in respect of this form of challenge took the court through the matters referred to in the defendants schedule MFI D84 (ii).
9 The third form of challenge related to Mr Martin's attempts to express opinions in his replies to certain statements, principally the statements of Professor Thomas and Mr Hodgkinson - generally summarised in MFI D84 (iii).
10 Subsequent templates expanded the plaintiffs’ attempts to press opinions as Section 79 opinions and in some instances led to agreement on particular issues. [See MFI P128, P129, P129A, D91, D92, D93]
Opinions as to Customisation (“The offshore customisation issue”)[Defendants category D1.1]
11 The defendants described as their “most significant” set of objections those taken by reference to category D1 on the defendants template The submission was that a clear line required to be drawn between on the one hand, such specialised knowledge as Mr Martin may be held to have acquired by his training, study or experience in relation to Australia and New Zealand and on the other hand, his suggested lack of such specialised knowledge in relation to other countries. It may be convenient to refer to this issue as “The offshore customisation issue” [regarding New Zealand as ‘onshore’ for this purpose]. In short the submission as I understood it was that Mr Martin had not been shown to have acquired specialised knowledge in relation to:
- "the development, operation, design, specification, formulation, functionality, writing and composition of software code for computer systems and software in the financial services industry, particularly in relation to financial products and e-commerce markets, trading and financial systems in countries other than Australia and New Zealand "
12 The approach taken by the defendants in terms of submissions was at least initially to generally withhold any concession as to the identification of such specialised knowledge as Mr Martin had in fact been shown, by his training, study or experience, to have acquired. Some concessions appear to have later been forthcoming although it seems to me that they have remained in extremely limited terms. One might have thought in the circumstances that the Court could for example, infer from the above extract from the defendants’ template reference to the first column on page 1 [D1], that the defendants were content to concede that Mr Martin had been found to have acquired specialised knowledge in relation to the development, operation, design, specification, formulation, functionality, writing and composition of software code for computer systems in the financial services industry, particularly in relation to financial products and e-commerce markets, trading and financial systems in Australia and New Zealand. That had been my understanding of Mr Halley’s submissions as initially advanced. But as Mr Halley later confirmed during the plaintiffs’ address on 26 March 2001, this was not a concession which the defendants were in fact prepared to make. At that time the sole concession appeared to be that recorded at transcript 7151. This is where the defendants indicated that they did not challenge the proposition that Mr Martin has acquired specialised knowledge of and relating to the development and operation of computer systems and software for and relating to:
· Foreign exchange dealing services
· Networks
· Direct Debit Files
· Magnetic stripe cards
13 The defendants’ position appears to have moved again in final written submissions in reply of 2 April 2001 [MFI D95]. It appears from the written submissions that:
(i) The defendants perceive a flaw in the plaintiffs submission that that Mr Martin had been found to have acquired specialised knowledge in relation to the development, operation, design for specification, formulation, functionality, writing and composition of software code for computer systems in the financial services industry, particularly in relation to financial products and e-commerce markets, trading and financial systems in Australia and New Zealand, in that the subject matter of the suggested specialised knowledge is said to be expressed at such a level of generality that it provides little assistance in determining whether Mr Martin has in fact sufficient specialised knowledge based on training, or experience to enable him to express particular opinions.
(ii) The defendants’ submissions do not proceed on the basis that Mr Martin lacks expertise and experience in interfacing computer systems [Submissions paragraph 5 ] Rather the defendants now accept that Mr Martin has shown experience in interfacing which equips him with specialised knowledge on the basis of which he is entitled to express opinions on issues which may arise in relation to the interfacing of computer systems. [Paragraph 13].
(iii) The defendants accept that Mr Martin has experience in information technology, particularly at the level of writing code [Submissions paragraph 10]
(iv) The defendants accept that Mr Martin has shown certain experiential knowledge in relation to superannuation companies, life assurance companies, mutual fund companies and the banking industry in Australia and New Zealand [Submissions paragraph 10 reproduced below]
(v) The defendants accept that Mr Martin does have certain customisation experience [Submissions paragraph 13]
(vii) The defendants accept that Mr Martin has specialised knowledge of the systems used to provide the Ausmaq Service which is principally of an experiential character.(vi) The defendants accept that Mr Martin has demonstrated familiarity with equities trading derived from his work at Market Advantage over a particular period and has also demonstrated familiarity with the Star Systems Shares software - the areas of demonstrated familiarity are accepted as having a relevance to his ability to express opinions about the National Automated Margin Lending Service
14 In those circumstances it falls to the court to hand down its holdings in regard to the demonstrated specialised knowledge in relation to all areas remaining in contention.
15 The short proposition for which the defendants contend is that Mr Martin seeks to express opinions relating to the degree of difficulty and effort necessary to customise Ausmaq from a systems/IT perspective to enable it to operate effectively in financial services markets in countries otherwise than Australia and New Zealand. The submission is that in general terms Mr Martin seeks to give opinions that Ausmaq customisation in offshore markets would be a relatively straightforward process, whereas it is put that he has no training, study or experience sufficient to equip him with the specialised knowledge on which wholly or even substantially to be in a position to express such opinions. The submission at least initially was that Mr Martin is shown to fall dramatically short in his training, study or experience because he cannot show that he worked in customising and designing software or in development of design or in relevant interfacing with local participants in each of the markets in respect of which he seeks to express opinions to the effect that it would not be a particularly difficult task to customise Ausmaq to service such markets.
16 As later refined in final submissions the proposition was that Mr Martin lacked contemporaneous exposure to and familiarity with the information technology systems used by the stock market, stockbroking firms, superannuation companies, life assurance companies, mutual fund companies and the banking industry, in countries other than Australia and New Zealand, and lacked exposure to and familiarity with the investigation of the capabilities, these objectives and the features of the types of computer and information technology systems that are in use and popular in the offshore financial industry. [Written submissions paragraph 6] The submission was that in the absence of such knowledge, Mr Martin would not be aware of the particular products available in each market, the specific interfaces to systems operated by key participants, including regulator is in each offshore financial services industry that would need to be established, and other related system software issues. [Written submissions paragraph 7]. Hence the submission was that on no view could some form of unspecified and imprecise exposure to offshore technology systems in the course of Mr Martin writing price and volume charting displays, sometime in the period between 1986 and 1992, equip Mr Martin with sufficient expertise to enable him to comment on the degree of difficulty and effort necessary to customise Ausmaq from a system/IT perspective for foreign markets during the period between 1997 and the present date. [Written submissions paragraph 8]. I interpolate to note that these submissions drastically understate the real expanse and depth of Mr Martin's overall experience.
17 The defendants’ proposition is that in order to satisfy the section 79 criteria and to be entitled to express opinions as to whether or not a customisation, (for example in the United Kingdom or in Italy or in Hong Kong) was going to be difficult or simple or something in-between, the witness would at least have to show that he or she had some material exposure to that market. To further buttress this submission, Mr Halley submitted as I understood him, that the court could and should take judicial notice of matters such as the speed with which software becomes outdated and changes, the fact that computers tend to have to be turned over every few years, the continuing differences in relevant speeds, the differences in facilities available in different countries, the differing approaches to use of the Internet and the many different interfaces which are available around the world.
18 The submission was that there would be no difficulty in a person who is shown to be an expert in software and who had in fact dealt with IT issues pertaining to offshore financial services markets being given particular assumptions as to what would be required in relation to a particular market and then expressing relevant opinions. The submission was that Mr Martin had not approached the matter in this way.
19 Mr Halley submitted as follows:
- "the customisation issue which the defendants seek to agitate is not that given unlimited resources and time one could not take Ausmaq out of Australia and put it into another market. Clearly, if one has enough time and one has enough resources, one can nearly do anything with software, but the issue is how long it would take and therefore the degree of difficulty and complexity is crucial… So the degree of difficulty in customisation is a central issue"
[transcript p 7080].
20 Some examples taken from Mr Martin's statements point up perhaps more clearly why these submissions are pressed by the defendants:
- (1) In paragraph 30 of Mr Martin's statement of 7 February 2001 he seeks to refer to a particular paragraph of Professor Thomas' statement. Mr Martin then seeks to give the following evidence:
- "As noted above, the modifications for New Zealand localisation were done in a manner which simplified future localisation to additional countries . While not solving every single issue, the next country added would gain from generic modifications and parameterisations already done in the New Zealand case . Further, the change to use a Windows GUI for the dealer service would simplify future country specific customisation of the most visible part of the system from the user's viewpoint…." [emphasis added]
- (2) In paragraph 187 of the same statement Mr Martin seeks to refer to the apparent fact that following the implementation of Release 1.1, including the New Zealand customisation, Ausmaq supported a mechanism for automatically selecting the appropriate national variant module to be dynamically called from the core system. This allowed for most national customisations to be smoothly integrated . [emphasis added]
- (3) In paragraph 191 of the same statement Mr Martin seeks to give evidence in response to a paragraph of Professor Thomas’ statement. Mr Martin seeks to give the following evidence:
- “Ausmaq had already interfaced with depositees, security custodians, regulators, tax departments, printing bureaus, banking deposit/withdrawal processing, faxing systems, signature image storage/display systems, interactive voice response systems, third party software products in Australia by mid 1995, and in New Zealand by mid 1997. Extending this to more parties in more countries was not a novel or difficult concept".
- (4) In paragraph 196 of the same statement Mr Martin seeks to give evidence that unusual products can always be implemented as a new market style in the trading engine, without fundamentally affecting the broader system . [emphasis added]
- (5) In paragraph 98 of his statement of 8 February 2001 Mr Martin seeks to give evidence that:
- "… it is impossible to anticipate every possible idiosyncrasy for every foreign market. However, many of the variations for the potential foreign markets had been anticipated and provided for, and there was a general flexibility to accommodate future enhancements for further adaptations "
[emphasis added]
“…as at November 1996 the Ausmaq system could facilitate trading in any type of security or product. The limitations on what could be bought or sold on the Ausmaq system were generally not technical limitations in the Ausmaq system. The limitations were not related to Ausmaq’s programs, software, operating system or hardware. The limitations were legal and/or regulatory and commercial”
Opinions on functionality comparisons
21 The second major issue which the defendants put as a matter of substance and addressed upon went to the extent to which Mr Martin purports to express opinions on functionality comparisons between Ausmaq and the Bank services. Here the defendants submitted that there was no material training, study or experience of Mr Martin shown to have equipped him with the necessary specialised knowledge on which wholly or even substantially to be in a position to express any such opinions
Opinions on customisation &c. in relation to languages other than English and French [Defendants category D1.2]
22 The defendants further contend that Mr Martin is not competent to express expert opinions relating to design, specification, formulation and functionality of computer systems and software in relation to languages other than English and French. [D1.2 opinions]
Disparate objections
23 Other disparate objections as pressed are dealt with below.
Relevant Training, Study or Experience
24 The convenient course is to briefly refer to Mr Martin's training, study or experience. It is set out on an overview basis in his CV annexure "A" to his first statement. [reproduced as part of MFI D67] [the CV was allowed over objection] [Transcript page 6387] This overview is not intended to replace or to limit his evidence before the Court on the issue of his expertise.
25 The defendants further sought in MFI D87 to thumbnail sketch the evidence of Mr Martin’s training, study and experience corresponding to the areas in which the defendants allege that he lacked training, study or experience sufficient to ground the requisite specialised knowledge for the purposes of section 79. The document is of some, although limited, assistance as it is far from comprehensive.
26 Mr Martin has a B.Sc in 1981 from the University of New South Wales with majors in computer science and in mathematics and some electrical engineering subjects.
27 In 1996 he commenced studying some post graduate subjects at Deakin University by correspondence. In a subject “EDI concepts, Standards and Technology” (‘EDI’ denoting ‘Electronic Data Interchange’) he was awarded a High Distinction. The subject covered the emerging use of EDI standards and the EDIFACT standard in the exchange of information between businesses. The subjects covered included messaging standards, security, integrity and encryption.
28 In my view his evidence clearly establishes extensive training, study and experience in relation to computer programming concerning financial operations and transactions including programming and consulting concerning superannuation, life assurance, general insurance, stock market information systems, foreign exchange settlement, real-time trading systems and news data bases. [It is convenient to produce an internal dictionary to identify certain of the areas of demonstrated training, study and experience. “E” numbers should suffice. Some overlap appears to be unavoidable as the areas often merge in to one another. The shorthand reference to this is area “E1”]. That training, study and experience also includes programming and consulting concerning natural language processing, heuristic classification algorithms, graphic drivers, communications protocols, terminal emulators, encryption, biophysics, text retrieval and electronics [“E2”].
29 It is generally unnecessary to repeat the specifics of the very detailed outline of Mr Martin’s training, study and experience in the development, operation, design specification, formulation, functionality, writing and composition of software code for computer systems and software in the financial services industry, particularly as obtaining in relation to financial products and e-commerce markets, trading and financial systems [“E3”]. That background is set out in the statements to which I have referred. At the same time the extent to which Mr Martin wrote or developed or was involved in the writing and development of the trading systems and other critical sections of the Ausmaq prototype and in relation to the various versions of Ausmaq is apparently common ground. He has very clearly demonstrated a detailed familiarity with information technology systems used in the Australian financial industry being familiar with the main information technology systems used by the stock market, stockbroking firms, superannuation companies, life assurance companies and the banking industry [“E4”]. He has regularly had at various times to investigate the capabilities, design objectives and features of the types of computer and information technology systems in use in the Australian financial industry. [“E5”]
30 His work over the years has included participation in the reorganisation of the structure of the Ausmaq hard disk and making sundry system modifications and performing modifications or writing programs or writing functional specifications related to the Ausmaq Service. He has also been involved in the detailed customisation of Ausmaq for the purpose of the New Zealand market roll out including development and testing. He was involved in the co-ordination of the re-integration of particular changes and additions made by outside contractors for the Ausmaq New Zealand project with the existing program modules at Ausmaq and merged those enhancements back into the master version of Ausmaq's system source. His evidence establishes that over the years he was heavily involved at almost every level with many of the projects which were important aspects of the systems development of Ausmaq. These included the Windows GUI project and the AMI project. He has also demonstrated study and experience relating to the configuration of the Ausmaq system trading engine. He has been integrally involved with and has specialised knowledge in relation to the configuration of the Ausmaq program insofar as it processes and effects a transaction. [The areas described in this paragraph will be referred to as “E6”].
31 The fact that the Ausmaq system had a number of market styles within the configuration of the trading engine [“E7”] is a matter in respect of which he is shown by reason of his training, study and experience to be in a position to have acquired specialised knowledge and upon the basis of which, whether wholly or substantially, he is able to express opinions. This is an important matter because apparently the evidence is likely to be that at the time of contract only one of these market styles [market style 4] was in use in terms of the suggested other capacities of the Ausmaq system as at November 1996. The issue will be the subject of evidence on the hearing. The extent to which and manner by which the Ausmaq system could facilitate trading in other types of security or product are clearly matters well within the domain of his training, study or experience and in respect of which he is, by that training, study or experience, shown to have acquired specialised knowledge upon the basis, whether wholly or substantially, of which he is shown to be in a position to be able to express opinions.
Pont Data
32 It is convenient to now set out a short summary of Mr Martin’s evidence in relation to his employment between 1986 and 1992 with Pont Data .
33 Prior to about mid 1987, Pont Data traded in Australia as Bridge Data Australia or a similar name. Pont Data was known as a “quote vendor”, selling security price quotes and related information (such as dividends, corporate actions, news items, charts, price histories). Pont Data obtained the information in raw form from various stock exchanges and then validated, stored, analysed, cross-referenced, consolidated, extrapolated from and summarised the information which was then offered on a commercial basis to customers. The service allowed customers to view the stored and processed information in a range of styles and formats.
34 During the period that Mr Martin worked at Pont Data, the company was in competition with other quote vendors such as AAP-Reuters and Bloombergs. During this time, the business extensively redeveloped their customer systems software, and expanded to have offices in 22 counties in which clients were supported. The clients and the Pont Data offices were connected by a private worldwide computer network served by 3 major processing centres (in Australia, UK and the USA). Each processing centre was interconnected with the other two, and each maintained redundant copies (similar to a back-up copy of the database) of the others' databases. The worldwide system supported fault recovery by allowing, for example, customers in Europe, who were normally serviced by the UK centre, to be temporarily serviced by either Australia or USA in the event of a problem at the UK centre. Mr Martin was therefore experienced in Information Technology systems with worldwide distributed architectures undertaking processing functions globally across a number of differing jurisdictions. [“E8”]
35 The Pont Data systems supported all types of securities, from all exchanges in those 22 countries. Mr Martin recalls that some of the countries supported included: Australia, New Zealand, Singapore, Hong Kong, Japan, UK, France, Germany, Switzerland, Italy, Finland, Sweden, USA and Canada. He recalls that negotiations were underway in Hungary, Argentina and Brazil.
36 In paragraphs 6-10 of Mr Martin’s statement of 21 February 2001, he describes the Australian system by way of example:
“In Australia for example, data feeds were processed from each of the 5 major Australian Stock Exchanges, prior to formation of the ASX. This included the exchanges of Sydney, Melbourne, Perth, Adelaide, and Brisbane. These prices would be displayed either separately or in a consolidated format. Also displayed were arbitrage opportunities.
"Arbitrage" is the practice of buying a security and then (almost immediately) selling the same security on a different exchange, at a different price. Later when these 5 exchanges merged into the ASX in its current form, a single data feed direct from the ASX was processed.
Data feeds were also processed from the Sydney Futures Exchange, in respect of both the day session and the overnight SYCOM session.
Data feeds from exchanges often had multiple strands, or composite information. The data which was processed included automated feeds of price quotes, trades completed, volumes of trades, price highs and price lows, corporate actions (ie. capital reconstructions, rights issues, takeovers), dividends paid, company splits, bonus issues, price corrections.
In addition to trading data, data feeds of text articles were processed, such as from AAP-Reuters and the Australian Financial Review. These news items were received, parsed, stored and indexed in a news database. Clients could then search the news database either by reference to a company or with a free text search to locate and display stories of interest to them.”
37 The system made information available for display on ordinary equity shares, rights, options on shares, SPI contracts, foreign exchange rates, commodity prices, commodity futures, foreign exchange futures, treasury bonds, interest futures and index futures. The system also stored and displayed information on underlying measures such as a range of interest rates and market indexes (All Ordinaries, top 20, top 100, All Industrial, All Mining, and others for Australia, and correspondingly for overseas markets the Hang Seng index, the Straits Times index, the Nikkei index, the Dow Jones index, and so forth).
38 The system supported foreign exchange rates and included the full set of cross rates between each of about a dozen major currencies (including that of the US, UK, Australia, Germany, Japan, France and Switzerland). The rate of minor currencies was quoted against each of the major currencies, but not against each of the other minor currencies.
39 Mr Martin acquired knowledge in relation to foreign exchanges as a result of his experience at Pont Data. [“E9”] He describes this in paragraphs 12A-18 of his statement of 21 February 2001:
“These rates referred to in the preceding paragraph are usually referred to as the "spot" rates. By spot rates I mean the immediate buy and sell rates. The "Spot" rate is the nominal exchange rate available as at the time of display, on the spot and available for an immediate trade. It may be possible to obtain a better rate for a large transaction, depending on negotiations, but the "spot" rate is the nominal rate. Conversely, an ordinary person cashing travellers cheques or foreign cash over the counter at a bank or foreign exchange bureau will not obtain such a good rate, due to, inter alia, the overheads involved and (generally) the small size of the transaction. The "spot" rates quoted on large, commercial quote vendor systems are applicable to institutional trading in large transactions, and are slightly different in value to the rates quoted by a bank for buying and selling travellers cheques or foreign cash.
In addition to the "spot" rates, the corresponding foreign currency future rates were also supported, on the Pont Data system for a range of future time intervals.
"Forward rates" are in effect futures in currency markets and currency market transactions. Forward rates are quoted as the rate at which a party is willing to enter into a contract as at the time of display, for settlement at some point in the future, such as 1 day, 1 week, 1 month or 6 months in the future and so forth.In the terminology often used by foreign currency market dealers and others the words "foreign exchange" are often abbreviated to "forex". I shall also use that abbreviation in this statement.
The forward rate for 1 day forward is often called the "overnight" rate.
Foreign exchange futures are one means by which companies involved in large importing or exporting transactions can "hedge" against the risk of currency fluctuations. For example a company importing American hospital X-ray equipment worth USD $1 million, which will take 1 month to arrive, has several choices :
(a) pay US dollars today, but risk "losing" money if the AUD rises during the month;
(b) arrange to pay US dollars on delivery but risk "losing" money if the AUD falls during the month;
(c) buy US dollars forward 1 month, at a rate agreed today, to allow paying in US dollars to the supplier on delivery, at a rate known in advance."Synthetic" rates refers to an artificially calculated rate between two (usually minor) currencies, based on multiple conversions using some major currency (usually USD) as an intermediate step. For example, a synthetic rate could be calculated between the Malaysian Ringgit and the Swedish Kroner, by reference to the known rates between the Ringgit and the US Dollar, and then the US Dollar and the Kroner. Of course, any actual transaction between these two minor currencies is subject to negotiation, but such a synthetic rate gives a yardstick for the appropriate theoretical value. Further, too great a departure from the "synthetic" rate gives rise to arbitrage opportunities.”There are naturally other options, including combinations of (a) and (c) or (b) and (c). The option which is preferred depends on interest rates applicable to borrowings, expected currency movements, and the cash flow of the company.
40 The Pont Data systems included systems for professional traders as well as private investors. Mr Martin primarily worked on the Market Advantage system, a dialup videotex information system which was customised to the needs of private investors. The system emphasised ease of use and clarity of presentation, however the information displayed was derived from the same databases as the information displayed to the professional traders. The major difference was that the more technical information was usually on a second screen, rather than being amalgamated into the main screen, due to limitations of space.
41 The Pont Data system had to cope with international variations in price quoting and numeric formatting. Mr Martin gives an example of this in paragraph 20 of his statement of 21 February 2001:
- “For example, in France and parts of Europe, a space is used in numbers where we in Australia would use a comma, eg. "1 000 000" in France for one million, rather than "1,000,000" as in Australia. Further, in France and parts of Europe, a comma is used as the decimal point, that is "1,5" for "one and a half" instead of "1.5". There are many variations in this area. For example Switzerland is different again to France in this regard. The system therefore had to be able to display information, such as price or volume information, in a format which was customised to reflect the attributes of the information (such as the relevant currency symbol) as well as reflect the norms of the particular users (such as whether a comma or a period sign was used to donate the decimal point).
42 He describes other international variations with which he dealt or was involved in paragraphs 21-24:
“In USA, on the larger exchanges (New York, Chicago), stock prices are not quoted in dollars and cents (even though it is a decimalised currency). Instead, stock prices are quoted in dollars and fractions of a dollar, for example "$ 51 3/4" rather than "$51.75". This practice extends to halves, quarters, and eighths of the dollar. On the other hand the NASDAQ exchange, also in USA, quotes prices in dollars and cents.
Canada, as I recall in the time I was at Pont Data, quoted prices of major stocks (ie. whose price was above say $5 Canadian) using the dollar and fraction approach, similar to USA, but simultaneously quoted prices of minor stocks using the dollar and cents approach.
The Pont Data systems, including the Market Advantage system (on which I predominantly worked), were capable of displaying any applicable security with any relevant display style or format. That is, every program, whether for charting graphs of prices and volumes, or displaying tables of numeric prices and volumes, or downloading data, had to support the full range of security types, from the full range of countries, and display information using the notation system appropriate to both the user's country and the security's country.”Foreign exchange rates are normally quoted as plain decimals, and are stated to a very high precision, typically 4 decimal places at least. This is because the amounts of money being converted are typically in the equivalent of millions of Australian dollars or larger, and small differences (or inaccuracies) in the conversion rate can translate into a large sum. The conversion rates vary from thousands of units to one unit for currencies such as the Italian Lira relative to say Australian or US dollars, down to less than one for currencies such as the Pound Sterling, relative say to Australian or US dollars.
43 In the Market Advantage system, Mr Martin personally wrote all of the programs which allowed for price and volume charting displays, including charts for intraday, daily, weekly and monthly price data. He also wrote all of the programs which allowed for the tabular displays of price and volume history, for daily, weekly and monthly time periods.
44 The Market Advantage videotex system had 2000 paying subscribers in Australia alone, and hit peaks of 64 simultaneous users logged on. These figures are not inclusive of the users of the more comprehensive system aimed at professional traders, nor of the users of the Market Advantage videotex system in the UK and France.
45 The underlying database systems from which the Market Advantage system obtained its data ran on a distributed network of about 25 hosts in Sydney, plus further multiple hosts in UK and US, and used a client/server architecture. The operating system was mainly VMS, with some RSX, and a small amount of Unix, as well as custom operating systems developed in-house.
46 Mr Martin wrote the programs for the receipt, compiling, storage and display of the news articles database for AAP news story feeds for the Market Advantage system. This included a full text retrieval, searching and indexing system of his own design. He also wrote the program which received the data feed from AAP and extracted the news stories from the message protocol.
47 Mr Martin also wrote a videotex terminal emulator which was sold to Market Advantage customers. This terminal emulator supported double width displays compared to normal videotex screens. It also supported automated downloading of stock prices including in foreign currencies for use by customers in their own spreadsheets or on their own market analysis software.
48 Mr Martin introduced a means of system testing wherein a modified terminal emulator was simultaneously logged in to two sessions, one using the old software version and one using the new software version. This allowed any introduced discrepancies to be highlighted automatically as the same commands were sent to both software versions and discrepancies could therefore be measured and/or observed.
49 Mr Martin explained in his oral evidence that he had written every line of the terminal emulator program from beginning to end. Along the way, it occurred to him that much time could be saved in systems testing and comparison of whether a modification had inadvertently introduced a problem somewhere else by arranging for the terminal emulator to maintain two sessions simultaneously. It was logged into two different computers, one with the old version, one with the new, and could display those side by side. He modified the program to do this: (T6261/01-T6262/14).
50 When Mr Martin said he “introduced a means of testing", he meant that he went further than writing and making enhancements to the program. He conceived of this means of testing as a means of increasing the rigour of testing and saving time during testing: (T6261/01-T6262/14).
51 By “modification”, Mr Martin explains that he changed the program source code so as to maintain dual contexts of what should be on screen and what the user was typing, so that the same instructions could be sent to both systems and have it display the responses back from the two systems, highlighting in red where the responses were different. The program had no innate way of knowing if the answer was correct or wrong, but it could highlight when the new system was getting a different answer to the old and leave it up to the operator then to decide what needed to be done: (T6261/01-T6262/14).
52 The Market Advantage system was interfaced with two other systems to allow users of those systems to access it without needing to separately dial into it. "Interfaced” means that each of these other systems was interconnected via computer networks to the Market Advantage system to enable users of those other systems to have available an additional menu choice, which allowed the users to enter all normal Market Advantage commands or selections and to display all normal Market Advantage screens and information, in addition to those services already available to them on their existing systems. Mr Martin interfaced Market Advantage to the Discovery 40 and Discovery 80 service operated by Telstra, and to the Info-One service operated by, amongst others (at various times), Info-One (previously known as CLIRS) which was at the time owned by Westpac Bank. The work included modifying the screen formatting software and the terminal driver software to support both VT100 terminals and Videotex terminals, in both 40 column and 80 column modes. The work also included modifying the chart generation to selectively use either colour graphics modes (for Videotex terminals) or monochrome character mode (for VT100 terminals). This allowed users of Discovery 40 to access Market Advantage with full colour graphics in 40 columns, and users of Info-One to access Market Advantage in monochrome in 80 columns. Users accessing Market Advantage directly could choose either 40 or 80 columns, in full colour graphics. The computer systems of Discovery 40 were interconnected to those of Market Advantage via the X25 network protocol. By "network protocol", he means an industry standard for network communication. The computer systems of Info-One were interconnected to those of Market Advantage via an SNA gateway protocol converter.
53 Mr Martin interfaced Market Advantage with one of the first Interactive Voice Response (IVR) systems in Australia, known as "Audiotex", which allowed people to dialup the Audiotex phone number, and then have stock prices and major foreign exchange rates read out to them over the phone by a computerised voice system. The price data was supplied from Market Advantage using a client/server interface. The work involved included specification of a simple message based protocol, and development of a server program to process incoming requests and to obtain the requested prices from the database and pass that price data to the IVR system at Audiotex.
54 When Market Advantage was modified for use in the UK and France, Mr Martin trained the UK staff and coordinated their customisation and porting of the software. The system was then available in the UK to all users of Prestel (operated by British Telecom) and in France to all users of Minitel (operated by the French telephony company PTT). The customisation work included the tailoring of system messages to the local language, tailoring of numeric displays, changes to the command options and changes related to X25 network interfacing.
55 At transcript 6336 Mr Martin gave the following evidence:
- “Q. In relation to those data entry fields and validation rules concerning Forex orders, what knowledge did you have in relation to what matters, for instance either at a design level or program level or a code level, and where did you obtain that knowledge from?
- A. Well, again, partly from working at Market Advantage and Pont Data for six years. You become just immersed in the whole general world of all idiosyncracies of the various security vehicles and the stock exchanges and the differing practices and terminology. In the end in designing data entry screens, essentially once you progress from being a trainee programmer and get beyond being able to enter somebody's name or address, in essence all data fields are the same, they are either numeric or prices or dates or names. At that level any data entry for any program is fairly much the same thing.
- What separates one application more from the other is more when you get into issues more tightly related to the particular application, such as with foreign exchange, for example, if a customer proposes to buy US dollars for $3 Australian each, obviously the system should have some cross-checks in it to show that something closer to $2 might be more practical.”
56 The Market advantage system included the capabilities to retrieve and display the foreign exchange rates for all major currencies, and many minor ones, including spot rates, forward rates, some synthetic rates, and to display these rates as numbers, tables of numbers, or charts showing the change in value over a span of time ranging from intraday (within a single day), through to daily, weekly, and monthly charts spanning 10 years of historical data. Mr Martin personally wrote those charting programs and those tabular displays of price data, and supervised the work of other programmers who wrote other parts of the system. Foreign exchange rates could be displayed in all relevant parts of the system.
57 One of the services offered to customers of the Market Advantage system was the Pont Data Telebroking system which was an order routing system collecting offers to buy or sell shares and routing them to brokers for execution at the ASX. Mr Martin wrote the programs for that telebroking system.
58 As a result of working at Pont Data for six years, Mr Martin became familiar with and experienced in the processing, supply and systems design of professional securities information systems, including experience with the special terminology of foreign exchange rates, the manner of operations of currency markets and equities markets and their requirements. [“E10”]
59 In his oral evidence, Mr Martin explains that he is attempting to summarise six years of his experience at Pont Data as described by him in the relevant paragraphs in his statement of 21 February 2001: (T6263/03-T6265/14).
60 In mentioning his experience in “professional securities information systems”, Mr Martin is referring to his experience in the two different systems of Pont Data (one for professional trainers and one for private investors). Mr Martin was in charge of the latter system. There was a lot of overlap between these two systems, so that the system that was aimed at primarily private investors actually looked up the same information in the same databases as the professional-oriented system. Each used aspects of the other where convenient or appropriate. During Mr Martin’s time at Pont Data, he personally wrote quite a lot of things, particularly in the smaller of the two systems and his opinion was also often sought on broader matters where he was involved in discussions with people designing the other system: (T6263/03-T6265/14).
61 By “special terminology of foreign exchange rates, the manner of operations of currency markets and equities markets and their requirements” Mr Martin is attempting to demonstrate a familiarity with some of the idiosyncrasies of differing exchanges around the world, different practises, different terminology and claims that this shows a familiarity with that area: (T6263/03-T6265/14).
62 Mr Martin also gained experience in the calculation of theoretical value of options (that is, of “put” and “get” options on equities) based on the Black-Scholes method which is one of industry standard methods. [“E11”]
63 In his oral evidence, Mr Martin explained that toward the end of his time at Pont Data, he became interested in these calculations of the theoretical get and put option prices on equities. While he hadn't written the code that calculated that in the system as it was used, one of the things going on was a move from some older computer systems to newer ones running on VAX computers. These computers from Digital Equipment Corporation had some new instructions which Mr Martin felt may be beneficial to speeding up the calculations of this option pricing: (T6265/21-T6267/57).
64 In doing this, Mr Martin wanted to see if he could improve on the speed of their calculation compared to the existing method. It was promising, however it was wasn't put into the production version in the time Mr Martin was at Pont Data: (T6265/21-T6267/57).
65 His evidence was that there are various methods of calculating option pricing, of which Black and Scholes is one. A key part of the calculations involved in the Black-Scholes method involves some polynomial expansions, the point being that the VAX computers had some special instructions which at the assembly language level, could streamline the calculation of polynomials, compared to most prior machines where the same calculations would have had to be spelled out in a longer manner: (T6265/21-T6267/57).
66 His evidence was that there are entire textbooks written about the Black-Scholes method (such as one called “Options Pricing”), but the point is that it's a method of calculating theoretically what a fair price would be on a get or a put option for a certain equity at some date in the future. Whether in fact it actually trades at that price or not is on his evidence, another matter, as dictated by supply and demand. His evidence was that like most theoretical methods, there are some shortcomings of it and people will argue the pros and cons of other methods, but at least it's an accepted yardstick.
67 In giving evidence that the Black-Scholes method is one of “several industry standard methods" Mr Martin means the finance industry or the stock market trading industry. His evidence was that he knows this because during his six years at Pont Data, their system supported initially the Black-Scholes method and later another method called the binomial method. On his evidence it is a standard method and almost any company in the finance industry uses it. Other methods do however exist: (T6265/21-T6267/57).
68 Mr Martin also gained experience in the development of a customer portfolio management system, which tracked the share holdings of an investor, the change in value over time, and allowed comparisons between multiple portfolios and their valuations. For the customer portfolio management system within Market Advantage, Mr Martin designed the database layout, and implemented the database using RMS indexing files, and wrote the C interfaces to RMS indexed files which formed the foundation of the portfolio management system. He either wrote or supervised the writing of all other parts of that portfolio management system. [“E12”]
69 Mr Martin refers to the following pages of exhibit “BM-1”:
(a) Pages 1 - 8 are a copy of a brochure containing information about the Market Advantage system, and as it was formerly known “Bridge Advantage”. On page 3, a photograph of a system screen shows a chart of the price of US dollar futures dated “13FEB87” (13 February, 1987). Mr Martin wrote the program which displayed that foreign exchange futures price data in graphical form as a price chart.
(c) Pages 11-18 is a copy of a brochure for “Pont Advantage” which was the name used in the UK and Europe for their version of Market Advantage. Prices are generally shown in “GBP” (Great Britain Pounds or pounds Sterling). Page 16 is a copy of a photo of a screen showing the quote for the fledgling “Eurodollar” futures trading on the LIFFE exchange in about October 1987.(b) Page 10 is a copy of a full page advertisement on the back cover of a magazine named “Telecom DISCOVERY” issue no 2, dated Autumn 1990. The advertisement is for Market Advantage, and shows some price charts which were written by Mr Martin.
Telstra CSSC - the FINE project
70 From 1992 to 1993, Mr Martin worked as a contractor to Computer People from Telstra’s premises. He provided his services to a section of Telstra referred to as CSSC (the Customised Software Solutions Centre). At CSSC, Mr Martin worked on the FINE system which supported foreign exchange settlement operations.
71 The target customer base of the system were large companies with material exposure to currency fluctuations.
72 Mr Martin read a brochure in relation to the FINE system. A photocopy of this brochure is attached as page 19 of exhibit BM1 to Mr Martin’s statement of 21 February 2001. He received this brochure when he commenced work.
73 The FINE system allowed companies to trade in forex contracts, either directly with each other, or via intermediaries. Mr Martin was aware of this from the specifications of the system, the proposals themselves, the source code, the testing that was done and the documentation kept in the library at the site. Reading these materials was a necessary part of learning the system. [“E13”]
General(Mr Martin’s Statement dated 21 February 2001, paragraph 42)(T6272/50-T6273/12)
74 Mr Martin dealt with a number of disparate issues in terms of his training, study and experience in his statement of 3 April 2001 in which his evidence was as follows:
“2. Almost all of the computer and IT related books available in bookshops in Sydney are by authors in either USA or Europe or UK. I have read many computer or IT related magazines and journals. Most of the computer or IT related magazines and journals available in newsagents in Sydney are written and published in USA. These include “Open Systems Review”, “C Language Users Journal”, “PC Magazine”, “PC Users Magazine”, “Dr Dobbs Journal” and “Linux Journal”. A small number are published in UK.
3. Most of the computer or IT related magazines and journals which have a title suggesting that their origin is Australian, such as “Australian Personal Computer” and “Australian PC Magazine”, are actually either owned by or closely affiliated with corresponding USA publications and usually carry a significant number of articles which are simply reprinted from the original US article, but with Australian advertisements and additional local material. For example, Australian Personal Computer was originally founded by Sean Howard in Australia, in the 1970's but is currently a subsidiary of the Ziff Davis company, which produces several US computer magazines.
4. Whether the computer or IT related magazines and journals are published in the USA, UK or Australia, they often have advertisements for software and hardware which is not produced or manufactured in Australia.
Opinions - Paragraphs 641, 646 of Martin’s statement of 27 June 2000
133 These paragraphs are rejected on the basis of a failure to demonstrate reasoning processes.
134 Paragraph 641 is now the subject of agreement.
135 Paragraph 646 is now the subject of agreement.
Breadth, Depth and Currency
136 The above reasons take into account the defendants several submissions with respect to suggested shortcomings in relation to the breadth, depth or currency of Mr Martin’s study training or experience. To the extent that the court has held that Mr Martin has been shown by his training, study or experience to have demonstrated that he has acquired the specialised knowledge on the basis of which wholly or substantially to be in a position to express opinions, the court has taken into account all the evidence which he has given and has come to the conclusion that there is no substance in the defendants submissions as to relevant lack of breadth, depth or currency. These parameters are always both relevant and relative to the particular form of specialised knowledge sought to be upheld. They are always both relevant and relative to the type of opinions sought to be expressed.
Schedule of Rulings - D91, D92, D93
137 The Courts’ rulings as to individual paragraphs have been inserted into the seventh (added) column of appendices “E”, “F” and “G” to this judgment. [The correlations are Specialised Knowledge “E” to “D91”; Form “F” to “D92”; State of Mind/extended to S.79 “G” to “D93”]
Further Submissions
138 By reason of the complexity of the issues raised on the expertise challenge and by reason of the wide-ranging number of objections it is possible that the above reasons have overlooked some particular issue or matter which required to be treated with. To a certain extent it has been necessary to deal with questions as a matter of principle for obvious reasons. Hopefully the essential gravamen of the critical findings is clear. The court will entertain such further submissions as either party may wish to address by way of clarification of the reasons or by way of the Court having for whatever reason simply omitted to treat with a particular issue. At the same time submissions will be taken as to timetable by which the plaintiffs will attend to those areas treated with by the judgment as appropriate for leave.
I certify that paragraphs 1 - 138
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 10 April 2001
___________________
Susan Piggott
Associate
10 April 2001
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