New Aim Pty Ltd v Leung [2023] FCAFC 67

A five-member Bench of the Full Court of the Federal Court (‘FCAFC’)¹ overturned a first instance decision² rejecting the evidence of an expert witness on the basis that the primary judge was not satisfied that the opinions expressed in the expert report truly represented the honest and independent opinions of the expert.

The primary judge’s rejection of the evidence was premised on their view that the extent of solicitor involvement in drafting the expert report was impermissible. In overturning many of the primary judge’s findings on this subject, the FCAFC provided some guidance on the appropriate involvement of lawyers in preparing expert reports.

Background

The appellant, New Aim, conducted an online retail business in Australia that sourced its products from Chinese suppliers. It commenced proceedings against a former employee, Mr Leung (‘Mr L’),³ alleging that he disclosed identity and contact details of some of New Aim’s suppliers (asserted to be confidential information) to a competitor and used that information to benefit that and another competitor.

New Aim asserted that Mr L’s conduct amounted to a breach of his equitable obligation of confidence, breach of his employment contract, and contravention of s 183 of the Corporations Act 2001 (Cth).

The expert report and its preparation

New Aim’s solicitors instructed Ms Chen (‘Ms C’) to provide expert evidence as to the confidential nature of the information disclosed by Mr L. Ms C was an expert in the Chinese products supplier industry, as well as the managing director of a company operating in that industry.

In relation to the preparation of Ms C’s report, the following events unfolded:

• On 21 February 2022, New Aim’s solicitors sent an email to Ms C, attaching an engagement letter and enclosures. The letter attached the Federal Court of Australia Expert Evidence Practice Note (GPN-EXPT) (‘Practice Note’), which included a copy of the Harmonised Expert Witness Code of Conduct (‘Code’).

• On 22 February 2022, Ms C sent an email to New Aim’s solicitors, referring to three attachments: (1) a ‘bio’; (2) a ‘script’ about her company; and (3) a sample product inspection report.

• Further email exchanges and telephone/AVL conferences between Ms C and New Aim’s solicitors ensued over the next fortnight or so.

• On 7 March 2022, New Aim’s solicitors sent an email to Ms C, attaching a letter of instructions and stating ‘[w]e will send to you your draft statement shortly’.

• On 8 March 2022, New Aim’s solicitors sent an email to Ms C, attaching a draft witness statement and expert report. Ms C signed her witness statement (to which her export report was annexed) that day without making any material changes.

Ms C’s expert report comprised 60 paragraphs. Sections A to C (paragraphs 1 to 55) comprised factual material addressing Ms C’s qualifications and experience, an overview of her company and a description of its procurement process. The FCAFC determined that this part of her report was clearly drafted by reference to the script which Ms C had provided. Section D (paragraphs 56 to 60) ‘was more in the nature of expert opinion evidence’.⁴

The decision at first instance

The primary judge dismissed New Aim’s claims on the basis that the supplier details did not constitute confidential information. In rejecting the entirety of Ms C’s expert report – being all of the opinions and factual material contained in it – as well as her oral evidence given during cross examination, the primary judge determined:

[70] There are many difficulties with the expert report of Ms [C], which individually and cumulatively lead me to the conclusion that I should reject it in its entirety. I am left in a state of uncertainty as to who was responsible for the drafting of which portions of her report. It would appear that most of the report was, at least initially, the product of drafting by the lawyers for [New Aim], albeit in reliance upon some material of a non-specific nature that Ms [C] provided to the lawyers. The fact that Ms [C] adopted the drafting of others as her opinion does not address the more fundamental issue that her engagement obliged her to act as an independent expert witness conformably with the requirements of the Expert Evidence Practice Note and the Harmonised Expert Witness Code of Conduct.


Clause 3.2 of the Practice Note advises that: A party or legal representative should be cautious not to have inappropriate communications when retaining or instructing an independent expert, or assisting an independent expert in the preparation of his or her evidence.⁵

The Full Court of the Federal Court

New Aim appealed on a number of grounds, including that the primary judge erred in rejecting Ms C’s evidence. The FCAFC allowed the appeal and ordered that the ‘matter be remitted for retrial’.⁶ In doing so, the FCAFC’s joint judgment provided some guidance on the appropriate involvement of lawyers in preparing expert reports.

Ethical requirements generally

The FCAFC observed that the Federal Court’s expectations concerning independent expert witnesses is set out in the Practice Note and the Code, stating that:

[119] … There are various ethical requirements on legal practitioners involved in the process of gathering or putting evidence into an appropriate form for hearing. At the core of these is a requirement not to influence a witness’s evidence. This applies both to witnesses of fact and expert witnesses providing opinion evidence. Legal practitioners commonly take proofs of evidence from, or draft affidavits of, witnesses of fact. These are commonly drafted from oral communications which occur in conference or written material provided by the witness or which are otherwise available. It is less common for this to occur in the preparation of expert evidence, but there are reasons why it might occur. Where a legal practitioner takes responsibility for the drafting of evidence, the perception may arise that the drafter may have influenced the content of the evidence, even subconsciously.

The court continued:

[120] There is not one rule or practice which covers all experts or all situations. For example, in the typical case where medical opinion evidence is required, the medical expert would ordinarily draft his or her own report. The same is generally true of an expert valuer preparing a valuation or an accountant preparing a report about economic loss. There may be discussion in relation to drafts of the report, but one would ordinarily expect the report to be drafted by the expert rather than the legal practitioner. Nevertheless, a number of situations might arise where legal practitioners are involved in the process of recording an expert’s evidence, including by preparing or drafting the report. For example, there may be physical, language or resource difficulties. Where these situations arise, care must be taken to ensure that the legal practitioner does not suggest what the expert’s evidence should be and that the report is drafted from what the expert has communicated to the legal practitioner as fact or what the expert has assumed or what the expert’s opinion is. Leaving aside formal matters or instructions or assumptions the expert is required to make, it is difficult to conceive of a situation in which a legal practitioner, acting appropriately and ethically, could draft an expert’s report otherwise than on the basis of what the expert had communicated to the legal practitioner to be his or her evidence.

Transparency and timing

With reference to BrisConnections,⁷ the FCAFC confirmed that the process of instructing an expert should be transparent so that what has occurred is clear – the material placed before the court should make clear what has been provided to the expert and the questions that the expert was asked to address.

However, the FCAFC observed that it is not unusual in a number of contexts not to finalise the formulation of questions asked of an expert without first discussing the issues with the expert. Nor, the FCAFC acknowledged, is it unusual for a final letter of instructions to be prepared shortly before an expert report is finalised.⁸

Other observations

In response to some specific findings made by the primary judge, the FCAFC elucidated the following propositions:

• If legal practitioners are involved in the drafting of an expert report, it may well be desirable to disclose that fact in the report, forensically or otherwise, but there is no legal obligation as such to do so. Whether there is an ethical obligation to do so depends on the particular circumstances.⁹

• While it might be desirable that all correspondence relating to the preparation of an expert report be disclosed, there is no legal obligation as such to do so. Again, whether there is an ethical obligation to do so depends on the particular circumstances.¹⁰

• As to the primary judge’s observation that any oral advice conveyed by a legal practitioner to the expert should be documented and disclosed in the expert’s report, the legal or ethical necessity of this depends on all of the circumstances, including the nature of the advice conveyed to the expert and the relevance of it, if any, to the report or opinions expressed.¹¹

Specific disposition

The FCAFC determined that it was is not clear why the primary judge rejected paragraphs 1 to 55 of Ms C’s report, apart from the fact that the primary judge was not satisfied that the opinions in paragraphs 56 to 60 reflected Ms C’s honest and independent opinions. The FCAFC stated that there was substantial material before the primary judge which indicated that paragraphs 1 to 55 of Ms C’s expert report were drafted by reference to Ms C’s ‘bio’ and script and on the basis of discussions with Ms C during one or more video conferences in relation to a draft or drafts prepared by New Aim’s solicitors. The FCAFC found that the primary judge’s reasons contained no reference to the similarities between paragraphs 1 to 55 of Ms C’s expert report and her script, and no clear reasons were given as to why this factual evidence was rejected.¹²

In relation to paragraphs 56 to 60 (being those more in the nature of expert opinion evidence), the FCAFC found that there was substantial material to suggest that those paragraphs were drafted on the basis of Ms C’s written and oral communications. The FCAFC determined that the reasoning adopted for the rejection of the opinion evidence at paragraphs 56 to 60 contained a number of factual errors and errors of approach (some of which have been discussed above), which, if they had not occurred, might well have resulted in the evidence not being rejected. BN

ENDNOTES

^{1 The Full Court of the Federal Court of Australia was constituted by Kenny, Moshinsky, Banks-Smith, Thawley and Cheeseman JJ who delivered a joint judgment.
2 New Aim Pty Ltd v Leung [2022] FCA 722.
3 There were a number of other respondents to the proceedings, who are not relevant for the purposes of this article.
4 New Aim Pty Ltd v Leung [2023] FCAFC 67: at [80] (’New Aim’).
5 New Aim: at [70].
6 The issue of the proper construction of the remittal order was the subject of New Aim Pty Ltd v Leung (No 3) [2023] FCA 1295.
7 BrisConnections Finance Pty Ltd (in liq) (recs and mgrs apptd) v Arup Pty Ltd (2017) 252 FCR 450.
8 New Aim: at [87]–[88].
9 New Aim: at [121].
10 New Aim: at [122].
11 New Aim: at [123].
12 New Aim: at [125]. 2024}