"In all matters of opinion, our adversaries are insane"[1]: Mere opinion or expert evidence?

By Chris Moore.

Key Points:
Experts' reports must demonstrate a number of formal requirements, in particular that the opinion is shown to have been derived by the application of specialised knowledge to the facts at hand. Failure to do so can have drastic consequences both to your case (in terms of the admissibility of the report itself) and to the costs of the litigation.

In recent years, significant attention has been directed by Australian courts, both in terms of judgments and in the administration of their own procedures by way of rules and appropriate guidelines, as to when expert evidence is properly admissible.

This question is likely to be central to many product liability disputes where manufacturers are faced with allegations of product defect and causation. In terms of an expert's report, it is clear that all Courts are now taking a disciplined approach to what is admissible based upon a rigorous application of what is the proper role of the expert.

In order to avoid the prospect of wasting substantial costs and court time with a report which is either rejected in full or its weight is substantially diminished, it is important to ensure that the expert's report meets the relevant requirements.

This article summarises the relevant principles.

The opinion rule

As a general rule, opinion evidence is not admissible in legal proceedings. The formulation of principle is similar in all jurisdictions. It is known as "the opinion rule".

However, the Uniform Evidence Acts establishes that expert evidence is an exception to the opinion rule. By way of example, section 79 of the NSW Evidence Act provides:

"If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."

In some ways, it is almost a mechanical process to ensure that in all cases the expert sets out the reasoning process in the expert report and to make clear the manner in which the specialised knowledge has been applied to the facts.

The role of the expert

The fundamental principle is that: "the purpose of expert evidence is to provide the Court with information which is outside the experience and knowledge of a judge and jury" (R v Turner [1975] 1 QB 834). To this extent, the expert's role is to assist the Court.

A court is not bound to accept the expert's evidence, even if uncontradicted. Rather, the expert is required to present an opinion which properly explains the processes of reasoning employed, including the manner in which the specialised knowledge has been applied to the facts to produce that opinion, in order that the court may make its own rational determination concerning the matter at issue and dealt with by the expert.

The Makita requirements

Makita v Sprowles (2001) 52 NSWLR 705 stated that, in order for expert evidence to be admissible, it must:

• demonstrate that there is a field of "specialised knowledge";
• demonstrate that the witness is an expert is an aspect of that field, by reason of specified training, study or experience;
• proffer an opinion that is "wholly or substantially based on the witness' s expert knowledge";
• so far as it is based on facts "observed" by the expert, the expert must identify and admissibly prove those facts;
• so far as it is based on "assumed" or "accepted" facts, those facts must be identified and otherwise proven in the course of the parties' case;
• establish that the facts on which the opinion is based form a proper foundation for it; and
• explain how the field of specialised knowledge applies to the facts and produces the opinion propounded.;

The Court noted that unless these matters are made explicit, it is not possible to be sure "whether the opinion is based wholly or substantially on the expert's specialised knowledge. Failure to do so may render the opinion inadmissible, or to the extent that it is admitted into evidence, its weight will be diminished."

Daubert compared

Those involved in international product liability litigation will no doubt be familiar with the Daubert standard.[2] It represents the US Supreme Court's response to some of the same issues as dealt with in Makita, but limited to the admissibility of scientific evidence.

It is said to have been an attempt to stem the emergence of so-called "junk science" in court hearings. The Daubert test in essence advocates a two-pronged test of admissibility:

• the relevance prong, which dictates that he evidence must be relevant to an issue in the trial;
• the reliability prong, in relation to which the Court set out a number of (non-exhaustive) considerations, as follows:
  • the technique must be falsifiable, refutable and testable, and have actually been tested in the field (as opposed to the laboratory);
  • has the technique been subjected to peer review and publication?
  • what is the known or potential error rate?
  • are there standards for the control or maintenance of its operation?
  • has the technique been generally accepted by a relevant scientific community?

Each of these elements would also be relevant to the admissibility or weight to be given to an expert report in Australia.

Objections to expert reports

Objections based on the Makita principles are commonplace, not only in product liability litigation but more generally.

These principles were recently considered in Australian Securities & Investments Commission v Rich (2005) 190 FLR 242, which concerned the admissibility of the expert opinion evidence of a member of PricewaterhouseCoopers (PwC).

The expert report covered three subject areas which included background information into the composition of the One.Tel board, the actual financial position of the group and the reporting of financial information to the board of directors.

The defendants argued that ASIC's expert accountant's report did not satisfy the relevant requirements because it allegedly did not set out clearly:

• the opinions expressed;
• the facts observed/assumed which form the basis of the opinions; and
• the reasoning process by which the expert’s specialised knowledge as an accountant has been applied to those facts so as to reach the opinions expressed.

Consequently, they argued that "it is not possible to be sure whether the opinion(s) [are] based wholly or substantially on the expert’s specialised knowledge".

Further, they submitted that the report had formal defects in that:

• the report failed to differentiate between facts, assumptions and opinions;
• the expert expressed opinions not shown to be based on his specialised knowledge;
• the report failed to set out the factual basis for the expert's opinions and his reasoning process;
• no proper records were kept of the information to which PwC had access, there was no proper segregation of PwC’s roles as independent expert and as assistant to ASIC, there were no minutes of meetings, and drafts of documents were destroyed; and
• the expert’s failure to disclose in the report that he had previously been involved in assisting ASIC was misleading.

In relation to the Makita principles, Justice Austin noted that the report failed to comply with the relevant requirements, and made the following comments in applying the Makita principles:

• every expression of expert opinion employs unarticulated assumptions at a basic level such as human nature, human anatomy, and atmospheric conditions on earth. It is therefore impossible for a witness to articulate in their report, every single presumption, inference and reasoning process surrounding the expression of opinion;
• where the reasoning process is less obvious, especially where the document is significant, a full explanation is necessary. For example, it is necessary to decide whether several documents are versions of one another or separate documents. While it would be appropriate for the reasoning process to be recorded in working papers, the report itself could set out this detail;
• the expert’s reliance on propositions stated in the Report involved "unconscious acceptance by him of facts not self evident in the document itself."

Most recently, the Makita requirements were again considered in detail in Seven Network Ltd v News Ltd (No. 14) [2006] FCA 500. The question was , specifically whether a report prepared on the value of lost economic opportunity satisfied the statutory requirements under section 79 of the Evidence Act.

The respondents objected primarily on the grounds that the report failed "to disclose a reasoning process sufficient to enable the Court to determine whether the opinions expressed reflect [the expert's] specialised knowledge based on his study, training or experience".

Justice Sackville ultimately rejected the tender of the report because he considered, in its present form, that the report failed to meet the relevant requirements. In particular, the expert had failed to identify how his specialised knowledge based on his study, training or experience was employed in his reasoning process regarding the quantification of losses suffered by Seven.

Conclusion

In many respects, the Makita requirements accord with common sense. As formal requirements, there is no impropriety involved with the lawyer advising the expert in structuring a report so that compliance with these requirements is properly demonstrated on the face of the report.

Failure to comply with the requirements can have a number of consequences. It can render an expert report inadmissible. In the alternative, the Full Court of the Federal Court has held that many of the requirements go to the weight or the persuasiveness of the evidence. This can result in considerable costs being thrown away - both on the report itself and in connection with lengthy arguments over its admissibility.

For further information, please contact Chris Moore.