Chaina v Presbyterian Church (NSW) Property Trust (No. 7)

In Chaina v Presbyterian Church (NSW) Property Trust (No. 1) [2012] NSWSC 1476 I gave evidentiary rulings pursuant to s 192A Evidence Act 1995 in relation to a large number of witness statements served in these proceedings. I summarised the background to the case and the reasons that such evidentiary rulings were sought.

By a further Notice of Motion dated 30 January 2013 the Defendants seek similar rulings in relation to the evidence contained in the statements of George Chaina of 8 February 2010 and Rita Chaina of the same date.

In my earlier judgment I provided reasons why I considered it appropriate to give the evidentiary rulings. The only matter that has altered since that judgment is that a mediation was held in early February 2013 but was unsuccessful. I had suggested one reason for the making of preliminary rulings was that it was better for the parties to know what evidence would be admitted at the hearing to assist their approaches to the mediation - see at [12]. I do not consider that the failure of the mediation and the removal of that reason alters the other reasons I gave for embarking upon this procedure.

The Defendants say that their objections to the evidence of George and Rita Chaina can be summarised in this way: (a) The evidence of the alleged industrial products pre- and post-1993 is completely irrelevant except to the extent that it concerns particular identified products which were to be relaunched by Proton (the "Relevance Objection"); (b) The evidence relating to the domestic products should be excluded because of failures to identify the alleged test subjects; (c) Further, the evidence relating to the domestic products should also be excluded because of failure to link the formulae with the test subjects; (d) Generalised objections based on form, opinion, expert evidence where the witness is not an expert or has not adopted the Expert Witness Code of Conduct, conclusions, subjective assertions, speculation, no precision and no primary facts stated.

The response of the Plaintiffs to these four bases are as follows: (a) The evidence of the Plaintiff's industrial business pre- and post- 1993 is highly relevant in that it relates to the skills and expertise of George and Rita Chaina in running a business and formulating products, as well as how those products were received in the industrial market. This is said to be directly relevant to the per quod servitium amisit claim brought by the Fourth and Fifth Plaintiffs and to the loss in the value of shares in the corporate Plaintiffs brought by the Second and Third Plaintiffs. (b) Evidence relating to the domestic products is admissible because it goes to the knowledge and experience of George Chaina, to the continued research, development and testing steps taken by George Chaina when formulating products generally, to the fact that he was creating products within the relevant product categories and was testing these in an attempt to fine tune them for launch in the domestic market and it goes to the role played by Rita Chaina in the testing of products. Even if the evidence is inadmissible in relation to the results of the testing the evidence, it is submitted, is admissible to establish George and Rita Chaina's knowledge and belief in the superiority of the products and their reliance on the same in the subsequent actions taken by them when preparing for the launch. (c) The Plaintiffs say that the alleged failure in the evidence to link formulae with the test subjects does not negate the probative value of the evidence regarding the domestic products. (d) The more generalised objections are dealt with on an example by example basis.

In relation to the Plaintiffs' general submissions if their evidence relating to the results of testing of the products is inadmissible their own knowledge and belief in the superiority of their products and their reliance on that belief when taking actions to prepare for the launch cannot be relevant. The issue is about the likely success of the products and not their belief.

The significant point made by the Defendants concerning the industrial products derives from paragraphs 119 and 120 of George Chaina's statement of 8 February 2010. Those paragraphs say: [119] After the fire in June 1993, Deluxe in very limited quantities continued to supply its Challenger, Classic and Quantum products to existing customers. The business by this time was trading through the company Jean-Pierre Cosmetics Pty Limited and utilising the business name Deluxe Products. It continued to supply the Challenger system to the industrial laundry market, the Classic range of products to commercial housekeeping and kitchen clients and the Quantum range to food processing clients. The focus however at this time was the formulation of the new industrial and domestic ranges. For this reason, I did not take steps to re-establish a capacity to manufacture the Challenger Plus system, nor did we pursue the Nappy Wash product or the Quantum range. Similarly the Jean-Pierre Cosmetics range was not re-established after the fire. [120] At the heart of the proposed industrial product relaunch was technologically superior super concentrated products combined with specifically designed delivery or dosing systems. In addition to the technology of the product and delivery system, the principal strategy behind all of the relaunch industrial products was to provide a "one stop shop". My one stop shop principal involved not only the supply of all chemical products to a particular industry or area of operation but also to supply all ancillary products. The relaunched industrial products were broadly set out in five segments labelled Vision, Spectrum, Quantum, Orbita and Challenger.

Similarly, in his statement of 2 September 2005 he said at paragraph 70: In the period 1995 to 1999, I developed a number of unique new products and reformulated all of the products.

The Defendants argue, therefore, that none of the old industrial product lines were to be part of the relaunch and that none of the new or reformulated industrial products were being sold at the time of the accident in 1999.

The Plaintiff submits that the evidence is relevant as it relates to the skill and expertise of George and Rita Chaina in running a business and formulating products. The Plaintiffs dispute that the older products were not to be relaunched and submit that the evidence of some of the older products demonstrates that the business had already expanded into the domestic market. They say that the evidence demonstrates the market's reception and response to the various product ranges which is relevant to establish the existence of processes employed by George and Rita Chaina in devising new processes. The Plaintiffs concede that such evidence is not to be relied on for the accuracy of its conclusions in relation to product superiority but say there are multiple purposes for which the evidence is legitimately relevant to a fact in issue being the formulation and testing processes of the products.

In my opinion, if there is no other reason to reject the evidence objected to concerning the industrial products case the evidence is admissible as background evidence showing what had been done prior to the accident in 1999. It may be accepted that a number of the product ranges were not relaunched or proposed to be relaunched after the fire in 1993 but that does not make an account of what had been achieved prior to the fire or between the fire and the accident irrelevant.

At least one basis for George Chaina asserting the right to give the evidence he does about the products, their make up, development and marketing, is his experience in the area. The specialised knowledge about which s 79 Evidence Act speaks is knowledge based on the person's "training, study or experience". The lack of the earlier claimed qualifications is not fatal to the admissibility of this evidence although it is not easy to discern, particularly in the 2005 statement which was purportedly based on qualifications that he did not have, on what his specialised knowledge was based. The evidence is generally admissible to support any submission that George Chaina should be regarded as an expert.

There are, however, a large number of particular objections to the evidence which now need to be ruled upon.

In my judgment of 7 December 2012 I dealt principally with statements of various witnesses concerned with the development of products for the domestic market. I noted that there was an issue in the proceedings about whether the Plaintiffs were manufacturing or producing any products for domestic use in the period 1995 to 1999.

Generally speaking, I rejected evidence of witnesses concerning what they thought of the products provided to them. This was because there was a lack of specificity in many cases about the products provided. It was also because the opinions of family members or friends about the products had little probative value. I did, however, admit evidence which purported to show that domestic products had been or were being developed during this period.

The Defendants now object to much of the evidence concerning domestic products. The Defendants say that the heart of the domestic products case is that test subjects who seem to be family or close associates all purport to corroborate the Plaintiffs' fundamental point which is that the domestic products, when trialled by the test subjects, were so incomparably better than well known brands which were available to purchase from supermarkets that the Plaintiffs would obtain a significant market share.

The Defendants criticise the evidence because of the lack of identity of test subjects, the generalised nature of statements about what the majority of the subjects thought or said and the hearsay nature of the evidence.

The Plaintiffs say that the principle submission of the Defendants is wholly inaccurate because the evidence does not seek to establish the superiority of the Plaintiff's products.

However, the correctness of the Defendant's assertion is made clear from paragraphs 87, 88, 89, 90 and 91 of the statement of George Chaina of 2 September 2005 that each refer in express terms to the Proton products having "the superior qualities ... in comparison to the existing products on the market" and to statements made in paragraphs 99 and 100 of the same affidavit. There are numerous other examples of such assertions in this and other statements.

The Plaintiffs further submit that the evidence is admissible to show the steps and processes taken by the Plaintiffs to research, develop and test the formulae, to show that the products were being produced at the relevant time. The Plaintiffs say the alleged hearsay evidence is admissible pursuant to s 60 of the Evidence Act (relevant for a purpose other than proof of the asserted fact) because it goes towards the belief that the Plaintiffs had in the superiority of the domestic products as well as their intentions to redevelop old products and develop new ones in preparation for the launch.

Subject to specific objections which I will deal with presently, the evidence concerning the domestic products is admissible, generally speaking, because of the issue about whether such products were being produced and developed at the relevant time. Consistently with rulings I gave in my earlier judgment the views of the friends and family are irrelevant and not probative of any issue. The belief of the Plaintiffs that the products were superior is irrelevant. A further problem, identified in my earlier judgment, is the general description of the products.

It is necessary, therefore, to look to objections to individual paragraphs.

The Defendants object to the whole of this affidavit on the basis of its form and that it contains expert evidence when Mr Chaina has not adopted the Expert Witness Code of Conduct. Given that there are specific objections to the form of particular paragraphs I consider that I should regard the overall objection as being based on its containing expert evidence. I do not consider that it does purport to give expert evidence. Rather, it contains factual material associated with what Mr Chaina expected he would need to have done and the people he would need to have employed at the proposed plant. In addition, it contains factual evidence of what he believed the business would have done in terms of its production and size.

It is necessary, therefore, to consider particular objections.

There are some generalised objections in the first instance. Paragraphs 26 - 45 are objected to on the basis of their form, their relevance and it is submitted that the material contains no nexus to any issue in the proceedings. It seems to me that, in the absence of the formal qualifications previously claimed by George Chaina, he will be endeavouring to show expertise and knowledge through experience in different occupations particularly in those involving chemical products. The material contained in these paragraphs is relevant for that purpose. I do not consider the generality of the material excludes it on the basis of its form.

Objection was also taken to paragraphs 48 - 118 on the same basis. Again, it seems to me that this evidence is relevant showing the background to the position of the business in the 1990s as well as demonstrating how George Chaina acquired the knowledge and expertise which he now claims. The Defendants also claim that the evidence offends s 102 of the Evidence Act which makes inadmissible credibility evidence about a witness. I do not consider that the rule is offended because the evidence does not appear to me to be used to give the witness credibility but rather to provide the basis for his claimed knowledge and expertise.

It is necessary, therefore, to consider the individual paragraphs for specific objections.

The purpose of this statement appears in paragraphs 2 and 3 of the statement as follows: [2] In paragraphs 87-91 of my first statement dated 2 September 2005 ("my first statement") I gave evidence that I conducted research, formulation and testing over a four year period between 1995 to 1999 for certain products developed by Proton Technology Ltd, the Fourth Plaintiff ("Proton") which compared favourably and in many cases exceeded the performance of competitors' products. [3] This statement provides a factual basis upon which the assertions of superiority in paragraphs 86 to 91 of my statement are based.

Paragraphs 87 to 91 of the first statement have been rejected by me because of their form. In particular, the thrust of those paragraphs was simply that the various categories of products which Proton proposed to supply had the superior qualities outlined at Tab 37 of GC3 in comparison to other products on the market.

Objection has been taken to a large number of paragraphs in this immense affidavit consisting of 676 paragraphs. The objections taken are consistent for almost all of the paragraphs objected to. Those objections are on the basis of form, opinion, expert evidence, witness has not adopted the Expert Witness Code, conclusion, subjective, speculation, no precision and no primary facts. A few paragraphs have been objected to on the basis of hearsay.

What is apparent from a reading of this affidavit is that it consists, almost in its entirety, of expert evidence. This is because, although George Chaina is describing the actual testing process that he undertook (which description may be accepted as evidence of fact) the only purpose of doing so is to reach conclusions such as those found, for example, in paragraphs 30, 37, 40, 49 and so on.

My present understanding is that George Chaina's expertise is an issue in the proceedings and has not yet been determined. However, in any event, he has not acknowledged the Expert Witness Code nor agreed that he was bound by it when expressing the conclusions contained in many or most of the paragraphs objected to in this affidavit. If the evidence is, as I perceive, expert evidence, it would be required to comply with r 31.27 UCPR. It clearly does not do so. The requirements are mandatory.

The problem is particularly highlighted by a reading of some of the conclusions that are reached in such paragraphs as 49, 68, 70, 72 and 97. These conclusions are stated without any basis for them being demonstrated, as far as can be discerned, from the testing process carried out. There are numerous other examples of this throughout the affidavit.

There are other conclusions expressed which do not provide the primary facts or are clearly based on hearsay - paragraphs 21 and 35 are examples.

The approach that I intend to take to this very long affidavit is that the Defendants' objections to the specified paragraphs are all upheld for the reasons that the evidence is expert evidence. If George Chaina is found to be an expert and the report constituted by the affidavit is expressed in proper form with due acknowledgement of the Expert Witness Code its admissibility will be reconsidered.

Objection is taken to paragraph 2 which contains a conclusion about paragraphs earlier rejected. The only purpose for which paragraph 2 is admitted is to provide an understanding of the purpose of the whole affidavit.