FEDERAL COURT OF AUSTRALIA Beadcrete Pty Ltd v Fei Yu trading as Jewels 4 Pools [2012] FCA 1091 Citation: Beadcrete Pty Ltd v Fei Yu trading as Jewels 4 Pools [2012] FCA 1091 Parties: BEADCRETE PTY LTD (ACN 071 743 961), DESIGNER CONCRETE COATINGS PTY LTD (ACN 102 760 234), BUYRITE STEEL SUPPLIES PTY LTD (ACN 053 173 041) and DESIGNERITE PTY LTD (ACN 146 670 706) v FEI YU TRADING AS JEWELS 4 POOLS, JEFFREY STUART MCALISTER, PEBBLE MASTERS PTY LTD (ACN 087 540 734), TWIN COAST POOLS PTY LTD (ACN 104 149 484), MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING (ACN 052 945 169) and GRIN DISTRIBUTIONS PTY LTD (ACN 133 541 563) File number: NSD 111 of 2011 Judge: JAGOT J Date of judgment: 4 October 2012 Catchwords: EVIDENCE – admissibility of affidavit containing experimental proof of certain facts under rule 34.50 Federal Court Rules 2011 – where subrule 34.50(1) not complied with Legislation: Federal Court Rules 2011 Cases cited: Bayer Bioscience NV v Deltapine Australia Pty Ltd (No 2) (2006) 71 IPR 40; [2006] FCA 1762 Lucent Technologies Inc v Krone Aktiengesellschaft (No 2) (1999) 94 FCR 124; [1999] FCA 1462 Date of hearing: 4 October 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 14 Counsel for the Applicants: Mr A J Bannon SC and Ms P Arcus Solicitor for the Applicants: Creagh & Creagh Counsel for the Respondents: Ms S J Goddard SC and Mr H P T Bevan Solicitor for the Respondents: Conditsis Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 111 of 2011 BETWEEN: BEADCRETE PTY LTD (ACN 071 743 961) First Applicant DESIGNER CONCRETE COATINGS PTY LTD (ACN 102 760 234) Second Applicant BUYRITE STEEL SUPPLIES PTY LTD (ACN 053 173 041) Third Applicant DESIGNERITE PTY LTD (ACN 146 670 706) Fourth Applicant AND: FEI YU TRADING AS JEWELS 4 POOLS First Respondent JEFFREY STUART MCALISTER Second Respondent PEBBLE MASTERS PTY LTD (ACN 087 540 734) Third Respondent TWIN COAST POOLS PTY LTD (ACN 104 149 484) Fourth Respondent MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING (ACN 052 945 169) Fifth Respondent GRIN DISTRIBUTIONS PTY LTD (ACN 133 541 563) Sixth Respondent JUDGE: JAGOT J DATE OF ORDER: 4 OCTOBER 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave to the tender of the report of Mr Mahaffey be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 111 of 2011 BETWEEN: BEADCRETE PTY LTD (ACN 071 743 961) First Applicant DESIGNER CONCRETE COATINGS PTY LTD (ACN 102 760 234) Second Applicant BUYRITE STEEL SUPPLIES PTY LTD (ACN 053 173 041) Third Applicant DESIGNERITE PTY LTD (ACN 146 670 706) Fourth Applicant AND: FEI YU TRADING AS JEWELS 4 POOLS First Respondent JEFFREY STUART MCALISTER Second Respondent PEBBLE MASTERS PTY LTD (ACN 087 540 734) Third Respondent TWIN COAST POOLS PTY LTD (ACN 104 149 484) Fourth Respondent MELKEN DEVELOPMENTS PTY LTD TRADING AS BAYSIDE POOLS & PAVING (ACN 052 945 169) Fifth Respondent GRIN DISTRIBUTIONS PTY LTD (ACN 133 541 563) Sixth Respondent JUDGE: JAGOT J DATE: 4 OCTOBER 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application for leave to tender as evidence in this proceeding an affidavit which constitutes experimental proof of certain facts. The application for leave is made pursuant to Part 34, rule 34.50(2)(b) of the Federal Court Rules 2011 (Cth). That rule provides: 34.50 Experimental proof as evidence (1) If a party (the proponent) proposes to tender, as evidence in a proceeding, experimental proof of a fact, the proponent must apply for orders in relation to the experimental proof, including orders about any of the following: (a) the service on other parties of particulars of the experiment and of each fact that the proponent asserts is, will or may be proved by the experiment; (b) any persons who must be permitted to attend the conduct of the experiment; (c) the time when, and the place where, the experiment must be conducted; (d) the means by which the conduct and results of the experiment must be recorded; (e) the time by which any other party (the opponent) must notify the proponent of any grounds on which the opponent will contend that the experiment does not prove a fact that the proponent asserts is, will or may be proved by the experiment. (2) Evidence of the conduct and results of the experiment is admissible in the proceeding, only: (a) if the proponent has complied with subrule (1) and any orders given under that subrule; or (b) with the leave of the Court. (3) If an order mentioned in paragraph (1)(e) has been made, and the opponent has not complied with the order in relation to a ground, the opponent may rely on the ground only with the leave of the Court. 2 There are two previous decisions which relate to the earlier manifestation of the rule, which was in the same terms. The first is Lucent Technologies Inc v Krone Aktiengesellschaft (No 2) (1999) 94 FCR 124; [1999] FCA 1462. At [8] Lindgren J observed that the key purpose of the predecessor rule (O 58 r 31 of the Federal Court Rules 1979): …is (a) to ensure that the other party has an adequate opportunity to challenge the validity of the experiment or test and (b) to avoid wasteful duplication by that party of an experiment that can be seen to be invalid. 3 His Honour held that the rule should be construed as applying to all experimental proofs, whether carried out before or after the date of the commencement of the proceeding. At [11] his Honour dealt with the question of leave to rely on such evidence if the proponent of the evidence had not complied with the requirements of subrule (1) and orders given under that subrule. His Honour said that: No doubt, many factors might suggest a granting of leave…The experiment or test may have been carried out long before the parties were in dispute; a physical object on which it was conducted may have been destroyed in the process, or lost, and so be no longer available for a repetition of the experiment or test; the result of the experiment or test may not be seriously in dispute; repetition of the experiment or test may involve undue expense and inconvenience. But such considerations do not go to the applicability of the rule in the first place. 4 Heerey J also considered the predecessor rule in Bayer Bioscience NV v Deltapine Australia Pty Ltd (No 2) (2006) 71 IPR 40; [2006] FCA 1762. His Honour made the point that the rule does not confer a power to permit or refuse experiments. A party can carry out any experiment it likes. However, if the party wants to adduce evidence of the experimental proof then the rule is engaged and as set out in subrule (2) evidence of the conduct and results of the experiment is admissible only if there has been compliance with subrule (1) or, alternatively, if the Court grants leave. At [12], Heerey J observed that "[t]o have the results of such experiments admitted into evidence [the proponent] needs to comply with directions which will give Deltapine a fair opportunity to observe them". In that sense the observation of Heerey J reflects what Lindgren J said about the purpose of the rule. 5 In the course of preparing this matter for hearing the applicants made an application for orders pursuant to Part 34, rule 34.50 in relation to the carrying out of an experiment by Boral, in terms of the sieving of certain samples of the respondents' product. Given the submissions that have been made I should also observe that the applicants did seek directions in accordance with rule 34.50. Further, although reference has been made by the respondents to the fact that the respondents were not permitted to attend the conduct of the experiment, what was placed before me were consent orders of 27 October 2011. In other words, the respondents must have consented to the regime for testing which the applicants proposed. As I understand it, no persons were permitted to attend the conduct of the experiment at the time because that was a requirement of the tester, Boral, not a requirement of the applicants, and presumably that is the reason why the respondents chose to consent to the orders which I made for the carrying out of that testing. 6 In addition, there has been a reference in this proceeding – and again I refer to this because of the submissions which have been put to me – that there was non-compliance with the orders made for the carrying out of the testing because the orders required retention of the test sample. However, in accordance with its usual practice and as the evidence disclosed Boral disposed of the actual test sample. What Boral retained were the larger 20 kilogram bags, four in all, from which Boral had taken a sample for testing. Those larger 20 kilogram bags were continuously maintained by Boral and were available for further testing by the respondents or the applicants, as either saw fit. Indeed the respondents subpoenaed, amongst other things, those bags and as I understand it they are in the province of the Court. Moreover, the test Boral conducted was relatively simple and with the 20 kilogram bags available effectively reproducible, even though not reproducible by use of the actual sample that Boral tested. It consisted of simply taking the relevant quantity from each bag, pre-prepared in accordance with a riffling process to make sure that the quantity was representative of the bag as a whole, and then passing it through a series of sieves. In these circumstances I infer that any such testing was relatively straightforward, relatively inexpensive, and effectively reproducible at any time, provided the original sample bag was maintained, as indeed it was. It was for this reason that I had no difficulty, insofar as leave might have been required for the applicants to rely upon the Boral test results, to allow the applicants to do so. 7 In my view what I am now confronted with is entirely different. I have no explanation from the respondents as to why they did not seek orders pursuant to rule 34.50 before carrying out the tests. By "tests" I mean the whole of the process, including the removal of core samples from the spa pool, the delivery of those core samples to Mr Mahaffey and Mr Mahaffey's conduct of the tests, which involved undertaking numerous actions including subjecting the samples to very high temperatures, the effect of which was that the samples were destroyed through the process of the tests themselves. Accordingly, I have no basis to understand the reason why the respondents did not seek orders either before the core samples were removed or even after the core samples were removed and before Mr Mahaffey carried out his tests. I do know, on the other hand, that Mr Mahaffey's evidence was filed and served on or about 26 April 2012 and accordingly has been in the possession of the applicants for about five months. I also know that after receipt of Mr Mahaffey's evidence the applicants indicated that they would be objecting to the evidence but only on the ground of late service. There was no reference in the letter from the applicants' solicitors to the respondents' solicitors pointing out that the entire affidavit involved an experiment where no orders had been sought pursuant to rule 34.50 and accordingly that the evidence would be inadmissible under rule 34.50(2) unless the respondents obtained leave of the Court as contemplated by that subrule. 8 I have evidence that the applicants would wish to adduce if Mr Mahaffey's evidence is admitted, being an affidavit of Mr Scerri of 28 June 2012 and an affidavit of Mr Bennett of 13 June 2012. The respondents argue that Mr Bennett and Mr Scerri have effectively answered the evidence of Mr Mahaffey and further that the applicants could have notified and should have notified the respondents at any time of the basis for the objection up to five months ago. Had that been done and the respondents not been taken by surprise today the respondents could have cured any difficulty, including possibly by way of the applicants seeking its own core samples from the same spa and the experiment being reconducted under the auspices of the applicants. 9 I will first deal with the evidentiary point. The affidavit of Mr Bennett of 13 June 2012 identifies a series of concerns that Mr Bennett had about the way in which the experiment was conducted and the possible invalidity of the results as a consequence. It is not an affidavit which answers the evidence of Mr Mahaffey. In truth, it is an affidavit which explains why there may well be problems with the affidavit of Mr Mahaffey that could have been exposed if Mr Bennett had in fact had the opportunity to observe the tests as they were carried out. From my review of the evidence of Mr Scerri the same conclusion should be reached about the true character of his evidence. No doubt both affidavits would be relevant if the evidence were admitted, but it would be a mistake to misunderstand their true purpose which in effect is to point out the types of disadvantage to which the applicants have been subjected in their analysis of the validity of the test results by reason of the fact that they had no opportunity to be present either at the removal of the test samples or at the carrying out of the process of testing under the supervision of Mr Mahaffey. 10 I will now deal with the procedural issues. I have no doubt that it would have been preferable if the applicants on receipt of the material had immediately pointed out to the respondents that this involved an experimental proof and that the respondents had not obtained orders pursuant to rule 34.50, with the consequence that leave would be required and presumably that the applicants would be objecting to leave on the same grounds that it now objects to leave. While this would have been preferable because it would have put the respondents on notice of the applicants' position, it is also the nub of why the discretionary factors weigh very heavily against the admission of this evidence by the grant of leave. 11 First, the actual testing process that Mr Mahaffey carried out had the effect of destroying the samples. Once that testing had been carried out the samples were gone. The tests that Mr Mahaffey carried out may not have been rocket science, as was put to me, but they were far more sophisticated, far more detailed, and presumably far more expensive, having regard to all of the work that was done under the supervision of Mr Mahaffey, and bear no resemblance to the type of testing Boral carried out. Indeed this type of testing, where the test itself inevitably destroys the samples, is precisely the type of testing where compliance with the rule is most essential. This is because effectively the tests can never be reproduced once they have been carried out. 12 The second discretionary issue that weighs heavily on my mind is that I do not have any explanation of why leave is being sought at this late stage. I am aware that an application seeking leave was filed last week, but the difference between last week and this week is no difference at all, in circumstances where I must infer that from no later than about October 2011, being the date upon which the consent orders were made for the carrying out of experimental tests by the applicants, the respondents well knew that rule 34.50 would apply to the adducing of such evidence. According to Mr Mahaffey's affidavit, he did not receive the test samples until 27 February 2012. That is well after 27 October 2011 when I made consent orders for the applicants' testing by Boral. I am simply in the dark as to why leave was not sought earlier. In circumstances where after 27 February 2012 the testing process destroyed the samples it seems to me that there is incurable forensic prejudice to the applicants by the admission of this evidence. Against that I have weighed the fact that Mr Bennett and Mr Scerri deal with the evidence but, as I have said, they do so in a way which in fact shows the forensic disadvantage to which the applicants is subject. 13 I have also taken into account the importance or potential importance of Mr Mahaffey's evidence to the respondents' case which it seems to me would also be a highly material consideration to the question whether or not leave is granted. I accept that the evidence is relevant and I accept that it could form part of a chain of reasoning to assist the respondents in their case. However, I do note that Mr Mahaffey's evidence does not address one issue, namely, the presence of the polymer. In addition, given the observations of Mr Bennett and Mr Scerri, I have a serious concern that if admitted the true value of this evidence will never be able to be ascertained for the simple reason that Mr Bennett and Mr Scerri or whoever else the applicants saw fit were never given the opportunity to attend the conduct of the experiment. 14 Taking into account these considerations, this seems to me to be a case where the proper exercise of discretion, weighing up the competing issues and competing prejudice, should weigh in favour of the applicants and the evidence should not be admitted. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 5 October 2012