Federal Court of Australia Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (Trial Ruling No 2) [2023] FCA 333 File number: NSD 2064 of 2019 Judgment of: WIGNEY J Date of judgment: 20 March 2023 Date of publication of reasons: 14 April 2023 Catchwords: PRACTICE AND PROCEDURE – Evidence Act 1995 (Cth) s 79 – expert evidence regarding trading in over-the-counter derivatives in Australia – objections by second defendant to plaintiff's expert evidence – contention that the plaintiff's expert, a compliance manager at a securities trading company, lacked specialised knowledge of trading and trading strategies – whether a "non-participating onlooker" can have specialised knowledge of trading and trading strategies – contention that one cannot acquire specialised knowledge from observing rather than engaging in trading in derivative markets rejected – expert found to possess specialised knowledge and not mere derivative familiarity with subject – objection dismissed – further objection premised on expert's alleged inadequate reasoning and ipse dixit assertions – opinion held to adequately reveal foundational facts, assumptions and application of specialised knowledge – objection dismissed PRACTICE AND PROCEDURE – Evidence Act 1995 (Cth) s 79 – expert evidence regarding trading of over-the-counter derivatives in Australia – objections by plaintiff to second defendant's expert evidence – objections premised on expert's lack of specialised knowledge of Australian derivatives market and retail customers – expert experienced in institutional trading in large securities markets in the United States – experience not relevant to conduct of corporate authorised representatives in the Australian market for over-the-counter derivatives and the conduct of inexperienced retail traders in that market – objections allowed in part Legislation: Evidence Act 1995 (Cth) s 79 Cases cited: Allstate Life Insurance Co v ANZ (No 6) (1996) 137 ALR 138; [1996] 64 FCR 79 Australian Securities and Investments Commission v Scholz [2022] FCA 118 Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645 Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 Daya v CX Reinsurance Co Ltd [2012] NSWSC 1622 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Nominal Defendant v Ismail [2014] NSWCA 432 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 55 Date of hearing: 17 March 2023 Counsel for the Plaintiff: Mr L Livingston SC with Mr D Birch Solicitor for the Plaintiff: Clayton Utz Counsel for the Second Defendant: Ms M Painter SC with Mr F Tao and Ms C Brain Solicitor for the Second Defendant: Piper Alderman ORDERS NSD 2064 of 2019 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: UNION STANDARD INTERNATIONAL GROUP PTY LTD ACN 117 658 349 First Defendant MAXI EFX GLOBAL AU PTY LTD ACN 625 283 785 Second Defendant BRIGHTAU CAPITAL PTY LTD ACN 619 685 120 Third Defendant order made by: WIGNEY J DATE OF ORDER: 20 March 2023 THE COURT ORDERS THAT: 1. The second defendant's objections to parts of the expert reports of Mr John Blundell dated 24 September 2022 and 25 November 2022 be rejected and the reports be admitted into evidence. 2. Paragraphs 18, 19, 24, 98 to 110 and 469 to 477 of the expert report of Mr George T Dowd III dated 10 November 2022 be excluded from evidence, but that the balance of the report be admitted into evidence. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from transcript) WIGNEY J: 1 The plaintiff, the Australian Securities and Investments Commission (ASIC), alleges that the defendants, including the second defendant, Maxi EFX Global Pty Ltd, contravened various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). ASIC alleges, among other things, that EFX engaged in misleading and deceptive conduct, made misleading and deceptive representations and engaged in conduct that was unconscionable in connection with EFX's supply of financial services to its retail customers. The financial services that EFX supplied to its customers were services relating to trading in financial products, including over-the-counter derivatives known as contracts for difference (CFDs) and margin foreign exchange (margin FX) contracts. ASIC's case is that, by engaging in that conduct, EFX and the other defendants contravened, relevantly, ss 1041E and 1041H of the Corporations Act and ss 12CB, 12DA and 12DB of the ASIC Act. 2 Both ASIC and EFX intend to adduce expert opinion evidence said to be relevant to a number of issues raised by ASIC's case against EFX. Those issues include, in general terms: whether certain representations made by EFX account managers to customers in connection with their derivatives trading were misleading or deceptive; whether certain conduct allegedly engaged in by EFX account managers in connection with their customers' trading was misleading, deceptive or unconscionable; and whether EFX's conduct in relation to the provision of the relevant services failed in certain respects to meet the standards required of a corporate authorised representative acting reasonably. 3 ASIC's expert witness, Mr John Blundell, is the head of compliance at a company which provides services relating to trading in over-the-counter derivative contracts, including CFDs and margin FX contracts, to customers in Australia. Mr Blundell previously worked in "market supervision teams" at ASIC, the Sydney Futures Exchange and the Australian Securities Exchange. EFX's expert, Mr George Dowd III, is an independent consultant and lawyer from the United States of America. He has experience as a "discretionary foreign exchange, stock index, and commodity derivatives trader", experience in "managing a foreign exchange desk for a major futures commission merchant" and experience as a "foreign exchange sales person" and "foreign exchange market-maker". Both Mr Blundell and Mr Dowd have prepared lengthy and detailed expert reports. Mr Blundell has furnished two reports, the first dated 24 September 2022 and the second, being a report replying to Mr Dowd's report, dated 25 November 2002. Mr Dowd's report is dated 10 November 2022. Mr Blundell and Mr Dowd have also prepared a joint report in which they identify various areas of agreement and disagreement. 4 EFX has objected to certain parts of Mr Blundell's reports. ASIC has also objected to certain parts of Mr Dowd's report. These reasons address the rulings I propose to make in respect of those objections. My reasons are necessarily brief given that the objections were taken during the trial and any delay in making and explaining the rulings would regrettably delay the trial, which is already unlikely to conclude within the allotted hearing time. EFX's objections to Mr Blundell's report 5 EFX's objections to Mr Blundell's reports were primarily directed at Mr Blundell's answers to three of the questions that were put to both Mr Blundell and Mr Dowd: common questions 3, 5 and 8. 6 Common question 3 concerns a number of specific representations allegedly made by EFX account managers about profits that the customer might generate from trading in CFDs or margin FX contracts: see [44(a)] of the Statement of Claim (SOC). The question is: "what was the likelihood or prospect of the [EFX] customer generating the profits or income referred to in the representation"? 7 Common question 5 concerns a number of specific representations allegedly made by EFX account managers about the prospect of positions that had moved against the customer subsequently becoming profitable, or the prospect that customers would generate profits from their trading which would be sufficient to recover their realised and unrealised trading losses: see SOC [44(e)]. The question is: "what was the likelihood or prospect of the position (or positions) opened by the [EFX] customer … subsequently becoming profitable" and "subsequently closing for a greater loss than the position (or positions) were in at the time the relevant [representation] was made?". 8 Common question 8 concerns the allegation that various statements made by EFX account managers to customers did not provide an adequate explanation or disclosure of the risk involved in investing in CFDs or margin FX contracts: SOC [71(a)] and Annexure E.1. The question, in summary, is whether the instructions or trading strategy identified by the account manager "would have been an effective means by which to manage the risks"? 9 EFX raised two broad objections to Mr Blundell's answers to these three questions, or parts thereof. 10 First, EFX contended that Mr Blundell did not have the requisite specialised knowledge to enable him to give expert opinion evidence in respect of common questions 3, 5 and 8. EFX submitted that in order to answer those questions, it was necessary for Mr Blundell to have specialised knowledge in respect of "trading and trading strategies". In EFX's submission, Mr Blundell did not possess that specialised knowledge because his experience was in "compliance and market supervision", not trading. Mr Blundell was, according to EFX, no more than a "non-participating onlooker" (cf Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645 at [6]) who had no more than a "derivative familiarity" (cf Daya v CX Reinsurance Co Ltd [2012] NSWSC 1622 at [24]) in relation to trading strategies. 11 Second, EFX contended that Mr Blundell's answers to common questions 3, 5 and 8 were objectionable in part because Mr Blundell had provided inadequate reasoning to support his opinions, or such reasoning that was provided suggested that his opinions were not based on such specialised knowledge that Mr Blundell possessed. EFX produced a table which identified a large number of passages in Mr Blundell's reports that were said to be inadmissible on this basis. Its submissions, however, focussed on three specific parts of Mr Blundell's reports which were said to typify or exemplify the alleged deficiencies. In these reasons, I will focus on and make rulings in respect of those three examples. Those rulings will essentially reveal my rulings in respect of the remaining identified objections which were put on essentially the same or similar terms. I will, however, permit EFX to identify any further specific objections which it wishes to press despite the rulings addressed in these reasons. Rulings in respect of Mr Blundell's report 12 I am satisfied on the balance of probabilities that, by reason of his study, training and experience, Mr Blundell possesses specialised knowledge in a recognised branch or field of organised knowledge such as to equip him to provide expert opinion evidence in answer to the questions posed to him, including common questions 3, 5 and 8. I am equally satisfied that, in answering those questions, Mr Blundell has sufficiently exposed and articulated his reasons so as to demonstrate that his opinions are based on his specialised knowledge, at least in the case of the three specific examples that were identified and primarily relied on by EFX. Objection based on absence of specialised knowledge 13 As for Mr Blundell's specialised knowledge, the relevant principles that apply when considering whether a witness is an expert for the purposes of s 79 of the Evidence Act 1995 (Cth) are relatively settled and well-known. It is unnecessary to rehearse those principles for present purposes. It was common ground that it was necessary for me to be satisfied that Mr Blundell had, through his study, training and experience, acquired specialised knowledge in a recognised branch or field of organised knowledge: see Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at 743 [85]. I am satisfied that Mr Blundell meets that criteria and reject EFX's submissions to the contrary for the following reasons. 14 First, I am satisfied that there is a recognised branch or field of organised knowledge which, in summary, concerns the operation and functioning of markets for over-the-counter derivatives in Australia (including CFDs and margin FX contracts) and the conduct of participants in those markets. EFX's arguments concerning the inadmissibility of Mr Blundell's opinion evidence were largely premised on the proposition that, to be able to give opinion evidence in respect of common questions 3, 5 and 8, Mr Blundell would be required to have specialised knowledge in the branch or field of organised knowledge which was concerned with "trading and trading strategies" in the derivative markets in question. I am not persuaded that the branch or field of organised knowledge relevant to common questions 3, 5 and 8 is as narrowly defined as EFX would have it. 15 Second, I am satisfied that, by virtue of his study, training and experience, Mr Blundell has acquired specialised knowledge and become an expert in the relevant branch or field of organised knowledge: namely the operation and functioning of markets for over-the-counter derivatives in Australia (including CFDs and margin FX contracts) and the conduct of participants in those markets. As for study, Mr Blundell has degrees or diplomas in economics, applied finance and investment, financial services and responsible management in financial markets. His studies in those areas would no doubt have, at least to some extent, touched on securities markets and trading in derivatives. As for training and experience, Mr Blundell has worked in market supervision teams at the Sydney Futures Exchange, Australian Securities Exchange and ASIC. More recently, and perhaps more significantly, for the last seven years Mr Blundell has been the head of compliance at a company which provides over-the-counter derivatives, including CFDs and margin FX contracts, to retail customers. In that role, Mr Blundell has had, and continued to have, responsibility for, among other things: assisting in the drafting of product disclosure statements; the development and management of compliance policies and procedures; the training of the company's "client-facing staff" in relation to compliance and regulatory issues; overseeing the complaints process, including complaints by customers in respect of the conduct of the company's "client-facing staff"; and reviewing marketing and promotional material for compliance issues. 16 EFX's arguments concerning the specialised knowledge possessed by Mr Blundell were based on the existence of a relevant distinction between the knowledge that may be acquired as a result of being a compliance officer in a company which operates in the relevant derivatives markets and the knowledge that may be acquired by a person who personally trades in those markets. EFX submitted that there was a distinction between "looking and watching as a bystander" in the relevant markets and "doing" – that is, trading and engaging in trading strategies. 17 In my view, however, that is a false dichotomy, at least for present purposes. A person can acquire relevant specialised knowledge in respect of the operation and functioning of derivative markets and the conduct of participants in those markets as a result of study, training and experience in the range of activities and responsibilities undertaken by a compliance officer in a company that operates in those markets. Of course, traders may also acquire specialised knowledge in the course of their trading activities, however the suggestion that only traders can acquire and possess the specialised knowledge relevant to common questions 3, 5 and 8 has no merit. If only traders could acquire specialised knowledge in respect of the functioning of derivative markets and the activities of the participants therein, it would follow that an experienced client adviser or account manager could not be said to have acquired specialised knowledge in relation to trading and trading strategies in the markets in question. EFX conceded, albeit somewhat reluctantly and begrudgingly, that an account manager could acquire relevant specialised knowledge, even they did not themselves trade. If an account manager can acquire such specialised knowledge, so too can a compliance officer who trains, supervises and investigates the conduct of account managers from a compliance perspective. 18 In any event, even if there was some validity in the dichotomy between those who merely observe trading in derivative markets and those who actually engage in trading activities in those markets, it is simply incorrect to characterise Mr Blundell as a mere observer or non-participating onlooker. Even a cursory reading of Mr Blundell's report reveals that he does far more than simply observe. He directly engages and communicates with client advisers, customers, other market participants and regulatory agencies in respect of, among other things, the very type of issues that are the subject of common questions 3, 5 and 8. The mere fact that Mr Blundell does not personally trade in the derivatives in question does not render him a mere observer, bystander or onlooker. 19 Third, and flowing from the previous point, the facts and circumstances of this case are distinguishable and far removed from the facts and circumstances of the cases relied on by EFX in challenging Mr Blundell's expertise, in particular: Cement Holdings; Allstate Life Insurance Co v ANZ (No 6) (1996) 137 ALR 138; [1996] 64 FCR 79; Daya; Australian Securities and Investments Commission v Scholz [2022] FCA 118; and Nominal Defendant v Ismail [2014] NSWCA 432. Time does not permit me to address those cases in any detail. It suffices to note that Mr Blundell's occupation, and the means by which his study, training and experience was said to equip him with relevant specialised knowledge, put him in a materially different position to the accountant in Cement Holdings who proposed to give evidence, based on his observations, of what a competent director would do; or the English accountant in Daya who acquired some "derivative familiarity" with aspects of accounting practice in the United States; or the ASIC investigator in Scholz who claimed to have acquired specialised knowledge concerning the meaning of slang and colloquial language in the share trading industry. Objections based on allegedly deficient reasoning 20 The relevant principles to apply in respect of objections to expert evidence based on alleged deficiencies in the expert's reasoning are also relatively settled and well-known. The expert's reasoning must reveal the facts and assumptions upon which the opinion is based and expose how their specialised knowledge had been applied to those facts and assumptions so as to support the opinion: Makita at [85]. As noted in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [37], however, those requirements can be met in "many, perhaps most, cases very quickly and easily" because the basis upon which it is said that the expert's opinion is based on his or her specialised knowledge will "require little explicit articulation or amplification once the witness has described his or her qualifications and experience, and has identified the subject matter about which the opinion is proffered". 21 As noted earlier, EFX objected to various parts of Mr Blundell's report on the basis that his reasoning was deficient and failed to sufficiently expose how his specialised knowledge had been applied to the facts and circumstances so as to support the opinion. EFX's submissions, however, ultimately focussed on three of Mr Blundell's answers which were said to provide the clearest examples of the alleged deficiencies. 22 The first example concerned one of Mr Blundell's answers to common question 3. Common question 3 is posed in respect of a number of specific representations made by EFX account managers to their customers. The first representation was as follows (at [8.1] of the report): Account Manager: … I will give you all the details of the deal, okay? It contains 7,500 barrels of oil with a risk management, okay? And the potential profit is 45 US dollars - 45,000 US dollars, which is equal in Australian to approximately 60, 65 Aussie, okay? 23 Mr Blundell's answer to common question 3 in respect of that representation was as follows (at [8.2]-[8.5] of the report): 8.2 In my role I review clients' trading accounts and activities on a weekly basis. I review the clients' trading histories and note the profits and losses being made and on which underlying asset classes clients are trading, including oil. As part of my role, I am also required to be aware of activity in the underlying financial markets as a whole, so that I can see the effect that activity could have on client losses and potential client complaints. I do this daily by reviewing financial market news. Having been aware of the activity in oil markets over the past seven years in my view; (a) although not impossible, it is very unlikely that this customer will generate the profit stated by the account manager in paragraph 8.1 in the short term (i.e. a few days); and (b) over the longer term that level of profit may be made, however whilst the client is waiting for that level of profit all funds in the clients trading account are at risk should prices in the underlying market move against the client's position. Consequently, while the likelihood of the customer making the profit stated over the longer term is greater than in (a), it is still quite unlikely (by which I mean significantly less likely than not) that the profit will be made. 8.3 Oil CFDs are typically based on an underlying futures contract of 1,000 barrels per contract. As such for a CFD based on 7,500 barrels to generate profit of USD45,000 that would take a $6 per barrel price movement in the underlying price of oil (i.e. USD45,000 divided by 7,500 barrels). A $6 per barrel move in the underlying price of oil would be very unusual. Such a price movement in a single day would be an extreme event that I have only seen occurring at most once in a year. In my experience, typically oil prices move no more than a $1 in any given day. 8.4 Accordingly, a movement of $6 in the oil price would typically have to take place over a number of days. During that time there is a significant risk that the price of oil may not move in that direction to that degree or could move in the opposite direction to the position. Oil prices can fluctuate and prices only moving in a single direction over a number of days would be a very rare occurrence. 8.5 With any CFD position and due to the volatility often involved, it is very hard to make a prediction of the exact amount of profit to be made on any one position. By stating a set amount of profit to be earnt by the client, the Account Manager is setting an expectation for the client to earn at least that amount for which, in this instance, the prospect of earning that degree of profit is unrealistic. 24 EFX submitted that this reasoning was deficient because: it was based on Mr Blundell's review of "unidentified trading accounts" over a number of years; Mr Blundell does not adequately explain why it was "not impossible", though "very unlikely", that the customer would generate the profit stated by the account manager; none of Mr Blundell's reasoning was "based on anything explicable"; and Mr Blundell did not explain how the review of "financial market news" could inform his opinion. 25 It may be accepted that some of the alleged deficiencies identified by EFX may ultimately be seen to have a bearing on the cogency of Mr Blundell's opinion in respect of this question and the weight that can be given to that opinion. The reasoning is far from elaborate, though that may merely be a product of the simplicity of the representation in question. I am, however, unpersuaded that Mr Blundell's reasoning amounts to mere ipse dixit (cf Makita at [87]) or that any deficiencies in the reasoning are such as to render the opinion inadmissible. 26 In his answer, Mr Blundell sufficiently identified the facts or assumptions upon which his opinion was based. He also sufficiently exposed the general nature of the specialised knowledge, based on his training and experience, that he brought to bear in answering the question. The gravamen of Mr Blundell's reasoning is evidently that the customer was unlikely to achieve the profit referred to by the account manager because, to achieve that profit, the price of a barrel of oil, being the commodity underlying the CFD in question, would have had to increase by US$6. Mr Blundell's opinion was that such an increase over the course of a trading day would be an "extreme event". Mr Blundell also explained that he acquired the specialised knowledge he brought to bear in answering the question because, among other things, his responsibilities as compliance manager required him to "review clients' trading histories" and take note of the profits and losses that clients were making in respect of certain "underlying asset classes". He was also required to "be aware of activity in the underlying financial markets as a whole", including the market for oil. 27 EFX raised similar objections to Mr Blundell's answers in respect of other account manager representations relevant to common question 3, in particular the second representation (see [8.6] to [8.10]), the third representation (see [8.11] to [8.13]) and the fourth representation (see [8.14] to [8.17]). It is unnecessary to consider Mr Blundell's answers in respect of those representations in any detail. Suffice it to say that, as with the reasoning in respect of the first representation (at [8.2] to [8.5]), I am unpersuaded that any deficiencies or inadequacies in Mr Blundell's reasoning in those parts of his report are such as to render his expert opinion evidence inadmissible. The question of the weight that may appropriately be given to his opinion evidence in those and other parts of his report is another matter. 28 The final specific example of reasoning in Mr Blundell's report that EFX focussed on in its submissions concerned parts of Mr Blundell's reasoning in his answer to common question 11. Common question 11 asked Mr Blundell and Mr Dowd to identify "what steps would have been taken by a corporate authorised representative in the position of [EFX], acting reasonably" to, among other things, ensure that sales representatives and account managers were adequately trained and competent and complied with applicable financial services laws. Mr Blundell's first report contains a fairly lengthy answer to that question: see [16.1] to [16.26]. At various points in that answer Mr Blundell referred to what he and his company did to ensure that its account managers were adequately trained and competent. EFX submitted that Mr Blundell's reasoning in that regard suffered from the vice, identified in Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095, of simply equating his, or his company's practices, with what is acceptable industry practice. 29 While evidence from an appropriately qualified person as to what a reasonably competent and careful professional would do in stated circumstances may be admissible, evidence of an expert as to what he or she would do in stated circumstances is inadmissible: Vines at [31]. In some cases, however, there will be a "fine line" between the former admissible category of evidence and the latter inadmissible category: Vines at [32]. I am not persuaded that Mr Blundell's evidence falls into the latter category. He does not merely equate his or his company's practices with appropriate industry practices. 30 As has already been noted, at various parts of his reasoning concerning common question 11, Mr Blundell does refer to the procedures and practices adopted by him and his company. When read fairly and in the context of Mr Blundell's entire reasoning concerning common question 11, however, Mr Blundell's evidence can be seen to go well beyond simply saying what he would have done and therefore does not suffer from the vice identified in Vines. Rather, he addresses the objective industry standard that he considered was required in the circumstances – what a corporate authorised representative in EFX's position, acting reasonably, would have done – and then illustrates or emphasises the point by referring to what he or his company does, or would have done, in the relevant circumstances. He also refers to what he is aware his industry counterparts do, or would have done, in the circumstances. 31 To give but one example, part of Mr Blundell's answer to common question 11 was that a corporate authorised representative, acting reasonably, would have ensured that all of its sales representatives and account managers were adequately trained prior to speaking to a customer. Mr Blundell's reasoning in that regard included the following (at [16.7] to [16.10]): 16.7 A CAR in the position of EuropeFX, acting reasonably, would have also required its Reps and AMs to undertake compliance induction training from the Compliance department of the CAR. Compliance departments will typically conduct their own training to ensure all new Reps and AMs have an understanding of their obligations when providing financial services under an AFSL. In my experience working in financial services over the years, and following discussions with my counterparts in compliance roles in other companies, it is common practice when commencing employment at a new financial services provider, to be required to undertake compliance induction training. 16.8 A CAR in the position of EuropeFX, acting reasonably, would have conducted compliance training which would ensure that all Reps and AMs had a strong knowledge of the difference between general and personal financial product advice, including what can and cannot be said to clients in certain circumstances. Regulatory Guide 244: Giving information, general advice and scaled advice (RG244) (Issued December 2012 and provided as Annexure 5) provides ASIC's guidance regarding what may constitute general and personal advice. 16.9 In my organisation I am responsible for the provision of compliance induction training to all new staff prior to those staff speaking to customers. When providing the training I usually have a one-on-one session with the new staff member and discuss in depth the key factors that they need to understand. The main factors include ensuring that all conversations are balanced, that Reps and AMs always act in the best interests of the clients and, most importantly, that the new staff member understands the difference between general and personal advice, including providing examples of what can and cannot be said to customers, during the training session. 16.10 In my experience from being in the financial markets industry in a number of roles over the years, and following discussions with my peers, one-on-one compliance induction training is the industry standard. I find it to be particularly useful when discussing vitally important matters such as the differences between personal and general advice. One-on-one training also enables the compliance officer providing the training to be satisfied that the new employee has understood all of the training presented. A CAR in the position of EuropeFX, acting reasonably, would have required that its Reps and AMs have at least one one-on-one training session with a compliance officer as part of their compliance induction. 32 I am not persuaded that, in those and similar passages of his report, Mr Blundell was simply saying that, because he and his company act in a particular way, that was the industry standard. Rather, he identified the industry standard – what a reasonable corporate authorised representative does, or would do in the circumstances – and then illustrated the point by reference to his and his company's practices and procedures. I do not accept that such reasoning is impermissible or inadmissible. 33 I should finally note that, in its written submissions, EFX complained about the generality of some isolated passages of Mr Blundell's reasoning in his reports. Those complaints particularly concerned passages of Mr Blundell's reports where he referred to his knowledge of how other companies operating in the relevant derivatives markets conducted elements of their business, and where he referred to his engagement with his company's clients and his consideration of the clients' trading statements. When those parts of Mr Blundell's reports are read fairly and in the context of the reports as a whole, I am not persuaded that they disclose any deficiencies which render any material parts of the reports inadmissible. Conclusion in respect of the objections to Mr Blundell's report 34 EFX's objections to parts of Mr Blundell's reports are overruled. I do not at this point propose to exclude or reject any part or parts of Mr Blundell's report. EFX has prepared a table of other discrete objections to Mr Blundell's report which it has not, at this point at least, addressed in its submissions. If, in light of these reasons, EFX elects to press any of those objections, I will deal with them separately. ASIC's objection to Mr Dowd's report 35 ASIC's main objections to Mr Dowd's report are based on the proposition that Mr Dowd does not possess the specialised knowledge necessary to permit him to answer some of the common questions, in particular common questions 2 and 7. 36 As has already been noted, Mr Dowd is a consultant and lawyer with experience in "foreign exchange, futures, cryptocurrency and metals markets". He is based in the United States. His curriculum vitae also reveals that he was educated in the United States and has worked almost exclusively in the United States. More significantly, his trading experience is limited to mostly institutional trading in certain markets, in particular the markets for foreign exchange, equity indices, fixed income (bonds), currency futures and certain commodities. It was common ground that Mr Dowd has no relevant education, training or experience, as a trader or otherwise, in any retail market for over-the-counter derivatives in Australia, including most significantly any retail market involving CFDs and margin FX contracts. It is also important to emphasise in this context that it is illegal in the United States to offer trading in respect of CFDs to retail customers. 37 The critical question is whether Mr Dowd's lack of education, training or experience in relation to the Australian retail markets for CFDs and margin FX contracts means that he does not have any relevant specialised knowledge to equip him to offer expert opinion evidence in respect of questions concerning the operation and functioning of those markets and their participants. In particular, can it be said that Mr Dowd has any specialised knowledge, based on his study, training or experience, that would equip him to give expert opinion evidence in relation to what a reasonably competent and careful corporate authorised representative in the position of EFX would do in certain circumstances? Rulings in respect of Mr Dowd's report 38 As impressive as Mr Dowd's experience and qualifications in respect of trading in certain markets in the United States may be, I am not satisfied on the balance of probabilities that Mr Dowd has any relevant specialised knowledge to enable him to answer some of the common questions. That is particularly the case in respect of the common questions which require specialised knowledge in respect of the conduct of corporate authorised representatives in the retail market for CFDs and margin FX contracts in Australia. 39 Perhaps the clearest example of Mr Dowd's lack of any relevant specialised knowledge is in respect of common question 2. Common question 2 is in the following terms: In light of your answer to Question 1, based on your experience, what steps would have been taken by a corporate authorised representative in the position of EuropeFX, acting reasonably, to ensure that the EuropeFX customers to which it offered the CFDs and FX Contracts understood: (a) the operation of the CFDs and FX Contracts; (b) and the risk (if any) associated with the CFDs and FX Contracts. 40 The critical point to note about this question is that it focusses on the steps that would have been taken by a corporate authorised representative in the position of Europe FX, acting reasonably. A corporate authorised representative in the position of Europe FX is a company which operates in the retail market for over-the-counter derivatives and margin FX contracts in Australia. A corporate authorised representative is a specific creature of Australia's legislative and regulatory regime in respect of financial markets and financial services and products. Mr Dowd has no education, training or experience in relation to the conduct of a corporate authorised representative operating in the retail market for over-the-counter derivatives in Australia. Mr Dowd conceded as much in his report: see Dowd report at [102]. 41 Mr Dowd sought to sidestep that lacunae in his education, training and experience by proffering the opinion that an "introducing broker" in the futures markets in the United States is the "functional equivalent" of a corporate authorised representative in Australia. The basis for that opinion appeared to be little more than Mr Dowd's comparison of ASIC's website description of an "authorised representative" and the description of an "introducing broker" on the website of the National Futures Association (NFA) in the United States. The NFA website description of the role of an introducing broker was as follows (Dowd report at [100]): An introducing broker (IB) is an individual or organization that solicits or accepts orders to buy or sell futures contracts, forex, commodity options, or swaps but does not accept money or other assets from customers to support these orders. IBs must carry all forex and futures accounts, including customer, proprietary and foreign futures, with a futures commission merchant (FCM) or retail foreign exchange dealer (RFED) on a fully disclosed basis. 42 Mr Dowd's opinions in respect of common question 2 were essentially based on reasoning by analogy from his knowledge or professional experience of what a reasonably competent introducing broker in futures markets operating in the United States would do in certain circumstances. 43 Mr Dowd's opinion based on his reading of the respective website descriptions of an authorised representative in Australia and an introducing broker in futures markets in the United States does not appear to be based on any relevant specialised knowledge he may possess. I also doubt, based on my own reading and comparison of the respective website descriptions, that an introducing broker in the futures markets in the United States can in fact be said to be the functional equivalent of a corporate authorised representative in Australia. In any event, I am not satisfied that Mr Dowd's opinion that an introducing broker in the futures markets in the United States is the functional equivalent of a corporate authorised representative in Australia provides any proper basis for a finding that Mr Dowd has specialised knowledge that would permit him to express expert opinions in respect of the conduct of an authorised representative in Australia, particularly an authorised representative in the retail market for CFDs and margin FX contracts. 44 Mr Dowd also claims that his "extensive relevant experience" informs his answers to common question 2. That relevant experience includes the completion of some examinations in the United States that permitted him to sell or trade in certain securities products, his registration with the NFA and his ownership of a business registered with that association. I am not satisfied on the balance of probabilities that the experience referred to by Mr Dowd equips him with any relevant specialised knowledge such as to permit him to offer expert opinion evidence in respect of common question 2. The relevant experience identified by Mr Dowd is, in summary, his experience in respect of institutional trading in markets in the United States – in particular, futures markets – that would appear to be quite fundamentally different to the retail market for over-the-counter derivatives in Australia, that being the relevant market which is in issue in this proceeding. 45 I am not, of course, intending to be critical of Mr Dowd. Far from it. I have little doubt that Mr Dowd would be well-qualified to proffer expert opinion evidence concerning the operation of the markets in which he has worked in the United States and, more particularly, the conduct of competent participants in those markets, including introducing brokers in futures markets. He would no doubt also be qualified to proffer opinions concerning trading and trading strategies in those markets, noting, however, that Mr Dowd's experience was largely limited to trading for or on behalf of large institutions. I am not, however, satisfied that Mr Dowd has specialised knowledge which would permit him to give expert opinion evidence concerning what a competent and reasonable corporate authorised representative operating in the retail market for over-the-counter derivatives in Australia would do in certain circumstances. 46 Accordingly, I reject paragraphs 18, 19 and 98 to 110 of Mr Dowd's report, those being the paragraphs that comprised his answers to common question 2. That opinion evidence is not admissible pursuant to s 79 of the Evidence Act. 47 For essentially the same reasons, I am also not satisfied that Mr Dowd has any specialised knowledge that equips him to provide expert opinion evidence in answer to common question 7. Common question 7 is as follows: Having regard to Assumptions 1 and 2 above, what was the likelihood or prospect of a EuropeFX customer, who was inexperienced with CFDs and FX Contracts, generating returns that exceeded the interest that they would earn by keeping the money in a bank account with an Australian deposit taking institution over the course of trading with EuropeFX? 48 As can be seen, common question 7 effectively requires the person answering the question to put himself or herself in the position of an inexperienced retail customer in the market for CFDs and margin FX contracts in Australia. Mr Dowd has no relevant education, training or experience in respect of that market, or dealing with inexperienced retail customers in that market. As noted earlier, CFDs cannot be offered to retail customers in the United States. It is not surprising, in those circumstances, that Mr Dowd has no relevant experience trading in, or dealing with retail customers in, the retail market for over-the-counter CFDs or like derivatives. Mr Dowd's trading experience mostly involved institutional trading, or dealing with institutional clients, in other markets. 49 It can also be noted that Mr Dowd's answer to common question 7 is based on fairly generalised observations concerning traders and trading generally, not inexperienced traders in the retail market for over-the-counter derivatives in Australia. Some of those observations appear to have been drawn from, or based on, passages from a book called "Market Wizards". Those passages appear to deal with the experiences of successful traders in the stock and futures markets in the United States. It is unclear how the general experiences of such traders can be usefully applied to answer questions concerning inexperienced traders in the retail market for over-the-counter derivatives in Australia. 50 I accordingly reject paragraphs 24 and 469 to 477 of Mr Dowd's report. I am not satisfied that Mr Dowd has any relevant specialised knowledge in respect of the opinions proffered in respect of common question 7. Nor am I satisfied that the opinions proffered by Mr Dowd in respect of that question are based on any such specialised knowledge. 51 I am, however, inclined to admit, over ASIC's objection, those parts of Mr Dowd's evidence in respect of common question 1. 52 ASIC objected to paragraphs 17, 74 and 75 of Mr Dowd's report, again on the basis that Mr Dowd lacked any specialised knowledge such as to permit him to give the opinion evidence in those paragraphs. Those paragraphs address paragraph (b) of common question 1, being the question directed to the "risks associated with the CFDs and FX contracts issued by Europe FX". In his answer, Mr Dowd, among other things, took issue with opinions expressed by Mr Blundell about USG's exposure to price movements affecting EFX customers. USG was the relevant "market maker" for the CFDs and margin FX contracts that EFX offered to its retail customers. Mr Dowd's opinion, in summary, was that Mr Blundell had failed to consider "the customary practice of market-makers to constantly hedge positions which result from market-making activity". Mr Dowd gave two examples to support his opinion. Both concerned market-makers in markets in the United States which cater to large institutional clients. 53 ASIC submitted that Mr Dowd's reasoning revealed that he lacked any specialised knowledge in respect of the practice of market-makers in the relevant market, that being the retail market in Australia for CFDs and margin FX contracts. I can see some merit in ASIC's submissions. On balance, however, I consider that the issues raised by ASIC go more to the weight that might be given to Mr Dowd's opinions, as opposed to the admissibility of those opinions. I am satisfied that Mr Dowd has specialised knowledge concerning the hedging activities of market-makers in certain securities markets and that he can legitimately bring that specialised knowledge to bear in answering general questions concerning the risks associated with the derivatives which EFX offered to its customers. 54 It should also perhaps be noted, in this context, that ASIC did not object to other parts of Mr Dowd's report that related to common question 1. It therefore appears that ASIC did not dispute that Mr Dowd was appropriately qualified to offer some relevant opinions concerning the general operation of CFDs and margin FX contracts and the risks associated with them. I also note that, unlike common question 2, common question 1 does not directly concern matters unique to Australian derivatives markets, such as the duties and responsibilities of corporate authorised representatives. 55 Accordingly, I would overrule ASIC's objections to paragraphs 17, 74 and 75 of Mr Dowd's report and admit those paragraphs. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney. Associate: Dated: 14 April 2023