[this is an expanded version of a earlier blog, as recently published in the July 2023 edition of the APIEx newsletter]

Background

An international manufacturer of insulation products was suspicious about an Australian rival’s claimed fire rating for a feature product.  In particular, it was concerned that the fire rating from a ceiling only test was presented to potential purchasers as the result from a walls and ceiling test. In practical terms, this meant it overstated its fire-resistance qualities.

It commissioned its own scientific analysis, which seemed to confirm its suspicions. 

From a business point of view the international manufacturer was impacted by what it saw as unfair competition, but in the aftermath of the 2017 Grenfell Tower fire in London – in which a fire spread rapidly via combustible aluminium composite cladding, resulting in 72 deaths – there was also a significant fire safety issue potentially in play.

The international manufacturer arranged for its lawyers to write to the Australian manufacturer outlining their concerns and providing copies of their own test results, and asked it to correct what were said to be misleading and deceptive representations.  The Australian manufacturer declined, and told the international manufacturer that it should raise any concerns it had with the relevant authorities.

The international manufacturer then implemented a “counter-marketing” campaign – dramatically named “Project Shield and Sword” – including the distribution of a narrated video to key customers and decision makers.  The video showed footage of the international manufacturer’s own test of its rival’s feature product, with an outcome that contradicted the claimed rating.

When the Australian manufacturer learned about the counter-marketing campaign, it commenced legal action seeking injunctions to stop any further distribution, and damages for the loss that it said had been caused by the campaign.

A central question for the trial was whether the original testing, and the dramatic re-test, were conducted in accordance with the fire safety testing standards, and so technical expert evidence was critical.  There were also important legal questions around the interpretation of standards – drafted for engineering purposes, rather than to facilitate legal analysis – notably, whether transitional provisions allowed the Australian manufacturer to rely upon a ceiling only test that had been conducted prior to a change in the standard that appeared to now preclude their use.

The international manufacturer engaged the fire safety engineer who undertook the original Project Shield and Sword analysis as one of its independent technical experts.  At trial, his independence was challenged twice.  First, the Australian manufacturer said that it was wrong for his original analysis to be described as “independent” as part of the counter-marketing campaign.  Secondly, it argued that his role in the original analysis, and other earlier work for the international manufacturer demonstrated that he was a “hired gun,” and not truly independent.  The Australian manufacturer said that his evidence should not be admitted in the proceedings because it was the product of a lack of independence.

The expert’s independence

The expert was subject to specific cross-examination about his understanding of the Practice Note and Expert Witness Code of Conduct, and it was clear that the court was satisfied that he had complied with those requirements, not just in relation to his evidence to the court, but critically, also in relation to the original analysis.

There was also forensic analysis of the communication between the international manufacturer’s lawyers and the expert, which, the Australian manufacturer argued, “improperly pre-empted the opinion or statements sought [from the expert].”

On this point the court found that the communication “neither occasioned nor established any want of independence on [the expert’s part]” noting the guidance in Boland v Yates Property Corporation Pty Ltd [1999] 74 ALJR 209:

“For…legal advisors to make suggestions is a quite different matter from seeking to have an expert witness give an opinion which is…not an honest opinion that he or she holds or is prepared to adopt…counsel and solicitors have a proper role to perform in advising or suggesting, not only which legal principles apply, but also that a different form of expression might appropriately or more accurately state the propositions that the expert would advance…so long as no attempt is made to invite the expert to distort or misstate facts or give other than honest opinions.”

Clearly the expert’s response in cross-examination impressed the court, which noted that “the opinions that he expressed…were his own and were arrived at independently of any held within [the international manufacturer].”

It appears that the independence of approach actually demonstrated by the expert outweighed any concerns about a theoretical risk to his independence.

Weaponisation!

The international manufacturer claimed that it was merely passing on the work of the experts, without making the alleged representations.  The court did not accept that argument, finding instead that the international manufacturer had “weaponised” the analysis, distributing it “effectively and with enthusiasm,” – but, notably, ruled that:

“[The international manufacturer] cannot be criticised for wanting to make as much as it could of the views that [the expert] expressed; and the fact that it did so is not evidence of some want of independence on [the expert’s] part. The alignment of [the expert’s] opinion with [the international manufacturer’s] interests arose as a result of the correct construction of the Transitional Provision.”

Conclusions

In Pirmax Pty Ltd v Kingspan Insulation Pty Ltd [2022] FCA 1340,[1] the Federal Court of Australia held that:

• The Evidence Act did not “require untrammelled independence or impartiality (however preferable those qualities plainly are).”
• The international manufacturer’s original engagement of the expert did not compromise his independence, and his views were arrived at independently – even if they were later weaponised as part of Project Shield and Sword.
• The international manufacturer’s concerns were genuinely held, and it sought to verify those concerns through a series of tests including those by independent testing bodies, and it repeatedly sought to engage with the Australian manufacturer about the results of that testing over an extended period, prior to commencing Project Shield and Sword.
• The international manufacturer did make the alleged representations that the product was non-compliant and could not safely be used, and it did represent that the original Project Shield and Sword analysis was independent.
• The transitional rules did not allow the Australian manufacturer to rely on the outdated ceiling only test, and so the representations made by the international manufacturer were factually correct.  Not only was the Australian manufacturer unsuccessful in its attempts to prevent the further distribution of the Project Shield and Sword materials, the court also held that it should be prevented from making claims about fire rating based on the ceiling only test.

---

[1] The subject of an appeal, per Pirmax Pty Ltd v Kingspan Insulation Pty Ltd (No 2) [2022] FCA 1526 at [3].