FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] FCA 340
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IN THE FEDERAL COURT OF AUSTRALIA |
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. On or before 29 April 2014, the applicant serve on all respondents a draft of the orders and directions it proposes at the present time.
2. On or before 13 May 2014, each respondent notify the applicant in writing as to whether or not he or it opposes the making of the draft orders and directions.
3. If any respondent opposes the making of the draft orders and directions, that respondent serve on the applicant, on or before 13 May 2014, a draft of the orders and directions that that respondent proposes.
4. Copies of all documents served in accordance with these orders be provided to the Associate to Yates J by the party serving the document at the time of service.
5. If the applicant is of the view that it has pleaded a cause of action that has not been addressed and determined in the reasons for judgment published today, written notice of that fact be given to the Associate to Yates J and to each respondent at the time the applicant serves its draft proposed orders and directions.
6. The proceeding be listed at 9.30 am on 21 May 2014 for directions only.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 1163 of 2011 |
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
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AND: |
SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133 First Respondent PETER CLARENCE FOSTER Second Respondent PETER LESLIE O'BRIEN Third Respondent ADAM TROY ADAMS Fourth Respondent MICHAEL ANTHONY BOYLE Fifth Respondent |
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JUDGE: |
YATES J |
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DATE: |
8 April 2014 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
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Evidence concerning the establishment and conduct of the SensaSlim business |
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The Institut de Recherche Intercontinental and the Strebel report |
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[828] |
INTRODUCTION
1 This case concerns allegations of contravention of the Trade Practices Act 1974 (Cth) (after 1 January 2011, renamed the Competition and Consumer Act 2010 (Cth)) (the Act) and the Australian Consumer Law (Schedule 2 to the Act) in relation to the establishment of franchises for the sale and distribution of a claimed weight loss product in the form of an intra-oral spray marketed under the brand “SensaSlim”, which was also referred to as “SensaSlim Solution” (the SensaSlim product). The brand “SensaSlim” is also referred to in the evidence as “Sensaslim”. The alleged contraventions involve various instances of conduct said to have been misleading or deceptive or to be constituted by false or misleading representations.
2 The first respondent, SensaSlim Australia Pty Ltd (in liq) (SensaSlim or the company) carried on what can be generally described as the SensaSlim business. It claimed the right to do so from an agreement purportedly entered into with a company said to be called SensaSlim (Suisse) Limited. Other evidence suggests that the relevant right was granted by a company said to be called SensaSlim International Limited. SensaSlim granted franchises to persons described as Area Managers. Each Area Manager was granted an exclusive right to distribute the SensaSlim product in a particular geographic area. Each Area Manager paid $59,950 in relation to the acquisition of that right, although the sum paid corresponded with the purchase price of the stock of the SensaSlim product and, importantly, point-of-sale materials that were to be sold, distributed and used by that Area Manager.
3 The evidence (which I will come to discuss in more detail) shows that the establishment of the franchises with the various Area Managers involved a common pattern of conduct. Generally, an advertisement would be placed in a newspaper circulating in a particular local area. The advertisement revealed the availability of a business opportunity from which participants could earn over $4,000 per week, although sometimes the advertised sum varied. There was a buyback guarantee. The identity of the business and the product to be sold were not stated but, typically, persons interested in the opportunity were invited to call a particular telephone number for more information. It is convenient to refer to the persons who responded to the advertisements as prospective franchisees.
4 In some cases, the advertised telephone number was in fact the number for an answering service which passed the prospective franchisee’s inquiry to a person engaged in the SensaSlim business as a Sales Manager. Sometimes, that person was named in the advertisement. The Sales Manager would contact the prospective franchisee and arrange an appointment to meet him, her or them. Generally speaking, no real information was given about the business opportunity at the time of this initial inquiry. In the course of the telephone call, information was obtained about the prospective franchisee. The evidence shows that this was part of a vetting procedure, which I will discuss in greater detail below.
5 At a subsequent meeting with the Sales Manager, the prospective franchisee was shown a DVD relating to, amongst other things, the development of the SensaSlim product, its characteristics, its advantages and its proven efficacy as a weight loss product (the SensaSlim DVD). The SensaSlim DVD stood as a persuasive statement of why prospective franchisees should become involved with the product. Importantly, the SensaSlim DVD reported that the SensaSlim product had been “trialled, tested and proven” in “the world’s largest weight loss trial”.
6 Also at the subsequent meeting, the Sales Manager would provide the prospective franchisee with some or all of the following, which I identify and describe below:
the Franchising Code;
the Area Manager Proposal;
the KMB letter;
the Robinson Legal letter;
the Frequently Asked Questions document;
the Disclosure Document;
the Retail Business Opportunities document; and
the Price and Potency Advantages document.
7 The evidence makes clear that the prospective franchisee was taken though the Area Manager Proposal in some detail.
8 Typically, a short time after the meeting, the prospective franchisee was contacted by a person identifying himself as Peter O’Brien, said to be the Operations Director of SensaSlim. A central issue in the proceeding is whether the second respondent, Peter Foster, assumed various identities including, on these occasions and other occasions, the identity of the third respondent, Peter O’Brien. I am satisfied that he did. Indeed, based on the evidence that I will discuss below, I am satisfied, on the balance of probabilities, that each time a prospective franchisee or an Area Manager dealt with “Peter O’Brien” in relation to the SensaSlim business, whether on the telephone or by correspondence, he or she was dealing with Mr Foster, who kept his true identity hidden from all but those intimately involved in establishing the SensaSlim business.
9 If the prospective franchisee was considered to be suitable (and, generally speaking, all prospective franchisees appeared to be considered to be suitable unless they were considered to be potential “troublemakers”, often because of their past involvement with a weight loss product promoted by Mr Foster), they were invited to enter into a Franchise Area Manager Agreement with SensaSlim. This required the prospective franchisee to execute the agreement and to pay half the fee for the franchise, with the balance to be paid at the time of a conference that was to be held to launch the SensaSlim product (the Area Managers’ Conference). Originally, it was said that this conference would take place in about August 2010. The Area Managers’ Conference actually took place in November 2010 at the Palazzo Versace Hotel on the Gold Coast. Before Area Managers were permitted to enter the auditorium at the hotel to attend, they were required to pay the balance of their franchise fee.
10 The applicant’s case is that, in the course of establishing the franchises with the Area Managers, each respondent contravened the Act and the Australian Consumer Law in various ways, by engaging in certain conduct or making certain representations, or by being culpably involved in the contraventions of the Act or the Australian Consumer Law by others. I will refer to this conduct and to these representations in more detail below.
The Franchising Code of Conduct
11 The Franchising Code of Conduct (the Franchising Code) is a prescribed and mandatory industry code for the purposes of s 51AE of the Act: see reg 3 of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth). It applies to a franchise agreement entered into on or after 1 October 1998: clause 5. It applies to the legal relationship between SensaSlim and each of its Area Managers.
12 Franchising is an industry for the purposes of Part IVB of the Act and franchisors and franchisees are taken to be participants in the industry of franchising, whether or not they are also participants in another industry: s 51ACA(3) of the Act.
13 For the purposes of the Franchising Code, a “franchise” includes the rights and obligations under a franchise agreement: clause 3. The term “franchise agreement” has the meaning given by clause 4, which relevantly provides:
(1) A franchise agreement is an agreement:
(a) that takes the form, in whole or part, of any of the following:
(i) a written agreement;
(ii) an oral agreement;
(iii) an implied agreement; and
(b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and
(c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:
(i) owned, used or licensed by the franchisor or an associate of the franchisor; or
(ii) specified by the franchisor or an associate or the franchisor; and
(d) under which, before starting business or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:
(i) an initial capital investment fee; or
(ii) a payment for goods or services; or
(iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or
(iv) a training fee or training school fee;
but excluding:
(v) payment for goods and services at or below their usual wholesale price; or
(vi) repayment by the franchisee of a loan from the franchisor; or
(vii) payment of the usual wholesale price for goods taken on consignment; or
(viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement.
(2) For subclause (1), each of the following is taken to be a franchise agreement:
(a) transfer, renewal, extension, or extension of the scope of a franchise agreement;
(b) a motor vehicle dealership agreement.
(3) However, any of the following does not in itself constitute a franchise agreement:
(a) an employer and employee relationship;
(b) a partnership relationship;
(c) a landlord and tenant relationship;
(d) a mortgagor and mortgagee relationship;
(e) a lender and borrower relationship;
(f) the relationship between the members of a cooperative that is registered, incorporated or formed under any of the following laws:
(i) Co-operatives Act 1992 of New South Wales;
(ii) Co-operatives Act 1996 of Victoria;
(iii) Cooperatives Act 1997 of Queensland;
(iv) Co-operative and Provident Societies Act 1903 of Western Australia;
(v) Co-operatives Act 1997 of South Australia;
(vi) Co-operative Industrial Societies Act 1928 of Tasmania;
(vii) Co-operative Societies Act 1939 of the Australian Capital Territory;
(viii) Co-operatives Act 1997 of the Northern Territory;
(ix) the Corporations Act 2001.
14 A franchisor must give a copy of the Franchising Code, a disclosure document and the franchise agreement in the form in which it is to be executed to a prospective franchisee at least 14 days before the prospective franchisee enters into a franchise agreement or an agreement to enter into a franchise agreement, or makes a non-refundable payment to the franchisor or an associate of the franchisor in connection with the proposed franchise agreement: clause 10.
15 If the franchised business has an expected annual turnover of $50,000 or more at any time during the term of the franchise agreement, the disclosure document must be in accordance with Annexure 1 to the Franchising Code and be signed by the franchisor, or a director, officer or authorised agent of the franchisor: clause 6(2). As will become clear below, the evidence in the present case shows that the expected annual turnover for each Area Manager was in excess of $50,000 per annum.
16 Clause 6A of the Franchising Code sets out the purposes to be fulfilled by a disclosure document:
The purposes of a disclosure document are:
(a) to give to a prospective franchisee, or a franchisee proposing to enter into, renew, extend or extend the scope of a franchise agreement, information from the franchisor to help the franchisee to make a reasonably informed decision about the franchise; and
(b) to give a franchisee current information from the franchisor that is material to the running of the franchised business.
17 Annexure 1 to the Franchising Code is very prescriptive of the information to be provided in a disclosure document and the form in which that information is to appear. It requires the provision of a number of details about a franchisor. The details include the name and address of each associate of the franchisor that is not a body corporate, and the name, position held and qualifications (if any) of each officer of the franchisor: see items 2.5 and 2.6, respectively, in Annexure 1.
18 Relevantly, clause 3(1) of the Franchising Code defines the term “associate” as follows:
associate, for a franchisor, means a person:
(a) who:
(i) is a director or related body corporate, or a director of a related body corporate, of the franchisor; or
(ii) for a franchisor that is a proprietary company — directly or indirectly owns, controls, or holds with power to vote, at least 15% of the issued voting shares in the franchisor; or
(iii) is a partner of the franchisor; and
(b) whose relationship with the franchisor is relevant to the franchise system, including supplying goods, real property or services to a franchisee.
19 The Franchising Code also adopts the meanings given by the Corporations Act 2001 (Cth) (the Corporations Act) to a number of terms, including “director” and “officer”: clause 3(2). In that connection, s 9 of the Corporations Act provides:
director of a company or other body means:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.
Note: Paragraph (b)—Contrary intention—Examples of provisions for which a person referred to in paragraph (b) would not be included in the term “director” are:
• section 249C (power to call meetings of a company’s members)
• subsection 251A(3) (signing minutes of meetings)
• section 205B (notice to ASIC of change of address).
…
officer of a corporation means:
(a) a director or secretary of the corporation; or
(b) a person:
(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation’s financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation); or
(c) a receiver, or receiver and manager, of the property of the corporation; or
(d) an administrator of the corporation; or
(e) an administrator of a deed of company arrangement executed by the corporation; or
(f) a liquidator of the corporation; or
(g) a trustee or other person administering a compromise or arrangement made between the corporation and someone else.
Note: Section 201B contains rules about who is a director of a corporation.
20 At this point, it is convenient to summarise the content of the SensaSlim DVD that was used as an important sales tool in the meetings between the Sales Managers and prospective franchisees. In later sections of these reasons, I record the evidence about how and by whom the SensaSlim DVD was made.
21 The central character in the SensaSlim DVD is the presenter, Tony Murphy, who is the vehicle through whom the development of the SensaSlim product is described and explained, aided by a pastiche of commentary from persons ostensibly holding positions with SensaSlim Suisse; excerpts from television news, current affairs and talk-show programs (mostly of United States origin including the Oprah Winfrey Show); scientific information and explanations given by persons identified as academics or clinicians from various institutions; and academic opinion on the value of celebrity endorsement. Careful analysis indicates that much of this material is not directed specifically to the SensaSlim product or, indeed, directed to it at all. Rather, it has been woven into the fabric of the SensaSlim “story” recounted by Mr Murphy and those ostensibly employed by SensaSlim Suisse. In this way, the material gives the impression of providing solid support for the statements made about and the benefits claimed for the SensaSlim product.
22 The SensaSlim DVD commences with a few words of welcome from Mr Murphy, after which he says:
To secure your financial future fast, it’s been said that you first must identify a problem that affects many people and then offer them the solution that they all seek. I’m here to tell you about an epidemic that is sweeping the world. It affects every age group in every race in both genders and doesn’t discriminate between rich and poor.
23 Mr Murphy then explains that “this epidemic” has given rise to “a multi-billion dollar industry” that “produces enormous profits”. The “good news” for people who suffer from “this disease” is that “we have the solution”. The “even better news” is that “you [the prospective franchisee] can share in our success”.
24 The SensaSlim DVD goes on to describe the problem of obesity with brief reference to a discussion in Time magazine and the Australian 60 Minutes television program. It also uses excerpts from news and current affairs reports on obesity (including commentary from medical practitioners apparently specialising in obesity) taken from United States television programs (including ABC News, Larry King Live on CNN, and CNBC News) and British television programs (including SKY News and BBC News). These excerpts include reportage of an initiative by the United States First Lady, Michelle Obama, to tackle childhood obesity.
25 The SensaSlim DVD reports that, in the United States of America, US$59 billion was spent on weight loss programs in one year alone. Data is then given about the problem of obesity in Australia, including a voice-over by Mr Murphy stating that “Australia now weighs in as the world’s most overweight nation, passing the United States”. He states that over $1 billion is spent each year in Australia on diet aids as part of a quest to lose weight.
26 Having identified the problem of obesity, the SensaSlim DVD describes, through Mr Murphy, the search for a “cure” and how this was regarded by “the pharmaceutical industry” as “the search for the Holy Grail”. Mr Murphy explains that “the company that could come up with the cure would get very rich very quickly”.
27 Mr Murphy relates how an accidental discovery over 20 years ago by an Italian dentist “led scientists down one fascinating path of research into obesity” and, simultaneously, how “a Swiss pharmaceutical company made an exciting breakthrough” with the discovery of a natural ingredient that promotes safe weight loss. Elsewhere in the SensaSlim DVD, this Swiss company is identified as Hoffmann La Roche. The discovery is said to have been based on research conducted at Brandeis University in the United States. Mr Murphy explains that it was the combination of these “two remarkable bodies of scientific research” which led to the “ultimate weight loss product available in the world today”: the SensaSlim product.
28 The ingredients in the SensaSlim product are then described in some detail. The first is said to be “a gift from nature” – the rind of a small tropical fruit (Garcinia cambogia) that people in southern Asia have made part of their diet for centuries. The rind is said to contain “a rare natural compound” which is hailed as “nature’s perfect diet ingredient”. The active compound is identified as (-) Hydroxycitric Acid” (HCA). HCA is said to be an “extraordinary” organic compound “clinically … very similar to the citric acid found in oranges but with a unique difference”. The compound acts to curb appetite, reduce food intake and inhibit the production of fat and cholesterol. Mr Murphy relates that, as it is safe, effective and natural, “SensaSlim of Geneva, Switzerland” took this “gift from nature” and used it as the key compound in the development of its breakthrough weight loss product.
29 This is followed by commentary from a man identified as Martin Prisse, Research Director of SensaSlim Suisse, who explains that SensaSlim took this discovery as its “starting point”. There is some scientific commentary from a person said to be Dr John Lowenstein of Brandeis University. Dr Lowenstein is referred to as the discoverer of HCA’s effects.
30 The SensaSlim DVD stresses the safety of HCA, particularly its lack of adverse side effects. Mr Murphy also refers to an independent study conducted by “La Roche” (presumably a reference to Hoffman La Roche) on the use of HCA in appetite suppression with no “rebound” effect. An image of a paper entitled “Effect of (-)-Hydroxycitrate upon the Accumulation of Lipid in the Rat: II. Appetite” is displayed. The authors of the paper are identified as associated with Hoffmann La Roche Inc. Mr Murphy refers to the release of HCA “to the US market” as “hugely successful”. This is underscored by excerpts from a number of news items on United States television programs concerning HCA and its use in the pursuit of weight loss. Mr Murphy continues:
The challenge for SensaSlim scientists was to push the boundaries and seek perfection by incorporating highly effective active ingredients that would work in harmony with HCA to accelerate weight loss.
31 This is the entrée for Mr Murphy and others in the SensaSlim DVD to discuss the “breakthrough” creation of a “unique formulation of a highly sensitive and exceptionally effective blend of five compounds”.
32 At this point, chromium is identified as the second active ingredient. Martin Prisse explains that, when combined with chromium, HCA is up to “700% more effective in promoting weight loss”. The third ingredient is then identified as levocarnitine. The role of this compound in weight loss is briefly explained. Martin Prisse then stresses the importance of combining these ingredients into a liquid formulation, not as a diet pill, so that they can “enter the bloodstream and work fast”.
33 Mr Murphy explains that intra-oral sprays offer “the most effective delivery systems”. He refers to a study by “the prestigious Physicians’ Desk Reference journal” that “proves that intra-oral sprays are the most effective method of delivery available”, working nine times faster than pills. In this way, he says, the SensaSlim product enters the bloodstream at “its highest potency level”. Mr Murphy says that, once again, “the media were quick to report the news”. This statement is followed by a further excerpt of a current affairs item from a United States television program, on the therapeutic use of intra-oral sprays.
34 Mr Murphy explains that “this is only part of the story”. He continues:
You see, what makes SensaSlim unlike anything that’s ever been seen before is not just the extraordinary active ingredients and the liquid formulation in an intra-oral spray. SensaSlim is the only product to act on not one but four key parts of the body: the stomach, the mouth, the nose and the brain.
35 Mr Murphy then discusses how Swiss neuroscientists believe they have developed the easiest and most effective way to lose weight because of a “mistake” made by an Italian dentist who accidentally overdosed a patient on novocaine. This is said to have had the consequence of novocaine entering the patient’s bloodstream and desensitising his taste buds. The patient reported an immediate loss of interest in food, leading to the patient losing a “remarkable amount of weight”. Reference is made to the belief of scientists that this could be “the dieter’s dream”: “the ability to fool the brain into a feeling of fullness and satiety without the calories”.
36 Commentary is then given by a man identified as Mathieu Racine, Biotechnologist with SensaSlim Suisse. Mathieu Racine speaks of “taste blindness”, which he describes as an altered sense of taste. This is, according to Mathieu Racine, a temporary condition manifested by a loss of taste perception by the taste buds on the tongue which makes it more difficult to eat. After a while, the appetite dwindles and the subject feels unenthusiastic about eating, leading to weight loss.
37 Martin Prisse explains that, in the SensaSlim product, this desensitisation is caused by “a natural herb” – oil of clove. He says that this desensitisation sends a message to the brain that suppresses appetite without affecting the central nervous system.
38 The fifth ingredient, Gymnema sylvestre, is then introduced by Martin Prisse. He discusses how this substance, apparently, eliminates the ability to taste sugar in the mouth, thereby reducing the craving for sugar. Martin Prisse says that this substance also suppresses glucose absorption and “can lower the effects of blood sugar”.
39 Martin Prisse then discusses how the SensaSlim product is administered. This is done three times per day by three sprays onto the tongue, 10 minutes before meals. He says that the effect of the formulation is felt “immediately” and the suppression of appetite is “swift”.
40 Mr Murphy says that the “news” that “taste buds affect eating habits” caught the attention of “Oprah Winfrey’s regular star health expert, Dr Oz”. There is an extract from a segment by Dr Oz on how “fat is an acquired taste” and taste buds can be “train[ed]”.
41 Further commentary is provided by Mathieu Racine on how you can “[l]ose weight whilst you sleep”. He says that the SensaSlim product “fool[s] the brain into believing that you’re full”. He says that “if you don’t think of food, you don’t crave food, you don’t eat food, the weight just drops off”.
42 Mr Murphy talks about how the SensaSlim product continues to work during periods of sleep. He says that “psychological dream research” reveals that people dream of food which creates a “food craving” that confronts the person on waking, leading to a regular “breaking” of diets. There is short commentary from a man identified as Professor Patrick McNamara from Boston University on the relation of dreams to human nature. Mathieu Racine then says that the SensaSlim product gives the user the willpower to lose weight, even when sleeping, by stimulating a “sensory area in the brain” to “remov[e] the perception of dieting”.
43 Mr Murphy talks about how taste is affected by the ability to smell. This is followed by Martin Prisse talking about the smell of food and its relationship to overeating. This is used to introduce yet another ingredient in the SensaSlim product, which Martin Prisse describes as “a carefully guarded secret”. He says that a secret ingredient – a scent – sends a message to the brain that the user is satisfied. Mathieu Racine reinforces this by saying that “[i]t makes anatomic sense that odours can affect appetite, because the part of the brain that we think smells, the olfactory lobe, is directly connected to the ventromedial nucleus of the hypothalamus, which is the satiety centre”.
44 Mr Murphy says that “news of the breakthrough” on “how to train your brain with smell” was “widely reported” and was “rewarded with the Nobel Prize for Medicine”. Mr Murphy says that, if this was not enough recognition, “it even had Oprah screaming to try it”. The “it” is not identified. There is a suggestion that the “it” is the SensaSlim product. However, an accompanying segment from the Oprah Winfrey Show shows that, in fact, Ms Winfrey was engaging with the proposition (which Ms Winfrey appears to treat as somewhat fanciful) that smelling bananas, green apples or peppermint can lead to weight loss.
45 Mr Murphy then explains how “Oprah, like the rest of the world” had to wait “several more years” before the SensaSlim product could be “trialled, tested and proven”. This reinforces the suggestion that the “it” that “had Oprah screaming to try it” was the SensaSlim product. There is other evidence, which I will note below, that shows that steps were taken by those running the Area Managers’ Conference to perpetuate an apparent association between Oprah Winfrey and the SensaSlim product.
46 The SensaSlim DVD then goes on to describe in detail how, after “finally perfecting the formulation”, “the largest weight loss trial worldwide” was conducted in 2007 before the product’s intended release to consumers in 2010.
47 At this point, a further representative of SensaSlim Suisse is introduced into the narrative of the SensaSlim DVD. This representative is identified as Nicholas Billon, Clinical Trial Analyst. He explains that the majority of trials on weight loss products are completed on sample sizes that are too small and for durations that are too short, with the consequence that “the results therefore cannot be accepted as reliable and significant to any degree”. He says that SensaSlim Suisse set a minimum target of “10,000 independent overweight participants from over 100 countries worldwide”. Nicholas Billon explains that, unlike other companies whose results are “obtained in secret closed weigh-in sessions controlled by the manufacturer”, the results in the SensaSlim trial were “obtained by the participant themselves” with all results posted on the internet “for transparency”. He says that “the aim was to have set a new standard in testing the efficacy of weight loss products before selling to consumers”. He continues:
Believing that SensaSlim was truly the most effective weight loss product available in the world today we wished to be able to make this claim based on unquestionable trials and proven results. In January 2008 the SensaSlim trial was launched in Europe. Press releases were published in media announcing the world’s largest human trial and inviting consumers to log into our website and join the trial for free. After six months, the study was enlarged and went worldwide seeking participants from over 100 countries. Ultimately 11,453 people completed the trial. They were given no special instructions about food to eat or avoid and they were told not to change their exercise habits.
48 Mr Murphy continues:
The world’s largest weight loss trial was an outstanding success. The results confirmed that SensaSlim is unquestionably the most effective weight loss product available in the world today.
49 Nicholas Billon then says that some participants lost “45 kilos” in the six-month study. In fact, he says, a side effect of using the SensaSlim product was “excess weight loss”. Some participants had to be dropped from the study because they became underweight. He reports that the average weight loss was “2.5 kilos” per month or “15 kilos” over the trial. The average participant lost about 16.9% of their body weight and there was no significant “yo-yo effect” when participants completed the trial. Participants did not put their weight back on. Nicholas Billon says that “[m]ost impressive of all” is that 87.2% of subjects lost 10% or more of their weight.
50 There is then discussion about the packaging of the SensaSlim product being created by one of Europe’s “leading design agencies”. The packaging is referred to as “chic”. The viewer is told that valuable and insightful information “written by some of the world’s foremost health experts” accompanies the product.
51 Mr Murphy then discusses how the viewer can become an Area Manager who will secure the right to distribute the SensaSlim product in a “protected territory”. Information is provided about the assistance to be given to Area Managers, such as the provision of a portable DVD player to show a four-minute corporate sales video to retailers. Mr Murphy tells the prospective franchisee that this DVD “explains everything they [retailers] need to know about SensaSlim and why they must stock it”. He says that “all you have to do is press play”. The DVD “does all the selling”. A graphic states that no sales experience is needed.
52 Mr Murphy also outlines the responsibilities of an Area Manager. These responsibilities appear to be limited to restocking display stands for the SensaSlim product once a week and replacing promotional materials at the premises of retailers of the SensaSlim product.
53 Mr Murphy says that there will be conferences and seminars and that Area Managers will be provided with “steady support to ensure your swift success”. There will be an advertising and publicity “push” that “will send SensaSlim into orbit”.
54 There is also some short commentary provided by a person identified as Professor Mark Ritson from the London Business School on the value of celebrity endorsement. This is followed by commentary provided by a woman identified as Elsa Robin, Lifestyle Specialist with SensaSlim Suisse. She explains how celebrity endorsement will be used to promote the SensaSlim product in Australia, including by reference to Australian sporting heroes. Elsa Robin also explains that there will be a campaign to educate about childhood obesity.
55 At this point, the SensaSlim DVD returns to “the epidemic of childhood obesity”. Excerpts from United States television programs are shown including part of an interview with and speech by Mrs Obama and footage of President Obama signing a memorandum establishing a taskforce on childhood obesity.
56 Mr Murphy makes reference again to a national advertising and promotional campaign in Australia for the SensaSlim product. He says that SensaSlim will be inviting “some of Australia’s greatest sporting heroes to visit schools in Area Managers’ territories to explain education strategies regarding healthy food choices, activity options, obesity trends as well as support of behavioural change strategies”. Images of well-known Australian sporting identities are shown. The suggestion is that these identities will be among those invited to participate in this activity. Mr Murphy says that the SensaSlim product will be supported by “a comprehensive national advertising and promotional campaign featuring television, newspapers and quality women’s magazines”.
57 Mr Murphy says that “SensaSlim is not a company to rest on its laurels”. The “research, development and supply of new products is fundamental to our future”. He explains that new products will be supplied on a regular basis. He says that a second product to complement the SensaSlim product has been developed and will be available for distribution exclusively by Area Managers. These products will be “manufactured to exacting standards in our TGA-approved laboratories”.
58 Mr Murphy then suggests that “now is probably a good time to further discuss this proposal with our Sales Manager”. The SensaSlim DVD ends with the slogan: “Nothing tastes as good as slim feels”.
59 On the basis of the evidence which I will discuss below concerning the creation of the SensaSlim DVD (see [256]-[289]), I am satisfied that Mr Murphy was hired as a presenter for the purpose of making the SensaSlim DVD. There is no evidence to suggest that he has or had any association with SensaSlim or the SensaSlim product beyond performing this role. I am also satisfied on the basis of this body of evidence that the persons identified as holding roles in and speaking for SensaSlim Suisse – Martin Prisse, Mathieu Racine, Nicholas Billon and Elsa Robin – were actors, once again hired for the purpose of making the SensaSlim DVD. I am satisfied that none of them holds any position with a company or business called SensaSlim Suisse, let alone the position assigned to him or her in the SensaSlim DVD.
60 I am satisfied on the basis of this body of evidence that Mr Murphy and each of these actors merely played the role that had been assigned to and scripted for each of them. I am satisfied that the scripts for these individuals were prepared substantially by Mr Foster, who also had overall control over and responsibility for making the SensaSlim DVD. I am satisfied that the SensaSlim “story”, as told in the SensaSlim DVD and other materials supplied to prospective franchisees, was his creation.
61 Further, as I will come to explain, the evidence makes clear that there was no trial of the SensaSlim product as reported in the SensaSlim DVD and in other materials provided to prospective franchisees, including the Area Manager Proposal. I am satisfied that the asserted worldwide trial of the SensaSlim product was a fabrication by Mr Foster intended to lead prospective franchisees into the false belief that the efficacy of the SensaSlim product as a weight loss product had been established scientifically. I am satisfied that this was done with the ultimate aim of inducing prospective franchisees to become Area Managers and to purchase stock of the SensaSlim product for supply to retailers such as chemists, health and beauty parlours, health food stores and fitness centres as a genuine weight loss product.
62 To be clear, there is no evidence in this proceeding of any study or trial that establishes that the SensaSlim product has efficacy as a weight loss product or that it possesses any of the benefits asserted in the SensaSlim DVD. There is, moreover, no other reason to believe on established objective grounds that the SensaSlim product is an efficacious weight loss product or has the benefits asserted in the SensaSlim DVD.
63 It is now convenient to describe a number of the key documents which the evidence indicates were given to prospective franchisees when they were given a sales presentation by a SensaSlim Sales Manager.
64 This document is 46 pages in length and includes a franchise application form requesting SensaSlim to consider the applicant for the position of Franchise Area Manager for a particular territory.
65 The front page contains a number of details, including the following:
AREA MANAGER PROPOSAL
COMPANY DETAILS: SensaSlim Australia Pty Ltd
(ABN: 32 140 333 133)
Registered Address: Level 29
Chifley Tower
2 Chifley Square
Sydney, NSW 2000
AUSTRALIA
TELEPHONE: (02) 9375 2230
FACSIMILE: (02) 9293 2930
E-MAIL: admin@sensaslim.com.au
WEB SITE: www.sensaslim.com.au
SENIOR DIRECTOR: Michael Boyle BBus (Finance & Banking)
OPERATIONS DIRECTOR: Peter O’Brien
ACCOUNTANTS: KMB Business Advisors & Chartered Accountants
Level 15, 37 York Street, Sydney, NSW 2000
SOLICITORS: Robinson Legal
Level 4, 430 Kent Street, Sydney, NSW 2000
BANKERS: Commonwealth Bank
48 Martin Place, Sydney, NSW 2000
66 The first numbered page contains a heading “MEET OUR SENIOR DIRECTOR”, under which there is a photograph of the fifth respondent, Michael Boyle. The following information is given with respect to Mr Boyle (errors in original):
Michael is an associate director of UBS Wealth Management Australia Ltd, a subsidiary of UBS one of the world’s leading Swiss investment banks. UBS was the result of the merger of the Union Bank of Switzerland and the Swiss Bank Corporation.
UBS is a diversified global financial services company, with its main headquarters in Basel and ZÜrich, Switzerland. It is the world’s second largest manager of private wealth assets, and is also the second-largest bank in Europe, by both market capitalisation and profitability.
Michael has a Bachelor of business - banking and finance specialising in funds management. He is currently completing a Masters of applied Finance.
He is PS146 compliant as required by the ASIC. He is an accredited derivatives specialist.
Michael worked on the trading floor of Deutche Bank in London, one of the world’s leading financial services providers. He returned home to further his career with Australia’s premier investment bank, Macquarie Bank, where he worked for over 8 years before joining UBS.
Michael obtained the Australian master franchise for SENSASLIM™ and now oversees its establishment. He lives in Sydney.
67 This is followed by a column headed “PERSONALLY SPEAKING” which states:
Congratulations, you have taken the first step towards securing financial independence.
We are dedicated to providing innovative, healthful products that will not only improve the quality of people’s lives but will help them to feel better about themselves.
We are committed to providing a financially secure future for our Area Managers by building upon a solid foundation of strong brands and quality products that are thoroughly researched and dexterously marketed.
This will enable our customers and distributors to live healthier, happier lives through better nutrition and financial stability.
I hope you join us in this inspiring project.
Yours Sincerely,
[Signature]
Michael Boyle
Senior Director
68 The evidence shows, and it does not appear to be disputed, that the purported signature of Mr Boyle has been affixed electronically to the document. The signature appearing on the document was not admitted as evidence of the fact that Mr Boyle had placed his signature on it or, indeed, that it was his signature at all.
69 In general terms, the Area Manager Proposal provides an overview of the creation of a distribution network for the SensaSlim product (in which an Area Manager could be expected to earn in excess of $3,000 per week), set against the backdrop of information on obesity, the profitability of the health and diet industry and the use of traditional, complementary and alternative medicines.
70 The document then progresses to discuss the origins of the SensaSlim product and to identify its unique selling point as its formulation, mode of delivery and mode of action. In that connection, the document states:
Until now most diet products have been manufactured in the form of tablets, powders, bars or shakes. The SENSASLIM™ weight loss programme is in the form of a revolutionary Intra-Oral Spray.
The unique formulation is a combination of five of the most thoroughly researched weight loss ingredients over the past 30 years.
The potent active ingredients enter the blood stream and naturally suppress the appetite. Simultaneously, the taste buds are pleasantly desensitised by a natural herb, oil of clove (Syzygium aromaticum) which acts as a temporary local anaesthetic. This sends a message to the brain that suppresses the appetite, without affecting the central nervous system.
SENSASLIM™ is administered three times a day, at the user’s convenience, by three sprays onto the tongue, ten minutes before meals. The effect of the formulation is felt immediately and suppression of appetite is swift. There have been no adverse side effects recorded.
71 The document states that SensaSlim “[w]orks 9 times faster than pills”. It refers to “[t]aste buds research featured on Oprah’s Dr. Oz”. The “five primary ingredients” are described as “totally natural and have been successfully tested and trialled, producing outstanding results in improving weight control”.
72 These ingredients are identified as HCA (described as extracted from a rare fruit grown in south-east Asia called Garcinia cambogia, more commonly known as “a fat fighting fruit”), chromium (described as a vital molecule in regulating carbohydrate metabolism by enhancing insulin function for proper use of glucose in the body), levocarnitine (described as responsible for maintaining energy metabolism throughout every cell in the body), oil of clove (Syzygium aromaticum) (described as a natural analgesic and antiseptic used primarily in dentistry for its main ingredient, eugenol, for dental pain relief) and Gymnema sylvestre (described as a herb native to the tropical forests of southern and central India where it has been used as a naturopathic treatment for diabetes for nearly two millennia). The benefits of intra-oral sprays as an efficient delivery system for medication are discussed.
73 The document also describes how, in the early 1980s, an Italian dentist made a “remarkable discovery” that “has led to a development that Swiss neuroscientists believe to be the most effective weight loss product available in the world today”. This discovery is said to be that a large dose of novocaine had inadvertently desensitised a patient’s taste buds and led to his weight loss because of his lack of desire for food. The document states:
The GP correctly determined that the patient had inadvertently had his taste buds desensitised by the analgesic. The question it raised was how this could have such a remarkable effect on his lack of desire for food or cravings. Could it be that the numbing of the taste buds sent a message to the brain that controlled appetite? Scientists believed this could be the “dieter’s dream”, the ability to fool the brain into a feeling of fullness and satiety without the calories. The research for the “holy grail” for dieters had begun.
74 The document then discusses how the brain controls appetite, “the taste and brain philosophy” (including a reference to the award in 2004 of the Nobel Prize for Medicine “to scientists for their research into olfaction, and its effect on the brain”) and how a person can “lose weight” while he or she is asleep.
75 Importantly, the document contains a significant discussion on how, after 20 years of research, “the developers of SENSASLIM™” elected in late 2007 to conduct “the world’s largest weight loss trial before bringing SENSASLIM™ to market in 2010”.
76 The document poses the question “[w]hy such a large trial?”, and answers it as follows:
The company believed that the majority of trials on weight loss products are deceptive and are completed on too small a number of subjects (less than 50 people) over a short period of time (14-21 days). The results therefore cannot be accepted as reliable and significant to any degree.
Furthermore they are not transparent and are funded and controlled by the manufacturers. They can be misleading and exaggerated. In many instances, short term weight loss results are claimed by using obese subjects which provide results that are unrealistic. These alleged “losses” are then advertised to consumers who are not obese and cannot possibly expect to achieve the same loss. They also fail to factor in the “yo-yo” dieting effect where weight lost is regained at the completion of the trial.
Believing they have developed the most effective weight loss aid available in the world today, SensaSlim Suisse wanted to put it through the most thorough and transparent test. The aim was to set a new standard in assessing the efficacy of weight loss products before selling to consumers.
In 2008 news reports were published in Europe, and later worldwide, calling for volunteers to join the trial.
The company sought 10,000 independent overweight participants from over 100 countries worldwide. This was so as to allow for usage by people of a vast diversity of cultures and dietary habits. Unlike other companies whose trial results are obtained in secret ‘closed weigh-in sessions’ controlled by the manufacturer, the results in this trial were obtained by the participant themselves and all results were posted on the internet for transparency.
The trials were over a minimum of six months usage and then six months of monitoring to ensure both short and long term benefits were recorded. The product was provided to the participants free of charge and no financial benefit was offered to anyone to partake or to lose weight.
77 The document highlights a number of features and results of the trial, including:
• The trial saw 11,453 people from over 100 countries participate.
• “Some people lost more than 100 pounds (45 kilos) in the six-month study. In fact, the number one side effect was excess weight loss! Some people lost so much weight that the researchers had to drop them from the study – they actually became underweight.”
• “The average weight loss of the participants was 2.5 kilos a month, and 15 kilos over the trial. The year-long trial (six month[s] of using the spray and then six month[s] follow up of weight monitoring) found that the average patient lost 16.9 percent of their body weight.”
• “A staggering 87.2 percent of subjects lost 10 percent or more of their weight.”
78 The document then turns to a discussion of matters of a more commercial nature, such as a marketing program; a retail targeting program; national advertising; a national publicity campaign; celebrity endorsement; in-centre and store promotions; social media; child-obesity education; and an overall picture of the advertising campaign with an analysis of an advertising budget.
79 Included in this part is a reference to an Area Manager Seminar (what I have called the Area Managers’ Conference), where the following is stated:
Area Managers and their partners are invited to a two day national seminar launch where they will be given specific product and general training and motivation to help ensure their business gets off to a flying start.
You will meet other Area Managers, our advertising and marketing executives and of course, our celebrity who will endorse our product at public events and speaking engagements on our behalf. Regular state wide Area Manager meetings will also be held.
80 The document discusses Area Manager responsibilities and a profit structure relating to the sale of the SensaSlim product, with Area Managers earning a 50% profit per unit sold. It then describes how Area Managers will be provided with a “sales kit” and point-of-sale materials.
81 The document also describes stock and financial requirements. In that connection, it states:
We expect a minimum of 100 retail outlets to be established in each Area Manager’s territory within the first year. Initially we require 50 outlets to be serviced during our launch phase.
To become an exclusive Area Manager will require the successful applicant to purchase $54,500 + GST of stock and Point of Sale material. This being 2300 units of stock and sufficient Point of Sale material to establish the first 50 retail outlets.
82 The document also discusses income projections by reference to a chart before turning to a discussion of “products in development”. This discussion presages the availability of “cosmeceuticals” (a combination of cosmetics with pharmaceuticals which is “set to boom”) and “nutraceuticals” (the treatment of the body with vitamins, herbs and other nutrient-based products).
83 The document talks of the development of an interactive website for use as an administration and sales tool and refers to a number of business advantages associated with the SensaSlim business. The advantages include a “BUY-BACK OPPORTUNITY”, described in the following terms:
After 90 days from the product launch, if you’re not happy and find the business isn’t for you long term, then by mutual consent we can agree to buy back your stock and point of sale material, shake hands and walk away. You can’t possibly lose money. This is your buy-back guarantee option.
84 The document concludes:
Should you wish to be considered for this exclusive appointment, we would welcome an expression of your interest by completing the Application Form that follows and faxing it to our National Sales Manager. Alternately, you can complete the form on-line at www.sensaslim.com.au.
85 It is apparent that much of the material in the Area Manager Proposal, especially that dealing with the ingredients of the SensaSlim product and their attributes, and the established efficacy of the SensaSlim product achieved through the conduct of the worldwide trial, repeats the substance of many of the statements and representations made in the SensaSlim DVD.
86 This document is an open letter dated 16 April 2010 and signed by a director of KMB Business Advisors Pty Ltd, Paul McGettigan. It states as follows:
To whom it may concern
KMB Business Advisors provides the administration platform to SensaSlim Australia to ensure a complete support service is available to you the Distributor.
We do this in conjunction with Michael Boyle, the Managing Director and founder of SensaSlim in Australia.
Michael established SensaSlim with our assistance in November 2009 and we work hand in hand with Michael and his operations team.
From our close working relationship with Michael we are strongly of the opinion that not only is he a man of good character, but he is also honest, conscientious and reliable.
KMB Business Advisors are proud to call Michael Boyle a business Partner.
87 The letter also sets out details about KMB, its history, range of services, experience, strengths, integrity and solution. The letter also contains biographical details in respect of Mr McGettigan.
88 This is an open letter dated 24 March 2010 which is signed by Julie Briscoe in her capacity as solicitor/director of the firm of solicitors practising as Robinson Legal. This letter advises that the firm holds a copy of a Distribution Agreement under which SensaSlim International Limited appointed SensaSlim as the exclusive distributor of the SensaSlim product in Australia for a term of 20 years commencing on 16 November 2009 and that it holds a copy of a letter from SensaSlim International Limited dated 19 March 2010 to SensaSlim confirming that SensaSlim has placed an order for 1.5 million units of the SensaSlim product for the first year, with the initial delivery being 500,000 units.
89 The letter also states that the firm has been instructed by SensaSlim that it is registered with the Therapeutic Goods Administration (the TGA) and that the manufacturer of the SensaSlim product is Good Manufacturing Practice compliant and is a licensed factory approved by the TGA.
90 The letter also states that SensaSlim has filed an application for registration in Australia of the trade mark “SENSASLIM” and an application for registration of the trade mark “Nothing tastes as good as slim feels”.
The Frequently Asked Questions document
91 This document is 14 pages in length and contains a number of questions and answers in relation to the SensaSlim business and the role of Area Managers in that business. It contains the following question and answer:
33. What happens if I am no longer capable of servicing my territory or no longer wish to be the Area Manager? Will I forfeit my rights and the good will value of the territory?
No. If for any reason you wish to leave the business, Clause 4 of the Agreement allows for termination of the Agreement by mutual consent. Basically we ask that you give the business a go for at least 90 days after receiving your initial stock and POS material. If, after that period, you decide that you want to leave then we will agree to assist you by appointing another Area Manager to own and operate your territory.
This is simply a case of the company needing to have all areas being operated professionally to ensure maximum productivity. If you aren’t making money, then we’re not making money and it is in our best interests to ensure that you are allowed to leave and make way for another operator who will in turn work the territory profitably.
We would advertise the territory to find a purchaser (or sell the territory to an existing Area Manager) and have our Sales Manager interview the potential Area Manager. You will then be paid in full for all your remaining stock and point of sale material by the incoming Area Manager together with any goodwill payment that might be forthcoming.
92 This document is the disclosure document required to be given to prospective franchisees by the Franchising Code. Separately, in the Frequently Asked Questions document, SensaSlim stated that it adhered to all franchise obligations and requirements under the Franchising Code and the Act. The evidence shows that the Disclosure Document was provided in two versions, one dated 1 March 2010 and the other dated 1 July 2010. The following description applies to both versions.
93 In providing details about SensaSlim as franchisor, the Disclosure Document gives its registered office at Level 29, Chifley Tower, 2 Chifley Square, Sydney, New South Wales 2000. Importantly, this address is also given as SensaSlim’s principal place of business in Australia. In a panel which is intended to disclose the name and address of each associate of SensaSlim that is not a body corporate, the statement “N/A” is given. This plainly indicates that there is no associate of SensaSlim who is an individual. In the panel for each director, secretary, executive officer or partner of SensaSlim who is likely to have management responsibilities for SensaSlim’s business operations in relation to the franchise, Peter O’Brien’s and Michael Boyle’s names are given, each as a director. Summary details are then given of Mr O’Brien’s and Mr Boyle’s respective business experience. As part of those descriptions, the following is stated in respect of Mr Boyle:
Michael obtained the Australian master franchise for SensaSlim and now oversees its establishment.
94 The following is stated in respect of Mr O’Brien:
As Operations Director, Peter’s role and responsibility to the Company is to implement and oversee the product development and manufacturing and importation of the Company’s products, point of sale material, freight as well as to develop strategic partnerships that increase Area Manager’s value.
The Retail Business Opportunities document
95 The apparent function of this document, which is headed “Retail Business Opportunities for Franchised Area” (the Retail Business Opportunities document), is to inform a prospective franchisee of suggested retail opportunities for placement of the SensaSlim product in the area or areas of interest to that person.
The Price and Potency Advantages document
96 This document, which is headed “Price and Potency Advantages Over Other Products” (the Price and Potency Advantages document), is a survey of products considered to compete with the SensaSlim product. It describes these products and gives their pricing based on a monthly course. It informs the prospective franchisee that the average cost for a one-month program “for most of the … competing products” appears to be over $100 whereas the SensaSlim product will have a recommended retail price of $59.95 for a 21-day supply. It also says that, as an intra-oral spray, the SensaSlim product is “up to 900% more effective than tablets”. The document also states:
Any company that claims a person will lose significant weight in a 7 or 10 day course of pills is being misleading. When a company sells a 7-10 day supply they are treating the public without respect, and they are also foolish because they are just getting the one sale and creating a dissatisfied customer. They won’t buy another packet, they’ll tell their friends it doesn’t work, so they lose long term.
SENSASLIM it is a full 21 day course. After about 2 weeks the user will start to see results, and they are enjoying very real benefits at the 3 week mark, so they are encouraged to buy another course – and they tell their friends of their results.
So on a pay-per-day basis not only is SENSASLIM the cheapest on the market, it is unquestionably the most effective.
97 Before turning to summarise some of the more important aspects of the evidence given by the witnesses, it is necessary for me to record some matters concerning the conduct of the proceeding and, specifically, the hearing.
98 The proceeding has been closely case-managed since its commencement on 15 July 2011. To that end, a series of directions hearings were held, at which time orders were made providing for the timetabling of a number of important steps. These included orders to the following effect:
The applicant file and serve its affidavit evidence on or before 19 December 2011.
The applicant give standard discovery and inspection on or before 14 February 2012.
The second to fifth respondents, if asserting a positive defence, file and serve a document identifying that defence on or before 30 January 2012. The time for Mr Foster, the second respondent, to undertake this step was subsequently extended to 20 February 2012.
The second to fifth respondents, on or before 24 February 2012, file and serve any affidavit evidence in support of any positive defence and, in any event, serve on the applicant hard or electronic copies of all documents on which each intended to rely at the hearing of the proceeding.
99 None of the respondents undertook the third and fourth steps noted above.
100 On 14 March 2012, I ordered that the matter be provisionally set down for hearing commencing on 3 September 2012.
101 I ordered each respondent to:
Give the applicant written notice of witnesses required for cross-examination on or before 17 August 2012.
Give the applicant written notice of any objections to the applicant’s affidavit and documentary evidence on or before 29 August 2012.
102 The first to fourth respondents gave no notice of either matter.
103 On 3 August 2012, I ordered that the proceeding be set down for hearing in the Queensland Registry of the Court at Brisbane before me.
104 SensaSlim is in liquidation and, save for one occasion, has not attended any court hearing. I granted leave to the applicant on 20 February 2012 to proceed against SensaSlim in liquidation: see s 471B of the Corporations Act. The liquidator of SensaSlim has been kept informed of the conduct of the proceeding by the applicant and has cooperated in the provision of documents and other information. Understandably, there has been no attendance by the liquidator.
105 Mr Foster had legal representation in the period 20 July 2011 to 1 February 2012. On 1 February 2012, his then solicitor filed a notice of ceasing to act, although he continued to act for Mr Foster, until 24 October 2013, in a contempt proceeding also before the Court: see Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (No 3) [2013] FCA 984.
106 On 24 August 2012, Mr Foster filed an interlocutory application seeking an order that the hearing of the present proceeding be adjourned until further order. He was represented by a solicitor for the purposes of that application. Otherwise, in the period 1 February 2012 up to 17 August 2012, Mr Foster represented himself at directions hearings that were held as part of the case management of the proceeding. On 30 August 2012, I dismissed his application for an adjournment: Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (In Liquidation) (No 3) [2012] FCA 939.
107 On 31 August 2012, Mr Foster filed an application for leave to appeal from that dismissal and sought an interim stay of the hearing of this proceeding which was due to commence on 3 September 2012. Mr Foster’s application for leave to appeal and for a stay were unsuccessful and dismissed on 2 September 2012: Foster v Australian Competition and Consumer Commission [2012] FCA 953.
108 Mr Foster did not appear when the matter was called on for hearing on 3 September 2012. I should add that the proceeding, although commenced in the New South Wales District Registry of the Court, was specifically fixed for hearing in Brisbane to meet Mr Foster’s difficulties in attending a hearing in Sydney in person because of the bail conditions imposed on him in the contempt proceeding.
109 The third respondent, Mr O’Brien, has played no active role in this proceeding since its commencement on 15 July 2011, other than appearances on his behalf at an interlocutory hearing on 27 July 2011, a hearing of a notice of motion on 17 August 2011 and a directions hearing on 5 December 2011. Mr O’Brien did not appear at the hearing.
110 The fourth respondent, Adam Adams, played no active role in this proceeding, other than appearances on his behalf at an interlocutory hearing on 27 July 2011, a hearing of a notice of motion on 17 August 2011 and a directions hearing on 5 December 2011. However, on the morning of the sixth day of the hearing (12 September 2012), Mr Adams appeared by a solicitor, Mr Gibson, who informed the Court that he had been retained by Mr Adams at approximately 2.00 pm on 10 September 2012.
111 At the time that Mr Gibson announced his appearance, closing submissions were about to commence, subject to the tender of certain formal evidence. Mr Gibson sought orders the effect of which would have been to adjourn the proceeding against Mr Adams so as to invoke a regime whereby the applicant would be required to provide Mr Adams with a list of witnesses whose evidence would be tendered against him and whereby Mr Adams would then be entitled to notify his objections to that evidence. Mr Adams’ solicitor proposed that, after those steps had been taken, he would provide written submissions. He envisaged that this process would take about one month.
112 Not surprisingly, that course was opposed by the applicant. The applicant submitted that Mr Adams’ application had come “out of the blue” and without evidence as to why Mr Adams had delayed participation in the proceeding until such a late stage.
113 In the end, I was not persuaded to make orders to the effect of those sought by Mr Adams. My reasons can be briefly stated as follows.
114 First, the evidence against all respondents had already been tendered (save for certain formal affidavit evidence verifying the provenance of certain documents already in evidence). This had been done in the context of my having ordered that the respondents provide written notice, by 29 August 2012, of their objections to the evidence to be relied on by the applicant. No written notice of objections was provided by Mr Adams (or, indeed, by the first to third respondents). The hearing proceeded on the basis that those respondents raised no objections to the evidence. The applicant conducted its case accordingly. The evidence adduced by the applicant was admitted against all respondents, save for certain admissions made by Mr Boyle (which were not admitted against the other respondents) and certain admissions by Mr Adams (which were not admitted against the other respondents), and subject to objections that had been notified and argued by Mr Boyle in respect of the reception of evidence specifically against him. Thus, by the time of the appearance on behalf of Mr Adams on the morning of the sixth day of the hearing, the evidence against the first to fourth respondents had already been admitted against them, without objection.
115 Secondly, the course sought by Mr Adams constituted, in my view, an unwarranted dislocation to and disruption of the trial process from which Mr Adams had hitherto absented himself. To accede to Mr Gibson’s proposal, over the applicant’s objection, would have been to embark upon an unravelling of the trial process when the hearing had already occupied five days and was anticipated to complete within the next two days.
116 Thirdly, Mr Gibson’s proposal, seen in the context of the time and particular circumstances in which it came to be made, was one that was, in my view, antithetical to the objectives of the overarching purpose of the civil practice and procedure provisions described in s 37M of the Federal Court of Australia Act 1976 (Cth). This proceeding had undergone specific case management with a view to achieving those objectives as stated in s 37M(2), namely:
Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Court;
(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court’s overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
117 I should note here that the applicant’s intended evidence in the form of affidavits and documents had been substantially served by March 2012, the hearing dates had been appointed as early as 12 March 2012 and the hearing in Brisbane had been confirmed by orders made on 3 August 2012. Mr Foster, Mr O’Brien and Mr Adams did not appear when the matter was called on for hearing on 3 September 2012.
118 Fourthly, as I have mentioned, by the time of Mr Gibson’s appearance for Mr Adams, closing addresses were about to commence. The case against Mr Adams, on the pleadings, was relatively confined. The evidence, subject to the proof of a very limited number of formal matters, had been tendered. Written submissions had been prepared by the applicant detailing the specific case against Mr Adams: see [106]-[116] on pages 24-26 thereof. These submissions were referenced to the evidence that had been adduced. Mr Gibson was provided with a copy of these submissions. To enable Mr Gibson to consider and respond to them, I informed him that I would defer hearing the submissions to be made on Mr Adams’ behalf for 48 hours (that is, until the morning of 14 September 2012), if the applicant’s and Mr Boyle’s oral submissions had been concluded before that time. In my view, that period was sufficient to enable Mr Adams to address the applicant’s submissions in the form in which they were presented and, indeed, in the form in which they came to be advanced in oral address. In my view, no greater time was necessary and no greater indulgence was warranted in the circumstances.
119 After considering his position over the luncheon adjournment, Mr Gibson sought leave to withdraw. He expressed the view that he would not feel able to meaningfully participate in Mr Adams’ best interests if the matter were to proceed in the manner that I said that it would. Mr Gibson’s assessment of his personal position was plainly a matter for him alone. I granted that leave.
120 The fifth respondent, Mr Boyle, has played an active role in the proceeding and was represented at the hearing by counsel and solicitors. A number of deponents were cross-examined by his counsel.
121 On 11 October 2012, Mr Foster filed an interlocutory application in which he sought leave “to file written submissions relating to this matter even though the hearing of this matter has concluded”. This application was heard on 24 October 2012. In an affidavit made by Mr Foster, which was filed in support of the application and read at the hearing, it became apparent that Mr Foster’s conception of “written submissions” included the tender of evidence and the filing of submissions that had been made in the contempt proceeding to which I have referred.
122 The applicant did not consent to or oppose Mr Foster’s application in so far as it concerned the filing of written submissions, provided that those submissions were filed within a short timeframe and it was given an opportunity to respond to them. The applicant did oppose Mr Foster’s application in so far as it extended to the tender of evidence and his intended reliance on submissions that had been made in the contempt proceeding.
123 I subsequently decided to give Mr Foster the opportunity to file and rely upon written submissions: Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (In Liquidation) (No 4) [2012] FCA 1171. As a matter of fairness, I also gave Mr Adams the same opportunity. These submissions were subject to certain limitations, including that they be filed by 4.00 pm on 23 November 2012. I gave both the applicant and Mr Boyle an opportunity to file answering submissions. Mr Adams subsequently sought, and was granted, a short extension of time. He filed his written submissions on 26 November 2012. The applicant responded to these submissions on 21 December 2012, in accordance with orders made on 26 October 2012. There was no response from Mr Boyle.
124 On 28 October 2012, Mr Foster emailed my Associate. Amongst other things, he sought to be provided with all written submissions made by all parties in the trial, all exhibits and documents marked for identification and the transcript of the trial proceedings. A response was provided on 29 October 2012. In that response, Mr Foster was informed that the written submissions of the applicant and the fifth respondent (being the only parties who had made written submissions) had already been provided to him and that the Court does not provide a copy of the transcript to the parties. He was also provided with a list of exhibits and documents marked for identification. Mr Foster was informed that an inspection, either by him or by an appointed legal representative, of an exhibit or document marked for identification could be arranged on his request. To that end, he was asked to identify the exhibits and documents marked for identification that he wished to inspect. No response was received. Mr Foster filed no submissions.
The evidence of VARIOUS witnesses
125 I now turn to summarise the evidence given by various witnesses. The applicant relied on a large number of affidavits which were read at the hearing. The applicant also tendered a large number of documents in addition to the documents referred to as annexures or exhibits to the affidavits. There was limited cross-examination of some of the deponents by counsel for Mr Boyle. Otherwise, the evidence adduced by the applicant stands unchallenged. Unless I state otherwise in the summary that follows, I accept this evidence as correctly recording the facts. Generally speaking, in the summary that follows, and particularly in quotations, I have not sought to standardise spellings or acknowledge the existence of all grammatical, typographical or similar errors. In some cases, I have indicated corrections simply for ease of exposition. Otherwise, I have summarised the evidence of the witnesses using their own words and modes of expression.
Evidence concerning the establishment and conduct of the SensaSlim business
126 Dr Waters described himself as a former investor in SensaSlim. In about June 2008, he met Arabella Foster through friends and associates on the Gold Coast. Dr Waters and Arabella Foster started a relationship shortly after that meeting. A few months later, Arabella Foster informed Dr Waters that she was related to Peter Foster. She told him that Mr Foster was currently in gaol for money laundering.
127 In about October 2008, Dr Waters had (what he described as) his “first interaction” with Mr Foster. It was at a house in Amalfi Drive on the Isle of Capri where Mr Foster’s mother (Luigina Foster, but referred to as “Louise” Foster) and sister (Jill Foster) were living.
128 This “interaction” was by way of a telephone conversation with Mr Foster who, according to Dr Waters, was in gaol at the time. In that telephone conversation, Mr Foster thanked Dr Waters for “looking after my family”. Over the following month, Dr Waters had a number of conversations with Louise Foster at the Amalfi Drive house about the Foster family generally and their history. According to Dr Waters, she told him that “[w]e’ve made a lot of money over the years, in relation to diet products”.
129 After returning from an overseas trip with a few friends at the end of 2008, one of whom was Mr Boyle, Dr Waters informed Arabella Foster that he wanted to pursue a business opportunity and wanted advice. Arabella Foster suggested that Dr Waters should speak to Mr Foster.
130 In around May 2009, Dr Waters met Mr Foster at the Amalfi Drive house. It was a short meeting and Dr Waters did not talk to Mr Foster at length. However, after that introduction, Dr Waters met Mr Foster over dinner in the winter of 2009. In the course of that dinner, Dr Waters told Mr Foster about some business ideas that he had. Mr Foster told Dr Waters that “[t]here is only one good industry: diet products”. Dr Waters also gave evidence that Mr Foster said:
I have a product at the moment. It is called Sensaslim.
It is a weight loss product. I intend to sell franchises which can on-sell the product to stores and business[es] across Australia.
We have conducted a world-wide trial. Here are some materials.
131 Mr Foster then handed Dr Waters a document entitled “Intercontinental Research Institute – The Sensaslim Trial”. Dr Waters scanned the document over dinner, but did not pay too much attention to its content. The document impressed him as looking “very professional”. He recalled thinking at the time that the SensaSlim product had been the subject of a worldwide trial and was supported by research.
132 Over the following weeks, Dr Waters had a number of conversations with Mr Foster, Arabella Foster and Louise Foster in relation to “the Sensaslim opportunity”. Sometime between mid-2009 and August 2009, Dr Waters spent a weekend at Mavis’s Kitchen and Cabins at Mt Warning with Arabella Foster, Mr Foster and a man introduced to him as Kevin McMullan. Dr Waters recalled that, over that weekend, Mr Foster and Mr McMullan talked about “how Sensaslim was being put together and what needed to be done”.
133 In about August 2009, Arabella Foster told Dr Waters that the Foster family was moving to 39 Norseman Court on the Gold Coast. In the latter part of 2009, Dr Waters and Mr Boyle went to the Norseman Court house for dinner. Mr Foster was present and talked separately to Dr Waters and Mr Boyle. Dr Waters gave evidence that Mr Foster said:
I’ve got the rights to represent Sensaslim in Australia. You know, people would give their left arm to buy Sensaslim. They are dying to buy it. But I’d rather work with you. I don’t want to be associated with those people.
You would be buying a 50% share in the Australian arm of Sensaslim. I would retain a 50% share and all profits would be shared between us.
134 Dr Waters also gave evidence that Mr Foster said:
I can’t be involved in the business. My reputation is mud so I cannot be connected to a weight-loss product.
135 Mr Foster then gave Dr Waters two documents. The first was entitled “Sensaslim Regional Owner Proposal – A private offer to obtain the exclusive rights for Australia”, which had a note attached to it which said “Read me first”, and the other was entitled “SensaSlim The Offer And Financial Projections”, to which was attached a note with the words “Read me second”.
136 Dr Water’s evidence is that, when handing these documents to him, Mr Foster said:
You are smart guys, read it on your own. My figures are accurate. I pride myself on my figures.
137 The issue of money then came up. After initially stating that he wanted to sell the Australian rights to the SensaSlim business for $1 million, Mr Foster said that he would sell it for $250,000.
138 Dr Waters’ evidence was that, after saying that he was “a bit worried about going into business”, Mr Foster said:
Family is everything to me and I wouldn’t do anything to harm my family.
I would never do anything to jeopardise Michael’s [that is, Mr Boyle’s] reputation or jeopardise my family.
I would never to anything to jeopardise Arabella.
139 Shortly after, Dr Waters decided that he would invest. He had some equity in his home, a line of credit with a health industry lender and some funds available to him on credit cards. He made an initial payment of $20,000 on 11 August 2009 and a subsequent payment of $180,000 on 31 August 2009. These funds were paid by Dr Waters by way of electronic funds transfer into a bank account for Satori Properties. Mr Foster gave him the relevant account details. Dr Waters said that he understood that he was purchasing the right to sell SensaSlim franchises in Australia from Mr Foster. Documents produced on subpoena by Westpac Banking Corporation show the deposit of $180,000 by “Dr Christopher Wa” into an account in the name of “Mr William E Duffy t/a Satori Properties” on 31 August 2009.
140 Dr Waters said that, during September 2009, he had a conversation with Mr Foster in which Mr Foster said:
We’re going to set-up Sensaslim [I]nternational to sell franchises all around the globe. I want to sell the international rights to you. We will set up a company in England that will sell the business all around the world.
You are too close to the Foster family name so you have to be an investor only. You can’t be the face of the company in Australia. You can buy the international rights through a trust, and Mike [that is, Mr Boyle] can participate in the Australian business as the face of the Australian business. Money will be paid to the company in England to pay for the Australian arm of Sensaslim.
The customers and trading partners will only do business with the England company.
141 Dr Waters also said that, at some point in 2009, he had a conversation with Mr Foster in which Mr Foster said:
I own Sensaslim Suisse and we will set you up with Sensaslim International we will use these companies to sell the distribution rights for Sensaslim internationally.
142 Mr Foster told Dr Waters that the additional cost for the international rights to SensaSlim would be $360,000. Dr Waters made two payments (one of $100,000 and the other of $75,000) to an account held by Mr Boyle who later told Dr Waters that he had “made the payment for you to Satori Properties”. Documents produced on subpoena by Westpac Banking Corporation show the deposit of $175,000 by “Boyle M” into an account in the name of “William E Duffy t/a Satori Properties” on 21 October 2009. Dr Waters’ evidence was that the profits in relation to the sale of distribution rights internationally in relation to the SensaSlim product were to be shared, with Mr Foster receiving 90% of the profits and Dr Waters receiving 10% of the profits.
143 Dr Waters said that he formed a “partnership” with Mr Boyle in relation to SensaSlim in Australia. He said that he and Mr Boyle agreed that Mr Boyle’s total investment would be around $35,000. There was no written agreement between Dr Waters and Mr Boyle but, by about the end of September 2009, they had agreed to share the profits from their investment equally.
144 Dr Waters said that he did not have a role in the day-to-day operation of SensaSlim, but Mr Foster and Arabella Foster “would keep me updated with what was happening”. He said that he would speak to Mr Foster a few times a week about the business and what was happening. He also visited the Norseman Court house about four times a week. From that contact, he was aware from about September 2009 (the time of his investment) to November 2010 (the time of the Area Managers’ Conference) that work was being undertaken by various people “in order to get Sensaslim franchises ready to sell”. This included identifying sales areas and creating maps; preparing distribution materials for the sales team; advertising the business in newspapers; and liaising with potential franchisees. Arabella Foster performed administrative work and general office duties, including copying maps and liaising with newspapers for placing advertisements. She was also responsible for arranging disbursements, like travel costs, for the people who were selling franchises to Area Managers. Arabella Foster used the name “Alli Loretti” when dealing with franchisees and third parties.
145 Between September 2009 and November 2010, Dr Waters observed work in relation to the SensaSlim business being undertaken from the Norseman Court house, an apartment rented in Southport Central and a house located at 2 Witt Avenue, Carrara to which the Foster family had moved in early 2010. The SensaSlim business was conducted from an open area in the Norseman Court house with a number of computers. He observed Mr Foster working in relation to that business at the Norseman Court house. Dr Waters visited the apartment in Southport Central on at least three occasions, probably closer to November 2010. Just before the Area Managers’ Conference in November 2010, he was at the Carrara house and observed “franchisee packs” being put together, including copies of documents with the SensaSlim logo.
146 Dr Waters’ evidence was that, according to his observations, Mr Foster “had a hand and say in everything” that Dr Waters saw occurring in relation to the SensaSlim business. People working at the three locations would invariably come to Mr Foster for direction on any issue of significance. All instructions of significance that he saw given came from Mr Foster. From time to time, he saw Mr Foster dictate SensaSlim newsletters on a dictaphone at the Norseman Court house. He observed Arabella Foster typing the newsletters at the Southport Central apartment, while Mr Foster was dictating over Skype from the Norseman Court house. Whilst at the Southport Central apartment, he saw drafts of franchise advertisements which were placed in local papers. He observed Mr Foster liaising directly with franchisees over the telephone during which Mr Foster would simply refer to himself as “Peter” without specifying a last name. He heard Mr Foster saying, for example:
That area has gone but other areas are still available, if you act quickly you could get another area.
147 Dr Waters said that “[w]e would have dinner as a family” (that is, with Louise Foster, Arabella Foster and Mr Foster). Mr Foster told him:
I can’t meet with the franchisees because of my reputation. People wouldn’t invest if they knew I was involved.
Mr Foster would also say things to him like:
I have to speak with them because none of the sales managers could close.
or:
We just sold another one.
or:
Another franchisee just called.
148 Dr Waters also observed other people working in the SensaSlim business. These included:
Leea Kenny. Ms Kenny used the name “Layla” when dealing with people in relation to the business. She had the same role as Arabella Foster.
Scott Emerton. When working in the SensaSlim business, Mr Emerton was known as “Scott Waller”. Dr Waters was introduced to Mr Emerton at a lunch at the Norseman Court house in early 2010. Mr Foster introduced Mr Emerton as the “head of sales”.
Kevin McMullan. Mr McMullan was involved in the set-up of the SensaSlim franchise network prior to the Area Managers’ Conference. His main job was to divide the franchises into areas. Dr Waters observed him working at the Norseman Court house from about September 2009. Dr Waters observed him working on a computer outlining the franchise areas.
Norm Covich. Mr Covich was a SensaSlim franchisee who ran errands for Mr Foster and worked around the Norseman Court house doing things like cleaning windows.
Adam Adams. Dr Waters was introduced to Mr Adams in 2009. Mr Foster told Dr Waters that he was giving advice to Mr Adams in respect of a business called “Direct Gourmet”. Mr Adams became the Operations Manager for SensaSlim and dealt with franchisee issues.
149 In about late September 2009, Mr Foster handed a document to Dr Waters which Dr Waters described as a “to-do list” for each of the people referred to above. The document is in evidence and is in the form of a timeline with specified tasks to be completed by certain dates. The document does not state the names of the persons who were required to undertake the tasks, but it does include a number of abbreviations in that regard. Dr Waters’ evidence was that:
The abbreviation “IMOM” meant Mr Foster. It is an abbreviation for “International Man of Mischief”, a designation that Mr Foster himself used and which can also be seen on his website www.peterfoster.com. Extracts from the website are in evidence.
LA meant Layla (Leea Kenny) and Alli (Arabella Foster).
Joseph meant Kevin McMullan.
CWMB meant Dr Waters (Christopher Waters) and Mr Boyle (Michael Boyle).
150 Dr Waters met Peter O’Brien, at the Amalfi Drive house, prior to meeting Mr Foster personally. He understood Mr O’Brien to be an old friend of the family. At some point in early 2010, Mr Foster told Dr Waters that Mr O’Brien was “one of the directors of Sensaslim”. According to Dr Waters’ observations, Mr O’Brien did not seem to have any day-to-day control of the business and did not appear to play any active role.
151 Dr Waters also met William Duffy. His evidence was that Mr Duffy was a friend of Louise Foster who would come over to the Norseman Court house for “general discussions”.
152 Dr Waters received a number of emails from Mr Foster in which Mr Foster used email addresses with different names. Mr Foster sent emails to Dr Waters using the email addresses william.e.duffy@hotmail.com, pobrien@sensaslim.com.au and bill.imom@gmail.com.
153 Dr Waters gave evidence of a number of things that caused him concern in relation to the SensaSlim business. One of these matters was the management of the main SensaSlim account. Dr Waters gave evidence of a conversation involving Mr Foster, Mr Boyle, Arabella Foster and himself, in which Dr Waters or Mr Boyle said that SensaSlim’s accountants, KMB, needed proper accounts to do the quarterly BAS returns for the company. He said that Mr Foster “flew off the handle” and “yelled at us” saying:
You’re attacking my integrity.
It doesn’t matter – we’re doing things my way.
It is under control. Don’t question what I’m doing. Leave it to me. It is my business.
154 Another matter of concern was that Mr Boyle, in around mid-2010, complained to Dr Waters that documents being distributed to prospective franchisees and Area Managers bore Mr Boyle’s photograph and referred to UBS with whom Mr Boyle had started working in Sydney in late 2008 or early 2009. Mr Boyle’s complaint was that, because UBS was referred to in these documents, it looked like it was connected to SensaSlim.
155 A further matter of concern involved Mr Emerton who, shortly before the Area Managers’ Conference in November 2010, had commenced demanding payment of commissions he claimed in relation to his sales of franchises to Area Managers. Mr Boyle told Dr Waters that Mr Emerton was contacting him and threatening to “uncover Mr Foster’s involvement in the Sensaslim business” and “drag my name through the mud”. Mr Boyle told Dr Waters that Mr Emerton was “threatening to talk to the police about Foster” and that “[h]e won’t stop pestering me for money”. Mr Boyle asked Dr Waters to “make it go away”.
156 Dr Waters said that, in or around September 2010, he had conversations with Mr Foster in which he asked Mr Foster about what he was “doing about Emerton”. Dr Waters’ evidence was that Mr Foster said:
Emerton is a crook and a lowlife. He is just extorting Mike [that is, Mr Boyle].
I’ll get my friends from Melbourne involved.
157 Dr Waters said that, in around September or October 2010, persons known to him as Mick Gatto and John Khoury came to the Norseman Court house. Dr Waters said that he was “introduced to Mr. Gatto when he came up”. Dr Waters’ evidence was that, later, Mr Foster told him:
The problem has been dealt with. Scott will leave Mike alone.
158 Dr Waters said that, in late 2010, probably in October and certainly before the Area Managers’ Conference in November, Mr Boyle told him that he needed to “resign” because UBS had informed him that he needed to get rid of his interest in SensaSlim. Dr Waters was a party to email correspondence passing between Mr Boyle and Mr Foster using the email address pobrien@sensaslim.com.au, in which Mr Boyle raised the need for him to resign from his directorship of SensaSlim and his need to “report back to UBS yesterday”. In that correspondence, Mr Foster asked Mr Boyle whether he could “stall them until 30th November?”. The importance of this date lies in the fact that it was the date of the Area Managers’ Conference at the Palazzo Versace Hotel on the Gold Coast.
159 Dr Waters also gave evidence that, in November 2010, prior to the Area Managers’ Conference, he and Mr Boyle went to the Carrara house to discuss Mr Boyle’s resignation. Dr Waters’ evidence was that, when Mr Boyle expressed his need to “resign from the company”, Mr Foster said:
Hang in there. We’ll transfer the shares after the launch.
We really need you for the launch. You can do what you want after that.
160 In late 2010, Dr Waters broke up with Arabella Foster. He had a conversation with Mr Foster, probably just before the Area Managers’ Conference in November, in which he informed Mr Foster of this and said that he wanted to get out of the business.
161 Dr Waters said that, at some point in December 2010, Mr Foster paid him $200,000 in one payment. He also said that he received some money in 2010 from Mr Foster when, for example, he had trouble paying bills.
162 In around June 2011, Dr Waters had a conversation with Mr Boyle in which Mr Boyle informed him that he was to attend a s 155 examination with the applicant in July. Mr Boyle raised with Dr Waters the prospect that representatives of the applicant would ask him “how I met Peter O’Brien”. The effect of Dr Waters’ evidence is that he raised this in a telephone conversation with Mr Foster, in which Mr Foster said:
Tell him he is not to mention my name.
This isn’t child’s play; people will go missing.
Leave it with me.
163 Dr Waters said that he repeated this conversation to Mr Boyle.
164 Dr Waters was cross-examined by counsel for Mr Boyle. Despite the way in which Dr Waters’ evidence in chief was couched, he accepted in cross-examination that the conversations I have recorded at [133]-[138] were only held between himself and Mr Foster. However, he was not challenged on his evidence that Mr Boyle was present at the dinner with Mr Foster. Presumably, Mr Boyle was there for some purpose, beyond attending a purely social gathering. The tenor of Dr Waters’ evidence does not suggest that Mr Boyle was merely a disinterested bystander in the events of that evening. Nevertheless, Dr Waters agreed that it was in September 2009, after having invested $200,000 in SensaSlim, that he formed the view that, in order to make his investment successful, he needed to involve Mr Boyle. This was during the time of Dr Waters’ discussions with Mr Foster about joining into an arrangement to sell, internationally, the rights to distribute the SensaSlim product, recorded at [140].
165 Dr Waters agreed that he told Mr Boyle about the conversation he (Dr Waters) had had with Mr Foster, which I have recorded at [140]. He raised with Mr Boyle the prospect that he (Mr Boyle) could be the “face” of the SensaSlim business in Australia. He agreed that Mr Boyle did not respond positively to that suggestion. He agreed that Mr Boyle told him that he wished to have a very limited role in SensaSlim. I accept that, initially, this might have been Mr Boyle’s attitude. However, as I later record, Mr Boyle did, indeed, signify to Dr Waters, and I infer to Mr Foster as well, that he was prepared to be the “face” of the SensaSlim business in Australia: see [781]-[784] below.
166 Dr Waters was taken to the evidence I have summarised at [162] and, in particular, the conversation I have quoted therein. It was suggested to him that the content of the threat in that conversation was made in October 2010. Initially, Dr Waters expressed his inability to agree that such a threat was made at that time. He then appeared to acquiesce in the suggestion that a threat – which counsel summarised as “not rocking the boat” – had been made to Mr Boyle before the Area Managers’ Conference. However, in responding, Dr Waters said that he was “lost on the timeline” of the conversation I have quoted. He then accepted that the threat to Mr Boyle had been made some time prior to November 2010.
167 I am not satisfied, on the basis of this cross-examination, that a threat was made to Mr Boyle some time prior to November 2010. The evidence in chief given by Dr Waters on this topic was of a threat made in about June 2011 in the context of Mr Boyle giving answers in a s 155 examination that might expose Mr Foster’s involvement in the SensaSlim business. That threat could not have been made at some time prior to November 2010, as counsel suggested in his questions.
168 If evidence of Dr Waters’ knowledge of some other threat to Mr Boyle prior to November 2010 was sought to be obtained from this cross-examination, distinct from the threat made in about June 2011, then the circumstances in which that threat was made and the terms of that threat are not at all clear from Dr Waters’ cross-examination. Indeed, if a threat had been made prior to November 2010, it sits oddly with Dr Waters’ evidence of his meeting with Mr Boyle and Mr Foster at the Carrara house in November 2010, which was not challenged (see [159]), and the tenor of the email correspondence between Mr Foster and Mr Boyle at around that time. I refer to that correspondence later in these reasons. Mr Boyle did not himself seek to give evidence of any threat made to him prior to November 2010.
169 I regard Dr Waters’ final acceptance in cross-examination of a threat having been made to Mr Boyle prior to November 2010 as no more than the product of confusion and suggestion in the course of questioning, rather than evidence of his actual recollection of a specific event or of specific events that he observed.
170 Mr Emerton is a former employee of SensaSlim. He was employed from mid-March 2010 to 17 October 2010. He gave evidence that, prior to his employment by SensaSlim, he had been involved in the real estate and car industries and had held positions with various banks and finance companies. He had also been involved as a manager in a betting software business called “Profit Runner”. That business failed in the second half of 2009.
171 In December 2009, Mr Emerton was invited by the director of Profit Runner to attend a meeting with Mr Foster at a caf´ on Chevron Island. At that meeting, Mr Foster asked Mr Emerton whether it was easy for a franchisee to get loans for franchise businesses. In the course of that conversation, Mr Emerton gave evidence that Mr Foster said:
I am after a National Sales Manager for a health and beauty product business that I am setting up, and there could be an opportunity for you there.
172 Mr Emerton referred to the meeting as “just a ‘meet and greet’”. There was no mention of the opportunity being SensaSlim although he knew that the opportunity related to a health and beauty product.
173 After further meetings and discussions with Mr Foster, Mr Emerton had a meeting with Mr Foster at a café in a shopping mall at Southport in December 2009. Mr Emerton said that, at this meeting, he told Mr Foster the results of inquiries he had made concerning the ability of franchisees to obtain funding. Mr Emerton gave evidence that Mr Foster said:
The price I am considering to sell a franchise in this new business is around $60,000.
174 Mr Emerton also gave evidence that, at one meeting, Mr Foster said:
I am waiting for a promotional DVD to be produced which I am in the process of editing. I want to show it to you as it will explain what the business is about. The DVD is being produced by an outfit business located in [a location Mr Emerton could only recall as being either Ballina or Byron Bay], but it is not yet available.
175 Mr Emerton also gave evidence that, on several subsequent occasions, Mr Foster said:
I have been provided with versions of the DVD, but have to send them back to be re-edited, so that they will include the information I want and in the order I want it.
176 Mr Emerton also gave evidence of other meetings and conversations with Mr Foster, including meetings attended by Mr Emerton’s wife, Vikki, and Louise Foster.
177 Mr Emerton gave evidence that, sometime during mid-January 2010 (before 19 January 2010), he and his wife were invited by Mr Foster to lunch at the Norseman Court house. Louise Foster and Arabella Foster were present in the house. Mr Emerton said that, at this meeting, the DVD which he had been told about was presented. He said that this was the first occasion on which he and his wife became aware of the SensaSlim product. On viewing the DVD, Mr Emerton noticed that locations in it had been filmed in the Norseman Court house.
178 Mr Emerton said that he was aware of Mr Foster’s “background” and “the fact that he had been involved in business opportunities which had problematic histories”, as well as Mr Foster’s involvement in the sales of slimming products. He said that, after the DVD had been shown, a conversation involving Mr Emerton and his wife, and Mr Foster and Louise Foster, occurred as follows:
Mr Foster said: Do you have any concerns?
Vikki said: Yes. I need to know how the marketing will work. That this is all different from the past.
Mr Foster said: It’s all different. I’ve got new marketing people involved. I’ve been up writing stuff in support of this for days.
Mrs Foster said: Yes, Peter’s very tired. He’s been up night after night working on this and the folders of materials to go with it.
I said: I don’t want to be involved in anything that’s not working.
Mr Foster said: I’ve done all the overseas trials. This one’s different to what I’ve done in the past. It works. Go and look SensaSlim up on Google.
179 Mr Emerton said that he subsequently searched “SensaSlim” using Google and saw many pages of results, including results which referred to the product as having been developed and trialled overseas.
180 Mr Emerton said that, prior to 25 January 2010, he and his wife were again invited to the Norseman Court house. Mr Emerton said that, at this meeting, one purpose of which was to watch another version of the DVD, or perhaps at an earlier meeting at which his wife was also present, Mr Foster said:
I have previously been in jail, and I am on parole and I can’t be a director of a company or involved in a business until [a date which Mr Emerton could not recall].
181 Mr Emerton said that, at around this time, he formed the view that he would “most likely” become involved in the SensaSlim business and that, following an assurance from Mr Foster that it was “alright to use a different name in your business dealings”, he decided that he would use another name when involved in the SensaSlim business.
182 Mr Emerton gave evidence that, prior to a subsequent dinner to meet “investors” in the SensaSlim business, he raised with Mr Foster in a text message whether Mr Emerton should use his real name when introduced at the dinner. He said that Mr Foster replied:
Scott. I told you, these are my friends. They can be trusted, so use your name Scott Emerton.
183 Mr Emerton gave evidence that, towards the end of February 2012, he and his wife were invited by Mr Foster to lunch at the Norseman Court house. He said that Mr Foster told him that the purpose of the lunch was to meet the director of the company, Mr Boyle. Mr Emerton said that, at this lunch, he decided to go by the name “David Waller”. He said that, at this lunch, Dr Waters, Mr Foster, Mr Boyle and Louise Foster were present as well as Mr Emerton and his wife. He also said that Arabella Foster was present, but did not sit down for lunch. He said that Mr Boyle was introduced as “a director of the company”. Mr Emerton said that it was following this lunch that he became “comfortable with the business”, that it was “all legitimate” and “above board”, and that he would become involved in the national role that Mr Foster had described to him. The evidence shows that, later, Mr Emerton used the name “Scott Waller” in his dealings with Sales Managers, prospective franchisees and Area Managers involved with the SensaSlim business.
184 Mr Emerton said that, in late January or early February 2010, he had a conversation with Mr Foster in which Mr Foster said:
You should communicate with my [sic] by email at william.imom@gmail.com. I like to use gmail addresses. I found out when I was in jail that these addresses can’t be traced. You need to set up a gmail or a hotmail account for our communications. Skype phones are also good, as they can’t be traced. I’ll arrange for the business to get some of these.
185 Mr Emerton said that, up until 9 March 2010, he communicated with Mr Foster using that email address. There is other evidence that shows Mr Foster as the author of an email dated 1 February 2010 that was sent to Mr Emerton from this address. In a subsequent email, Mr Foster said:
PS That previous attachment was for your eyes only as the property section of the document discloses me as the author. If you have to show it to someone cut and paste it into a new word document from your computer or give them a hard copy.
Thanks
P
186 On 9 March 2010, Mr Emerton received an email from Mr Foster asking him to use a new email address: bill.imom@gmail.com. Mr Emerton said that most of his email communications with Mr Foster were either through the “bill.imom” or “william.imom” accounts, or through SensaSlim email accounts, such as peter.obrien@sensaslim.com.au. Mr Emerton said that although, usually, in this email correspondence, Mr Foster did not give his own name, he did receive email correspondence from Mr Foster using the account peter@fosterworldwide.com in relation to the SensaSlim business. There are in evidence two emails, each dated 26 April 2010, to Mr Emerton from this account: one enclosing a link to Australian postcodes (which Mr Emerton said were to be used in working out franchise areas) and one forwarding a credit report on Liana Emberg, who Mr Emerton described as Mr Foster’s girlfriend at the time.
187 There was also in evidence another email (dated 9 July 2010) to Mr Emerton from that address attaching a SensaSlim newsletter. I will make further reference to these newsletters below. Mr Emerton said that he was surprised that this email had been sent using this email address. The evidence shows that he replied by asking:
Was that suppose[d] to come from that address?
The response received was:
No just to you only.
188 Mr Emerton said that, on numerous occasions, he would receive emails from Mr Foster from the address pobrien@sensaslim.com.au or sales@sensaslim.com.au or admin@sensaslim.com.au. He also said that he communicated with Mr Foster by telephone to one of two prepaid mobile phones. Mr Emerton’s evidence was that one of these was a mobile phone number “which was disclosed to prospective franchisees and other area sales managers, as being the mobile phone for Mr O’Brien”. He said that, when he called that number, he generally used a prepaid mobile phone that had been provided to him by Mr Covich, who Mr Emerton described as an associate of Mr Foster who undertook “handyman” tasks around Mr Foster’s residence.
189 Mr Emerton said that the second number was not “associated” with Mr O’Brien. He said that this was a number given to him by Mr Foster in an email dated 27 July 2010 using the “bill.imom” address. The email is in evidence. It states:
Scott in future ring me on [a particular telephone number]
Too many people have the other number, so this new number is only given to you and the girls.
190 Mr Emerton gave evidence that the number of this service was stored in the memory of the mobile phone with which he had been provided. His wife marked it with a red dot sticker so that he would not inadvertently use it to call clients. Telephone records in evidence also show Mr Emerton using his personal mobile phone to call Mr Foster on that number.
191 Mr Emerton gave evidence that, on 10 March 2010, he received an email from Mr Foster using the “bill.imom” address offering him the position of National Sales Manager. He said that, two days later, he had a telephone conversation with Mr Foster in which Mr Emerton confirmed that the proposal in that email was acceptable. However, he said that, even before accepting that proposal, he started doing work and undertaking tasks associated with the SensaSlim business at Mr Foster’s request. He said that, over these weeks, he was regularly (approximately three to four times per week) at the Norseman Court house working with Mr Foster.
192 He said that this work involved:
Assisting people associated with Mr Foster and SensaSlim in obtaining lines of credit through multiple credit card applications. He said that the purpose of this was to assist the cashflow for the business. In respect of Mr Covich and Ms Emberg, it was to allow them to purchase SensaSlim franchises on their credit cards.
Obtaining alternate office space for the SensaSlim business.
Assisting in preparing sales and promotional materials to be presented to franchisees.
Assisting in developing the sales presentation to be made to prospective franchisees.
193 He said that, during these visits, he would see or deal with the following people: Mr Foster; Louise Foster; Ms Emberg; Arabella Foster (who called herself Alli or Ali or Allie Loretti); Ms Kenny (who was referred to as Layla); Mr Covich; Mr McMullan; Mr O’Brien; Mr Duffy; and other persons he described as friends of Mr Foster and Louise Foster.
194 Mr Emerton gave more detailed evidence about Mr O’Brien and Mr McMullan. Mr Emerton described Mr O’Brien as stocky and overweight, in his late 50s to 60s, with a slightly pockmarked face. He said he was a slow talker. Mr Emerton gave evidence that, on one occasion, he had a conversation with Mr Foster at the Norseman Court house in which Mr Foster said, with respect to Mr O’Brien:
I won’t know what to do with him if the media get interested. I suppose I’ll have to buy him an expensive suit and dress him and get him to front the media, but he won’t be able to open his mouth.
195 Mr Emerton’s evidence was that Mr Foster was the person with whom he dealt essentially on a daily basis in relation to his work at SensaSlim. He said he never reported to Mr O’Brien, nor did he ever have any discussions or communications with Mr O’Brien concerning the operation of the SensaSlim business.
196 In relation to Mr McMullan, Mr Emerton said that, shortly before Mr Emerton’s appointment as National Sales Manager, he had a conversation with Mr Foster in which Mr Foster said that he had worked with Mr McMullan in the past in other ventures dealing with health products. Mr Emerton’s evidence was that Mr McMullan established the Gmail accounts which were used by various people working at SensaSlim and which were needed for the use of Skype phones. On 17 March 2010, Mr Emerton received an email from Mr McMullan advising him of the details of the Gmail account that had been set up for Mr Emerton. Mr Emerton said that he was also involved with Mr McMullan in trips arranged for meeting and interviewing prospective franchisees.
197 Mr Emerton said that, at the Norseman Court house, two office areas had been set up upstairs. One was a main office, and the other was Mr Foster’s individual office. These two office areas were separated by a corridor. He provided a sketch of each room in his affidavit evidence. He said that the main office was a large room of about the size of a double garage. It contained desks set against outside walls, as well as a row of desks in the centre of the room, with PCs, laptops, printers and telephones. He said that Arabella Foster and Layla usually sat in the centre of the room in front of pink laptops. Mr McMullan usually sat at a desk along the wall. He said that Mr Foster’s office was smaller. He said that, in that office, Mr Foster had two PC screens to the side and another at a side desk.
198 Mr Emerton gave evidence of his dealings with Mr Foster in obtaining card merchant facilities for SensaSlim so that it could process credit card payments to be used to purchase franchises. He also gave evidence of his work in making credit card applications for various persons including his communications with Mr Foster in relation to those applications. The applications were made for Arabella Foster, Ms Emberg, Mr Covich, Dr Waters and Mr O’Brien.
199 Mr Emerton also gave evidence about obtaining new office premises for the SensaSlim business. He said that he had had a conversation with Mr Foster, at some time in February 2010, at the Norseman Court house in which Mr Foster said:
I want to get some commercial premises to work out of. I want to get all the girls out of here and the phones and printers before you go on the road. I don’t want anything which links Sensaslim back to Mum’s house.
200 He said that, in the period 17 February to 4 March 2010, he assisted in searches for properties in Southport. The premises had to be south-east facing, with no line of sight from another building. He was told by Mr Foster that:
I’ve started making enquiries in Bill Duffy’s name, and the lease will need to be taken out in his name. As you’ll also be working there in your own office, I’d like you to inspect the place and meet the agent.
201 Mr Emerton was copied in on email correspondence between “Bill” using the “william.imom” email address and Natasha Perkins, a senior assistant property manager, and Gayle Elliott, a residential property manager, at SPC Residential Management Pty Ltd (receivers and managers appointed).
202 Mr Emerton gave evidence that, subsequently, he assisted Mr Covich and Mr McMullan to load a hire truck with furniture from the Norseman Court house for delivery to Southport Central. Arabella Foster and Layla were using their cars to move some lighter materials. Premises were ultimately leased at a unit development called Southport Central in Lawson Street, Southport.
203 Mr Emerton also gave evidence about the preparation of promotional materials and advertisements used in relation to the SensaSlim business. He said that, on one occasion prior to mid-March 2010, he was in Mr Foster’s office at the Norseman Court house when Mr Foster gave him a copy of a draft of the Area Manager Proposal, at which time Mr Foster said:
I’ve been working on this. Have a look - what do you think?
204 Mr Emerton said that he assisted Mr Foster by proofreading the document when it was near its final stage. Mr Emerton said that, initially, small quantities of the Area Manager Proposal were printed at the Norseman Court house using laser printers. However, when larger numbers were required when the sales were underway, copies were printed at commercial printers at Southport.
205 Mr Emerton also gave evidence of discussions with Mr Foster about how presentations to prospective franchisees would be made. He said that, in these conversations, Mr Foster “developed and refined the sales pitch which he wanted delivered to prospective franchisees”. He said that Mr Foster told him:
They will be shown the DVD, but not permitted to take a copy away. However, they will be able to take the Area Manager’s Proposal away with them, as well as the Disclosure Documents.
… I’ve been involved in selling businesses like this before. To get the sale, the presentations need to be carefully structured.
206 Mr Emerton gave evidence that Mr Foster outlined for him how he wanted the “sales pitch” to proceed. He said that Mr Foster prepared copies of the Area Manager Proposal for use by SensaSlim Sales Managers which, by green dots at the side of the page, highlighted the particular items that Mr Foster required the Sales Managers to read and emphasise to prospective franchisees and, by red dots, those parts that did not have to be read word for word but should be “casually mentioned”. The marked copy also gave guidance on what sections could be skipped, where something should be written in the prospective franchisee’s Area Manager Proposal and how to respond to queries. A series of printed notes were also prepared on “Handling Queries”. Examples of these documents are in evidence. The information in the Area Manager Proposal dealing with the weight loss trial is marked with a green dot.
207 Mr Emerton also gave evidence that Mr Foster required the SensaSlim DVD to be played on a large-screen television rather than on a laptop computer. One of the printed guidance notes states as follows:
MOST IMPORTANT RULE
Never, but never ever cut the DVD/video presentation short or fast forward.
It has been written, directed and edited with not just a sales emphasis, but psychological factors considered that it addresses and satisfies.
Allow the DVD/video to do all the hard work for you. Before anyone will become a Area Manager they must become excited about the proposal - and to become excited they must fully understand the concept.
The DVD/video is designed to answer their questions as quickly as they come into their mind - before they have a chance to ask you. Before any issue can become an objection.
By the time they have watched the DVD/video, they will be 100% certain in their own minds that:
• The product is scientifically tested and they now have no doubts it is effective. This eliminates them wanting to take samples of the product home and test it themselves for 4 weeks. Its efficacy is beyond question and no longer an issue.
• They have seen the enormous media interest it has created so they know it is a hot item.
• They have seen it sells out fast.
• They understand what is required of them as a Area Manager.
• They know the company will support them with training and motivation and seminars.
If you don’t allow the DVD/video to do its job, there will be parts of the puzzle missing and you won’t get a sale.
Play the DVD/video through. Don’t interrupt it. Don’t talk throughout it. Let it do its job. It will make your job a lot easier.
208 Mr Emerton also gave evidence that Mr Foster instructed him that Sales Managers were to provide pens and pencils to prospective franchisees at certain times during the presentation and encourage them to write down financial information. He said that he and Mr Foster would also engage in a role-playing exercise, with Mr Foster on occasion taking the role of a Sales Manager and Mr Emerton taking the role of a prospective franchisee. Sometimes, the roles would be reversed.
209 Mr Emerton said that Mr Foster prepared the Frequently Asked Questions document. In his affidavit, Mr Emerton also identified an email sent from bill.imom@gmail.com attaching a document dealing with the procedures to be followed when franchisee contracts were signed. I infer that this document was sent to Mr Emerton by Mr Foster and that it was prepared by Mr Foster.
210 Mr Emerton gave evidence concerning newspaper advertisements used as part of the process of selling franchises. He said that, prior to 21 March 2010, when he went on the road selling those franchises, he had had a number of conversations with Mr Foster concerning the content of draft advertisements which had been prepared by Mr Foster. Generally, Mr Foster asked Mr Emerton to obtain copies of newspapers containing the advertisements. Advertisements were also placed on the website seek.com. Examples of advertisements are in evidence. The examples vary in their form and content. Generally, they speak of a “phenomenal new product” or a “revolutionary new product” that is destined to dominate in an industry worth over “$1 billion per annum” that has been spoken of by “the highly respected international news magazine, TIME” in glowing terms. The advertisements refer to the ability of Area Managers to earn in excess of $3,000 or $4,000 per week after an initial investment of $59,950 for the purchase of stock.
211 Mr Emerton gave evidence of his observations concerning Mr Foster’s involvement in preparing newsletters sent to franchisees. He gave evidence of telephone conversations with Mr Foster in which Mr Foster referred to his need “to get this newsletter out”. Mr Emerton also said that, on occasion, Mr Emerton and his wife edited the newsletters and would provide revised comments.
212 Mr Emerton also gave evidence of what he identified as “some of the business practices which were used at Sensaslim in dealing with prospective franchisees, and to create and maintain the impression that the business was a legitimate business, conducted out of the registered office in Chifley Tower Sydney, and not associated with Mr Foster”.
213 First, Mr Emerton gave evidence of what he said were Mr Foster’s concerns that “the Sensaslim operation” be presented to prospective and actual franchisees as a Sydney-based business that was not linked to the Gold Coast. The documents relied upon by Mr Emerton show him reporting his own concerns to Mr Foster that certain franchisees or prospective franchisees had been made aware of, or had seen evidence of, an association between the SensaSlim business and the Gold Coast. If anything, this evidence shows Mr Emerton’s awareness that this association should not be disclosed, rather than direct evidence of Mr Foster’s concerns in that regard.
214 One email (from the address pobrien@sensaslim.com.au) does show Mr Foster’s concerns that prospective franchisees were being given the contact details of appointed franchisees. In that email, Mr Foster said:
We have a security risk giving out all the Area Managers numbers to prospective Area Managers. etc
Stuart Watts is now keeping everyone’s numbers and ringing them all.
That is why we blind copy email and don’t let them talk to eachother.
eg Last week Lorraine Falrve raised with the Peter Foster / slimist issue. I contained that..but now she has raised it with Stuart Watts, who didn’t know about it…and now he has raised it with others…
I don’t believe we should give out Area Managers numbers to anyone…the risk are too great because one negative comment can spread far too fast…and be too hard to contain, especially between now and the seminar.
215 Given the date of this email (17 August 2010), I infer that the reference to the “seminar” is to the Area Managers’ Conference.
216 Mr Emerton gave evidence about the process of “finding and signing” prospective franchisees, and Mr Foster’s involvement in that process. Mr Emerton said that the process of identifying and meeting prospective franchisees was “fairly standardised”. A Sales Manager would travel to a region. Prior to that time, a newspaper advertisement was published in a local or regional newspaper. The advertisements were placed by “the staff in the office” usually using either Arabella Foster’s credit card or Mr Covich’s credit card. The advertisements included a “1800” number to a marketing service based in New Zealand, MEP Services Limited, which operated as a message-taking centre. A receptionist would obtain “basic information” from respondents to the advertisements and forward this information in an email addressed to recruitment@sensaslim.com.au or “another Sensaslim email address”. The email would be forwarded to Mr Emerton, sometimes from the address bill.imom@gmail.com. In this connection, Mr Emerton said:
… The procedure in place at the Sensaslim office was that the girls in the office were not permitted to provide me with any leads until they had been approved by Mr Foster. I understood this was because Mr Foster wanted to check that none of the leads had previously dealt with him in his prior business ventures, or had not already purchased a Sensaslim franchise. On several quiet weekends, I telephoned Mr Foster, and would ask him to provide me with additional leads for me to pursue. Whilst on the phone, he would review the recent enquiries, and say words to the following effect “I’ll just check them against the list in the PC of my previous sales before Sensaslim”. He would then give me the details of the leads I could pursue.
217 One email in evidence, which I infer was sent by Mr Foster to Mr Emerton, concerns leads in Cairns and Townsville. The email shows a concern that some of the leads might have had a previous association “with Chaste and Trimit”, businesses with which Mr Foster had had a previous association. The instruction in the email was “to double check [these] aren’t the same people”.
218 Mr Emerton said:
I would make contact with the prospective franchisee, and ask them a series of questions to determine if they were “qualified” to proceed to a meeting with me. … If they “qualified”, I would arrange a meeting with them at the hotel or apartment where I was staying. When they arrived, I would provide them with coffee etc; play the DVD; leave the room; let them watch it and come back and talk to them and emphasise particular aspects of the presentation, using the procedures which Mr Foster had instructed me to use. I did not always stick strictly to Mr Foster’s instructions, and would sometimes supplement the presentation. The prospective franchisees could then choose if they wished to proceed with the investment. In all cases, I would have told people to undertake their own due diligence. The prospective franchisees could then complete a hard copy application form which could be faxed to Sensaslim’s offices, or alternatively, go on to the Sensaslim website and provide information completing an application form which would be submitted electronically. I always encouraged people to go away after these meetings, and to not complete the application form until they had time to consider matters.
219 Mr Emerton also said:
The Sensaslim website was structured so that when people lodged applications through the website, they could tick an option if they wanted one of the directors of Sensaslim to make contact with the franchisee. If a prospective franchisee completed an application (either on-line, or by faxing a handwritten form), that would be received by Mr Foster. Using either the “bill.imom” email address, or the peter.obrien@sensaslim.com.au address or another Sensaslim email address, Mr Foster would usually forward the application to me, and on some occasions provide some commentary about the prospect. …
220 Mr Emerton also said that, after applications had been received from prospective franchisees, he would, on occasion, discuss the prospective franchisee with Mr Foster and obtain his view on “whether they should be proceeded with”. He also gave evidence that he regularly discussed prospective franchisees with Mr Foster after Mr Foster had made contact with the franchisee. There are emails in evidence, which I accept are communications between Mr Foster (from various email addresses, such as bill.imom@gmail.com and pobrien@sensaslim.com.au) and Mr Emerton about prospective franchisees, including those with whom Mr Foster had spoken on the telephone. The evidence shows that, for this purpose, Mr Foster used the name “Peter O’Brien”.
221 Mr Emerton said:
On some of the emails that would be generated internally, Mr Foster, using his “imom” email address, would send an email to one of the office girls such as Layla, providing them with a copy of a Sensaslim franchise application completed by a prospective franchisee, and giving instructions along the lines that the person had been interviewed by “POB”. Those references to “POB” are not references in fact to Mr O’Brien. They are instructions to the office staff, to complete the proforma welcome letter, identifying Peter O’Brien (and whoever else Mr Foster identified) as the person who had interviewed the franchisee. This maintained the fiction that Mr O’Brien was involved in the process of speaking with prospective franchisees and approving their applications. The reference and instructions would be used by Layla when generating the “Welcome” letter to the applicant, in a sentence that would say words along the lines of “I would like you to know that you certainly impressed both Peter O’Brien and Scott Waller” (or whoever interviewed the prospect). In reality, it was a reference to the telephone conversation that Mr Foster had had with the person, in the guise of Mr O’Brien. …
222 If a prospective franchisee “signed up”, that person’s payment was processed and they would be sent a formal “welcome” letter. Mr Emerton said that the letter was signed by Mr Boyle. I will return to that matter, later in these reasons.
223 Mr Emerton also gave evidence about “[u]nwanted applicants”. In this connection, the newspaper advertisements did not disclose the nature of the business opportunity being advertised. Mr Emerton said that, in cases where Mr Foster wanted to reject or discourage an applicant or wanted to “burn off” someone, he would sometimes provide them with information in relation to another business opportunity, called “Anti-Age me” (there are various spellings in the evidence), a business conducted by a Mr Roach. There are a number of emails in evidence which relate to communications from Mr Foster to Mr Emerton concerning prospective franchisees that Mr Foster wanted to “burn off” and who were encouraged to switch to the “Anti-Age me” product.
224 It is clear on Mr Emerton’s evidence that Mr Foster had a close involvement in monitoring the progress of applications for franchises. In an email sent to Mr Emerton on 6 May 2010, Mr Foster (using the address bill.imom@gmail.com) said:
I think before we advertise for more salespeople we have to figure where we are going wrong.
Our costs are high and our conversation rate is low.
So far we have only sold 4 areas to three people in 6 1/2, nearly 7 weeks. At the same stage of my last project we had sold 15 areas.
We had roughly 8 leads off the first Brisbane ad and sold 1 area. We have had upwards of 20 leads off the second ad and sold 1. (so far)
I am also noticing a vastly reduced number of applications.
The proposal obviously has attraction otherwise Neil Simpson, Dennis and Lindy wouldn’t have bought. But others are hesitant, nervous, they are getting close but then feeling uncomfortable or not excited enough to be convinced.
If we keep going at the closing rate we are, with the costs we’re incurring, we won’t turn a profit. It’s not just because we don’t have enough salespeople, but the closure rate has to be greater because the ads are costing $3000 each and only producing one sale, on 20 leads it is a matter of our overheads are too high and it will take too long to achieve our objectives no matter how many salesmen we have working.
I can say that four absolutely genuine buyers have fallen over, being Cairns, Bundaberg, Lismore and Townsville. For whatever reasons they would have made all the difference to our closure rate.
I am not panicking, (although Michael Boyle is) but I can see we do have a problem somewhere..it is just a case of finding out what is going wrong.
225 Mr Emerton gave evidence of communications with particular prospective franchisees. Some of these prospective franchisees have also given evidence. I will deal with these communications when discussing the evidence of these witnesses. It is convenient, however, to deal at this juncture with some communications with Margaret Faint who, when making inquiries about the SensaSlim business after being interviewed by Mr Emerton, sent an email to another address, headoffice@sensaslim.com. In an email dated 11 April 2010, which was addressed “Dear Sensaslim Team”, Ms Faint said:
Good Morning from sunny Queensland, Australia. I hope you will be able to assist me with an enquiry.
I have been discussing a franchise opportunity for my area with some gentlemen from Sensaslim Australia Pty Ltd. I am very interested and believe this is a great product and a great opportunity. I do however feel it would be wise to do some research before handing over my hard earned money. It is unfortunate that we do have con men in this day and age, making it necessary to check facts. With those factors in mind, would you please confirm the names of the gentlemen in Australia with whom I should be dealing? I have been in discussions with the National Sales Manager and also with the Operations Director. They are both very well spoken and polite men, and I believe them to be who they say they are, but would like your confirmation.
Naturally I do not wish to cause offence to anyone, so I would also request that you keep this correspondence confidential. Thank you so much for any assistance you are able to offer. I do hope I will be working with the Sensaslim team in the very near future!
226 On the same day, Mr Foster (using the email address pobrien@sensaslim.com.au) forwarded Ms Faint’s email to Mr Emerton saying:
We are not suppose[d] to have seen this email so don’t say anything. It was sent to Switzerland.
227 In that email, Mr Foster also said:
The legal department at Switzerland will send her an email.
228 The following day, Mr Foster forwarded an email chain to Mr Emerton containing communications between “René Desbois” (from the address legal@sensaslim.com) and Ms Faint. The evidence establishes that the address legal@sensaslim.com was, at that time, associated with an account in the name of Jill Louise Foster. The email, ostensibly sent by René Desbois, is as follows:
Dear Madame Faint,
Thank you for your email which has been forwarded to my office for reply. Yes, we are also sunny this Sunday morning, but it is only 10 degrees here at 10 a.m., so unlike you, no suntanning for us today. Also we must work as we are very busy. (c’est trop fort).
Your email has been re-directed to me by our website for answer on the week-end, and accordingly there is only limited information I have available without speaking to my colleagues on Monday who handle the Asia Pacific region out of the United Kingdom.
We can confirm that the Australian master distributorship license was secured by Mr. Michael Boyle and his business partner, Mr. Peter O’Brien. The exclusive license is for a term of 20 years (with renewal options) and they operate through a company called Sensaslim Australia Pty Ltd.
Prior to assigning the license we needed to satisfy ourselves as to not only their financial stability, but their ability to conduct the business in a professional and forthright manner. Our investigations lead us to believe that they are honest, reliable and trustworthy and are fully capable of meeting their financial commitments and ensuring all business dealings are conducted to the highest standards. We are confident you will find Sensaslim Australia Pty Ltd. dependable and reliable.
As for the two gentlemen you have spoken with, you would have to refer to the Sydney, Australia office to be confident they are employed by Sensaslim Australia Pty. Ltd. Their telephone number is +61 2 9375 2230.
But I believe it is Sunday evening there now, so you may have to wait until tomorrow morning.
Your request for this communication to remain confidential will be respected. I hope everything is to your satisfaction with your enquiries.
Please contact me at legal@sensaslim.com should you require any further information.
Yours very sincerely and respectfully,
René Desbois
Legal Department - International Affairs
Chargé d’affaires
229 Ms Faint responded in the following terms:
Dear René
Thank you so much for your prompt and thorough response. I am so surprised that you were working on Sunday. I’m sure it must be very busy for you at this time, with the launch coming up so soon now. Your reply has been the confirmation I required to move forward – thanks again.
Regards,
Margaret Faint …
230 After receiving this email chain, Mr Emerton telephoned Mr Foster. He said the following conversation took place:
Mr Foster said: Did you like that?
I said: I know some Renée’s and it is a French name. Is it used in Switzerland?
Mr Foster said: It’s a common name in Switzerland. I even made sure I checked the weather there and the time before I sent it, in case she checks.
231 Mr Emerton gave evidence of other communications between himself and Ms Faint, and between Mr Foster and Ms Faint. It is not necessary to set out the detail of these communications. They show, however, that both Mr Foster and Mr Emerton were prepared to prey on Ms Faint’s religious convictions in order to induce her to become an Area Manager. Fortunately for Ms Faint, she eventually decided against becoming an Area Manager.
232 Mr Emerton’s evidence revealed other occasions on which prospective franchisees received a communication ostensibly from René Desbois after seeking to investigate the SensaSlim business by making inquiries to overseas websites connected with the SensaSlim business. Mr Foster brought these inquiries to Mr Emerton’s attention. The evidence shows that Mr Foster cautioned Mr Emerton that “[w]e are not suppose[d] to know [about these communications]”.
233 Mr Emerton said that, over time, he became “disappointed and dissatisfied with the way Mr Foster was running Sensaslim”. According to Mr Emerton, initially, the cause was disagreements he had with Mr Foster about the degree of autonomy Mr Emerton would have in the operation of the business and disagreements about the payment of his remuneration, as well as that of other employees and agents who Mr Emerton had engaged and who were working with him. Mr Emerton also said that he became dissatisfied because Mr Foster would not give him the “free hand” he expected in selecting and training sales staff. He said that there were instances where he expressly disagreed with employees that Mr Foster took on. He gave examples of employees who he said had been “pressed upon me” by Mr Foster. When Mr Emerton complained, Mr Foster insisted that his directions concerning these employees were to be followed. Mr Emerton said that, in the period 7 May 2010 to 4 June 2010, his relations with Mr Foster were such that, if Mr Emerton criticised him, Mr Foster “would give me the cold shoulder and not communicate with me other than by email”.
234 On 21 May 2010, Mr Emerton was informed by a messenger from Mr Foster that he was no longer the National Sales Manager for SensaSlim. Nevertheless, Mr Emerton remained in the business and continued to sell franchises.
235 In September 2010, Mr Emerton decided to leave the business. His reasons for this decision included his dissatisfaction that “the launch date was continually put off” and his dissatisfaction with the inadequate and unprofessional office and administrative support. His main cause for dissatisfaction was, however, his continuing complaints that he was not being paid by Mr Foster in a timely manner for the amounts that he regarded as being due to him. In this connection, Mr Emerton commenced to air his complaints to Mr Boyle, sending emails to the address boyleboyle1@gmail.com. Mr Foster told Mr Emerton that he had asked Mr Boyle to “inject more money” and that, as soon as Mr Boyle did so, Mr Foster would transfer funds to Mr Emerton. Mr Emerton said:
In these emails, I was seeking to use every means available to me to ensure I would receive the amounts due to me, and for that reason, made unveiled references to Mr Foster’s involvement. In previous correspondence, I had been careful to avoid any reference to Mr Foster.
I was communicating with Mr Boyle using the gmail address. I am uncertain whether those emails that I was receiving were from Mr Boyle or Mr Foster. They do refer to Mr Boyle looking after “the investors” but I suspect that during this period, his gmail account may have been co-opted by Mr Foster.
236 Mr Emerton gave evidence concerning his association with other people connected to the SensaSlim business. He gave evidence concerning his knowledge of and contact with Mr Adams, whom he first met with Mr Foster at the Norseman Court house in late March or early April 2010. On one occasion at about this time, during lunch at “Shuck Restaurant Main Beach”, Mr Foster told Mr Emerton:
Adam will be joining us. He will relieve some of the pressure from me. He will be liaising with the franchisees, handling any complaints and enquiries, so not as many people will be asking for Peter O’Brien.
Adam will be available to fly interstate and meet with the franchisees if required, so they don’t get disappointed by not being able to meet anyone.
237 Mr Emerton said that, sometime between May 2010 and July 2010, Mr Adams commenced working with SensaSlim. However, as Mr Emerton was travelling, he said he was dealing with Mr Foster and “the office staff”.
238 Mr Emerton also gave evidence concerning his knowledge of and contact with Mr Duffy. He said that Mr Duffy operated or maintained a bank account which was used to benefit Mr Foster and Arabella Foster. He said that there were cheque books and ATM cards “lying around at Norseman Court” which were in Mr Duffy’s name which Mr Foster and Arabella Foster used. He also said that Mr Foster held blank SensaSlim cheques which had been signed by Mr Boyle and a SensaSlim cheque book. He said that the cheque book was kept in the top drawer of a desk at the Norseman Court house.
239 Finally, Mr Emerton gave further evidence concerning his knowledge of and contact with Mr O’Brien. Mr O’Brien was one of the people for whom Mr Emerton obtained credit cards. When completing the necessary forms for these credit cards, Mr Emerton said that he was told by Mr Foster that Mr O’Brien was or would become a director of SensaSlim. He said, however, that Mr Foster was the person he dealt with essentially on a daily basis in relation to his work at SensaSlim. He said that he never reported to Mr O’Brien, nor did he ever have discussions or communications with Mr O’Brien concerning the operation of the SensaSlim business. Mr Emerton said that, on many occasions, he observed Mr O’Brien wandering into the office at Norseman Court and sitting down, even if Mr Foster was on a telephone call. He said that he had observed Mr O’Brien walk in to Mr Foster’s office on many occasions when Mr Foster was “going through Sensaslim paperwork”.
240 Notwithstanding these appearances, it was Mr Emerton’s evidence that Mr Foster assumed the identity of Mr O’Brien when dealing with franchisees or prospective franchisees in emails or telephone conversations. Mr Emerton said:
Regularly I would be present with Mr Foster at Norseman Court and have a query about information provided to a prospective franchisee, or information to be received. On those occasions, Mr Foster would direct Arabella and Layla to check emails received in the peterobrien@sensaslim.com.au account. On occasions when I would call seeking information and Mr Foster was not present, they would check the “peterobrien” emails on Mr Foster’s behalf and provide me with the answer to my queries.
241 Mr Emerton said that, on 17 October 2010, a “settlement meeting” was held in relation to his decision to leave the business. He had initially proposed that the meeting be held at the Surfers Paradise Beer Garden. He said that he chose that venue because his son was a bouncer there. He was also concerned to ensure that the meeting occurred in a place that was public or where there was closed circuit television recording the event. He said that he was concerned about his safety.
242 As events transpired, the meeting was held in a private room at the Broadbeach Sofitel. The meeting was to be between himself and Mr Boyle. He said that, when he arrived at the Sofitel, Mr O’Brien and Mr Covich met him and told him to come upstairs where he would “meet Mr Boyle with the investors”. When he arrived outside the room, he saw Mr Adams. However, when he entered the room, Mr Boyle was not present. He said that Mick Gatto and John Khoury had entered the room from another door and “a negotiation ensued”. Mr Emerton said that he made an audio recording of the meeting. At the conclusion of the meeting, he signed an agreement which Mr O’Brien also signed as a director of SensaSlim, pursuant to which certain funds would be paid to Mr Emerton.
243 Mr Emerton was cross-examined by counsel for Mr Boyle. He was cross-examined on his use of the aliases “David Waller” and “Scott Waller” when working in the SensaSlim business. He denied using these aliases for a dishonest purpose. He referred to the existence of some bad publicity with the Profit Runner business and the publication of his name in relation to that business in The Courier-Mail and later on the internet. His explanation for using the aliases in connection with the SensaSlim business was, in substance, that he did not want the previous bad publicity to come to the attention of SensaSlim’s “customers”. In this connection, he said that he “wasn’t doing it to mislead clients of Sensaslim at all”. Rather, he said that he “didn’t want them to get the wrong information by reading it on the internet, that had been falsely put up there”. I do not accept that explanation. I am satisfied that Mr Emerton used the aliases “David Waller” and then “Scott Waller” to mask his true identity so that he could not be identified as being associated with the SensaSlim business. I should add that I do not believe Mr Emerton’s evidence (at [183] above) that he regarded the SensaSlim business to be “all legitimate” and “above board”, although I have no doubt that he was “comfortable with the business”.
244 Mr Emerton accepted that, from January 2010, he was “perfectly aware of Mr Foster’s reputation as a conman”. I will return to the subject of Mr Foster’s reputation. Mr Emerton also accepted that he knew in April 2010 that Mr Foster was using the name “René Desbois”. He obfuscated about his knowledge that Mr Foster was using the name “René Desbois” in email correspondence with Ms Stanistreet. I refer to this correspondence in later paragraphs of these reasons. Mr Foster forwarded that correspondence to Mr Emerton. It is sufficient for me to note at this point that I am satisfied that Mr Emerton knew, contemporaneously, that Mr Foster was using the name “René Desbois” in this correspondence with Ms Stanistreet.
245 Mr Emerton was cross-examined on other topics. These topics are not relevant to the present narrative.
246 Vikki Dallas Emerton is Mr Emerton’s wife. She attended a number of meetings with Mr Emerton and others associated with the SensaSlim business. These meetings were all preliminary ones, before Mr Emerton became engaged in the SensaSlim business. One meeting was at the Spendlove Cafe at the Brickworks, a shopping mall in Southport, Queensland. Apart from Mr and Mrs Emerton, this meeting was attended by Mr Foster, Louise Foster and Michael Ryan. The evidence indicates that Mr Ryan was one of Mr Emerton’s business associates. This meeting was followed by three meetings at the Norseman Court house.
247 The first meeting at the Norseman Court house was in mid-January 2010. Apart from Mr and Mrs Emerton, this meeting was attended by Mr Foster. Louise Foster and Arabella Foster were present in the house, but not for the entire meeting.
248 At this meeting, Mr Foster talked about “a new product he was working on”. According to Mrs Emerton’s recollection, Mr Foster said:
We have had a trial done on [I forget how many] people and this product’s delivery is revolutionary. I came up with the idea when I was at the dentist[’]s and the dentist used [a drug name I cannot recall] during the treatment.
249 Mrs Emerton also gave evidence of the following conversation:
Peter Foster said: The whole approach to this business is different from anything else I’ve done before.
I said: So the business plan you have is different?
Foster said: Yes completely different
I said: Just so long as things are being done differently, to your
other businesses.
Louise said: Yes everything is different, this is Peter’s last chance, he has to do things right. He has been working really long hours, and up until all hours of the night redoing and updating paperwork.
250 Mrs Emerton said that, at this meeting, Mr Foster produced two folders. One was for use by “the salesman”. The other was for use by “the client”. She said that Mr Foster gave an introduction on “how he expected the salesperson to deliver the spiel on the product”. When asked by Mr Emerton whether there could be any deviation from what was written, Mr Foster said:
No that’s the way I expect the salesperson to do it.
251 Mrs Emerton said that Mr Foster explained the procedure as follows:
The client comes in and watches the DVD, and you leave them alone to do this, then you come back and go through the paperwork with them. They have their folder and you have yours, the highlighted areas in the salesperson’s folder are the things that the salesperson has to say on each page.
252 She said that they watched a DVD concerning the SensaSlim product, which Mr Foster said he had prepared. According to Mrs Emerton’s recollection, Mr Foster said:
There is still some editing to be done, but you will get the idea. I’ve used the news reader [and he gave a name which I cannot recall], to do the presentation, you should know him, he used to read the news for Channel [I cannot recall which channel].
253 The second meeting at the Norseman Court house was later in January 2010, but before 25 January. This meeting was, once again, with Mr Foster. Louise Foster and Arabella Foster were present for parts of the meeting. Mrs Emerton said that Mr Foster again played the DVD concerning the SensaSlim product, saying that it still needed final editing and would be sent “back to Ballina again to have that done”.
254 Mrs Emerton said that the third meeting that she attended at the Norseman Court house was about a fortnight after she had accompanied Mr Emerton to a dinner held on 6 March 2010 at an Indian restaurant where she met Mr Covich and Ms Emberg, who accompanied Mr Foster. That third meeting was a lunch attended by Mr Foster, Louise Foster, Arabella Foster, Dr Waters and Mr Boyle, as well as Mr and Mrs Emerton. Mr Foster introduced Mr Boyle as “the Director of Sensaslim”. Mrs Emerton said that Mr Boyle said something to the effect of “I’ve made a capital investment in the company”.
255 Mrs Emerton was cross-examined by counsel for Mr Boyle. There were no matters arising from Mrs Emerton’s cross-examination that materially added to or qualified her evidence in chief.
Evidence concerning the making of the SensaSlim DVD
256 Sometime in the period August/September 2009, Mr Frare was approached by a man called Kevin Joseph to make a video for a company involved with a dietary/slimming aid. Mr Frare had been a freelance cameraman and editor. Over the period from about 1991 to 1996, he had been involved in television production for the Nine Network in programs such as Burke’s Backyard, Getaway, the Today Show and RPA.
257 This approach apparently came through Mr Frare’s association with Tracey Hannaford with whom Mr Frare had worked at a television station based in Lismore in the period 1986 to about 1989. Mr Frare understood Kevin Joseph to be Ms Hannaford’s boyfriend. The evidence establishes that Kevin Joseph was in fact Kevin McMullan, about whom Dr Waters and Mr Emerton also gave evidence. I will treat Mr Frare’s evidence concerning Mr Joseph as referring to Mr McMullan
258 Mr McMullan’s first contact with Mr Frare was by telephone. In his evidence, Mr Frare recounted a conversation in which Mr McMullan explained that the video would be 15 to 20 minutes in length; most of the footage would be supplied from an existing video which would come from overseas; and the scripts were currently being written by a man named “Peter” who was “very experienced in this sort of thing”.
259 Following this initial telephone contact, Mr Frare received emails from Mr McMullan, who used the email address joseph.imom@gmail.com.
260 Mr Frare later contacted one of his colleagues, Richard Woolley, who agreed to be the cameraman on the assignment.
261 On 10 December 2009, Mr Frare and Mr Woolley drove to a “large Queenslander style house” at Uki, which was the location for a restaurant known as Mavis’s Kitchen. On arrival, they were met by Mr McMullan, who then introduced them to the man called “Peter”. Subsequently, through photographic evidence, Mr Frare identified “Peter” as Mr Foster. I am satisfied, on the basis of that identification evidence, that “Peter” was Mr Foster. It is convenient when dealing with Mr Frare’s evidence to now refer to “Peter” as Mr Foster.
262 Mr Foster gave Mr Frare a script which included reference to a pre-existing DVD, at least part of which was then shown to Mr Frare on Mr Foster’s laptop computer. Mr Frare said that Mr Foster wanted a part of the script (shown to him by Mr Foster) “to look like this part of the DVD I’m showing you”.
263 The restaurant was located on land that included a number of small cottages and a large bungalow. After considering the site, Mr Frare and Mr Woolley chose the restaurant itself as the location for the shoot. Mr Frare said:
Kevin presented the talent to us as each actor came to be needed by the script. Talent is a term used in the television production industry to refer to anyone who is going to appear on camera. There were four people that comprised the talent for the morning component of the shoot. They had foreign accents. Each time a new person was referred to in the script he or she would come forward.
After shooting in the restaurant for a period of time, the four people left as they were no longer required.
264 The afternoon of the shoot did not go well. Mr Frare said that the presenter was “having difficulty remembering the lines and was not presenting well”. Mr Frare formed the view that this “talent” needed to be replaced. He informed Mr Foster and Mr McMullan of his view. Filming ceased for the day. Mr Frare said that, when he and Mr Woolley were leaving the restaurant, Mr McMullan informed them that “Peter” was Mr Foster. Mr McMullan asked them to keep the details of the shoot confidential.
265 The reshoot took place in about late December 2009 at a residence on the Gold Coast. Through Mr Frare’s efforts, a new presenter was engaged. The evidence reveals that the new presenter was Mr Murphy to whom I have referred. On the basis of Mr Frare’s description of the residence, and his identification of it in photographs, I am satisfied that the new location was the Norseman Court house. This evidence also accords with Mr Emerton’s evidence that, on viewing the DVD shown to him by Mr Foster, he recognised that part of it was shot at the Norseman Court house.
266 On this occasion, Mr Frare was introduced to a young woman called Arabella, whom he had recognised as also being present at the Uki shoot; another young woman called Layla; and a man called Norman. He also recalled a woman at the shoot called Liana.
267 After the shoot on that day, Mr Frare gave Mr Foster an invoice for $3,200. Mr Foster said that the invoice would be paid “tomorrow”. When he had not been paid by 29 December 2009, Mr Frare sent an email to Mr McMullan and Mr Foster using the address william.imom@gmail.com. He received responses from “P”. I am satisfied that these responses were sent by Mr Foster. Mr Frare received further emails from “Peter”, “PF” and “P” from this address. Generally, these emails concerned the editing of the DVD that was to be prepared. I am satisfied that these last-mentioned emails were also sent by Mr Foster.
268 One email gave a contact telephone number for Mr Foster as 0458 000 669. Other evidence shows that this telephone number was one used by Mr Foster, although the service was formally recorded as in the name of William Duffy. Mr Foster gave this number to his accountants as a personal contact number. As noted below (see [287]), Mr Foster also gave this number to Mr Woolley. Additionally, Mr Foster told the applicant’s solicitors that this was a number used by him. Despite the formal recordal of this service in the name of William Duffy, I am satisfied that this number was one used exclusively by Mr Foster as one of his personal mobile telephone numbers.
269 On 22 January 2011, Mr Frare commenced sending emails to Mr Foster at the address pobrien@sensaslim.com. Mr Frare said:
… Richard Woolley had forwarded me this email address as a contact for Peter Foster. I believed that this email address was just another email address to contact Peter Foster on. Peter Foster, Layla and Kevin were the only people that I had been dealing with in relation to the DVD footage. I did not know anyone by the name of ‘Peter Obrien’ and I wasn’t aware of the role of a ‘Peter Obrien’ in relation to Sensaslim.
270 Mr Frare gave evidence of a number of subsequent email communications with Mr Foster using this email address and the address william.imom@gmail.com. He also gave evidence of a number of telephone conversations with Mr Foster. A number of these communications related to editing work which Mr Foster wanted Mr Frare to undertake, as well as the delivery of the final product. Mr Frare identified the final product as the SensaSlim DVD.
271 Mr Frare was subsequently approached to shoot the “Versace launch” of the SensaSlim product (that is, the Area Managers’ Conference). He was not interested in doing the work and referred the job to Mr Woolley. As events transpired, Mr Frare agreed to be Mr Woolley’s sound recordist for the job.
272 Mr Frare gave evidence of a number of observations he made at the Area Managers’ Conference:
I recall that at some stage during the launch, a man took the stage. I cannot now recall whether someone else introduced him as Peter O’Brien or he introduced himself as Peter O’Brien. This grabbed my attention because prior to this, I wasn’t aware of an actual person by the name of Peter O’Brien in connection with Sensaslim and had assumed that I was corresponding with Peter Foster at the email address ‘pobrien@sensaslim.com’, being one of many email addresses that Peter used to communicate with me. I was holding the microphone at the time that Peter O’Brien took the stage. Although I didn’t have a good look at him when he took the stage, the Peter O’Brien that took the stage was not Peter Foster.
273 In November 2010, the day after the Area Managers’ Conference, Mr Frare and Mr Woolley returned to the Palazzo Versace Hotel to shoot an interview. At that time, Mr McMullan introduced Mr Frare to Mr Adams. Mr Frare said that he recalled that, during the Area Managers’ Conference, Mr Adams had been introduced to the audience. Mr Frare identified Mr Adams from photographic evidence.
274 Mr Frare was told that they would be shooting an interview between Mr Adams and a Dr Capehorn. Mr Frare saw Mr Adams give directions to Dr Capehorn to talk from a supplied script. Mr Adams directed the filming between takes.
275 Mr Frare also gave evidence of assisting Mr Woolley, after the Area Managers’ Conference, to shoot an advertisement for the SensaSlim product involving interviews with two young women who were twins and two young men who were twins. Prior to the shoot of the interview with the two young women, the script was discussed with Mr Foster. Mr Frare gave this evidence:
During the conversation, I recall that Peter Foster kept going over the importance of certain lines of questioning. I understood from this that Peter Foster wanted to make clear in the video that each set of twins had been competitive about their appearance and that one twin had taken the Sensaslim product and lost weight as a result of taking the product, whilst the other twin hadn’t lost weight and the reason for not losing weight was because the other twin had taken a placebo.
276 Mr Frare said that he was also approached by Mr Adams to do some further work in relation to the SensaSlim product. Mr Frare declined to be involved in that work.
277 Since 1994, Mr Woolley has been the sole director of RSW Holdings Pty Ltd, a video production company based in Alstonville, New South Wales. It trades under the name Vision 21. Mr Woolley is a freelance cameraman and photographer.
278 As is apparent from my summary of Mr Frare’s evidence, Mr Frare and Mr Woolley were colleagues and involved in the production of the SensaSlim DVD and in filming other material promoting the SensaSlim product. Mr Woolley gave evidence about shooting the SensaSlim DVD at Uki and at the location I have found to be the Norseman Court house. He also gave evidence about his involvement in the shoot of the Area Managers’ Conference at the Palazzo Versace Hotel on the Gold Coast, the interview with Dr Capehorn and the interview with the twins. Mr Woolley’s evidence corroborated a number of matters in Mr Frare’s evidence.
279 In relation to the shoot of the SensaSlim DVD at Uki, Mr Woolley gave evidence that he was introduced to “Peter” and “Kevin”. At the time of preparing his affidavit, he was shown a photograph of Mr Foster. He identified the “Peter” to whom he had been introduced as Mr Foster. He identified “Kevin” as Mr McMullan. His evidence was that, when travelling to Uki with Mr Frare, Mr Frare said that “Kevin McMullan is the contact that we are working with on this job”. He said that he observed Mr Foster and Mr McMullan “giving directions to Peter Frare as to the shoot”. He also observed Mr Foster and Mr McMullan giving directions to Mr Frare at the resumed shoot of the SensaSlim DVD at the Norseman Court house, although he said that Mr Foster did not stay for the shoot itself.
280 Mr Woolley said that, on about 12 November 2010, he travelled to Carrara on the Gold Coast to discuss the editing of a video with Mr Foster and Mr McMullan. After an initial meeting with Mr McMullan, Mr Woolley said that he and Mr McMullan travelled to a nearby residence, which Mr Woolley described as “a large home surrounded by a large brick wall with gated entry”. Mr Woolley said:
Once inside the residence I was met by Peter Foster and a person introduced to me by Kevin McMullan as Adam Adams. Kevin McMullan told me that Adams was a [manager] for Sensaslim. We had general discussions about editing of the Sensaslim DVD and each person was engaged in the discussion. I recall I had a conversation with Peter Foster which included words to the following effect:
Peter Foster said: We are looking to put some more modern scenes into the “all together now” DVD to bring it up to date ?
I said: Okay.
281 Mr Woolley subsequently corresponded with Mr Foster by email. Mr Foster used the email address pobrien@sensaslim.com.au.
282 Mr Woolley said that, leading up to the Area Managers’ Conference at the Palazzo Versace Hotel on the Gold Coast, he received an email from Mr Foster, who used the email address bill.imom@gmail.com. The email related to editing a video called “All Together Now”. This is the video that Mr Foster discussed with Mr Woolley at the meeting on 12 November 2010. Mr Woolley understood that this video was to be used as a motivational tool at the Area Managers’ Conference.
283 Mr Woolley confirmed that he attended the Palazzo Versace Hotel on the Gold Coast in November 2010 to shoot the Area Managers’ Conference. He recalled a number of people being introduced onstage including Mr Adams, Dr Capehorn and the female twins.
284 He said that, on the following day, he shot an interview in the conference room at the Palazzo Versace Hotel between Mr Adams and Dr Capehorn. Mr Woolley said that he observed Mr Adams asking Dr Capehorn questions. Mr Adams was reading the questions from a script he had in his hand. He said that Mr Adams was also directing the shoot.
285 Mr Woolley said that, on 14 December 2010, he emailed Mr Foster at peter@fosterworldwide.com to inform him that he was available to do the shoot with the female twins. He said that this email address “was not really known to me”. It was nevertheless the address used by Mr Foster when sending an earlier email to Mr Woolley.
286 Mr Woolley said that the shoot took place in December 2010 at an apartment complex close to the Southport shopping strip. He said that Mr Adams greeted him and Mr Frare. The shoot of the female twins took place by a pool located in the apartment complex. Mr Woolley said that, later, at a different location, he and Mr Frare shot the interview involving the two male twins. This interview was conducted by a person Mr Woolley identified as Tracey McMullan. It is clear, reading this evidence in conjunction with Mr Frare’s evidence, that Tracey McMullan is the same person referred to by Mr Frare as Tracey Hannaford. Mr Woolley said that Mr Adams and Ms McMullan were directing the shoot at that location.
287 At about this time, Mr Woolley received another email from Mr Foster using the address bill.imom@gmail.com. This email gave instructions in relation to editing work that Mr Foster wanted Mr Woolley to undertake. It is possible that these instructions related to the shoot of the interview with Dr Capehorn. In any event, I am satisfied that the work that Mr Woolley was asked to undertake in this email related to the promotion of the SensaSlim product. In that email, Mr Foster gave Mr Woolley the mobile phone number 0458 000 669. He asked Mr Woolley to call him on that number before he started editing.
288 Later, on 22 March 2011, Mr Foster sent an email to Mr Woolley using the address pobrien@sensaslim.com.au. In this email, Mr Foster asked Mr Woolley to edit footage of Dr Capehorn to insert into a four-minute advertorial.
289 Mr Woolley said that, in about June or July 2011, he was contacted by Mr Adams on two or three occasions to do some more work for SensaSlim. Mr Woolley said that he declined to do this work and that, on 5 October 2011, he received a text message from Mr Adams’ mobile phone number asking him to return “all of the Sensaslim material that Vision 21 has in its possession”.
The evidence of Sales Managers and Area Managers
290 In the period early May to November 2010, Ms Stanistreet worked as a Sales Manager for SensaSlim and also became an Area Manager.
291 She first heard of the SensaSlim business (although the name of the business was not identified) in an advertisement published in The Courier-Mail. The advertisement referred to the launch in Australia of “a revolutionary new product that is destined to dominate in an industry worth over $1 billion”. It represented that Area Managers could earn over $4,000 per week. This latter representation caught Ms Stanistreet’s attention. She said:
… I also noted that the advertisement included a reference to an article that had appeared in Time Magazine, which provided credibility to the product, and that there was a buyback guarantee, which was attractive to me because it meant that there would be no financial risk.
292 Ms Stanistreet telephoned the number in the advertisement and left a message for the person named in the advertisement as Scott Waller. Based on Mr Emerton’s evidence, I am satisfied that the person referred to in the advertisement as “Scott Waller” was in fact Mr Emerton. When summarising the more salient parts of Ms Stanistreet’s evidence, I will treat her references to Scott Waller as being to Mr Emerton.
293 On 29 April 2010, Ms Stanistreet attended a meeting in a serviced apartment in Spring Hill, Brisbane. On arrival, she was met by Mr Emerton and Brendan Roach. Mr Emerton introduced himself as the SensaSlim National Sales Manager. He introduced Mr Roach as “someone starting out with Sensaslim”.
294 Ms Stanistreet said:
We entered the apartment and I was shown a Sensaslim Information DVD. I watched it alone for about 40 minutes. While watching the DVD I noted that it was a weight loss product and was immediately disinterested. It wasn’t until I saw the claims about the trials that I became interested in the product. Because of my scientific background, I was impressed with the results and considered these trials to be evidence that the product worked. Had it not been for the information regarding the clinical trials of Sensaslim, I would not have purchased my distributorship.
295 Ms Stanistreet’s reference to her scientific background is to the fact that she holds a Bachelor of Applied Science (Medical Laboratory Technology) degree.
296 When the DVD had finished, Mr Emerton returned to the room and gave her a number of documents, including:
the KMB letter;
the Robinson Legal letter; and
the Area Manager Proposal.
297 At the end of the meeting, and after going through the proposal, Ms Stanistreet was given:
the Disclosure Document;
the Frequently Asked Questions document; and
the Franchising Code.
298 When describing how Mr Emerton went through the documents with her, Ms Stanistreet said:
Scott also drew my attention to Michael Boyle. He was the Senior Director of Sensaslim and I considered him to be the face of the business, as detailed information about him appears on page 1 of the Area Manager Proposal. That page describes him as being employed as an Associate Director of UBS Wealth Management. I considered that Michael Boyle’s involvement with Sensaslim was solid proof that this was a bona fide company. I had not heard of Michael Boyle before my meeting with Scott, but Scott said to me words to the effect: “Michael Boyle has been working in Switzerland, and is an upstanding member of the Sydney business community.”
299 Ms Stanistreet also said that Mr Emerton went through the KMB letter with her and said words to the effect:
KMB have put no disclaimer on their approval of Michael Boyle. If Michael Boyle wasn’t who he said he was, we could sue KMB.
300 At the conclusion of the meeting, Ms Stanistreet indicated to Mr Emerton that she was “pretty interested in becoming a franchisee”. Later that night, she received a call from a man who identified himself as Peter O’Brien. Ms Stanistreet said he claimed to be a director of SensaSlim. She said that she found “Mr O’Brien” to be “a very engaging person”. She said she “felt an instant rapport with him”. During the conversation, Mr O’Brien offered her a franchise and also a position as a Sales Manager, which she accepted.
301 On 1 May 2010, she signed a Franchise Area Manager Agreement. The next day, she conducted some internet searches by entering the term “SensaSlim” in the Google search engine. She also entered the term “Intercontinental Research Institute” as she understood this to be the organisation which had undertaken clinical trials on the SensaSlim product. It is not necessary for me to summarise the results of those searches, other than to note that one result led her to initiate further internet inquiries which resulted in her receiving the following email from the address sciencereview@publicist.com:
Dear Lindy,
In reply to your query, we can confirm the Sensaslim trials results were authenticated prior to our release being published. We also completed category 5 fact checking to a high level of satisfaction.
There is a embargo on the paper being published in full until July 30, 2010 pursuant to confidentiality agreements with the worldwide owner of the product Sensaslim. This is due to coincide with the planned release of the product to the general public.
We cannot assist you with any issues regarding you “purchasing an area” as we have no knowledge of their business activities, but have on-sent your email to our client company for them to direct your query to Sensaslim Suisse.
In regard to the lawsuit in the article to which you refer, media agencies reported that the law suit was dismissed in favor of Sensaslim.
We hope this is of some assistance to you.
Yours faithfully,
Rebecca Maund
Administration & Reporting Manager EU
SRS
302 Ms Stanistreet also sent an email to what she believed to be the head office of SensaSlim in Switzerland. On the following day, 3 May 2010, she received the following email from the address legal@sensaslim.com:
ChargÉ d’affaires
Dear Madame Lindy,
Thank you for your email which has been forwarded to my office for reply.
Your email has been re-directed to me by our website managers for answer on the week-end, and accordingly there is only limited information I have available without speaking to my colleagues on Monday who handle the Asia Pacific region out of the United Kingdom.
I note that you have stated in your query, that you are interested in purchasing an area in Australia to sell SensaSlim. I must advise that the Australian master distributorship license was secured by Mr. Michael Boyle and his business partner, Mr. Peter O’ Brien. The exclusive license is for a term of 20 years (with renewal options) and they operate through an Australian registered company called Sensaslim Australia Pty Ltd.
Therefore, under the terms of the licence agreement, we must refer you and all distribution issues you have to the Australian company in relation to any matter of obtaining their permission to sell and distribute SensaSlim. We cannot sell you an area ourselves or authorise you to distribute, and ask that you contact SensaSlim Australia Pty. Ltd. It is a fundamental requirement of our agreement that we do so.
We are confident you will find Sensaslim Australia Pty Ltd. dependable and reliable. Prior to assigning the license we needed to satisfy ourselves as to not only their financial stability, but their ability to conduct the business in a professional and forthright manner. Our investigations lead us to believe that they are honest, reliable and trustworthy and are fully capable of meeting their financial commitments and ensuring all business dealings are conducted to the highest standards.
If you have any specific queries in regard to Australian operations, or franchise opportunities, you would have to refer to the Sydney, Australia office. Their telephone number is +61 2 9375 2230. They will also be able to [assist] you with information as for delivery of product, and samples, although I am at liberty to confirm that we are currently manufacturing their first order, second and third orders, so product most definitely is able to be supplied as required.
Please contact me at legal@sensaslim.com should you require any further information.
Yours very sincerely and respectfully,
René Désbois
Legal Department - International Affairs
303 It is convenient at this point to return to Mr Emerton’s evidence. His evidence establishes that Ms Stanistreet’s inquiry that led to her receipt of the email ostensibly from “Rebecca Maund” was passed on to Mr Foster at the address pr@sensaslim.com. The text of Ms Stanistreet’s inquiry was as follows:
I am interested in purchasing an area in Australia for the sale of SensaSlim. Did you carry out the research trials on this product? I am trying to do my due diligance [sic] and satisy [sic] myself that the product does actually exist as I have not been able to actually see any evidence of the product itself. I would greatly appreciate it if you could email me.
304 Mr Foster forwarded a copy of this inquiry to Mr Emerton. Mr Foster used the email address bill.imom@gmail.com. When doing so, he said:
Looks like the 10 to 1 on shot got up.
I’ll do a reply later today - of course we are not meant to know.
305 Mr Foster subsequently sent Mr Emerton a copy of the reply to Ms Stanistreet’s inquiry. The reply was the email I have quoted at [301] above. I am satisfied that Mr Foster was the author of that reply and that, when replying, he adopted the name “Rebecca Maund”.
306 On 3 May 2010, Mr Foster sent an email chain to Mr Emerton which included a copy of the email I have quoted at [302] above and Ms Stanistreet’s response, which was:
Dear Rene,
Thank you for your email. You have supplied all the information that I required.
I appreciate your time and thank you for your prompt reply,
Yours sincerely,
Lindy Stanistreet
307 Mr Emerton responded to Mr Foster’s email to him as follows:
Hi,
Very Creative writing Rene.
In the book written by Bernie Mathews that Vik has finished reading there is mention of a Peter Foster a welterweight going to Parramatta jail on 2 occasions to fight a bout against “Irish Jim” Smith, the second of which was televised by the ABC. Peter apparently won both fights on points. Popular name.
308 I am satisfied that Mr Foster was the author of the email quoted at [302] above and that, in replying to Ms Stanistreet, he used the name “René Désbois”.
309 On 4 May 2010, Ms Stanistreet paid a deposit for her franchise area. On 5 May 2010, she received a letter, ostensibly from Mr Boyle, welcoming her to “the SENSASLIM™ family”.
310 Ms Stanistreet said that, during her involvement with SensaSlim, she received weekly newsletters. She identified the newsletters in a schedule to her affidavit.
311 Ms Stanistreet received her training as a Sales Manager for SensaSlim from Mr Emerton. Mr Emerton provided her with a sales manual to guide her in her presentations to prospective franchisees. She was also given a telephone inquiry sheet. She said:
I was instructed by Scott and by the manual to go through the Area Manager Proposal in detail, on a page-by-page basis. In my presentations to potential franchisees, I followed a similar practice each time, which was to show people the DVD, then provide them with the documents … and go through the Area Manager Proposal with them in detail. My practice was to leave the room while the DVD was being shown. This was not something I was instructed to do, rather I did so simply because I had heard and seen the DVD many times.
312 Ms Stanistreet said that she began to travel extensively selling franchises on behalf of SensaSlim. She sold franchises in Queensland and Victoria.
313 Ms Stanistreet gave evidence of a number of conversations she had with Mr O’Brien in the period July to November 2010. It is not necessary for me to record the detail of those conversations in this summary of Ms Stanistreet’s evidence.
314 Ms Stanistreet attended the Area Managers’ Conference at the Palazzo Versace at the Gold Coast on 29 and 30 November 2010. Ms Stanistreet said that she met Dr Capehorn briefly. He was introduced to her by Mr Adams. She said that, at the Area Managers’ Conference, she introduced herself briefly to Mr Boyle. She said that she did not meet Mr O’Brien. She said that:
… Because I wanted to meet Peter, I tried to phone him, but all that he said was words to the effect: “I am busy in negotiations with Oprah’s people”. Adam Adams was also there. Richard Cooper and Robin from Sensaslim International were present also. I considered the seminar to be more of a show than a launch. There was no meet and greet except for Michael Boyle who did a general welcome and announced the promotion of Adam Adams to General Manager. … The content of the presentation was rubbish. It appeared to me as if it had been set up overnight.
315 Ms Stanistreet also said:
… In the period from May to November 2010, I was in regular contact with Peter O’Brien. I would speak to him at least twice a day, and for at least 5 to 10 minutes in each instance. Peter was interested to know what leads I had, and what I thought of the people I had met, and he was very pleasant to talk to.
316 In January 2011, Ms Stanistreet received 20 cartons of the SensaSlim product. She decided not to place any stock with retailers until advertising for the product commenced. She said that, as it turned out, the advertising never started.
317 In January and February 2011, some Area Managers raised with Ms Stanistreet the prospect that there was a connection between the SensaSlim product and a product called SlimMist (there are various spellings in the evidence), with which Mr Foster was connected. On one occasion, she raised this possibility with Mr O’Brien who told her that there was no such connection. Also, in February 2011, an Area Manager suggested to Ms Stanistreet that there was a link between Mr O’Brien and Mr Foster. This caused Ms Stanistreet to enter the name “Peter Foster” into the Google search engine. She found, by this means, the website www.peterfoster.com.au. In respect of this site, Ms Stanistreet said:
… I listened to a recording of an interview with Peter Foster by Monica Attard. After a couple of minutes Peter Foster starts to speak, I immediately recognised the voice. There was no doubt in my mind that this was the voice of the person known to me as Peter O’Brien.
318 I am satisfied that the person with whom Ms Stanistreet spoke on the telephone and corresponded as Mr O’Brien was in fact Mr Foster.
319 Ms Stanistreet was cross-examined by counsel for Mr Boyle. There were no matters arising from Ms Stanistreet’s cross-examination that materially added to or qualified her evidence in chief.
320 From June to 30 November 2010, Mr Evans was employed as a Sales Manager for SensaSlim. In this role, he interviewed prospective franchisees and promoted the SensaSlim business to them to encourage them to become Area Managers. To the best of his recollection, he sold 29 territories to franchisees in Victoria, South Australia, Western Australia, New South Wales and Tasmania. He also conducted interviews in Queensland.
321 From 1 December 2010 until April or May 2011, he, in partnership with his wife, was an Area Manager operating the SensaSlim Bulimba franchise.
322 Mr Evans said that he first became aware of the SensaSlim business when he read an advertisement in The Courier-Mail on 24 or 25 April 2010. This advertisement advertised a business opportunity to become an Area Manager earning over $4,000 per week in respect of a product to be launched in Australia that was said to be “a revolutionary new product that is destinated [sic] to dominate in an industry worth over $1 billion”. On about 28 April 2010, Mr Evans called the telephone number shown in the advertisement and left a message for someone to call him back. He said that, within a few days, a man named Scott called him back. When Mr Evans sought information about the business, Scott said:
We don’t like to give too much information over the phone, we have a DVD presentation that runs for about 40 minutes, come into the office and watch it and then we can go through everything after that.
323 Mr Evans made an appointment for a meeting and, in late April 2010, went to a serviced apartment in central Brisbane with his wife, where they met a man who identified himself as John. John said that he would play a DVD to Mr and Mrs Evans and then go through an Area Manager Proposal with them. Mr Evans said:
John played the DVD. I noted that the Sensaslim spray was a weight loss product. That was the first time I had seen or heard of the Sensaslim spray, or the name “Sensaslim” at all. A reference was made in the DVD to oil of cloves being an ingredient. My wife had recently had dental surgery, so I was aware of the numbing effect of the oil. I also noted that dentists, professionals had made representations … about the effect of the oil on numbness and weight loss.
324 After Mr and Mrs Evans had viewed the DVD, John went through the Area Manager Proposal with them. This document is in evidence. It contains notes made by Mr Evans during the course of the meeting. Mr Evans said:
I recall reading page 1 of the document and thinking that it was an attractive feature of the business that someone of Michael Boyle’s calibre was running it, because he was an associate director of UBS Wealth Management Australia Ltd, and the fact that he was PS146 compliant as required by ASIC. Because of his involvement as stated in the Area Manager Proposal, I thought the business was a pretty safe bet as Mr Boyle would be putting his reputation on the line by operating it. When he took me to that page, John reiterated the importance of Mr Boyle being involved and being PS146 compliant.
325 Mr Evans gave detailed evidence of the conversation he had with John in respect of the Area Manager Proposal. It is not necessary to record the detail of that evidence. John took Mr and Mrs Evans to particular pages in the document, making comments at various points. John provided Mr and Mrs Evans with a “product pack” containing the following documents:
the KMB letter;
the Disclosure Document;
the Frequently Asked Questions document;
the Franchising Code;
the Robinson Legal letter; and
the Price and Potency Advantages document.
326 Mr Evans said that, shortly before the meeting ended, “Scott Waller” arrived. He said that this was the first time that he had met “Mr Waller”. In light of Mr Emerton’s evidence of his adoption of the alias “Scott Waller”, I am satisfied that Mr Evans had in fact been dealing with Mr Emerton. I will, therefore, treat Mr Evans’ evidence concerning “Scott”, “Scott Waller” and “Mr Waller” as references to Mr Emerton when further recording Mr Evans’ evidence.
327 On 1 May 2010, Mr Evans received a follow-up telephone call from Mr Emerton concerning the presentation that he and Mrs Evans had attended. On the same day, shortly following that conversation, Mr Evans said that he received a telephone call from a man who identified himself as “Peter O’Brien, the director of … Sensaslim Australia”. In part, this conversation related to the franchise areas that would be available to Mr and Mrs Evans. Mr O’Brien subsequently sent an email to Mr Evans providing information about franchise areas. Mr Evans also received some telephone calls from Mr O’Brien inquiring whether Mr Evans “wanted to be a part of the business”. In one of those telephone conversations, Mr O’Brien said:
I was a big sceptic at first, one of the biggest. That was until Michael Boyle had paid for me to travel to the facility in Switzerland and see it firsthand for myself. After seeing it in operation, I was sold.
328 Mr Evans gave this evidence:
When Mr O’Brien referred to the “facility”, I understood him to be referring to the Sensaslim factory and research facility in Switzerland.
I was reassured knowing that he was initially hesitant, as I felt the same way. I was then convinced by the fact that he had said he was sold upon seeing the facility in Switzerland.
Mr O’Brien was very succinct and sounded very confident. I thought he sounded like an astute businessman and was very reassuring.
On one occasion, Mr O’Brien said to me words to the effect: “I will get an area manager who also has a science background to give you a call”.
329 In early May 2010, Ms Stanistreet gave a repeat presentation to Mr and Mrs Evans and also to their daughter and son-in-law. Mr Evans understood that Ms Stanistreet was not just a sales representative, but an Area Manager herself. He said that he found this to be encouraging as he thought that she was more than just a salesperson and would have done her own research. Despite the encouragement that Mr Evans received from this presentation, his daughter and son-in-law were anything but encouraged. Mr Evans’ son-in-law said that he “wouldn’t touch it with a 40 foot pole”. Having felt discouraged by this reaction, Mr Evans decided that, as part of his due diligence, he would undertake some research into Mr Boyle. Mr Evans said:
I re-read page 1 of the Area Manager Proposal which contained information on Mr Boyle. He seemed to me to be the face of the Sensaslim business, as his photo was on the front page of the area manager proposal. As the proposal stated that he was employed by UBS, I contacted UBS to check this and they advised he was employed by them. This was significant to me as I thought this provided credibility to the company.
330 Ms Stanistreet sent some further materials to Mr Evans, which Mr Evans said were “to assist with our due diligence”. He also had further conversations with Mr O’Brien that “would last for up to one hour”. On about 11 May 2010, he decided “to sign up”. He said that the buyback guarantee made him think that there was no risk, and it was attractive to earn over $4,000 per week. Mr Emerton met with Mr Evans on 12 May 2010 to arrange for payment of his deposit and provided him with a copy of the Franchise Area Manager Agreement, which Mr and Mrs Evans signed. Mr Evans said:
I signed the agreement on the basis of the representations made to me during the presentations by John and Ms Stanistreet, as well as several telephone discussion[s] with Peter O’Brien, and the representations in the area manager proposal, frequently asked questions document and the disclosure document. In particular, I was persuaded by the buyback guarantee and the profitability.
331 Mr Evans said that, following this, he received a letter dated 12 May 2010 from Mr Boyle as a welcome letter to SensaSlim.
332 Mr Evans said that he was so convinced about the business that he discussed with Mr Emerton the possibility of becoming a Sales Manager himself. Mr Evans said that, in May 2010, he had many discussions with Mr O’Brien, mostly over the telephone, on this subject. He said that, at some stage in May 2010, he was finally offered a position by Ms Stanistreet.
333 Mr Evans said that, at the end of May 2010, he received training as a Sales Manager from Ms Stanistreet. This training took place in the lounge area of a hotel. He received a bundle of documents. One of these was entitled “Handling Queries”. Another was entitled “How to Sell Areas”. Mr Evans said that the last-mentioned document was the Area Manager Proposal with additional information about how to sell, and answer queries, “to reinforce the positives of the product”. He was also instructed by Ms Stanistreet to follow a “Telephone Inquiry Sheet”, with which he was provided.
334 On about 14 June 2010, Mr Evans flew to Melbourne with Ms Stanistreet to carry out interviews with prospective franchisees. Ms Stanistreet had a list of appointments. Mr Evans said:
Ms Stanistreet provided me with “leads”, which were contact details of people who had seen the advertisement and phoned the number in it. I then contacted the people on the list under Ms Stanistreet’s observation and guidance. Following the questions set out in the telephone inquiry sheet, I would then invite them in to attend a sales presentation if they qualified based on their answers to those questions. If they accepted, I would meet them, play the DVD to them, and provide them with the documents that I had been provided in my first meeting with John. …
335 Mr Evans said that, during the course of most days that he was conducting sales presentations, his practice was to speak with Mr O’Brien by telephone to update him on how the sales were going. He said that Mr O’Brien made a point of telling him on several occasions that he should “create a sense of urgency in the sales environment”.
336 In September 2010, Mr Evans travelled to Sydney with Mr Emerton. Mr O’Brien had indicated to him that he would benefit from Mr Emerton’s sales experience. Mr Evans said that he made about six sales in Sydney, and then travelled up the New South Wales coast doing a number of presentations, including at Coffs Harbour. In October 2010, he returned to Melbourne and sold three areas before travelling to Perth. He said:
During these trips, it was my practice to speak to Peter O’Brien between three and four times a day, each call lasting five to 10 minutes. I would call him on a direct line. I would call him on [numbers which Mr Evans gave]. I still have those numbers in my phone. We mostly spoke about how the presentations were going and also I would like to follow-up on potential applications and see whether Mr O’Brien had approved certain potential area managers. From late May 2010 to November 2010 I was in constant daily telephone contact with Mr O’Brien, and also by email. …
337 The Area Managers’ Conference was meant to be in August 2010. It was, however, delayed. Mr Evans said that, in October 2010, he began receiving calls from Area Managers who expressed concern about the delay in the launch of the product. He said that, at this point, he started receiving newsletters explaining that “the delay was due to TGA approval and what else was going on …”.
338 In October and November 2010, Mr Evans continued to travel including to South Australia.
339 In about early November 2010, several Area Managers (including Mrs Evans and Ms Stanistreet) raised the issue of wanting to see the SensaSlim product. Mr Evans said that he rang Mr O’Brien and told him that Area Managers were asking to see the product. In the course of this conversation, Mr Evans said that he raised the suggestion that Area Managers might pay their remaining “deposits” after the Area Managers’ Conference that was to launch the SensaSlim product. He said:
Peter blew his top at that suggestion. He said to me words to the effect: “No way. Everybody will have to pay before they can go inside”. His tone sounded firm and angry.
340 Mr Evans attended the Area Managers’ Conference at the Palazzo Versace on the Gold Coast in November 2010. Mr Evans said that, after registering and paying the balance of his deposit, he assisted in putting together packages for the Area Managers. He said that, at that time, Mr Adams introduced himself and also introduced Mr Boyle. Mr Evans said that he recognised Mr Boyle from the Area Manager Proposal.
341 Mr Evans said:
During my time as sales manager, even while in Sydney selling areas, close to Sensaslim head office, where I had also assumed Mr O’Brien worked, I had never met him. Therefore, at the launch I went around asking people “where is Peter O’Brien?” as I just wanted to meet the guy and put a face to his voice. I did not see him at the launch. When I asked Adam Adams where Peter was, he said to me words to the effect: “He’s tied up at the moment.”
342 Mr Evans said that the first he knew of Mr Foster was when he was in country Victoria in June or July 2010. A person to whom he was trying to sell a franchise said:
This is the same marketing as another product that ripped my friend off called ‘Slim Mist’. Peter Foster was behind Slim Mist. This is exactly the same product. My friend has a garage full of the stuff.
343 Mr Evans said that he spoke to Ms Stanistreet and to Mr O’Brien about his experience, but they dismissed his concern. Mr Evans said that, notwithstanding this concern, he did not feel the need to investigate further because he had researched Mr Boyle and “thought that he was credible”.
344 In January 2011, Mr Evans received delivery of the SensaSlim product. However, according to him, there was supposed to be four weeks of advertising prior to the product arriving, and this had not occurred. He communicated this concern by “some enquiries with Sensaslim’s head office”, but received a telephone call from Mr Adams, in which Mr Adams said:
You are a trouble-maker in asking about Peter O’Brien at the seminar and are stirring up other area managers.
345 Mr Evans’ concern about the SensaSlim business did not abate. In February 2011, he received a telephone call from another Area Manager, Scott Charles, who asked Mr Evans whether he thought that Mr Foster was involved in the business. This led to Mr Evans doing some internet searches on the name “Peter Foster” which led him to the ABC interview with Mr Foster conducted by Monica Attard. Mr Evans said:
My wife and I clicked on this interview to hear his voice. I wanted to do that because I’ve spoken to him for so long that I reckoned that I would know his voice straight away.
I downloaded the ABC interview from abc.net.au. It is quite lengthy. About 2 minutes into the interview, a person named Peter Foster starts to speak. I noticed his voice, the pitch, tone and inflection and the way he pauses and says “uh”. As soon as he spoke I was 100% positive it was the voice I had spoken to numerous times, the person I knew as Peter O’Brien.
346 I am satisfied that the person with whom Mr Evans spoke on the telephone and corresponded by email as Mr O’Brien was in fact Mr Foster.
347 On coming to the realisation that the person he knew as Mr O’Brien was Mr Foster, Mr Evans travelled to Sydney in March 2011. He gave this evidence:
… I went to UBS at Chifley Towers to talk with Michael Boyle. I met with Mr Boyle and we discussed the outstanding money Sensaslim owed me. He took me into a side room. When [sic] then had the following conversation which included words to the effect:
Michael said: “When I got your demand I sent it though I was hoping they had paid you. Really it’s nothing to do with me”.
I said: “Mate you’re part of it, you’re a director, you’re the face of the company and you’ve got a say in it”.
Michael said: “This is just like many business deals. As I see it, I’m just a financier, I just put the money in”.
After the meeting, as I went to get into the lift, we had a conversation in words to the following effect:
I said: “Have you ever met Peter O’Brien?”
Michael said: “Yes a couple of times”.
I said: “Did you go to Switzerland with Peter O’Brien”.
Michael said: “I travelled to England with Peter O’Brien”.
348 Mr Evans also gave evidence that he received weekly SensaSlim email newsletters. The newsletters he received were identified in a schedule to his affidavit.
349 Mr Evans was cross-examined by counsel for Mr Boyle. There were no matters arising from Mr Evans’ cross-examination that materially added to or qualified his evidence in chief.
350 Between mid-September 2010 and 6 June 2011, Mr Bubb worked as a Sales Manager for SensaSlim. He sold franchise territories in Australia and New Zealand.
351 In about September 2010, Mr Bubb saw a franchise business advertised on seek.com. He telephoned the number in the advertisement and left a message. He was contacted by Ms Stanistreet who later conducted an interview with Mr Bubb in early September 2010. Mr Bubb said that, at that interview, he “watched a DVD about Sensaslim and listened to what Ms Stanistreet told me about the product”. Mr Bubb said that, at that time, he was not in a position to buy a franchise area. However, he asked Ms Stanistreet whether she was looking for sales representatives. Following this expression of interest, Mr Bubb said that he received a telephone call from a person who identified himself as Adam Adams. He subsequently met Mr Adams at the Loganholme Shopping Centre. At the end of this meeting, at which Mr Bubb and Mr Adams discussed the sales role that Mr Bubb was seeking, Mr Adams said that he would “get Peter O’Brien to give you a call”.
352 Mr Bubb said that, shortly afterwards, Mr O’Brien gave him a call in which Mr O’Brien said that “[w]e’d like to have you on board” and “[w]e want to get you over to Perth, where you can meet our national sales manager, Scott Waller”.
353 Mr Bubb said that he went to Perth on 10 September 2010 and remained until 17 September 2010. He said he sat in on presentations by Scott Waller to potential franchisees. Based on Mr Emerton’s evidence, I am satisfied that the presentations to which Mr Bubb referred were in fact given by Mr Emerton. I will, therefore, treat Mr Bubb’s evidence concerning Scott Waller as referring to Mr Emerton.
354 Mr Bubb said that he was provided with a document pack, which consisted of the following documents:
the Robinson Legal letter;
the KMB letter;
the Frequently Asked Questions document;
the Disclosure Document;
the Price and Potency Advantages document;
the Retail Business Opportunities document; and
the Area Manager Proposal.
355 Mr Emerton instructed Mr Bubb to provide prospective franchisees with the documents listed above and to go through the Robinson Legal letter and Area Manager Proposal with them. Mr Emerton also provided him with a training manual which set out the procedure Mr Bubb was to follow with potential franchisees. Mr Emerton told Mr Bubb to go through the Area Manager Proposal in detail.
356 Mr Emerton also instructed Mr Bubb to draw to the attention of potential franchisees that:
Mr Boyle worked for UBS and discovered SensaSlim, and SensaSlim Suisse’s office was in the same building in Switzerland as UBS.
Mr O’Brien was a client of Mr Boyle and, together, they paid $5 million for the rights to distribute the SensaSlim product in Australia;
clinical trials had taken place involving over 11,500 people.
357 Mr Bubb said his training involved him watching Mr Emerton conduct nine or 10 presentations with potential franchisees. Mr Bubb also conducted two or three presentations in Mr Emerton’s presence.
358 Mr Bubb said that he sold 11 or 12 franchise areas in Australia. After his training in Perth, he conducted sales presentations in Brisbane and in some areas of regional Queensland. Between late September and late November 2010, he conducted sales presentations in regional New South Wales, Canberra, Melbourne and, finally, Launceston. After returning from Tasmania, he attended the Area Managers’ Conference on the Gold Coast in November 2010. He then went on further sales trips to Launceston and Townsville in December 2010. He also conducted sales presentations in New Zealand in late January 2011. His presentations went for around two hours, including viewing the DVD.
359 Mr Bubb said that he spoke to Mr Boyle on only one occasion. This was at the Area Managers’ Conference on the Gold Coast on 30 November 2010.
360 Mr Bubb said that he saw Mr Adams at several “Sensaslim lunches”. Mr Bubb also said that he dealt with Mr Adams when Mr Bubb sold the New Zealand master franchise for SensaSlim.
361 Mr Bubb also said that he had regular telephone contact with the person known to him as Mr O’Brien. In that connection, he said:
…While I was selling areas, which was over a period of five months from September 2010 to January 2011, I spoke to him on the telephone three or four times a day on days I was doing appointments. Call durations varied from only a few minutes to ten minutes in each instance. Most of the time, I called Mr O’Brien, but sometimes he phoned me. His practice was to ask me how the presentations went and what my thoughts were on the people I had interviewed. He was very friendly and encouraging and I consider that he and I had a good relationship. I would call him on the following numbers [which Mr Bubb gave].
362 Mr Bubb said that, by “the end of December 2011” (I infer 2010), he stopped selling areas in Australia. He said, however, that he was informed by Mr O’Brien and Mr Adams that he would be selling in England, and possibly Malaysia and South Africa. He said that he kept in telephone contact with Mr O’Brien for that reason.
363 Mr Bubb said that he met Mr O’Brien only once. This was at a lunch at Omeros Brothers restaurant. Mr Bubb said that, as he understood it, the purpose of the lunch was for Mr Driscoll, representing the Area Managers’ Association, to meet Mr O’Brien and Mr Adams and “to have some of his concerns addressed”. Mr Bubb said that Mr Covich also attended the lunch. Mr Covich was introduced by Mr Adams as “an old friend” of Mr O’Brien.
364 Mr Bubb gave this evidence of the meeting:
After ten or fifteen minutes, two men came in and joined our table, and one was introduced as Peter O’Brien, and the other as his solicitor, Jeff Horsey. I cannot recall who did the introduction. Mr O’Brien gave Mr Covich a big hug. I recognised Mr O’Brien’s face from the photograph provided to me in one of the newsletters with the material for the filming of the advertorial. I no longer have a copy of that photo.
Mr O’Brien said something to Mike Driscoll, which I couldn’t hear. Mr O’Brien shook my hand, smiled and said just one word: “finally”. I could barely hear what he said as the restaurant was very loud and I was straining to hear above the noise. Mr O’Brien signed the document which was being put to him at the lunch, and after about 5 to 7 minutes after their arrival, Mr O’Brien and Mr Horsey got up to leave, and someone said words to the effect: “They have to get back to court, but they’ll be back.” Prior to them leaving, a photo was taken of all of us. Mr O’Brien did not return to the lunch. The lunch lasted for at least another hour.
365 Mr Bubb said that, in a conversation he had with an Area Manager called Charmaine Simmons in approximately April 2011, the prospect was raised that the person he was speaking to as Mr O’Brien was in fact Mr Foster. Mr Bubb said that, based on an interview of Peter Foster he had seen on a 60 Minutes program “from many years prior to 2011” (he also said “around 20 years”), Mr Bubb did not believe that Mr O’Brien and Mr Foster were the same person.
366 However, in June 2011, Mr Bubb received from Mr Adams an email circulated by the Area Managers’ Association, which contained a link to a 2009 ABC interview with Mr Foster. The link contained an audio component. Mr Bubb gave this evidence:
I played the audio component, the hairs on the back of my neck stood up. I immediately recognised the voice to be that of the person who had identified himself to me, and was known to me, as Peter O’Brien.
367 Other than in respect of the meeting at Omeros Brothers restaurant, I am satisfied that the person with whom Mr Bubb spoke as Mr O’Brien was in fact Mr Foster.
368 Mr Bubb was cross-examined by counsel for Mr Boyle. There were no matters arising from Mr Bubb’s cross-examination that materially added to or qualified his evidence in chief.
369 From August 2010 to May 2011, Mr Driscoll worked as an Area Manager for SensaSlim. He first became aware of the SensaSlim business (although not by that name) when he read an advertisement, in May 2010, in the Saturday edition of The Courier-Mail. Having become interested in the advertised proposal, he telephoned the number given in the advertisement. He left a message and was later contacted by Ms Stanistreet.
370 On about 25 May 2010, Mr Driscoll had a meeting with Ms Stanistreet in an apartment at Spring Hill, Brisbane. This followed an earlier telephone conversation with Ms Stanistreet, who declined to give Mr Driscoll any information about the business over the telephone, but suggested a one-on-one meeting.
371 The meeting commenced with Ms Stanistreet playing the SensaSlim DVD for Mr Driscoll. Mr Driscoll gave this evidence:
Ms Stanistreet then put on a DVD and left the room. I watched the DVD. It mentioned that the product in question was a weight-loss product called Sensaslim. I groaned when I saw that it was a weight-loss product, as I knew that there were already many such products on the market. However, despite my initial reservations, I was impressed by the time the DVD finished, as the presentation was exceptionally professional. The presentation seemed to me to cover most aspects of the product. I was impressed by the development phase and how favourable the results had been from the clinical trials. The fact that the product was Swiss-branded also appealed to me, as I thought that the fact that it was European lent some credibility to it. …
372 At the meeting, Ms Stanistreet gave Mr Driscoll the following documents:
the Retail Business Opportunities document;
the Robinson Legal letter;
the KMB letter;
the Frequently Asked Questions document;
the Disclosure Document;
the Area Manager Proposal;
the Franchising Code; and
the Price and Potency Advantages document.
373 Mr Driscoll said that the most attractive feature of the proposal for him was the promise of “the buyback guarantee”. He said:
… Because of the buyback guarantee, I believed that there was no real risk. Even if the business did not go as well as I’d hoped, I believed I would still get my investment back.
374 On 5 June 2010, Mr Driscoll completed an online application form for a SensaSlim franchise area.
375 On around 9 June 2010, Mr Driscoll received a telephone call from a person who identified himself as Peter O’Brien. He said that a conversation took place to the following effect:
He said: “Have you made a decision yet?”
I said: “I’m still checking things out. When I saw it was a weight-loss product I thought less of it”.
He said: “I thought the same. When Michael Boyle first came to me, I was very sceptical. But then he convinced me to take a look at the research facility in Switzerland. I thought, ‘well, if it doesn’t work out, I’ll get a nice vacation’. When I saw the facility, I was convinced. After that I was desperate to get in on this. I see this as being a great thing. I told Michael ‘I’m not leaving before I sign’”.
376 Mr Driscoll also gave this evidence:
I spoke to Peter O’Brien for about 30 [minutes]. O’Brien did most of the speaking. I remember thinking how eloquent Mr O’Brien was, and how professional and positive he was. His whole attitude seemed to be one of possibility. After speaking to him and hearing about his personal experience and impressions of Sensaslim as described in the conversation set out above, I felt I had been tipped over the edge. Until that point, I had had a few reservations about the product. Once I heard that Mr O’Brien was so apprehensive about the product at first … but was now so keen on it after looking at the research facility, I was convinced.
377 In June 2010, Mr Driscoll had another telephone conversation with Mr O’Brien. The conversation lasted for approximately 20 minutes. During this conversation, Mr O’Brien said:
Michael Boyle is a long-standing friend of mine, and has a massive history of investment and wealth creation for others. He works at UBS.
378 Mr Driscoll said that he was impressed by the fact that Mr Boyle, as one of the directors of SensaSlim, worked at UBS. He said that he had done some internet research on UBS and knew of its reputation in investment banking.
379 On 28 June 2010, Mr Driscoll signed a Franchise Area Manager Agreement and paid a deposit of $29,975. Mr Driscoll said:
I signed the Agreement on the basis of Ms Stanistreet’s presentation to me, as well as the Area Manager Proposal, the Frequently Asked Questions document and the Disclosure document. With respect to the Area Manager Proposal, I relied in particular on Mr Boyle’s biography and the representations about the clinical trials. I was also persuaded by my discussion with Mr O’Brien regarding what he said was his experience in Switzerland …
380 In around November 2010, Mr Driscoll said that he had at least two further short telephone conversations with Mr O’Brien.
381 He also said that, while he was a SensaSlim Area Manager, he received weekly newsletters by email. His affidavit contained a schedule setting out the newsletters he said he had received.
382 Mr Driscoll attended the Area Managers’ Conference at the Palazzo Versace Hotel on the Gold Coast in November 2010. He said that he met Mr Adams, briefly, at the conference. He also said that he was looking out for Mr O’Brien and Mr Boyle. He said, however, that, after the morning tea break, Mr Adams, acting as presenter, informed the gathering that “Michael Boyle and Peter O’Brien have flown back to Sydney to meet the PR people for Oprah.”
383 On 31 March 2011, Mr Driscoll sent an email to Mr Adams, Mr O’Brien and a number of franchisees concerning correspondence sent by another franchisee, Steve Clough, concerning a lack of marketing by SensaSlim in respect of the SensaSlim product, and complaints about other operational issues. In about mid-April 2011, Mr Driscoll started emailing all SensaSlim franchisees. Mr Driscoll said that the purpose of sending these emails was, ultimately, “to press the Sensaslim management on the launch of the product and other general issues”. He set up an association of franchisees so that they could communicate with each other. The communication was undertaken by email. On 24 April 2011, Mr Driscoll received a telephone call from Mr O’Brien. The conversation lasted for about 20 to 30 minutes, and concerned the association of franchisees that Mr Driscoll had set up. In the course of the conversation, Mr O’Brien suggested that “we set up a meeting with you as a representative of the area managers”. Further conversations occurred between Mr Driscoll and Mr O’Brien in an attempt to set up the meeting. Mr Driscoll said that Mr O’Brien kept changing the time for the meeting. However, one Sunday morning, Mr O’Brien telephoned Mr Driscoll to suggest a meeting on 12 May 2011. The arrangement was that Mr Driscoll was to wait outside a McDonald’s restaurant, where he would be collected by Mr Adams.
384 On 12 May 2011, Mr Driscoll met Mr Adams as arranged. They went to Omeros Brothers restaurant. When Mr O’Brien arrived, he was introduced to Mr Driscoll by Mr Adams. Also present at the meeting were Jeff Horsey (who Mr Driscoll described as Mr O’Brien’s solicitor), Mr Covich (who Mr Driscoll said was introduced as a “very old friend of Mr O’Brien”) and Mr Bubb, the National Sales Manager of SensaSlim. Mr Driscoll said:
… Mr O’Brien and I shook hands. He said either “hello” or “hi”. He did not say anything further and I did not have a further conversation with him at that time, despite the fact that I understood the purpose of the meeting to be meeting with Mr O’Brien. Instead, Mr Adams took over the meeting. Mr O’Brien left the meeting from time to time. Mr Adams said that Mr O’Brien had to deal with the “jockey” issue. This was the first time I had met Mr O’Brien in person.
385 In about May 2011, through conversations with other franchisees, Mr Driscoll heard that Mr Foster was involved with the SensaSlim business. Ms Stanistreet sent Mr Driscoll an email with a link to an ABC webpage which contained an audio link to an interview with Mr Foster. Mr Driscoll said that, when he listened to the interview, he recognised Mr Foster’s voice in the interview “as being identical to the voice of the person that I had been speaking with as Peter O’Brien in the [telephone] conversations described above”. Mr Driscoll said that the “person that I spoke to had a distinctive voice that I would be able to pick out”.
386 Other than in respect of the meeting on 12 May 2011 at Omeros Brothers restaurant, I am satisfied that the person with whom Mr Driscoll spoke on the telephone as Mr O’Brien was in fact Mr Foster.
387 Mr Driscoll said:
Prior to signing up with Sensaslim in June 2010, I was aware of Peter Foster. I knew that he had been resident in the United Kingdom in the 1980s and had had a relationship with a model. I recall that he had previously been prosecuted for conduct associated with a slimming product. I also know that he assisted Cherie Blair [to] purchase some real estate and that that had caused some controversy. I was well aware of his reputation as a con-man.
If I had known that Peter Foster was involved in this business opportunity I would not have gone near it.
388 Mr Driscoll was cross-examined by counsel for Mr Boyle. There were no matters arising from Mr Driscoll’s cross-examination that materially added to or qualified his evidence in chief.
389 Mr James and his wife are the sole directors and shareholders of SensaSlim Morphett Vale Pty Ltd. This company operates as an Area Manager for SensaSlim.
390 Mr James first became aware of the SensaSlim business in early November 2010 when he saw an advertisement in the Saturday edition of The Advertiser. The advertisement offered distribution areas for an unnamed product. It included a contact telephone number.
391 After considering the advertisement over approximately four days, Mr James telephoned the number in the advertisement and spoke to a woman who asked for his name, telephone number and postcode. She said that someone would call back.
392 The following day, Mr James received a telephone call from a man who identified himself as Jim Evans. It is clear that Jim Evans is the Mr Evans whose evidence I have summarised above. Mr Evans suggested that he and Mr James have a meeting in Adelaide “in the next few days”. Mr Evans would not give any information about the product over the telephone.
393 As events transpired, Mr James and his wife met Mr Evans at their home, sometime in mid-November 2010. Mr Evans gave a presentation, which commenced with him showing Mr and Mrs James a DVD.
394 Mr James said:
The DVD presented facts and figures in relation to humans getting fatter, particularly in Australia and America. The presentation mentioned that there was a weight-loss product called Sensaslim, which was the first time I had heard of that product. It went through the list of ingredients contained in the Sensaslim product. I was impressed by the DVD as I thought it was very professionally prepared and appeared to be well-researched. I was particularly impressed by the information regarding the clinical trials.
395 Following Mr and Mrs James’ viewing of the DVD, they discussed “various aspects of the product and the business” with Mr Evans. Mr Evans gave them the following documents:
the Area Manager Proposal;
the Retail Business Opportunities document;
the Price and Potency Advantages document;
the KMB letter;
the Robinson Legal letter;
the Frequently Asked Questions document;
the Franchising Code; and
the Disclosure Document.
396 The meeting lasted approximately two hours.
397 With respect to the Area Manager Proposal, Mr James said he recalled reading the information on page 1 about Mr Boyle. He said:
… I was impressed by Mr Boyle’s credentials and thought that the information about him suggested that he was honest and reputable. I recall thinking that it was strange that there was so little information on Peter O’Brien when the inside cover page of the Area Manager Agreement indicated that they were both directors. I recall thinking at the time that the way Mr Evans spoke about Mr O’Brien and Mr Boyle, it sounded as if they were partners. I recall thinking this because when speaking about the operators of the business, Mr Evans said “they” a lot, for example, “They bought the marketing rights for Australia, they paid $4 million for it.”
398 He said that he also recalled Mr Evans discussing the clinical trial referred to in the Area Manager Proposal:
… I recall from what I read and from what Mr Evans said that I was very impressed by the scale of the trial, and the fact that the product was backed up by the results of the trial. Without seeing the information about the trial, I would not have been interested in pursuing the product.
399 He also said:
After our meeting with Mr Evans, Lynne [Mr James’ wife] and I decided to think it over. I was impressed by what I had heard from Mr Evans and read in the Area Manager Proposal about the clinical trials, as it seemed to me that Sensaslim had done a lot of research into the effectiveness of the product, and it looked very promising. I decided that I would be happy to go ahead if we were provided with the second area for free. I phoned Mr Evans and told him that, and he said to phone Michael Boyle.
400 Mr James said that he telephoned the SensaSlim office and left a message for Mr Boyle. He said that Mr Boyle called him back and, in the course of that conversation, said that “we’ll put the two areas together”, referring to the fact that, if Mr James “bought” the Morphett Vale area, then the Mt Barker area would also be included. Mr James was cross-examined on the identity of the person to whom he was talking in this telephone conversation. He agreed that he could not be certain that he was talking to Mr Boyle, only that the person to whom he was talking introduced himself as Mr Boyle.
401 On 12 November 2010, Mr and Mrs James signed a Franchise Area Manager Agreement and paid a deposit for the franchise.
402 Mr James said that, in respect of the Disclosure Document, he noted that it was signed by Mr O’Brien and Mr Boyle. He said that this confirmed his understanding that Mr O’Brien and Mr Boyle were business partners and were both actively involved in the business.
403 I should note that the applicant conceded, for the purposes of the present proceeding, that the various copies of the Area Manager Proposal and the Disclosure Document that were provided to prospective Area Managers and which bear apparent signatures of Mr Boyle were not physically signed by him, the signatures having been applied electronically or in some other way.
404 Mr James said that, when he signed the Franchise Area Manager Agreement, he relied on the representations made in the Area Manager Proposal, the Disclosure Document and the Frequently Asked Questions document. He said that he particularly relied on the information regarding clinical trials. He said that he would not have entered into the agreement were it not for the existence of those trials.
405 Mr and Mrs James attended the Area Managers’ Conference on 29 and 30 November 2010. Mr James recalled that Mr Adams was “up on stage”. He did not see Mr O’Brien or Mr Boyle at the conference.
406 In about March 2011, Mr James made a proposal to two other Area Managers, Mr and Mrs Coffey, that they enter into a 50-50 partnership to purchase the New Zealand licence for the SensaSlim business. On 4 April 2011, Mr James and Mr Coffey signed an agreement with SensaSlim International to buy the New Zealand licence for US$240,000.
407 In accordance with an arrangement he made with Mr Coffey, Mr James drew a cheque for the total amount of the purchase price payable to SensaSlim Suisse Limited.
408 In February 2011, Mr James first became aware of an allegation that Mr Foster was involved with SensaSlim. It had been suggested, through one of Mr and Mrs James’ customers, that SensaSlim had some connection with SlimMist.
409 On 4 February 2011, Mr and Mrs James sent an email to Layla at SensaSlim asking about the possibility of Mr Foster’s involvement with SensaSlim. Mr James said that they received two email replies, one from Mr O’Brien and another from Mr Adams. Mr James did not retain the email from Mr O’Brien. He did, however, retain the email from Mr Adams. In that email, Mr Adams said:
… [T]o answer your question simply, this man has nothing to do with our company, you are aware who the directors are with Sensaslim as it is in the First page of your Area Managers Proposal and you meet both of them at the Seminar …
410 As I have noted, Mr James’ evidence was that he saw neither Mr O’Brien nor Mr Boyle at the Area Managers’ Conference.
411 In about late March 2011, Mr James said that he had a telephone conversation with a man who identified himself as Peter O’Brien. Mr James gave this evidence:
… This was the first time I had spoken to Mr O’Brien. The conversation related to the New Zealand Licence and to the proposed introduction of new flavours in the Sensaslim formula to mask the strong taste of cloves. It was a conference call and a number of individuals participated: Robin Reicheldt, Lynne [Mr James’ wife], Christopher Coffey, Marni Coffey … the man identifying himself as Peter O’Brien and me. The conversation lasted for at least 20 minutes. Peter O’Brien did most of the talking, and he was supported by Mr Reicheldt. I recall thinking that Mr O’Brien had a very unique voice.
Apart from the conversation above, I had heard Mr O’Brien’s voice on one other occasion. Christopher Coffey provided me with an audio recording of a conversation he had had with Mr O’Brien which went for 15 to 20 minutes in or around late May 2011. I had thought that I would be part of that conversation because Mr Coffey had told me that he would call me to include me in the call. I still do not know what happened and why I was not called. I believe Mr Coffey recorded it on his Blackberry. He played it to me from his phone and I listened to it. This occurred while Mr Coffey and I were in New Zealand in May 2011. The conversation concerned the distribution of the Sensaslim product in New Zealand.
412 In around late May 2011, a SensaSlim online forum contributor, Will Dodge, posted a link on the SensaSlim forum to the Monica Attard interview with Mr Foster on the ABC. Mr James said that, on about 3 June 2011, he accessed the interview by clicking on the link. He gave this evidence:
… I have absolutely no doubt that the voice in the interview is the same voice represented to me to be that of Peter O’Brien during our conference call in March and recorded on the audio recording provided to me by Mr Coffey. Peter Foster has a very distinctive voice. I would have no problem picking that voice out of a thousand.
413 The recording of the telephone conversation made by Mr Coffey is the recording analysed by Dr Storey-Whyte. Based on her evidence, and Mr Coffey’s and Mr James’ evidence of recognising Mr Foster’s voice in the conversation, I am satisfied that Mr Foster participated in that telephone conversation and, when doing so, represented himself to be Peter O’Brien.
414 Mr James said that, prior to his involvement with SensaSlim, he was aware that Mr Foster had a reputation as a “con-man”. He said:
… Had I known of Mr Foster’s involvement in Sensaslim, there is absolutely no way I would have become involved with Sensaslim. I would not have given the business two cents.
415 Mr James was cross-examined by counsel for Mr Boyle. Apart from Mr James’ evidence concerning his telephone conversation with Mr Boyle (see [400] above), there were no matters arising from Mr James’ cross-examination that materially added to or qualified his evidence in chief.
416 From January to late September 2011, Mr Coffey and his wife, Marni Coffey, worked as Area Managers for SensaSlim, initially in their own right and later through their company, SensaSlim North Pty Ltd.
417 Mr Coffey first heard about the SensaSlim business in late November 2010, in a conversation with his friend, Mr James, who told him that he had purchased two franchise areas. Later, Mr Coffey inspected the SensaSlim website at www.sensaslim.com.au, where he viewed video clips, including one presented by a man identified as Dr Matthew Capehorn, who referred to an oral spray called the SensaSlim solution. According to Mr Coffey, Dr Capehorn referred to a clinical trial that had been conducted on the product. Mr Coffey recalled Dr Capehorn saying that “the clinical trial involved a large number of people and had fantastic results”. Mr Coffey said that he was “impressed with the results of the trial as outlined in the video and the endorsement of a doctor”.
418 In early December 2010, Mr Coffey filled out an inquiry form on the SensaSlim website. Mr Bubb later contacted him by telephone. They arranged to meet at Mr Coffey’s home in Alice River on 13 December 2010.
419 On 13 December 2010, Mr Bubb gave a presentation to Mr and Mrs Coffey at their home. Mr and Mrs Coffey watched the SensaSlim DVD. Mr Coffey said:
When I first watched it, I recall being impressed by the Sensaslim DVD because it appeared to be professionally shot, had interviews with researchers and other persons who seemed credible and referred to the results of a clinical trial. The Sensaslim DVD referred to the clinical trials conducted on the Sensaslim solution. I was impressed by the reported results of the clinical trial which were that a large number of people had lost an excessive amount of weight. Everything about the Sensaslim DVD seemed plausible to me but I wanted to do further searches and inquiries about the company.
420 Mr Coffey gave evidence about the further searches and inquiries that he conducted. It is not necessary for me to record the detail of that evidence.
421 At the meeting on 13 December 2010, Mr Coffey said that Mr Bubb showed them the Area Manager Proposal, and went through it page by page. Mr Coffey said:
I recall looking at a picture of Michael Boyle … which was at the front of the Area Manager Proposal. I recall noticing that the Area Manager Proposal stated that Mr Boyle was associated with UBS. I had heard of UBS and knew that it was a large, professional organisation.
422 Mr Coffey said that, a few days after the meeting, he conducted a search on UBS. He said:
The statement in the Area Manager Proposal that Michael Boyle was associated with UBS influenced my decision to become a Sensaslim franchisee. I viewed Mr Boyle as a professional person with a good reputation that was associated with a large, reputable company. I understood that Mr Boyle backed Sensaslim, was a director of Sensaslim and was therefore financially involved. All these factors influenced my decision to become a Sensaslim franchisee.
423 Mr Coffey also said that the Area Manager Proposal referred to a “90 day buy-back guarantee”. He said that he understood this to mean that “Sensaslim would buy back the franchise within 90 days if I was not happy with it”. This, however, is not a true reflection of what the Area Manager Proposal says in this regard. I will return to consider that question. Mr Coffey said that, at the meeting with Mr Bubb, he said that he would only sign up as a franchisee if given a 180-day buyback guarantee.
424 At the meeting with Mr Bubb, Mr and Mrs Coffey filled out and signed a franchise application, which Mr Bubb took with him. Mr Bubb left a copy of a Franchise Area Manager Agreement.
425 Mr Coffey said that, in mid-January 2011, he received a telephone call from a man who identified himself as Peter O’Brien. Mr Coffey said that, from the materials given to him by Mr Bubb, he knew that Mr O’Brien was one of the directors of SensaSlim. Mr O’Brien said that he had been speaking to Mr Bubb, who had informed him that Mr Coffey “would be a good fit for the business”. After briefly discussing some matters that need not be recorded, Mr O’Brien told Mr Coffey that Mr Bubb “will be in touch to progress this further”.
426 On 17 January 2011, Mr Coffey received a letter signed by Mr O’Brien confirming approval of the franchise application.
427 On 19 January 2011, Mr and Mrs Coffey “purchased two franchises” for Gladstone/Bundaberg, and for the Northern Territory.
428 Later that month, they established SensaSlim North Pty Ltd and transferred their franchises to that company, which then acted as the Area Manager.
429 Between February and May 2011, Mr Coffey received weekly newsletters from SensaSlim by email. He said that most of these newsletters were “signed off by Mr Adams”.
430 In early to mid-February 2011, he said that he received SensaSlim stock and began to distribute it to stores.
431 Mr Coffey said that, in early March 2011, he and Mr James came to an arrangement that they and their wives would seek to purchase the master franchise for SensaSlim in New Zealand. He made an inquiry to that end through the website of SensaSlim International at www.sensaslim.com. He subsequently received a telephone call from Mr Bubb. Between about 7 March and 4 April 2011, Mr Coffey said that he “engaged in various correspondence with Sensaslim International Ltd about the terms of the agreement”. This was largely by email through Mr Bubb. Importantly, for present purposes, this also included “two phone hookups” on 31 March 2011 and 29 May 2011.
432 Mr Coffey said that, on 31 March 2011, he and Mrs Coffey had a “telephone hookup” with Robin Reichelt of SensaSlim International Limited, Mr Bubb and Mr and Mrs James. On about 6 April 2011, Mr and Mrs Coffey and Mr and Mrs James executed a Distributorship Agreement with SensaSlim International Limited providing for SensaSlim Morphett Vale Pty Ltd and SensaSlim North Pty Ltd to be the “authorised exclusive distributor” for New Zealand.
433 Mr Coffey said that, on 29 May 2011, he and Mrs Coffey had a second telephone hook-up with Mr Reichelt and Mr Bubb. Mr Coffey said that Mr O’Brien also participated. Mr Coffey said that he recorded the conversation because Mr James was “not able to be present” and he “wanted to be able to ensure that Andy James was aware of everything we discussed”. Mr Coffey said that he later played this recording to Mr James.
434 Mr Coffey said that, in May and early June 2011, he began to receive emails and telephone calls from other SensaSlim franchisees who raised “concerns about the legitimacy of the Sensaslim business”. Mr Coffey said that he recalled that the name “Peter Foster” was mentioned. He said that, at the time, he did not know who Peter Foster was.
435 Mr Coffey said that, on about 30 May 2011, while he was in New Zealand with Mr James, his wife telephoned him and said, amongst other things, that she had “listened to an ABC interview with Peter Foster” which she wanted Mr Coffey to listen to when he returned. Mr Coffey said that, on about 31 May 2011, when he had returned from New Zealand, he listened to an audio recording of an interview on the ABC website, which was identified as being with Peter Foster. He said:
… I immediately recognised the voice of Peter Foster as being the same as the voice of Peter O’Brien who I had had conversations with in or about mid-January 2011 and on 29 May 2011 …
436 The weight to be given to this evidence must be assessed in light of Mrs Coffey’s evidence about her conversation with Mr Coffey on 30 May 2011. In that evidence, which I record below, Mrs Coffey made clear her own view that the Peter O’Brien who participated in the second telephone hook-up on 29 May 2011 was Mr Foster. Thus, I give less weight to Mr Coffey’s identification evidence in that regard. Nevertheless, it stands as some evidence that the Peter O’Brien in the second telephone hook-up was Mr Foster, and is to be taken with the other identification evidence. I am more than satisfied that, on that occasion, as well as on other occasions, Mr Foster represented himself as Peter O’Brien. I am also satisfied, on the balance of probabilities, that the person identified as Peter O’Brien with whom Mr Coffey conversed in January 2011 was in fact Mr Foster.
437 Mr Coffey subsequently provided the applicant with his iPad on which he had recorded the second telephone hook-up. The evidence establishes that this was the recording later provided to Dr Storey-Whyte for analysis.
438 Mrs Coffey gave evidence about the meeting with Mr Bubb in December 2010 when Mr Bubb gave his presentation to Mr and Mrs Coffey. Her evidence is consistent with Mr Coffey’s evidence that I have summarised above. I do not propose to separately summarise Mrs Coffey’s evidence on that matter or the circumstances leading to Mr and Mrs Coffey entering into the Franchise Area Manager Agreement with SensaSlim.
439 Mrs Coffey recalled receiving emails from other SensaSlim franchisees in mid-February 2011 “expressing concerns about the way Sensaslim was being run”. She said that the gist of the communications was that “people were concerned Sensaslim was not telling the truth about the launch dates and that advertising was not going ahead as promised”. She said that she shrugged off these concerns because she understood that “they were originating from a group of franchisees who I considered to be very negative about the business”.
440 Mrs Coffey said that, in about March 2011, she received an email from another SensaSlim franchisee which referred to the possible involvement of Mr Foster in the SensaSlim business. She said:
I knew who Peter Foster was because I had seen a 60 [M]inutes interview with him 15 or 20 years ago but only knew that he had been involved in a scandal with Cherie Blair and had gone out with Samantha Fox. At the time I did not recall any slimming products he was involved in, but I knew he had a reputation as a con man. I shrugged off these concerns because I felt my husband and I had done our diligence about the Sensaslim business and was confident that Foster was not involved. I thought that it was simply speculation from people who I considered to be very negative about the business. If I had any idea that Peter Foster was involved in Sensaslim I would not have gotten involved as a franchisee.
441 Mrs Coffey said that, on 29 May 2011, she and Mr Coffey had a telephone hook-up with Mr Reichelt, Mr Bubb and a person who identified himself as Peter O’Brien. Mrs Coffey said that it was she who suggested to Mr Coffey that the conversation be recorded for Mr and Mrs James. She said that she saw Mr Coffey “turn on our iPad and press record”.
442 Mrs Coffey said that, in June 2011, she received an email from a reporter from A Current Affair. The email said that A Current Affair would be running a story “on Sensaslim and the people behind it”. That evening, she watched the segment on television. It alleged that Peter Foster was involved in SensaSlim. Mrs Coffey said that this made her suspicious that Mr Foster may have been involved with SensaSlim.
443 Mrs Coffey also said that, at around this time, she received an email from another SensaSlim franchisee that contained a link to an ABC interview with Mr Foster. She said that, on 30 May 2011, she listened to the interview by accessing the link. She said that she recognised the voice of Peter Foster as being the same as the man who was introduced to her as Peter O’Brien during the telephone hook-up on 29 May 2011.
444 Mrs Coffey said she rang Mr Coffey on about 30 May 2011 and said:
It’s him, you need to listen to the ABC interview, it’s the guy we talked to on the phone. Peter O’Brien is actually Peter Foster.
445 In about July 2010, Mr Dharmaratne’s father showed him an advertisement which had appeared in a Sunday newspaper circulating in Sydney. The advertisement referred to a product that was “sensational” with “world wide appeal”.
446 Mr Dharmaratne later learned that the advertisement was about the SensaSlim product. The advertisement “contained a telephone number to call for enquiries”. Mr Dharmaratne rang the number. He spoke to a man called Scott Waller. Once again, based on Mr Emerton’s evidence, I am satisfied that Mr Dharmaratne spoke to Mr Emerton. I will, in summarising his evidence, treat Mr Dharmaratne’s evidence concerning Scott Waller as referring to Mr Emerton.
447 Mr Dharmaratne said that, in late July or early August 2010, he met Mr Emerton at a serviced apartment in Parramatta. Mr Emerton, in his evidence, refers to the meeting being on 27 August 2010. Nothing turns on this difference.
448 Mr Dharmaratne said that Mr Emerton described himself as an external contractor hired by SensaSlim to recruit franchisees. Mr Emerton told him that “[e]verything will be explained in this DVD”. Mr Dharmaratne said:
Mr Waller then started playing a DVD … on a television in the apartment and left the room. I recall that the Sensaslim DVD talked about the Sensaslim solution, its ingredients and a clinical trial. The Sensaslim DVD contained a segment from the Oprah Winfrey show that spoke about a spray intended to cause weight loss. It was not specifically stated but I assumed that the spray referred to was the same as the Sensaslim solution. I also recall that the Sensaslim DVD said that the Sensaslim solution was based on a discovery made by a dentist that taste controls appetite, and that the discoverers were awarded a Nobel Prize.
The Sensaslim DVD appeared to be professionally shot and I found it convincing about the way the Sensaslim solution worked. The references to the clinical trial, listing of ingredients, explanation for how the Sensaslim solution worked and apparent link to Oprah were part of what convinced me to become a Sensaslim franchisee.
449 Mr Dharmaratne said that, after the DVD had finished, Mr Emerton came back into the room and “took me through a folder of information about Sensaslim”. Mr Dharmaratne said that Mr Emerton spoke about the clinical trial and the ingredients in the SensaSlim product. He said that he recalled Mr Emerton mentioning that SensaSlim would pay for advertising and promotion of the SensaSlim product. Mr Dharmaratne said that he gained the impression that SensaSlim was already established in Europe. He said that both of these matters formed part of the reason that he chose to become a SensaSlim franchisee.
450 Mr Dharmaratne said that, at that time, he wanted to make inquiries “before signing anything”. However, Mr Emerton’s evidence shows that Mr Dharmaratne made an application for a SensaSlim franchise on 28 August 2010.
451 Mr Dharmaratne said that, in the next few days following his meeting with Mr Emerton, he tried to find a website for SensaSlim International. Because he had understood from Mr Emerton’s presentation that SensaSlim was already established in Europe, Mr Dharmaratne “wanted to discuss the business with some existing franchisees in Europe”. After some difficulty, he was able to get to the SensaSlim International website and use the “contact us” link to ask to be put in touch with existing SensaSlim franchisees in Europe.
452 It emerges from Mr Emerton’s evidence that, on 28 August 2010, Mr Foster sent an email to Mr Emerton using the email address pobrien@sensaslim.com.au, in which Mr Foster said:
Your client Jeremy has emailed the sensaslim usa site and new Zealand site. See below.
We are not suppose[d] to know this.
453 This appears to be a reference to Mr Dharmaratne. On 29 August 2010, Mr Dharmaratne received an email from legal@sensaslim.com. The email was ostensibly sent by René Desbois from “Legal Department - International Affairs”. This appears to be a response to one of the inquiries that Mr Dharmaratne was making at the time. In that email, Mr Dharmaratne was informed that the “Australian master distributorship license was secured by Mr. Michael Boyle and his business partner, Mr. Peter O’ Brien”. Apart from other matters, the email informed Mr Dharmaratne that “all distribution issues” had to be forwarded to “the Australian company”. Mr Dharmaratne was told that “[w]e are confident you will find Sensaslim Australia Pty Ltd. dependable and reliable”.
454 Mr Dharmaratne said that the email did not really answer his question, but the fact that he had received a response reassured him that SensaSlim International was real and that “it was behind Sensaslim”.
455 It is clear from Mr Emerton’s evidence that he was sent a copy of the response to Mr Dharmaratne on 29 August 2010 from the email address admin@sensaslim.com.au. The email forwarding this response simply said “FYI”.
456 I am satisfied that the email response to Mr Dharmaratne was sent by Mr Foster using the name “René Desbois”.
457 On about 29 August 2010, Mr Dharmaratne also asked Mr Emerton by email whether Mr Dharmaratne could be put in contact “with a few existing Australian Sensaslim franchisees”. Mr Emerton responded by providing the names and contact details of five SensaSlim franchisees. Mr Dharmaratne contacted two of them, who “came across as enthusiastic about their involvement in Sensaslim”.
458 On 2 September 2010, Mr Dharmaratne met Mr Emerton for a second time. Mr Dharmaratne paid a deposit to SensaSlim by cheque and entered into a franchise agreement for the Newtown area.
459 Mr Dharmaratne said that, within a couple of days, he received a telephone call from a man who introduced himself as Peter O’Brien. Mr Dharmaratne could not recall the words of the conversation, but he said that “the gist of it was that he was congratulating me on becoming a Sensaslim franchisee”.
460 Mr Dharmaratne attended the Area Managers’ Conference at the Palazzo Versace Hotel at Surfers Paradise in late November 2010. He said that, after that, he regularly corresponded with several other franchisees by email and by telephone. From early 2011 onwards, these communications related to concerns that SensaSlim was not carrying out the advertising it had promised and that Peter Foster might be involved in the business.
461 Mr Dharmaratne said that he “never saw any hard evidence of Peter Foster being involved and so did not pay much attention to the allegations”. Nevertheless, Mr Dharmaratne said:
I knew generally who Peter Foster was. I knew he had a reputation as a conman, had dated Samantha Fox, had sold slimming teas, was involved in duplicitous behaviour with Cherie Blair and had been in Gaol in Fiji.
462 He also said:
If I had known Peter Foster was involved in Sensaslim I would not have gotten involved as a franchisee.
463 From September 2010 until March 2011, Mr Cook worked as an Area Manager for SensaSlim.
464 Mr Cook said that, on 21 August 2010, he saw an advertisement in the classifieds section of the Sydney Morning Herald. The advertisement was headed “Catch Your Second Wind”. It referred to “a phenomenal new product” and the ability to earn “$4,000 plus per week”. It referred to Time magazine reporting it as “the most successful launch of any new product in the history of the industry” and a “great business” with “frantic expansion” that brought “Wall Street investors flocking”. It referred to the requirement for a payment of $59,950 for stock and point of sale materials, but said that the payment was “supported by a buy-back guarantee”. The advertisement included a contact telephone number, and the contact name Scott Waller.
465 Mr Cook said that, on 23 August 2010, he called the telephone number in the advertisement. The call was unanswered and Mr Cook left a message. Later that day, a man who identified himself as Scott Waller returned the call. In light of Mr Emerton’s evidence, I am satisfied that Mr Cook was telephoned by Mr Emerton. I will treat Mr Cook’s evidence concerning Scott Waller as referring to Mr Emerton.
466 In the telephone call, Mr Emerton gave Mr Cook some unspecific information about the product as well as some information about the availability of franchise areas in Sydney. Mr Cook and Mr Emerton arranged to meet.
467 On 27 August 2010, Mr Cook met Mr Emerton at an apartment in Parramatta. Following some general introductions, Mr Emerton took Mr Cook to the lounge room of the apartment where Mr Cook watched the SensaSlim DVD alone. When the DVD had finished, Mr Emerton entered the room and gave Mr Cook the following documents:
the Robinson Legal letter;
the KMB letter;
the Frequently Asked Questions document;
the Disclosure Document; and
the Area Manager Proposal.
468 Mr Emerton discussed the documents with Mr Cook. In the course of doing so, Mr Emerton gave Mr Cook certain information which Mr Emerton said that Mr Cook should write down. Amongst other things, they discussed the projected revenue that could be made from a franchise area, the cost of obtaining a franchise area ($59,950) and the requirement for a deposit of $29,975 to be paid, with the balance paid at the Area Managers’ Conference.
469 Mr Cook said:
At the time that I read the material, I noticed that the Area Manager Proposal contained information about Michael Boyle, the Senior Director. I read page 1 of the Area Manager Proposal which stated that Mr Boyle was an Associate Director at UBS Wealth Management Australia Ltd. I knew that UBS was a highly successful bank and the fact that the senior director of Sensaslim was from UBS gave the business some pedigree, to my mind. At some stage later, I noticed that there was no photograph of Peter O’Brien, which I thought was a little odd.
470 He also said:
… On leaving, I thought to myself that the Sensaslim opportunity looked like a good one and I decided to look more at the matter. The key factor in my mind was the fact that the average weight loss at the clinical trials was 15kg per person. Because of my background in marketing, I would never have proceeded to become an area manager of Sensaslim without some evidence of product efficacy. I was also attracted by the fact that there was no goodwill payment, the fact that there was a buy-back guarantee, and that my investment would be in stock. I thought that whatever happened, I would be able to sell the stock, and in the worst case scenario, there would be a buy-back guarantee, so there was no real risk.
471 On 27 August 2010, Mr Cook submitted an online application form for a SensaSlim franchise.
472 Mr Cook said that, on 31 August 2010, he received a call from a man who identified himself as Peter O’Brien. They discussed, amongst other things, the fact that the franchise area that Mr Cook was seeking was no longer available. However, other areas were available. Mr O’Brien suggested that, if Mr Cook was “still keen”, he should give “Scott Waller” a call.
473 Mr Cook said:
About 20 minutes after the call, I had made up my mind to purchase a distributorship. I had spoken to my wife about the opportunity, I had the material, I had seen the DVD presentation, there was no goodwill payment, just a payment for stock and given that the average weight loss at the clinical trial was 15 kg, I was confident that the product was effective. If I didn’t manage to sell the product, there was a money back guarantee. If I did not succeed in selling the product, I thought I could just shake hands and walk away. I thought that it was highly unlikely I could lose.
474 Later that day, Mr Cook called Mr Emerton and arranged to meet at the apartment at Parramatta the following afternoon. The meeting duly took place. Mr Cook said that “we took out the Franchise Area Manager Agreement, the Area Manager Proposal and the Frequently Asked Questions document to sign, and we signed the paperwork in front of the receptionist as a witness”. Mr Cook paid the deposit by credit card.
475 Mr Cook said that, later, he began receiving emails from SensaSlim containing information in the form of newsletters, publicity updates and news updates. He said that, in Newsletter 17, he received notice that the Area Managers’ Conference on the Gold Coast would take place on 30 November 2010.
476 Mr Cook and his wife attended the Area Managers’ Conference at the Palazzo Versace Hotel on 30 November 2010. On 1 December 2010, he paid the balance of the money he owed in relation to his franchise.
477 Mr Cook gave evidence about the proceedings of the conference on 1 December 2010. It is not necessary for me to set out that evidence. He said that, at the conclusion of the conference that day, he was “fairly disappointed”. He said:
… I felt the conference lacked substance and the necessary details about the product. It was generic in nature. Instead of being provided with a plan for selling the product, we were provided with a philosophy. We had also been promised in Newsletter 18 that retailers would be there to provide us with information about selling from their perspective, but that did not eventuate. I left the conference and returned to Sydney.
478 Mr Cook said that he received a newsletter which indicated that he would receive a sales DVD and other materials by 20 December 2010. However, the materials did not arrive. He said that he began “at that time to become concerned about the legitimacy of Sensaslim”. He started to conduct internet searches to find more information. He said that, from his searches, the information he had about SensaSlim Suisse gave no telephone number or physical address, and no photograph of a building in Geneva. He gave evidence of inquiries which indicated to him that SensaSlim Suisse was not a registered company in Switzerland. Further inquiries indicated to him that SensaSlim Suisse was not a registered company in the United Kingdom. He also gave evidence about searches he undertook in relation to Intercontinental Research Institute, the organisation that had supposedly conducted clinical trials on the SensaSlim product. Mr Cook’s evidence was that he failed to locate any information on the research institute. He was unable to locate an address. Mr Cook also gave evidence of searches he conducted on Mr Boyle and Mr O’Brien. He also conducted inquiries in relation to SensaSlim UK International. It is not necessary to set out the detail of Mr Cook’s evidence concerning the results of his inquiries. It is sufficient for me to record that Mr Cook’s inquiries only heightened his concern about “the legitimacy of Sensaslim”.
479 Mr Cook said that, in early February 2011, he wanted to express his concerns directly to Mr Boyle with a view to SensaSlim buying back Mr Cook’s stock. Mr Cook gave evidence of two telephone conversations with Mr Boyle in which he tried to arrange a meeting, to no avail. After the second call, Mr Cook received a telephone call from Mr Adams, who suggested that Mr Cook should be speaking to him or to Mr O’Brien. Mr Cook said that Mr Adams told Mr Cook that Mr Boyle did not want to meet Mr Cook and that “if you’ve got anything that you want to talk about, you’ll need to discuss it with me or put it in writing with Michael Boyle”.
480 Mr Cook then gave evidence about a series of email communications he had with Mr O’Brien.
481 In early April 2011, Mr Cook sought legal advice. This culminated in a letter being sent on his behalf and on behalf of some other franchisees to SensaSlim alleging misleading or deceptive conduct on its part. The solicitors’ letter, dated 6 April 2011, demanded a refund of the franchisees’ “investments”. SensaSlim responded through its solicitors, Robinson Legal. In a letter dated 14 April 2011, these solicitors sought to answer the allegations in the letter of demand. Their letter concluded by stating that “our client has no obligation to refund your client’s investments, and accordingly your clients’ demands are rejected”. This resulted in further correspondence from Mr Cook’s solicitors. Apparently, no reply has been received to these further letters.
482 Mr Cook said:
… Had I not been told that clinical trials had taken place in relation to Sensaslim, I would not have purchased my distributorship.
He also said:
Prior to my involvement with Sensaslim, I was aware of Peter Foster through the media and had knowledge of his past actions and conduct. My general understanding of Peter Foster was that he was a white-collar con-man.
Had the involvement of Peter Foster with Sensaslim been either drawn to my attention or otherwise disclosed to me at any point in the process of me purchasing a franchise, I would not have entertained any further involvement with the company or representatives of it, let alone purchase a franchise. I would not have done so because of Mr Foster’s reputation. I was familiar with Mr Foster’s reputation as a white-collar con man.
483 Mr Cook was cross-examined by counsel for Mr Boyle. There were no matters arising from Mr Cook’s cross-examination that materially added to or qualified his evidence in chief.
484 Dr Storey-Whyte has a first degree in languages and linguistics, a higher degree in linguistics and a PhD in Linguistics (Morphophonology). She is a member of a number of professional associations, including the International Association for Forensic Phonetics and Acoustics, and a founding member of the International Association of Forensic Linguists. She is also the founding chairman of the Forensic and Military Linguist, Interpreter and Translator Executive.
485 Since 1990, she has been regularly consulted by law enforcement agencies including State and Federal police throughout Australia; police forces in England, Wales, Scotland and Northern Ireland; Her Majesty’s Customs and Excise; the Office of the Commonwealth Director of Public Prosecutions; the National Crime Authority; and various other agencies, on matters including speaker identification using auditory, acoustic and text analysis techniques; linguistic profiling; disguised voice analysis; and voice line-ups.
486 Dr Storey-Whyte was engaged by the applicant’s solicitors to provide an opinion as to whether a voice identified as Male Speaker 2 in a recorded conversation (Voice Recording A) matched the voice of a male in another voice recording (the control sample). Voice Recording A was contained in an .mp3 file that recorded a conversation between male speakers and a female speaker. This is, in fact, the conversation in which Mr and Mrs Coffey participated, as referred to at [433] and [441] above. The control sample was an .mp3 file called “ABC Interview with Peter Foster”. This was a copy of a recorded interview for the ABC Radio program Sunday Profile between the interviewer, Monica Attard, and a male speaker identified as Peter Foster.
487 In Dr Storey-Whyte’s opinion, the control sample provided an excellent reference sample for relevant aspects of the voice and speech habits, in terms of duration, quality and comprehensiveness, of the target male speaker. It was her opinion that Voice Recording A provided an excellent sample for forensic phonetic analysis in terms of duration and comprehensiveness, and a fair sample in terms of quality. In Dr Storey-Whyte’s parlance, the term “excellent sample” means that the sample has characteristics that are of sufficient quality, quantity and representativeness to provide an optimum amount of data on which to work.
488 After undertaking an initial auditory analysis, Dr Storey-Whyte undertook a more detailed analysis assisted by a specialised system of notation developed by the International Phonetic Association for capturing the features of speech. She made a study of the patterns of pronunciation and voice of the target male speaker represented in each recording. She also made detailed annotations of selected vowel and consonant articulations, as well as notes on observations of rhythm, tempo, timing, pitch, intonation, phonation and voice quality.
489 Dr Storey-Whyte concluded that Male Speaker 2 in Voice Recording A and the male speaker in the control sample shared the same distinctive voice quality. She noted, in addition, that the way in which the hesitation marker “erm” was spoken by the target male speaker in each sample was noticeably similar.
490 Dr Storey-Whyte also carried out an acoustic analysis in which she used spectrograms and fundamental frequency measurements to compare the voices of the target male speakers. A spectrogram is a computer-generated graph indicating speech energy against frequency across time. It shows a series of bands which reflect the vocal tract of the speaker. Two spectrograms of the same speaker will not always be exactly the same due to variations in tone, amplitude and context as well as ambient noise. The term “fundamental frequency” refers to the pitch of a given voice. Dr Storey-Whyte explained the nature of the analysis that she undertook in this regard. After considering her auditory analysis and acoustic analysis, she expressed the following conclusions:
Given the nature, range and distribution of the similarities between the target male speakers in each recording and samples of speech, the distinctiveness of the voice, and the lack of counter-examples, I have formed the following opinions:
(a) I formed the opinion that the voice of the male speaker in the Control Sample is consistent with the voice of the male speaker identified as [Male Speaker 2] in Voice Recording A.
(b) Further, I consider the distinctiveness of the consistencies between the samples to be Highly Distinctive …
491 Dr Storey-Whyte explained that her use of the word “consistent” described the fact that, in respect of the two target male speakers, all available points of comparison matched. She also explained that the analytical techniques she used did not provide an identification comparable to fingerprints. She said that the analytical techniques she employed allowed her to arrive at an opinion which, although necessarily interpretive and subjective, can be supported by reference to phonetic features of the material she examined.
492 I am satisfied from this evidence that, on the balance of probabilities, Male Speaker 2 in Voice Recording A is Mr Foster. This evidence is also supported by the voice identification evidence given by Mr James and Mr and Mrs Coffey and the voice identification evidence given by the other witnesses to whom I have referred.
493 Mr Iliev is a forensic examiner. He holds a number of professional qualifications including the Degree of Master of e-Forensics and Enterprise Security, conferred by the University of Melbourne. He is a computer examiner certified by the International Society of Forensic Computer Examiners and a computer hacking forensic investigator certified by the International Council of e-Commerce Consultants. He made two affidavits that were read at the hearing. These affidavits included two reports.
494 Amongst other things, Mr Iliev linked a number of email addresses given in certain emails with a corresponding telecommunications account and account holder, using account and other information provided to the applicant by various service providers under s 178(2) of the Telecommunications (Interception and Access) Act 1979 (Cth). These email addresses included the various email addresses I have referred to in recording the evidence of the witnesses.
495 By way of summary, a large number of these addresses were matched to Jill Louise Foster, Mr Foster’s sister, who can be taken as having been the subscriber to a particular service when certain of the examined emails were sent from the identified email addresses. Other subscribers that were matched included, on some occasions, Mr Duffy, Ms Kenny and Mr Adams. This evidence assists in connecting the email addresses with demonstrated associates of Mr Foster. I have used it in conjunction with the direct evidence of witnesses concerning their email communications with Mr Foster. I accept the evidence of these witnesses that they were corresponding with Mr Foster, notwithstanding that the email address used might be taken as indicating a communication with an individual associated with Mr Foster, rather than Mr Foster himself.
The Institut de Recherche Intercontinental and the Strebel report
496 The report entitled “Effect of the Intra Oral SENSASLIM Spray on weight reduction” ostensibly authored by P B Strebel, G F Zenner, K Kabbara, K Krause and H Mantel (the Strebel report) dated January 2010 was published by an organisation ostensibly called Institut de Recherche Intercontinental (the Institute), whose address was given on the report as 18, Avenue Louis-CasaÏ, 1209 GenÈve, Switzerland.
497 The Strebel report is 19 pages in length. It reports on a randomised, double-blind placebo-controlled human clinical study conducted in 101 countries for six months using 12,481 overweight subjects representing a diversity of cultures and dietary habits. Under the heading “Results”, the Strebel report states (amongst other things):
The clinical study on SENSASLIM SPRAY reported that subjects not only had a significant weight loss, but reduced food intake, and decreased BMI compared to placebo. The study also demonstrated that a double dosage of SENSASLIM SPRAY caused greater significant changes in all parameters measured.
Many subjects reported a loss of cravings for sweet/sugar and a loss of food cravings. This was the most noticeable observation reported by subjects, being 83.5% of trial participants and 97.5% of GROUP A and GROUP B using the SENSASLIM solution.
Clearly the sense of taste had an effect on weight and appetite control, as reported by the majority of the subjects. The average weight loss of the participants was 2.5 kilos a month, and 15 kilos over the trial. In excess of 146,000 kilos was lost during the trial.
There was no significant “yo yo” effect and 88% of subjects reported no noticeable weight gain in the six months following the trial.
498 It is apparent that the Strebel report deals ostensibly with the claimed worldwide trial of the SensaSlim product referred to in the SensaSlim DVD and the other materials provided to prospective franchisees, including the Area Manager Proposal.
499 Evidence was given of searches conducted using the SciVerse Scopus database and the PubMed database, two medical and scientific databases. Searches were conducted against the names of the authors of the Strebel report. While the search on the SciVerse Scopus database revealed results against the names “Kabbara K”, “Krause K” and “Mantel H”, none of these was a person affiliated with the Institute.
500 A search for the Institute was conducted using the Google search engine. This revealed a website for the Intercontinental Research Institute at Geneva, Switzerland (shown on the website to be the same as Institut de Recherche Intercontinental). The website showed that the senior medical staff at the Institute were:
P B Strebel, Managing Director;
G F Zenner, Clinical Operations Officer;
Kabbara K, MD, Director of Business Operations;
Krause K, MD, Quality Assurance Director; and
Mantel H, MD, Director of Regulatory Affairs,
and that the Institute employed 21 full-time employees, eight part-time employees, five student assistants, 14 data entry personnel and a large number of external experts.
501 The website says that the Institute was established in 2000 and that it plans, designs, manages, monitors and analyses medical trials throughout the world, including online trials. The website says that the Institute is a Centre of Excellence and one of the largest commercial trial management operations in the pharmaceutical industry.
502 A search was conducted on the PubMed database for any articles that had been published by the Institute. The search returned no results. This is significant because the evidence indicates that this database encompasses over 21 million citations for biomedical literature taken from a variety of sources which include life science journals and online publications. This undermines the claim made on the Institute’s website that it is one of the largest commercial trial management operations in the pharmaceutical industry which analyses medical trials throughout the world.
503 A search on the address given for the Institute in the Strebel report showed it to be a business centre at Geneva Airport, housing serviced offices. In this connection, it should be noted that a copy of a consultancy agreement between SensaSlim Suisse Limited and Dr Capehorn gave the same address for SensaSlim Suisse.
504 Acting on information published in The Age newspaper, the applicant’s solicitors conducted an internet search for the St Paul Lung Clinic in Minnesota in the United States of America. The website for that clinic listed the names of its medical providers with accompanying images of those providers. By comparing the images of the identified authors of the Strebel report on the website for the Institute with the images of medical practitioners on the St Paul Lung Clinic website, it can be seen that:
the image of P B Strebel on the Institute’s website matches the image of Dr Brian Amdahl, MD, displayed on the St Paul Lung Clinic website;
the image of G F Zenner on the Institute’s website matches the image of Dr David W Bonham, MD, displayed on the St Paul Lung Clinic website;
the image of Krause K, MD, on the Institute’s website matches the image of Dr James R Fink, MD, on the St Paul Lung Clinic website; and
the image of Mantel H, MD, on the Institute’s website matches the image of Dr Mark R Freiberg on the St Paul Lung Clinic website.
505 The image of “Kabbara K, MD” on the Institute’s website does not match any of the images of medical practitioners displayed on the St Paul Lung Clinic website.
506 The applicant then carried out an analysis of certain image files used on the St Paul Lung Clinic website and on the website of the HealthEast Care System (with which the St Paul Lung Clinic appears to be affiliated). The results of this analysis were compared with the image files located on the webpage found at http://rechercheintercontinental.ch/assets/. This webpage (the assets webpage) shows a list of electronic files used for the purposes of the Institute’s website, including numerous electronic image files. The assets webpage gives certain attributes for each file. It includes the following image files:
Brian_Amdahl.gif;
David_Bonham.gif;
James_Fink.gif; and
Mark_Freiberg.gif.
507 The assets webpage shows that these files were last modified on 11 February 2011.
508 The assets webpage also includes the following image files:
strebel.gif;
zenner.gif;
krause.gif; and
mantel.gif.
509 The assets webpage shows that these files were last modified on 20 June 2011.
510 A comparison of the images in these files shows that:
the images in the files Brian_Amdahl.gif and strebel.gif are the same;
the images in the files David_Bonham.gif and zenner.gif are the same;
the images in the files James_Fink.gif and krause.gif are the same; and
the images in the files Mark_Freiberg.gif and mantel.gif are the same.
511 On the basis of this analysis, I am satisfied that:
the images of Drs Amdahl, Bonham, Fink and Freiberg were downloaded from either the website for the St Paul Lung Clinic or the website for the HealthEast Care System;
these images were then used for the purposes of the Institute’s website by modifying them to show them as images of the senior medical staff purportedly employed at the Institute; and
the names associated with the images of the senior medical staff purportedly employed at the Institute are fictitious.
512 The assets webpage also shows an image file Linda_Funk.gif, referable to Dr Linda M Funk, MD. This file appears to have been downloaded from either the St Paul Lung Clinic website or the HealthEast Care System website. This image, however, does not appear to have had any relevant use on the Institute’s website.
513 The assets webpage also shows the image file Ernesto_Brauer.gif. This file is shown as last modified on 11 February 2011. The same image appears for the file kabbara.gif, which is shown as last modified on 20 June 2011. I am satisfied that the image of Ernesto Brauer was obtained from a source presently unknown and used for the purposes of the Institute’s website in association with the fictitious name “Kabbara K, MD”.
514 My findings in relation to the matters I have recorded above are as follows:
The individuals said to be employed by the Institute as senior medical staff are fictitious.
The Institute is a fabrication.
The authors of the Strebel report are fictitious.
The Strebel report is a fabrication.
The clinical study of the SensaSlim product reported in the Strebel report (being the worldwide trial of the SensaSlim product referred to in the SensaSlim DVD and other materials provided to prospective franchisees) is a fabrication.
515 There is an additional aspect to this evidence. Mr Iliev was able to match the email address aide@rechercheintercontinental.ch (in relation to an email sent on 27 May 2011 at 4.29 pm to rogersdigital.com@gmail.com), to Jill Louise Foster as the subscriber. The evidence shows that the recipient, Gregory Eric Rogers, was involved in preparing promotional materials and distributing press releases in relation to the SensaSlim product. Mr Rogers’ evidence was that he was in frequent contact with a person he knew as Peter O’Brien. I am satisfied that this was, in fact, Mr Foster. The email sent from the address aide@rechercheintercontinental.ch was sent to Mr Rogers ostensibly by Dr P B Stebel, described as the Managing Director, Institut de Recherche Intercontinental. I am satisfied that this email was in fact sent by Mr Foster, using the name “Dr P B Stebel”. The surname “Stebel” appears to be a misspelling of “Strebel”. I am satisfied that the Institute was fabricated by Mr Foster.
516 A significant number of other affidavits were read and a large number of other documents tendered. I will not seek to summarise them here. Some were directed to the proof and production of documents, including telephone records and bank accounts, and to establishing continuity in the chain of proof in relation to documents used by the expert witnesses. Some were directed to the analysis of documents. Some were directed to aspects of the establishment of the SensaSlim business, including the selection and purchase of computer equipment, the design of SensaSlim’s webpage and the commissioning of press services, and to demonstrating Mr Foster’s involvement in each of these activities. Some were directed to the visual identification of Mr Foster and to linking Mr Foster to the Norseman Court house. Some were directed to other modes of advertising the SensaSlim product, including by broadcasting advertorials.
517 I will refer to evidence provided by these affidavits and documents only to the extent that it is necessary to do so in order to consider whether the contraventions, as alleged, have been established. Once again, in referring to this evidence I have not sought to standardise spellings or acknowledge the existence of all grammatical, typographical or similar errors. Where I have indicated corrections, I have simply done so for ease of exposition.
518 The alleged contravening conduct and representations are pleaded in the applicant’s first further amended statement of claim (the statement of claim or SOC) and can be considered by reference to the following subject matter, described in more detail below:
Mr Foster’s involvement;
Mr O’Brien’s involvement;
The worldwide trial of the SensaSlim product;
Projected earnings;
The buy-back guarantee;
Mr Boyle’s involvement;
Newsletter Nos 1 and 2, and
Mr Boyle’s intention to resign.
519 Save for submissions advanced by Mr Boyle concerning the contraventions alleged against him, the pleading of the alleged contraventions in the statement of claim was not subjected to rigorous scrutiny during the course of the hearing. The statement of claim is a lengthy and complex document. It was referred to by then junior counsel for the applicant, accurately, as “necessarily fairly long, and necessarily a little bit convoluted, relying, as paragraphs do, on other paragraphs earlier in the document”: Transcript 405.
520 Unfortunately, the statement of claim is not always internally consistent in relation to the allegations that have been pleaded, particularly as to the precise conduct said to constitute the contraventions that have been alleged. Nor were the applicant’s submissions always faithful to its pleading. In a number of instances, its submissions travelled beyond its pleaded allegations in relation to particular contraventions.
521 I have proceeded on the basis of the pleaded allegations, as I understand them to be. Where there is significant ambiguity in the pleading itself, I have given the pleading its more narrow construction. However, where the applicant’s final submissions confined the pleaded case in a particular way, I have proceeded on the basis that the confined case is the one that the applicant seeks to have determined.
522 The applicant alleges that SensaSlim contravened one or more of s 52(1), 53(a), s 53(c), s 53(d) or s 59(2) of the Act, in relation to conduct occurring or representations made before 1 January 2011. When I refer to these provisions of the Act, I intend to refer to the form that the Act took before 1 January 2011.
523 Section 52(1) provided:
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
524 Section 53(a) provided:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
(a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;
525 Section 53(c) provided:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
…
(c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have;
526 Section 53(d) provided:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
…
(d) represent that the corporation has a sponsorship, approval or affiliation it does not have;
527 Section 59(2) provided:
Where a corporation, in trade or commerce, invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring the performance by the persons concerned of work, or the investment of moneys by the persons concerned and the performance by them of work associated with the investment, the corporation shall not make, with respect to the profitability or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular.
528 The applicant alleges that SensaSlim contravened one or more of s 18(1), s 29(1)(a) or s 29(1)(g) of the Australian Consumer Law in relation to conduct occurring and representations made on and after 1 January 2011.
529 Section 18(1) provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
530 Section 29(1)(a) provides:
A person must not, in trade or commerce in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(a) make a false or misleading representation that the goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;
531 Section 29(1)(g) provides:
A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits;
532 The applicant alleges that each personal respondent was knowingly concerned in, or party to, one or more of SensaSlim’s contraventions. That involvement is described in more detail below. In relation to conduct before 1 January 2011, the applicant relies on s 75B(1)(c) of the Act which, before 1 January 2011, provided:
A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU, 75AYA or 95AZN, shall be read as a reference to a person who:
…
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention;
533 In relation to conduct on and after 1 January 2011, the applicant relies on paragraph (c) of the definition of “involved” in s 2 of the Australian Consumer Law, which provides:
a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person:
…
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention;
534 The applicant also relies on s 232(1)(e) of the Australian Consumer Law, which provides:
A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
…
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision;
535 The notion of accessorial liability under the Act was discussed by the Full Court in Rafferty v Madgwicks (2012) 203 FCR 1 (at [249] to [254]). This discussion provides a convenient summary of the relevant principles concerning the requirement of knowledge that must be established in order to make out a case of accessorial liability under the Act and the Australian Consumer Law:
249 At the outset, it is important to distinguish between the position of a principal contravener and an accessory under s 75B(1)(a) or s 75B(c). The relevant distinction is drawn out in the leading case on s 75B, Yorke v Lucas (1985) 158 CLR 661 at 667-670 (Yorke v Lucas). In their joint judgment (at 666-667), Mason ACJ and Wilson, Deane and Dawson JJ observed the following in relation to the operation of s 75B(1)(a):
“[T]he words … ‘aided, abetted, counselled or procured’, are taken from the criminal law where they are used to designate participation in a crime as a principal in the second degree or as an accessory before the fact. Both in the case of felonies where the principal offender and the secondary participant commit separate offences, and in the case of misdemeanours where no distinction is drawn between the two, a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.”
(Emphasis added.)
250 Their Honours referred to Giorgianni v The Queen (1985) 156 CLR 473 (Giorgianni) by way of example, observing:
“[T]he appellant had been convicted of culpable driving under s.52A of the Crimes Act 1900 (N.S.W.) in reliance upon s.351 of that Act. The latter section provides that a person who aids, abets, counsels or procures the commission of any misdemeanour may be proceeded against as a principal offender and was held to be declaratory of the position at common law. The offence of culpable driving under s.52A is an offence of strict liability which, putting the defence of honest and reasonable mistake to one side, requires no proof by the prosecutor of any mental state on the part of the accused. Nevertheless it was held that to have aided and abetted or counselled and procured the offence of culpable driving the appellant must have intentionally participated in that offence and to have done so must have had knowledge of the essential matters which went to make up the offence on the occasion in question. Those matters included the defective condition of the brakes upon the vehicle being driven, because the culpable driving alleged consisted of the driving of that vehicle with defective brakes. Proof of such knowledge on the part of the principal offender was, however, not part of the prosecution case because the principal offence was one of strict liability.”
251 Similarly in relation to s 75B(1)(c), their Honours held (at 670) that:
“There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.”
252 In Yorke v Lucas (at 668) their Honours specifically rejected the submission that the requirement of intent should be discarded in the context of s 75B of the TPA, holding that that there was no reason to dispense with the requirement of intent (and therefore knowledge) simply because of the civil context of s 75B, or because the “application of s 75B may occur in conjunction with a provision such as s 52 [of the TPA], which requires no intent”. Yorke v Lucas thus stands for the proposition that for a person to aid, abet, counsel, procure, or be knowingly concerned in, a relevant contravention under s 75B(1), he or she must have knowledge of the essential elements of the TPA contravention.
253 The essential elements constituting a TPA contravention will necessarily depend upon the terms of the provision that has been contravened. In many cases, the essential elements constituting the contravention in question will be simple matters of fact. For example, in Yorke v Lucas the relevant essential element of a breach of s 52 was the falsity of the representation in question; and in Giorgianni the relevant essential element of the offence of aiding and abetting culpable driving was the defective condition of the brakes.
254 In other cases, as Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 (Rural Press v ACCC) illustrates, the terms of a legislative prohibition may mean that the essential elements involve more complex facts. Although this can make the identification of the essential facts less than straightforward, the principles referred to in Yorke v Lucas continue to apply. In Rural Press a newspaper publisher, Bridge Printing Office Pty Ltd (Bridge), started circulating a local newspaper in a neighbouring community in competition with that community's newspaper, which was published by Rural Press Pty Ltd (“Rural Press”). Rural Press threatened to start distributing a newspaper in Bridge's community unless Bridge ceased distributing its paper in the Rural Press community. Bridge, mindful of Rural Press' financial strength, ceased to do so. The ACCC subsequently brought an action against Rural Press for contraventions of ss 45 and 46 of the TPA, which, broadly speaking, prohibited (1) the making of arrangements that would have, or be likely to have, the effect of substantially lessening competition in a relevant market, and (2) the having and taking advantage of a substantial degree of power in a market for a proscribed purpose. In determining whether the regional manager and the general manager of Rural Press were “involved” in the corporate contraventions of ss 45 and 46 of the TPA under s 75B(1), the trial judge required the general and regional manager to be aware of each of the relevant essential elements of the offences, but did not require them to have undertaken a more specific analysis in terms of the legislative prohibitions: see Australian Competition and Consumer Commission v Rural Press Ltd [2001] FCA 116 at [138]. The High Court later upheld his Honour's approach. Hence, whilst the identification of the elements of a contravention requires careful legal analysis, “[i]n order to know the essential facts, and thus satisfy s 75B(1) … and like provisions, it is not necessary to know those facts are capable of characterisation in the language of the statute”: see Rural Press v ACCC at [48]. This is another aspect of the longstanding principle that it is not necessary for a person to “recognize” the contravention as such, or explicitly to think about the relevant legislation that their actions may contravene: see Giorgianni at 506 and Yorke v Lucas at 676 per Brennan J, citing Johnson v Youden [1950] 1 KB 544 at 546.
536 A person’s actual knowledge of the essential elements of a contravention of the Act or the Australian Consumer Law by another will not itself be enough to sheet home liability to that person in an accessorial capacity. More is required for the person to be “concerned in” or “party to” the contravention.
537 Under the common law, a person cannot become criminally involved in an act made unlawful by mere knowledge or inaction on that person’s part. Some act or conduct by the person is necessary: R v Tannous (1987) 10 NSWLR 303 per Lee J at 308, with whom other members of the Court of Criminal Appeal agreed (at 304 and 310).
538 The same applied in relation to s 5 of the Crimes Act 1914 (Cth) (the Crimes Act) which provided, amongst other things, that a person, who by act or omission is in any way directly or indirectly knowingly concerned in, or party to, the commission of any offence against any law of the Commonwealth or of a Territory, shall be deemed to have committed that offence and be punishable accordingly. This provision is closely similar to the corresponding provisions of the Act and the Australian Consumer Law.
539 In R v Goldie; Ex parte Picklum (1937) 59 CLR 254, the question was whether the defendant, Picklum, was criminally liable under s 5 of the Crimes Act on the basis that he was concerned in the offence of an illegal immigrant being present in the Commonwealth. As to that, Latham CJ said (at 259-260):
The alleged offence committed by Gee Kee Way was that he, being a prohibited immigrant, was found in the Commonwealth in contravention or evasion of the [Immigration Act 1901-1935 (Cth)]. His presence in the Commonwealth was the essence of his alleged offence. The offence alleged against Picklum was that he was concerned in Gee Kee Way so being in the Commonwealth. In my opinion, the evidence did not establish that Picklum had been in any way directly or indirectly concerned in Gee Kee Way being within the Commonwealth. The evidence showed that Picklum was concerned in Gee Kee Way being at Burwood, but not that he had anything to do with him being in the Commonwealth. In order that a person may be concerned in an immigrant being found within the Commonwealth, it is necessary to show that he had something to do with him being in the Commonwealth instead of being in some place outside the Commonwealth. It is not enough to show that he is concerned in him being in one place in the Commonwealth rather than in another place in the Commonwealth. Transportation within the Commonwealth of a person already in the Commonwealth does not amount to being concerned in him being in the Commonwealth. The court can consider only whether Picklum ought to have been found guilty of the particular offence with which he was charged. Any consideration of other possible offences is irrelevant.
540 In Ashbury v Reid [1961] WAR 49 the Full Court of the Supreme Court of Western Australia considered s 54(1) of the Forests Act 1918 (WA), a provision which, for present purposes, can be taken as similar to s 5 of the Crimes Act. In delivering the judgment of the Full Court, Virtue J (at 51) referred to dictionary meanings of the word “concerned”, namely “to be in a relation of practical connexion with”, “to have to do with”, “to have a part in”, “to be implicated or involved in”, and “to have to do with something, especially something culpable”, which his Honour took as conveying the meaning of the provision. His Honour said:
The question which a court should ask itself in determining whether an act or omission on the part of an individual comes within the terms of s 54 is whether on the facts it can reasonably be said that the act or omission shown to have been done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connexion between him and the offence.
541 In Kennedy v Sykes (1992) 24 ATR 546, two employees attested that they had each been told by their employer or their manager that, by using false names on income tax instalment declarations, income could be split, thereby avoiding tax. The employer denied having said this. He conceded, however, that he had signed declaration forms made out in false names. The employer was charged pursuant to s 8U of the Taxation Administration Act 1953 (Cth) and s 5 of the Crimes Act with being knowingly concerned in falsifying the identities of the two employees with the intention of deceiving the Commissioner of Taxation. In considering the scope of “knowingly concerned in”, in the context of s 5 of the Crimes Act, Nathan J stressed that the provision contains, as words of extension, “directly or indirectly”. His Honour said (at 551):
… In this case, Sykes was much more than passingly “concerned in” the enterprise to mislead the Commissioner. His signature applied to the declaration forms was an essential and not an insignificant ingredient in the enterprise of misleading the Commissioner. It is obvious that where a person plays an essential part in the venture of deception or to mislead, no matter how slight or momentary that part may be, and whether by action or inaction that person becomes “concerned in” the venture. I have already observed that phrase is preceded by an adverb “knowingly”. In my view, and having had recourse to the authorities, this requires the Crown to establish that the person involved in the venture was aware of its misleading or deceptive character or objective. It does not require proof that the actor be aware of all the mechanical details of the venture or the identity of all participants. If he or she is aware of the general nature of the transaction, that the part played by him or her whether by positive act of omission will assist the misleading or deception then, in my view the requirement of being knowingly concerned is satisfied.
542 Later (at 551), his Honour said:
The qualifications of an aider or abettor as defined by s 5 of the Crimes Act are that the person should be aware of the fact that his or her activity or inactivity will play a part in the achievement of an objective which is directed toward misleading or deceiving another person. It is not necessary that the assistance be vital or critical to the success of the venture nor that the objective of which the actor is aware may be only part of a larger transaction, neither must the actor be aware of all the participants in the scheme. The attachment to the venture may either be express or by conscious omission or wilful blindness, action or inaction. The degree of attachment to the scheme is that which a reasonable man would say is one which implicates and connects the person in the venture.
543 These authorities show that, for a person to be directly or indirectly knowingly concerned in the contravention by another of a relevant provision, such as those now under consideration, there must be, at least, some practical involvement by the person in the acts or omissions constituting the contravention.
544 It is trite that a person cannot liable as an accessory to another’s contravention unless the other’s contravention is established: Mallan v Lee (1949) 80 CLR 198 at 210. As the passage quoted above from Picklum 59 CLR 254 makes clear, the corollary to this proposition is that any liability on the part of the alleged accessory must be referable to the principal contravention pleaded and found, not to some other acts or omissions that might be contraventions had they been pleaded.
545 In the present case, the applicant also alleges, in some instances, that a personal respondent contravened the Act or the Australian Consumer Law as a principal, relying on s 6(3) of the Act, which currently provides:
In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by another subsection of this section, the provisions of Parts 2 1, 2 2, 3 1 (other than Division 3), 3 3, 3 4, 4 1 (other than Division 3), 4 3, 4 4 and 5 3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if:
(a) those provisions (other than sections 33 and 155 of the Australian Consumer Law) were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and
(b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation.
546 In final submissions, the applicant effectively confined its case against SensaSlim, in relation to Mr Foster’s involvement, to SensaSlim’s failure to disclose in the Disclosure Document Mr Foster’s involvement in the SensaSlim business. This would seem to be the true ambit of its pleading in relation to SensaSlim’s conduct in any event: see SOC paras 28-32, 75-76, 78-80 and 110-111. Although paragraph 21 of the statement of claim does incorporate a reference to the Area Manager Proposal, the Frequently Asked Questions document and the SensaSlim DVD, this is only in an incidental way in relation to a subsidiary allegation that each was an “invitation” for the purposes of s 59(2) of the Act.
547 The applicant’s particulars show that it also relies on Mr Foster’s reputation as a conman in relation to weight loss products (to which I refer below) as an independent basis for imposing an obligation on SensaSlim to reveal Mr Foster’s involvement in the SensaSlim business, with the consequence that its failure to reveal that involvement – its silence on that matter – alone constituted conduct that was misleading or deceptive or likely to mislead or deceive: see SOC para 79. I do not accept that contention. As I will seek to explain, any obligation on the part of SensaSlim to disclose Mr Foster’s involvement in the SensaSlim business really stemmed from the relationship of franchisor and franchisee that was in contemplation between SensaSlim and those who later became its Area Managers.
548 In Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 (at [25]) the High Court observed:
The purposes of the scheme of Pt IVB and the Code in question are to regulate the conduct of persons in the franchising industry in order to improve business practices, to provide some protection to franchisees proposing to enter into franchise agreements and to decrease litigation. Those purposes are sought to be achieved, in large part, by ensuring that a prospective franchisee is in a position to make an informed decision about the operation of the franchise and is encouraged to take independent advice before entering into a franchise agreement …
549 As I have noted at [17], Annexure 1 to the Franchising Code is very prescriptive of the information to be provided in a disclosure document and the form in which that information is to appear. This includes the identity of persons who, generally speaking, have significant management or decision-making responsibilities affecting the conduct of the franchise system. If Mr Foster’s role in SensaSlim was not such as to require his identity to be disclosed, it is beside the point that he had a reputation as a conman. It would be a strange situation if the requirements of the Franchising Code, as a prescribed and mandatory industry code for the purposes of s 51AE of the Act, were to be taken as not adequately meeting the object of the Act stated in s 2 – namely, “to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection” – with the result that the failure to disclose the identity of a person whose identity is not required to be disclosed under the Franchising Code should be taken to be conduct that is misleading or deceptive or likely to mislead or deceive in contravention of the Act. As Brennan J said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 (at 225):
Section 52 operates in a milieu of the external legal order, so that the character of conduct which falls for consideration under s 52 is to be determined by reference to the external legal order as it exists when the conduct is engaged in.
550 It seems to me, therefore, that the real focus of this aspect of the applicant’s case must be the conformity of the Disclosure Document with the requirements of the Franchising Code and whether, by providing information in the Disclosure Document, there has been conduct that is misleading or deceptive or likely to mislead or deceive.
551 In this connection, when considering a “prospectus” issued in relation to a proposal for demutualisation of certain companies, the Full Court in Fraser v NRMA Holdings Limited (1995) 55 FCR 452 said (at 466):
Although s 52 gives rise to no duty to provide information, when information is in fact given in purported discharge of the fiduciary duty, s 52 requires that the information given is not misleading or deceptive or likely to mislead or deceive. Additionally, the section requires that the conduct of the directors in withholding certain information is not itself conduct which is misleading or deceptive or likely to mislead or deceive. It is in the area of the proper discharge of the fiduciary duty to provide relevant information that there is an overlap between discharge of the duty and the operation of s 52 …
552 So too in the present case, it is in the area of the proper discharge of the duty to provide information in the Disclosure Document that there is an overlap between discharge of the duty and the operation of provisions such as s 52(1). Later (at 467), the Full Court said:
Whilst s 52 does not by its terms impose an independent duty of disclosure which would require a corporation or its directors to give any particular information to members asked to consider a motion in general meeting, where information for that purpose is promulgated, unless the information given constitutes a full and fair disclosure of all facts which are material to enable to members to make a properly informed decision, the combination of what is said and what is left unsaid may, depending on the full circumstances, be likely to mislead or deceive the membership.
553 In the present case, SensaSlim was obliged to issue a disclosure document under the Franchising Code. The purchase price for each franchise was not only for stock of the SensaSlim product but also for point of sale materials to be used by the Area Manager in carrying on the franchise business. Moreover, separately, SensaSlim issued the Disclosure Document on the explicit basis that the document in fact conformed with the obligations imposed by the Franchising Code: see [92] above. The Franchising Code requires such a document to disclose the name and address of each associate who is not a body corporate, and the name, position held and qualifications (if any) of each officer: see [15]-[17] above. See also [18]-[19] above, concerning the relevant definitions of “associate” “director” and “officer”.
554 The applicant submits that Mr Foster controlled and directed the SensaSlim business. In support of that submission, it refers specifically to the evidence concerning Mr Foster’s development and implementation of the SensaSlim business. This includes his preparation of newspaper advertisements that were used as part of the process of selling franchises, his involvement in preparing the SensaSlim DVD and documents such as the Area Manager Proposal, the Disclosure Document and the Frequently Asked Questions document as well as his ruse in representing himself as “Peter O’Brien” in emails and telephone conversations. The applicant relies, principally, on Dr Waters’ and Mr Emerton’s evidence that I have summarised above, as well as Mr Frare’s and Mr Woolley’s evidence concerning the preparation of the SensaSlim DVD. I have also summarised the evidence of Sales Managers and Area Managers concerning their email and telephone communications with “Peter O’Brien”.
555 In light of these matters, the applicant contends that Mr Foster was an associate and/or a director and/or an officer of SensaSlim.
556 In order to establish that Mr Foster was an associate of SensaSlim, the applicant must establish that he was a director of SensaSlim whose relationship with SensaSlim was relevant to its franchise system, including through supplying goods, real property or services to a franchisee: cl 3(1) of the Franchising Code. As to whether Mr Foster was a director, the applicant relies on paragraph (b) of the definition of “director” in s 9 of the Corporations Act.
557 Paragraph (b) of the definition of “director” in s 9 of the Corporations Act concerns what may be conveniently described as “de facto” directors (paragraph (b)(i)) and “shadow” directors (paragraph (b)(ii)). The authors (Austin RP, Ford HAJ, Ramsay IM) of Company Directors Principles of Law and Corporate Governance (Lexis Nexis Butterworths, 2005) at [5.8] argue that these terms are alternatives that generally should be regarded as mutually exclusive. More recently, however, the Full Court has suggested in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 (at [69]) that, although the matter does not seem to have been authoritatively settled in Australia, a “rigid distinction” between a de facto and a shadow director cannot be maintained.
558 The distinction between a de facto director and a shadow director was discussed in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 where Millett J (at 183) said:
A de facto director … is one who claims to act and purports to act as a director, although not validly appointed as such. A shadow director, by contrast, does not claim or purport to act as a director. On the contrary, he claims not to be a director. He lurks in the shadows, sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself. He is not held out as a director by the company. To establish that a defendant is a shadow director of a company it is necessary to allege and prove: (1) who are the directors of the company, whether de facto or de jure; (2), that the defendant directed those directors how to act in relation to the company or that he was one of the persons who did so; (3) that those directors acted in accordance with such directions; and (4) that they were accustomed so to act. What is needed is first, a board of directors claiming and purporting to act as such; and secondly, a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the directions of others.
559 In the present case, the applicant appears to argue that Mr Foster was both a de facto director and a shadow director. As to the latter, in accordance with paragraph (b)(ii) of the definition, it argues that the directors of SensaSlim at the relevant times (Mr Boyle and Mr O’Brien) were accustomed to act in accordance with Mr Foster’s instructions or wishes.
560 In discussing the corresponding provision of s 124 of the Companies Act 1962 (SA) in Harris v S (1976) 2 ACLR 51 Wells J (at 63-64) said:
… The role and function of a director of a corporation are assumed; the class of such directors is statutorily enlarged to include persons other than directors, stricto sensu, whose directions or instructions (in effect) are obeyed by the directors. In my opinion, the extension has effect only where there are directors who are fulfilling their role and function as directors, but who carry out that role and function in accordance with directions or instructions given by someone dehors directorate, such as the governing director of a holding company, who directs and instructs the directors of the subsidiary what to do. For this provision to apply it must appear, first, that although the outside person calls the tune, it is the directors who dance in their capacity as directors; and second, that the directors perform positive acts, not simply forbear to act or desist from acting. It seems to me that if the directors simply stand aside – either voluntarily or under compulsion – and allow another person to supersede them, it cannot truly be affirmed of them that they are accustomed to act on the instructions or directions of him who, in effect, replaces them. …
561 These observations were quoted with approval in Bluecorp Pty Ltd (in liq) v ANZ Executors & Trustee Co Ltd (1994) 13 ACSR 386 (at 402). See, also, The Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124 (at [31]).
562 In the present case, the evidence does not reveal, in specific detail, how or to what extent Mr Boyle or Mr O’Brien, as directors of SensaSlim, acted in those capacities. Neither Mr Boyle nor Mr O’Brien gave evidence.
563 I hold some reservation that the evidence is of such clarity on the topic that I can conclude on the balance of probabilities that, as directors, Mr Boyle and Mr O’Brien were accustomed to act in accordance with Mr Foster’s instructions or wishes. It is possible that they did. But, on the present state of the evidence, and to adopt the description of Wells J in Harris, it is also possible that each simply stood aside and allowed another, Mr Foster, to supersede them. In Hancock, Anderson J (at [29]-[31]) was persuaded to infer that the plaintiff’s board acted under the direction and instructions of Mr Hancock, who was not a validly appointed director. However, the evidence before his Honour on that matter was far more complete and pellucid than the evidence before me. It is unclear on the evidence before me whether Mr Foster was a shadow director of SensaSlim.
564 Further, I am not able to conclude that Mr Foster claimed to act and purported to act as a director of SensaSlim. This would be contrary to the thrust of the applicant’s case that Mr Foster concealed his involvement in SensaSlim and used Mr O’Brien as his alter ego. I am not satisfied, therefore, that Mr Foster was a de facto director of SensaSlim.
565 That said, I have no doubt that Mr Foster controlled and directed, in an executive capacity, the way in which the SensaSlim business was carried on. The evidence presents a convincing picture of Mr Foster as the puppeteer who pulled all the strings in that regard, aided in various ways by intimates, such as those described at [144], [146], [148]-[149], [193]-[197], [202] and [236]-[238] above, who appear to have been only too willing to participate in what was, in substance, Mr Foster’s venture, albeit implemented through SensaSlim as the corporate vehicle for that purpose.
566 I am certainly satisfied that Mr Foster was, at all relevant times, a person who made decisions that affected the whole or a substantial part of the business carried on by SensaSlim. I am satisfied, therefore, that, even if not a director (and therefore not an associate) of SensaSlim, Mr Foster was an officer of SensaSlim, within the meaning of paragraph (b)(i) of the definition of that term in s 9 of the Corporations Act. As the Full Court remarked in Grimaldi (at [45]), the focus of paragraph (b) of the definition of “officer” in s 9 is essentially functional in character, with its concern being the stipulated quality of a person’s actions or capacity and their effects. It follows, therefore, that, at the very least, the Disclosure Document, as a document required to be issued in compliance with the Franchising Code (see item 2.6 in Annexure 1 thereof), and which in any event SensaSlim sought to issue as complying with the Franchising Code, should have identified Mr Foster as an officer of SensaSlim.
567 Moreover, the Disclosure Document, on its face, purports to identify “each director, secretary, executive officer, or partner of the franchisor who is likely to have management responsibilities for the franchisor’s business operation in relation to the franchise”. Mr Foster’s involvement, even in that more directed capacity, was not disclosed.
568 Further, the Disclosure Document prominently states on the front page, that its function is to provide information that a prospective franchisee would need in order to make an informed decision about whether to enter into a franchise agreement with SensaSlim.
569 I am satisfied that the failure to disclose Mr Foster in the Disclosure Document was deliberate. I am satisfied that all documents given to franchisees were prepared by Mr Foster or under his direction. Plainly, the Disclosure Document was one of those documents. I am satisfied that Mr Foster decided what was to be stated, and what was not to be stated, in it. I am satisfied, therefore, that it was Mr Foster who decided not to disclose, in the Disclosure Document, his involvement in the SensaSlim business.
570 In this connection, it is to be recalled that, early in the venture, Mr Foster informed Dr Waters that he (Mr Foster) could not be involved in the business because his reputation was “mud”: see [134] above. This evidence is to be understood as Mr Foster informing Dr Waters that Mr Foster could not publicly be seen to be involved in the business because of his bad reputation in relation to the sale of weight loss products and the inimical effect that this would have on the successful selling of franchises to prospective franchisees. Mr Foster’s awareness of his own bad reputation provides powerful evidence of the existence and extent of that reputation.
571 There is also evidence in the form of newspaper articles and electronic media that speak to the existence and extent of Mr Foster’s bad reputation in relation to the sale of weight loss products. Indeed, Mr Foster’s own “official website” contains a link to a Wikipedia entry, which (omitting references) describes him as:
…an Australian conman and international playboy. He has been labelled the “International Man of Mischief” and the “human headline” following his involvement in helping Cherie Blair, wife of United Kingdom Prime Minister Tony Blair buy properties in Bristol. He had been convicted on numerous occasions for offences involving weight loss products and property transactions. …
572 Some Area Managers gave evidence concerning their understanding of Mr Foster’s reputation. Mr James understood that Mr Foster had a reputation as a conman. He said that, had he been aware that Mr Foster was involved in the SensaSlim business, he would not himself have become involved as an Area Manager. He said that he “would not have given the business two cents”: see [414] above. Mr Driscoll gave similar evidence. He said that he was well aware of Mr Foster’s reputation as a conman. He said that if he had known that Mr Foster was “involved in this business opportunity I would not have gone near it”: see [387] above. Mr Dharmaratne’s evidence was to the same effect. He said he knew that Mr Foster had a reputation as a conman and that, had he known of his involvement, he (Mr Dharmaratne) would not have become involved as a franchisee: see [462] above. Mr Cook said that his general understanding was that Mr Foster was “a white-collar con-man” and that he would not have purchased a franchise had he known that Mr Foster was involved: see [482] above.
573 There is, perhaps, another reason why Mr Foster did not want to be publicly associated with the SensaSlim business. On 2 September 2005, Mr Foster was found to have made certain representations in relation to a weight loss product called TRIMit. By order of this Court, he was restrained for five years from, amongst other things, being directly or indirectly knowingly concerned in the promotion or conduct by a corporation of any business relating to weight loss, cosmetic or health industry products or services of any kind: Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liquidation) [2005] FCA 1212.
574 On this aspect of its case, the applicant alleges that SensaSlim contravened s 59(2) and s 52(1) of the Act: SOC paras 110 and 111. The applicant also pleaded a contravention of s 18(1) of the Australian Consumer Law in relation to conduct on and after 1 January 2011: SOC para 111. At the time of final submissions, the applicant only advanced contraventions of s 59(2) and s 52(1) of the Act. I assume that this position was taken advisedly, given that this aspect of the case turns on what was, and what was not, disclosed in the Disclosure Document. I am not aware of any evidence that shows that this document was issued by SensaSlim on or after 1 January 2011.
575 In relation to the contravention of s 59(2) of the Act, the applicant contends that, by failing to disclose in the Disclosure Document that Mr Foster was an officer (or, also in its case, an associate), SensaSlim represented in trade or commerce that Mr Foster:
was not making or participating in making decisions that affected the whole, or a substantial part of the SensaSlim business; and/or
was not providing instructions in accordance with which the directors of SensaSlim were accustomed to act; and/or
was not a director of SensaSlim and did not have a relationship which was relevant to SensaSlim’s franchise system.
576 There is no doubt that SensaSlim issued the Disclosure Document. I do not think that, by issuing the Disclosure Document in the form that it did, SensaSlim made a positive representation concerning, specifically, Mr Foster’s non-involvement in the ways pleaded by the applicant. That said, I am satisfied that, by issuing the Disclosure Document in the form that it did, SensaSlim did represent, in trade or commerce, that no persons other than Mr Boyle and Mr O’Brien were involved as officers (or associates) of SensaSlim. Specifically, I am satisfied that through issuing the disclosure document, SensaSlim represented that no persons other than Mr Boyle and Mr O’Brien were making or participating in making decisions that affected the whole or a substantial part of the SensaSlim business, when in fact Mr Foster was doing just that, and would continue to do so. His involvement in SensaSlim and the SensaSlim business should have been disclosed in the document, at least in his capacity as an officer of SensaSlim. In this sense, SensaSlim represented that Mr Foster was not making or participating in making decisions that affected the whole or a substantial part of the SensaSlim business. It seems to me that this representation falls squarely within the ambit of SensaSlim’s case as pleaded and advanced in final submissions.
577 I am also satisfied that, for the purpose of s 59(2) of the Act:
the Disclosure Document stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the representation that no persons other than Mr Boyle and Mr O’Brien were involved as officers (or associates) of SensaSlim was a representation with respect to a material aspect of that business activity, and
the failure to disclose Mr Foster as an officer of SensaSlim, particularly as a person who was making or participating in making decisions that affected the whole or a substantial part of the SensaSlim business, was, in the circumstances, a material matter.
578 Consequently, I am satisfied that, by failing to disclose in the Disclosure Document Mr Foster’s involvement as an officer, SensaSlim made a representation in trade or commerce that was false or misleading in a material particular, in contravention of s 59(2) of the Act.
579 For the same reasons, I am satisfied that, more generally, SensaSlim engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act.
580 Mr O’Brien was at all relevant times a director of SensaSlim. He was its sole director for a period commencing from 2 December 2010. He was identified in the Disclosure Document as the Operations Director of SensaSlim. I have set out at [94] an extract from the Disclosure Document describing his role in, and responsibility to, the company. Once again, it is to be noted that the function of the Disclosure Document was to provide information that a prospective franchisee would need in order to make an informed decision about whether to enter into a franchise agreement with SensaSlim. Mr O’Brien was also identified as SensaSlim’s Operations Director in the Area Manager Proposal.
581 The applicant submits that, by identifying Mr O’Brien as its Operations Director in the Disclosure Document and in the Area Manager Proposal, SensaSlim represented in trade or commerce that Mr O’Brien was actively involved in the SensaSlim business, whereas in fact Mr O’Brien was not actively involved in the business. Indeed, as the evidence makes clear, Mr Foster had assumed the identity of “Peter O’Brien” in the day-to-day conduct of the SensaSlim business.
582 I accept those submissions. The Disclosure Document, in particular, describes Mr O’Brien’s responsibilities as implementing and overseeing product development, as well as product manufacturing and importation. His responsibilities were also said to include point of sale material, freight and the development of “strategic partnerships that increase Area Manager’s value”. The identity of the person bearing those responsibilities, and his fitness, suitability and competence to carry them out, would be important considerations for a prospective franchisee deciding whether or not to enter into a franchise agreement with SensaSlim.
583 To underscore Mr O’Brien’s fitness, suitability and competence for the role of Operations Director, the Disclosure Document also stated:
Through 2000-2009 Peter was Manager Pacific for CEO Global Logistics an Australian owned freight forwarding company, part of an international group that focuses on a wide range of transportation and logistics products. His role was to assist in the expansion of the business in the Asia Pacific region.
584 The Disclosure Document also referred to Mr O’Brien’s alleged service in the Royal Australian Navy in which, according to the document, Mr O’Brien “served with distinction” in the period 1969 to 2000. His service was said to include active service in Vietnam, the first Gulf War and Somalia.
585 I am satisfied, based on all the evidence I have summarised, but in particular Dr Waters’ and Mr Emerton’s evidence, that, on a day-to-day basis, Mr O’Brien had no active, or indeed meaningful, role in the SensaSlim business as Operations Director in the way described in the Disclosure Document. I am satisfied that it was never intended that he would have such a role. I am satisfied that, in fact, he was no more than a frontman for Mr Foster, appearing where required to maintain the fiction that he (Mr O’Brien) was the Operations Director of SensaSlim. For example, Mr O’Brien made himself available for some photo opportunities associated with the business, including with Mr Adams. He attended the Area Managers’ Conference. He also attended a lunch with Mr Driscoll and others, at a time when Mr Driscoll was seeking to ventilate the dissatisfaction of a number of Area Managers with respect to certain aspects of the way in which the SensaSlim business was (or was not) being carried on: see at [383]-[384]. Even then, Mr O’Brien’s participation in that meeting appears to have been no more than a “walk on role”, without any real participation. I am satisfied that Mr O’Brien attended that meeting at Mr Foster’s instigation because Mr Foster realised that “Peter O’Brien” could no longer put off meeting Mr Driscoll. At the same time, Mr Foster must have realised that he could not risk his own association being revealed by a public appearance as “Peter O’Brien”.
586 The applicant alleges that, by representing that Mr O’Brien had an active role in the SensaSlim business, SensaSlim contravened s 59(2), s 52(1) and s 53(d) of the Act: SOC paras 112 and 113. These allegations are based on the Area Manager Proposal together with the Disclosure Document making the alleged representation: SOC para 26. As pleaded, this representation included the representation that Mr O’Brien controlled and directed the SensaSlim business. In final submissions, however, the applicant relied only on the representation that Mr O’Brien was actively involved in the business.
587 I am satisfied that, for the purposes of s 59(2) of the Act:
the Area Manager Proposal and the Disclosure Document, collectively and individually, stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the identification of Mr O’Brien as Operations Director, in both documents, and the description of his role in the Disclosure Document, represented that Mr O’Brien was actively involved in the SensaSlim business in that capacity;
this was a representation with respect to a material aspect of SensaSlim’s business activity, and
Mr O’Brien’s non-active involvement in the SensaSlim business as Operations Director was, in the circumstances, a material matter.
588 Consequently, I am satisfied that, by representing that Mr O’Brien was actively involved in the SensaSlim business as Operations Director, when that was not the case, SensaSlim made a representation in trade or commerce that was false or misleading in a material particular, in contravention of s 59(2) of the Act.
589 For the same reasons, I am satisfied that, more generally, SensaSlim engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act.
590 As to s 53(d) of the Act, I am satisfied that SensaSlim made a false representation in trade or commerce that it had an affiliation with Mr O’Brien as Operations Director. Its representation, more specifically, was that, as Operations Director, Mr O’Brien was actively involved in the SensaSlim business, bringing to it the attributes and skills, and fulfilling the roles and undertaking the responsibilities, described in the Disclosure Document. SensaSlim had no such affiliation with Mr O’Brien.
The worldwide trial of the SensaSlim product
591 I have found that the clinical study of the SensaSlim product reported in the Strebel report (being the worldwide trial of the SensaSlim product referred to in the SensaSlim DVD and in other materials provided to prospective franchisees by SensaSlim, including the Area Manager Proposal) was a fabrication by Mr Foster, intended to lead prospective franchisees into the false belief that the efficacy of the SensaSlim product as a weight loss product had been established scientifically: see [61]-[62] and [496]-[515] above.
592 Newsletters sent by SensaSlim to Area Managers also referred to the worldwide trial of the SensaSlim product. It is only necessary to refer to a selection of those newsletters.
593 In Newsletter No 5 sent on 30 July 2010, ostensibly under Mr Adams’ authorship, the following is stated:
As you are aware SENSASLIM was the subject of unprecedented worldwide trials throughout 2008-2009. People from over 100 countries participated including many from Australia.
We wanted to get in contact with those Australian participants to see if they would like to become part of the SENSASLIM launch and for us to able to use their story as part of our promotional campaign. We believe that people would like to hear of their personal experiences in being part of the trial and perhaps they could appear on television shows or as part of some media campaign.
The European company advised us that due to confidentiality restrictions they weren’t able to give us names and contact details of all the Australian participants however they would contact each of them and give them our details and invite them to contact us if they would like to participate.
I am delighted to say that we have been overwhelmed by the response and I am impressed by the passion and enthusiasm those who where a part of the trial have for SENSASLIM.
Last Sunday I had the pleasure of meeting Zara, a 19 year old girl from QLD who lost 20kgs during 6 months of the trial. She is one of the most genuinely grateful people I have met.
Her story as a young woman and the discrimination she experienced being overweight is both disturbing and touching. She has an inspiring story to tell for young people and I am excited that she is going to be part of our campaign.
One of the tasks of our PR consulting over the next few weeks will be to meet with the other Australian trial participants and to evaluate their story to determine who will be part of our promotional campaign.
I must say that meeting Zara was probably the first time it dawned on me what the essence of this business is. It truly is about helping people to enjoy a better quality of life. It’s about people feeling better about themselves, having more confidence and of course the obvious medical helpful benefits of not being overweight.
Michael Boyle said to me once that he couldn’t think of a better way of earning a living than offering people a better lifestyle and educating children about the perils of obesity. It took a 19 year old girl for that message to sink in to me.
594 In Newsletter No 21 sent on 19 November 2010, ostensibly under Mr Adams’ authorship, just before the Area Managers’ Conference, the following is stated:
This week I have had the pleasure of meeting several more participants who were part of the world wide trials and heard their stories. It’s both impressive and moving and it just gives you the nice, warm, fuzzy feeling to be doing something worthwhile in business, not just making money which of course is most of our original motivation but also to fully see that what we are doing has just so much benefit to so many people.
595 Later in the newsletter, reference is made to Dr Matthew Capehorn. He is described as Clinical Director of The National Obesity Forum (United Kingdom) and Clinical Manager, Rotherham Institute for Obesity (England). He is also described as Research & Medical Director, SensaSlim International. The newsletter refers to Dr Capehorn as having been awarded the NHS Health and Social Care Award 2009.
596 The newsletter says that Dr Capehorn will be joining the Area Managers’ Conference. It continues:
His reputation as a leading expert on obesity has seen him appear on virtually every television program in the United Kingdom and he is constantly the first person media organisations contact when they want to talk to someone about the issue of obesity.
Therefore you will appreciate how delighted we are to learn that he is coming to Australia in his role as research and medical director for SensaSlim International and as co-author of the White Paper on the worldwide trials of SensaSlim.
597 Newsletter No 30 sent on 4 February 2011, also ostensibly under Mr Adams’ authorship, attached “a preview of Dr Capehorn’s White Paper”. The newsletter reports:
Of course we in Australia couldn’t wait until May for the release of the White Paper and SensaSlim International fully understand that and that is why they have agreed for it to be released in Australia now and why Mr. Richard Cooper [elsewhere described in the newsletter as the Chairman of the Executive Committee of SensaSlim International in London] is coming here to personally oversee its release. This is very big news for Australia because it’s a bit of a coup for us to be able to break the news this side of the world first.
The copy of the White Paper you have is version 3.2.
This White Paper is for you and your eyes only and it is not to be released to retailers or the media as that will detract from the media being given the formal release next week.
By the way, the paper being released next week is a version 3.3 which is a larger White Paper than the copy you have been given today. Your copy contains all the relevant information in regard to the worldwide trials; however version 3.3 has a lot more scientific information which will be of interest to academics and some members of the media.
Now you can see what the White Paper is all about, what it says and how strongly it confirms the efficacy of SENSASLIM being better than any other product previously trialled. This really is very big news and it’s going to go a long way towards establishing our credibility with all our retailers and the general public.
To coincide next week the release of the White Paper to the Australian media it will be posted on websites and your retailers will be able to go these websites (when you tell them which ones they are) and download a copy or alternatively you will be able to print out a copy and take it to them. Again, I emphasise that will be version 3.3 and not the version which is the shortened version 3.2.
The release of the White Paper is the last step prior to the publicity campaign commencing for SensaSlim.
598 The White Paper, as attached to the newsletter, includes the following statement:
The trial was conducted over a realistic period of time and the results analysed and collated by experts appointed by Institut de Recherche Intercontinental in Switzerland at the conclusion of a 12 month period.
599 Based on Dr Waters’ evidence at [146] and Mr Emerton’s evidence at [211], I am satisfied that all newsletters sent by SensaSlim to Area Managers were prepared by Mr Foster or under his direction. He was the author of those documents.
600 An advertorial for the SensaSlim product was broadcast on The Kerri-Anne Show on a number of occasions on TCN 9 Sydney, GTV 9 Melbourne and QTQ 9 Brisbane in the weeks of 10 April, 17 April and 24 April 2011. A similar advertorial was broadcast on The Circle on a number of occasions in the weeks of 10 April and 17 April 2011.
601 The advertorials told the stories of female twins Sarah and Ashleigh and male twins Cameron and Lincoln who had participated in the worldwide trial, with Sarah and Lincoln using the SensaSlim product and losing weight, and Ashleigh and Cameron using a placebo and not losing weight. Sarah and Ashleigh, and Cameron and Lincoln, appeared in the advertorials and made convincing statements about having participated in the trial. I infer that they were actors engaged for the task of performing the roles that had been scripted for them. The advertorials contained footage of Matthew Capehorn who, I infer, is the Dr Capehorn referred to in other evidence. He is introduced in the advertorials as coming from The National Obesity Forum. He says:
The SensaSlim trials were very clever by using identical twins, Sarah and Ashleigh as the female identical twins and Cameron and Lincoln as the male identical twins. Now being twins means they have the same genetic makeup and will have the same metabolism therefore any difference in their weight at the end of the trials will be as a result of the effect of SensaSlim solution.
The way that the world wide trials were conducted was very significant by the fact that it was carried out in over 100 countries, it actually suggests that it doesn’t matter what lifestyle or dietary habits you actually have you will lose weight using this spray. Some of the participants in the world wide trial loss phenomenal amounts of weight.
SensaSlim solution is unlike any other product on the market because of the unique ways in which it works. The SensaSlim Solution actually contains natural occurring active ingredients that when sprayed on the tongue actually fools the brain into thinking we’re more full then we actually are. It does this by altering our taste and then chemical messages are sent back to our brain telling us that we no longer want to eat as much.
Based on the SensaSlim worldwide trials that included nearly 11 and a half thousand participants in over 100 countries which showed an average 15 kilogram weight loss over the 12 month period that would make the SensaSlim solution an effective weight loss product.
602 The applicant contends that advertorials were placed on SensaSlim’s website, along with other promotional videos concerning the SensaSlim product. However it is unclear to me whether this has been established by the evidence. I am prepared to hear the applicant further on that question.
603 Consistently with my finding at [565] that Mr Foster controlled and directed, in an executive capacity, the way in which the SensaSlim business was carried on and “pulled all the strings”, I am satisfied that Mr Foster directed and controlled the making of advertorials as well as the production of other promotional materials used by SensaSlim to advertise the SensaSlim product. Mr Frare’s evidence at [275] and Mr Woolley’s evidence at [285]-[288] concerning Mr Foster’s involvement in the production of advertorials for SensaSlim supports the conclusion that Mr Foster directed and controlled the making of the advertorials described immediately above.
604 By these various means, SensaSlim perpetuated the falsehood that there had been a worldwide trial of the SensaSlim product that had established its efficacy as a weight loss product.
605 The applicant alleges that SensaSlim contravened s 59(2), s 52(1) and s 53(a) of the Act, and also s 18(1), 29(1)(a) and s 29(1)(g) of the Australian Consumer Law in relation to conduct occurring on and after 1 January 2011: SOC paras 114-117.
606 In relation to all these alleged contraventions, the applicant relies not only on SensaSlim’s representation that the worldwide clinical trial took place, but also on its representation that those trials established the efficacy of the SensaSlim product as a weight loss product.
607 I am satisfied that, for the purpose of s 59(2) of the Act:
the Area Manager Proposal and the SensaSlim DVD each stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in the business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the asserted fact that the SensaSlim product was a product whose efficacy as a weight loss product had been established by a worldwide trial, was a representation with respect to a material aspect of that business activity, and
the fact that the SensaSlim product had not been tested in a worldwide trial and was not thereby shown to be an efficacious weight loss product was, in the circumstances, a material matter.
608 Consequently, I am satisfied that, by representing in the Area Manager Proposal and in the SensaSlim DVD that the Sensaslim product had been tested in a worldwide trial that had established its efficacy as a weight loss product, SensaSlim made a representation in trade or commerce that was false or misleading in a material particular, in contravention of s 59(2) of the Act: SOC para 114. It is to be noted that, as pleaded, this contravention only fixes on the representation conveyed by SensaSlim’s provision of the Area Manager Proposal and its showing of the SensaSlim DVD : SOC para 33.
609 I am satisfied that, by engaging in each of the various promotional activities to which I have referred, (namely, the provision Area Manager Proposal, the showing of the SensaSlim DVD, the publication of the newsletters and the publication of the advertorials) which represented that there had been a worldwide trial that had established the efficacy of the SensaSlim product as a weight loss product, SensaSlim engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act. I am satisfied that SensaSlim engaged in the same conduct after 1 January 2011 and thereby contravened s 18(1) of the Australian Consumer Law: SOC para 115(a).
610 I am satisfied that SensaSlim represented in trade or commerce that the SensaSlim product was of a particular standard or quality, namely that it had been tested in a worldwide trial that had established its efficacy as a weight loss product. It follows that SensaSlim thereby contravened s 53(a) of the Act. In this connection, it is to be noted that “quality” as used in s 53(a) extends beyond the degree or grade of excellence a product can be said to possess and includes the product’s virtues, attributes, properties or other special features: Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 16 FCR 562. I am satisfied that SensaSlim engaged in the same conduct after 1 January 2011 and thereby contravened s 29(1)(a) of the Australian Consumer Law: SOC para 115(b).
611 I am also satisfied, based on the statement made in the White Paper quoted at [598] above, that, after 1 January 2011, SensaSlim represented that the SensaSlim product had an approval that it did not have, namely that provided by a worldwide trial (which had not been conducted) whose results had been collated and analysed by experts appointed by the Institute in Switzerland (which did not exist). SensaSlim thereby contravened s 18(1) and s 29(1)(g) of the Australian Consumer Law: SOC para 117. It is to be noted, that, as pleaded, these contraventions only fix on the representations conveyed by Newsletter No. 30, and in particular, the White Paper: SOC para 51.
612 The applicant alleges a separate contravention of s 52(1) of the Act based on the false representation in Newsletters Nos 5 and 21 that Mr Adams had met participants in the worldwide trial of the SensaSlim product “and thereby represented that such trials had been conducted”: SOC paras 50 and 116. It does not seem to me that this conduct by SensaSlim stands outside the contravening conduct I have already found. It is an aspect of SensaSlim’s conduct of falsely representing that the SensaSlim product had been tested in a worldwide trial that established its efficacy as a weight loss product.
613 SensaSlim made various representations about the income-earning potential of Area Managers selling the SensaSlim product. I have referred to the fact that the newspaper advertisements soliciting interest in the business opportunity (later disclosed to be the opportunity to become an Area Manager supplying the SensaSlim product) represented that participants could earn a certain amount per week. Typically, this was stated to be over $4,000 per week, although the sum varied.
614 The Area Manager Proposal also contained statements about income projections. The statements were presented, however, as simple arithmetical extrapolations based on the premise that an Area Manager would make a gross margin of $11 per unit of the SensaSlim product. For example, the Area Manager Proposal said:
Therefore, if a Area Manager has 50 outlets, and each outlet sells only 2 units a week, a modest supposition to say the least, the Area Manager earns $1,100 for that week.
615 Earlier in the Area Manager Proposal, SensaSlim stated its expectation that a minimum of 100 retail outlets would be established in each Area Manager’s territory, with 50 outlets “to be serviced during our launch phase”.
616 The Area Manager Proposal contained a Weekly Income Projection Chart in which calculations were given based on the number of units of the SensaSlim product sold and the number of outlets serviced by the Area Manager. Ranges were given: 40 to 100 outlets serviced, and 2 to 10 “packets” sold per week. Plainly the feasibility of servicing 100 outlets was in SensaSlim’s contemplation given the expectation it had expressed earlier in the Area Manager Proposal.
617 The following statement in smaller, but nevertheless clearly visible, text was subjoined to the chart:
NOTE: These are income projections only for the Area Manager. The company does not make any guarantee or warranty as to the obtainable income. The company recommends that you discuss these projections with your Accountant or Financial Advisor before entering into any agreement.
618 The applicant submits that the newspaper advertisements in The Sydney Morning Herald and The Age, and the Area Manager Proposal, represented, in this regard, that:
the business activity, once acquired by a potential purchaser and after the launch of the SensaSlim product, had the potential to generate weekly earnings for the potential purchaser in the stated amount (projected earnings);
there was a realistic prospect that the business activity, once acquired by a potential purchaser and after the launch of the SensaSlim product, would generate the projected earnings; and
there was a reasonable basis for potential purchasers to expect that the business activity would generate the projected earnings.
619 The applicant alleges that, by making these representations, SensaSlim contravened s 59(2) and s 52(1) of the Act: SOC para 119. Significantly in this regard, the applicant relies on s 51A of the Act (in the form the Act took prior to 1 January 2011), which provided:
(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not have had reasonable grounds for making the representation.
(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
620 The reference to “this Division” in s 51A(1) is to Division 1 of Part V of the Act. At the relevant time, this Division included s 52(1) and s 59(2).
621 I accept that the newspaper advertisements, when identifying an amount for the weekly income that could be derived from the business opportunity being offered, represented in trade or commerce that the business opportunity had the potential to generate those earnings; that there was a realistic prospect that the business activity would generate those earnings, and that there was a reasonable basis to expect that the business activity would generate those earnings.
622 I am also satisfied that the Weekly Income Projection Chart in the Area Manager Proposal constituted a representation in trade or commerce by Sensaslim that an Area Manager selling the SensaSlim product had the potential to generate weekly earnings within the stipulated range; that there was a realistic prospect that such sales would generate earnings in that range, and that there was a reasonable basis to expect such sales would generate earnings within that range. This finding is not gainsaid by the note to the chart, which can only be sensibly read as meaning that SensaSlim did not make any specific guarantee or warranty as to the precise earnings that an Area Manager could achieve. To read the note otherwise would be to deprive that part of the Area Manager Proposal of any real meaning or significance. Objectively, that cannot have been the intent of the note. In its pleading, the applicant also relies on the Frequently Asked Questions document (SOC para 34), although I do not think that this document adds materially to what is stated in the Area Manager Proposal concerning projected earnings.
623 It is to be noted that, as pleaded, this contravention only fixes on the representations conveyed by the advertisments in the Sydney Morning Herald and The Age, as well as the Area Manager Proposal and the Frequently Asked Questions Document: SOC paras 19(a) to 19(c) and 34(a) to 34(c). In each case, the representation was one concerning future earnings of the contemplated business activity. I have no doubt that a representation as to the future earnings of a business activity is a representation with respect to a future matter for the purpose of s 51A(1) of the Act. The effect of s 51A(2) is that the corporation making the representation is deemed not to have had reasonable grounds for making it unless the corporation adduces evidence to the contrary. SensaSlim has adduced no evidence to the contrary. It is therefore deemed not to have had reasonable grounds for making the representations to which I have referred. It follows that, by operation of s 51A(1), the representations must be taken to be misleading. This is true for s 59(2) as it is for s 52(1) of the Act.
624 In the circumstances, I am satisfied that, in each case, the making of the representations constituted conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act.
625 I am satisfied that, for the purpose of s 59(2) of the Act:
the newspaper advertisements in The Sydney Morning Herald and The Age, and the Area Manager Proposal, each stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in the business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment; and
the statement of the weekly income in each of those newspaper advertisements, and the income projections in the Area Manager Proposal, were representations with respect to material aspects of that business activity.
626 Given the deeming effect of s 51A(1) of the Act, and given that a statement of future earnings is most certainly a material matter, I am satisfied that, in the circumstances, SensaSlim also made a representation in trade or commerce that was misleading in a material particular, in contravention of s 59(2) of the Act.
627 The applicant pleaded separate contraventions of s 52(1) and s 59(2) of the Act based on an advertisement placed in The Courier-Mail. The applicant alleges that this advertisement represented that the business activity, once acquired by a potential purchaser, had the potential to generate the projected earnings because there were other persons involved in the business activity who were generating the projected earnings: SOC paras 14(a) and 118. An aspect of this allegation was that this representation was false or misleading in a material particular because there were no other persons involved in the business activity who were generating the projected earnings.
628 I accept that, at the time this advertisement was placed, no person then involved in the SensaSlim business was selling the SensaSlim product in Australia. However, I do not read the advertisement as representing that any person was presently involved in selling the product in Australia. The advertisement certainly contains the headline: “If our average Area Manager is over 50 and earns over $4,000 a week … then why shouldn’t you?”. But the headline cannot be read in isolation from the body of the advertisement, which makes perfectly clear that the selling activity had not yet begun. The advertisement states clearly that the undisclosed business is “set to launch in Australia”. Read as a whole, the advertisement spoke of a prospective business in Australia that was seeking recruits to participate in a future selling activity. The headline can be seen, in that context, to be revealing to the reader that he or she might be part of the target demographic for the business opportunity and that he or she, as an average Area Manager, could earn the projected earnings. For these reasons, I am not satisfied that the alleged contraventions concerning this aspect of the publication of The Courier-Mail advertisement have been established. However, separately, the applicant relies on the deeming effect of s 51A(1) of the Act: SOC paras 97 and 118. In my view, this aspect of the alleged contraventions has been established, for the same reasons given at [626] above.
629 In the newspaper advertisements and in the Area Manager Proposal, SensaSlim referred to a buy-back guarantee or a buy-back opportunity.
630 The advertisement in The Courier-Mail (the one seen by Ms Stanistreet: see [291] above) referred to the payment for stock and point of sale materials ($59,950) as being “supported” by “a money-back buy-back guarantee”. The same statement was made in an advertisement in The Sydney Morning Herald (the one seen by Mr Cook: see [458] above) and The Age. This “guarantee” was not described in greater detail in the advertisements.
631 As I have noted at [83] above, a “BUY-BACK OPPORTUNITY” was described in the Area Manager Proposal in the following terms:
After 90 days from the product launch, if you’re not happy and find the business isn’t for you long term, then by mutual consent we can agree to buy back your stock and point of sale material, shake hands and walk away. You can’t possibly lose money. This is your buy-back guarantee option.
632 So expressed, this “opportunity” was clearly dependent on mutual consent and future agreement.
633 The Franchise Area Management Agreement contained the following condition (clause 3):
This Agreement may be terminated by mutual consent upon such terms as the parties may agree, PROVIDING that the Manager may not apply for a consensual termination within the first ninety (90) days after the date of delivery of stock to the distributor.
634 Clause 6 was as follows:
The statements made in the documents titled “Frequently Asked Questions”, the “Disclosure Document for Franchisee or Prospective Franchisee” and the “Franchise Area Manager Proposal” shall apply as if the same were incorporated in this Agreement.
635 I have quoted the relevant part of the Frequently Asked Questions document with respect to termination and buy-back at [91] above.
636 The applicant submits that SensaSlim represented that there was little or no risk involved in the prospective franchisee’s investment of $59,950 for stock and point of sale materials because there was a “buy-back guarantee”. It submits, however, that there was no “guarantee” because an Area Manager could only have the investment refunded at SensaSlim’s discretion. It alleges, therefore, that, by making the representation of a “buy-back guarantee”, SensaSlim contravened s 52(1) and s 59(2) of the Act: SOC para 120. It is to be noted that, as pleaded, this contravention only fixes on the representation conveyed by the advertisements in The Courier-Mail, The Sydney Morning Herald and The Age, as well as the Area Manager Proposal read with the Frequent Asked Questions document.
637 I am not persuaded that, in this regard, SensaSlim contravened s 52(1) or s 59(2) of the Act. Plainly, much depends on the meaning to be given to the words “buy-back guarantee”. In the context of soliciting expressions of interest for a business opportunity described in non-specific terms and obviously requiring further information to be sought – such as in the newspaper advertisements – I doubt that the ordinary or reasonable member of the public reading the advertisements with an interest in responding to them, would invest the words “buy-back guarantee” with a certain and immutable meaning. It seems to me that what was involved in the “buy-back guarantee” was just one of the matters in the advertisements inviting further inquiry. A reader of the advertisements acting reasonably in his or her own interests would wish to know more about what was involved in the notion of this “buy-back guarantee”. What was the guarantee? Whilst in the absence of more information such a person may be caused to speculate on that matter, I doubt that he or she would proceed without further inquiry as to the content of this “buy-back guarantee”, if that was significant to his or her decision-making. It is a frequent occurrence in everyday life that “guarantees”, so styled, are often not absolute or unqualified but given in relation to particular circumstances or events, or on the basis of particular terms and conditions. The “buy-back guarantee” referred to in the newspaper advertisements does not stand outside that milieu. In any event, in the present case, the statements made in the newspaper advertisements in this regard must be seen in the context of this subject being taken up in the Area Manager Proposal and the Frequently Asked Questions document.
638 The position of the “buy-back guarantee” is made clearer by the Area Manager Proposal and informed, more fully, by the Frequently Asked Questions document. I accept that there may be a question about the aptness of the word “guarantee” to describe what was, in reality, no more than a prospect, provided other circumstances obtained. Nevertheless, I do not think that would be a sufficient reason, in all the circumstances, to characterise SensaSlim’s impugned conduct as misleading or deceptive or likely to mislead or deceive, such as to constitute a contravention of s 52(1) of the Act. Similarly, I do not think that it can be truly said that, in this regard, SensaSlim made a representation that was false or deceptive in a material particular, such as to constitute a contravention of s 59(2) of the Act.
639 I am not satisfied, therefore, that, by making the representation of a “buy-back guarantee”, SensaSlim contravened s 52(1) and s 59(2) of the Act.
640 The applicant submits that SensaSlim represented that Mr Boyle controlled and directed the SensaSlim business and was actively involved in it. In this connection, it relies on SensaSlim issuing to prospective franchisees and Area Managers:
the Area Manager Proposal, which described Mr Boyle as SensaSlim’s Senior Director and gave biographical information about him and his role in SensaSlim, including that he “obtained the Australian Master Franchise for SensaSlimTM and now oversees its establishment”: see [66] above;
the Disclosure Document, which described Mr Boyle as a director of SensaSlim and contained substantially the same biographical information with respect to him as in the Area Manager Proposal: see [93] above;
the KMB letter, which, amongst other things, described Mr Boyle as “the Managing Director and founder of SensaSlim in Australia” and stated that “we work hand in hand with Michael and his operations team”: see [86] above;
“Welcome letters” sent to new Area Managers after their appointment, which were purportedly signed by Mr Boyle as Senior Director and in which he purportedly said: “In the weeks that follow you will receive regular communications and updates to keep you fully abreast of developments. I want you to know that I am only a phone call or email away, so please do not hesitate to contact me if I can be of assistance. My personal email is mboyle@sensaslim.com.au.”;
Newsletter No 1 which was purportedly authored and signed by Mr Boyle (who was pictured and described as CEO) and reported on current developments concerning the SensaSlim business, and
Newsletter No 2 which was also purportedly authored and signed by Mr Boyle and reported on current developments concerning the SensaSlim business, including the appointment of Mr Adams (who was pictured) as “our Operations Manager”.
641 The applicant submits that, on his own admission, Mr Boyle had no involvement in the day-to-day running of the SensaSlim business. It also relies on Dr Waters’ and Mr Emerton’s evidence I have summarised above on how and by whom the SensaSlim business operated on a day-to-day basis.
642 I accept that, individually and collectively, the Area Manager Proposal, the Disclosure Document, the KMB letter, the “Welcome letters”, Newsletter No 1 and Newsletter No 2 represented that Mr Boyle controlled and directed the SensaSlim business and was actively involved in it. I also accept that Mr Boyle did not control or direct the SensaSlim business and was not actively involved in it.
643 The applicant alleges that, by representing that Mr Boyle controlled or directed the SensaSlim business or was actively involved in it, SensaSlim contravened s 59(2), s 52(1) and s 53(d) of the Act. As pleaded, the applicant’s case that s 59(2) was contravened is based only on the provision of the Area Manager Proposal together with the Disclosure Document to prospective franchisees: SOC paras 121 and 27. It pleads a broader range of conduct in relation to the alleged contraventions of s 52(1) and s 53(d) of the Act, which extends beyond the provision of the Area Manager Proposal and the Disclosure Document to include the provision of the KMB letter, the sending of the “Welcome letters” and the publication of Newsletters Nos 1 and 2, each pleaded as constituting a separate contravention of those respective provisions: SOC para 122.
644 I am satisfied that, for the purposes of s 59(2) of the Act:
the Area Manager Proposal and the Disclosure Document stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the representation that Mr Boyle controlled and directed the SensaSlim business and was actively involved in it was a representation with respect to a material aspect of SensaSlim’s business activity, and
Mr Boyle’s lack of control or direction of, and non-active participation in, the SensaSlim business as Senior Director were, in the circumstances, material matters.
645 Consequently, I am satisfied that, by representing that Mr Boyle controlled and directed the SensaSlim business and was actively involved in it as Senior Director, SensaSlim made a representation that was false or misleading in a material particular, in contravention of s 59(2) of the Act.
646 Moreover, I am satisfied that, more generally, SensaSlim engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act, based on the conduct described at [640]. As I have noted, separate contraventions are pleaded. I am satisfied that these separate contraventions have been established.
647 As to s 53(d) of the Act, I am satisfied that SensaSlim made a false representation that it had an affiliation with Mr Boyle as Senior Director. Its representation, more specifically, was that Mr Boyle was actively involved in the affairs of the company, bringing to the company the attributes and skills, and fulfilling the roles and undertaking the responsibilities, that SensaSlim had ascribed to him as the person controlling and directing the SensaSlim business. SensaSlim had no such affiliation with Mr Boyle. Once again, separate contraventions are pleaded. I am satisfied that these separate contraventions have been established.
648 This aspect of the applicant’s case is closely related to the contraventions I have discussed in Mr Boyle’s involvement. As I have noted, Newsletter No 1 and Newsletter No 2 were each ostensibly authored and signed by Mr Boyle. The applicant submits that, by publishing these newsletters, SensaSlim represented, in trade or commerce, that each newsletter was prepared or substantially prepared by Mr Boyle and that he had approved their contents. It transpires from the evidence, however, that Mr Boyle did not prepare or substantially prepare either newsletter or approve its contents. That is, the newsletters were not prepared under his supervision and did not represent his communication to Area Managers as Senior Director or CEO of SensaSlim.
649 I accept those submissions. I am satisfied that all newsletters sent by SensaSlim to Area Managers were prepared by Mr Foster or under his direction. He was the author of those documents. Their preparation was another example of Mr Foster “pulling the strings”. I refer, once again, to Dr Waters’ evidence summarised at [146] above, and Mr Emerton’s evidence summarised at [211] above. I am satisfied that Mr Boyle did not prepare Newsletter No 1 or Newsletter No 2, or approve their contents in the sense I have described.
650 The applicant alleges that, by this conduct, SensaSlim contravened s 52(1) of the Act: SOC para 123(a). It also alleges that SensaSlim represented it had a sponsorship, approval or affiliation it did not have, in contravention of s 53(d) of the Act: SOC para 123(b). It is to be noted that, as pleaded, this contravention only fixes on the representations made by Newsletters Nos 1 and 2: SOC para 47.
651 I am satisfied that, by this conduct, SensaSlim engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52(1) of the Act. However, I am unable to see how, in this regard, s 53(d) is engaged independently of the contravention of that provision I have already found respecting Mr Boyle’s involvement.
Mr Boyle’s intention to resign
652 Mr Boyle produced documents to the applicant under s 155 of the Act. These documents included communications with Mr Foster. They reveal that, apparently based on the description of Mr Boyle in the Area Manager Proposal and Disclosure Document as an Associate Director of UBS Wealth Management Australia Ltd (UBS Australia), prospective franchisees started contacting UBS Australia inquiring about Mr Boyle’s involvement with SensaSlim. The stated associations between Mr Boyle and UBS Australia, and Mr Boyle and SensaSlim, in the documents provided to prospective franchisees were a matter of concern to Mr Boyle’s more senior colleagues at UBS Australia. Mr Boyle’s initial reaction was to endeavour to ensure that no continuing explicit reference be made to his employment with UBS Australia in documents provided to prospective franchisees and Area Managers. Later, Mr Boyle sought to extricate himself from involvement with SensaSlim as a director.
653 In a document dated 6 October 2010, which was produced to the applicant by Mr Boyle, the following is stated:
Michael Boyle’s position at SensaSlim.
I have advised my fellow Director – Peter O’Brien that I will be resigning from my position as Director and as such I will be seeking to sell my investment at the appropriate time. He has requested that I give him a 30 day period to arrange this in appropriate manner and to find fair value for my share.
654 This document was prepared by Mr Boyle. It represents his response to questions asked of him by UBS Australia. It stands as a statement of his intention as at 6 October 2010 to resign as a director of SensaSlim, although other evidence suggests that Mr Boyle had probably formed that intention much earlier.
655 On the morning of 19 October 2010, Mr Boyle sent an email to Mr Foster using the address pobrien@sensaslim.com.au and to Dr Waters. I am satisfied that, from the outset of his involvement, Mr Boyle knew of Mr Foster’s true involvement in the SensaSlim business and that Mr Foster was using the name “Peter O’Brien” for that purpose. I am also satisfied that Mr Boyle well-knew that Mr Foster controlled and directed the SensaSlim business.
656 In that email, Mr Boyle said:
Good morning,
Just touching base in regards to the resignation of my Directorship. I was due to report back to UBS yesterday but given the circumstance of the weekend I have requested an extension.
Can you let me know where we are at with that or if we need to discuss tonight.
I have told UBS I will advise them on Wednesday as to the timeframe.
Thanks
Michael
657 Mr Foster responded a short time later:
Mike can you stall them until 30 November?
Can you advise that you have stepped down from daily duties, a General Manager is being appointed, and your resignation will take effect from the end of next month? That’s only six weeks away? How do you think they would react?
Cheers
658 The reason for Mr Foster’s apparent concern is obvious. It was necessary to delay Mr Boyle’s resignation until 30 November 2010 because that was the date on which the Area Managers’ Conference was to be held. Indeed, Mr Foster said as much to Mr Boyle when Mr Boyle, Dr Waters and Mr Foster discussed Mr Boyle’s “need to resign” at the Carrara house in November 2010: see [159]. It was vital to the success of the venture, which included collecting the balance of the moneys owing by Area Managers for the purchase of products and point of sale materials, that Mr Boyle continue to be seen as the person who controlled and directed the conduct of the SensaSlim business, assisted by Mr O’Brien as Operations Director. I am satisfied that Mr Boyle knew this at the time. As events transpired, Mr Boyle was able to “stall them”. I am satisfied that, in doing so, he was complying with Mr Foster’s wishes in that regard.
659 Mr Boyle attended the Area Managers’ Conference on 30 November 2010. He conducted a “meet and greet”. He even spoke briefly at the Conference. He expressed words of welcome, and even “thanked Peter O’Brien for all his work”, even though he must have known that Mr O’Brien had no active involvement in the SensaSlim business and had done no meaningful work as SensaSlim’s apparent Operations Director. I am satisfied that, by this charade, Mr Boyle perpetuated the perception of Area Managers that he controlled and directed the conduct of the SensaSlim business, assisted by Mr O’Brien as Operations Director, and that his (Mr Boyle’s) position in SensaSlim and his involvement in the SensaSlim business would continue into the foreseeable future.
660 Mr Boyle resigned as a director on 2 December 2010. None of the Area Managers knew of his intention to do so.
661 The evidence shows that one factor inducing Mr Boyle to comply with Mr Foster’s wishes in delaying his resignation was that he retained what he saw as a substantial financial investment in SensaSlim and did not want to “compromise” that investment. It should not go unstated that Mr Boyle’s financial investment in SensaSlim ($35,000) was substantially less than each Area Manager’s financial investment in the SensaSlim business ($59,950) for products and point of sale materials. Mr Boyle’s thoughts and concerns were directed primarily to his own financial well-being, apparently without significant regard to the situation of the Area Managers.
662 The applicant submits that Mr Boyle’s continued involvement in SensaSlim as a director was a material consideration for prospective franchisees when deciding whether to become Area Managers and in paying the price for their franchises, including the balance of moneys due at the time of the Area Managers’ Conference. It submits that Area Managers had a reasonable expectation that they would be informed if Mr Boyle intended to resign as a director.
663 I accept those submissions. Mr Boyle was not merely a director. By issuing the KMB letter, SensaSlim represented him to be “the founder of SensaSlim in Australia”. By issuing the Area Manager Proposal and the Disclosure Document, SensaSlim represented him to be the person who had acquired the Australian master franchise for the SensaSlim product. He was the person establishing the SensaSlim business in Australia – the business in which, for a significant financial investment in products and point of sale materials, the Area Managers had been invited to participate. SensaSlim represented Mr Boyle as a person impeccably suited for the task. SensaSlim stressed his academic qualifications, his accreditation as a derivatives specialist, his compliance with standards said to be required by the Australian Securities and Investments Commission, his work experience in London with “Deutche [sic] Bank” and his experience in Australia with Macquarie Bank (“Australia’s premier investment bank”) for some years. The relevance of some of these matters is not entirely clear. But, plainly, SensaSlim, acting under Mr Foster’s direction, was seeking to impress on prospective franchisees Mr Boyle’s credentials as Senior Director.
664 Most of all, SensaSlim played on Mr Boyle’s role as an associate director of UBS Australia, which it stressed as being:
… a subsidiary of UBS one of the world’s leading Swiss investment banks. UBS was the result of the merger of the Union Bank of Switzerland and the Swiss Bank Corporation.
UBS is a diversified global financial services company, with its main headquarters in base and Zurich, Switzerland. It is the world’s second largest manager of private wealth assets, and is also the second–largest bank in Europe, by both market capitalisation and profitability.
665 No doubt this Swiss connection was very convenient. It was redolent of the Swiss pedigree that SensaSlim had falsely represented for the SensaSlim product itself: a breakthrough product of SensaSlim Suisse that had been tested in a worldwide trial whose results had been analysed and reported on by a Swiss research institute.
666 For prospective franchisees and, later, Area Managers, SensaSlim put Mr Boyle forward as their leader who would guide the SensaSlim business to success. SensaSlim represented Mr Boyle as “speaking personally” in the Area Manager Proposal, when he congratulated prospective franchisees for taking “the first step towards securing financial independence”. He was put forward as saying:
We are committed to providing a financially secure future for our Area Managers by building upon a solid foundation of strong brands and quality products that are thoroughly researched and dexterously marketed.
667 Mr Boyle’s persona was used to rally prospective franchisees to “join us in this inspiring project”: see the full text at [67].
668 When SensaSlim represented Mr Boyle as speaking of “we” and “us”, it represented to prospective franchisees and, later, Area Managers a vision and a future of “we” and “us” that included Mr Boyle. This vision of Mr Boyle was reinforced by Newsletters Nos 1 and 2 being sent to Area Managers in a way that represented a personal commitment from Mr Boyle himself. Had Mr Boyle’s intention to resign been known, it would have struck at the core of that vision and fractured it. I have no doubt that, in the eyes of Area Managers, Mr Boyle’s involvement was seen as very important to the successful establishment of the SensaSlim business they had been promised. I am satisfied that Area Managers held the reasonable expectation that, if Mr Boyle intended to resign, they would be informed of that fact in a timely way. Given that Mr Boyle had that intention no later than early October 2010, and possibly well before that time, it was misleading or deceptive of SensaSlim not to inform Area Managers of that fact well before the holding of the Area Managers’ Conference. The naked truth is that, if Mr Boyle’s intention to resign became public knowledge, the Area Managers would want to know why he was resigning. It is highly likely that this would have provoked more questions than could have been convincingly answered by SensaSlim, and risked exposure of the scam that had been perpetrated on the Area Managers.
669 The applicant alleges that by failing to disclose Mr Boyle’s intention to resign as a director of SensaSlim, which involved the decision to delay Mr Boyle’s resignation until after 30 November 2010 when the Area Managers’ Conference was held, in circumstances where Area Managers had the reasonable expectation to which I have referred, SensaSlim engaged in conduct that was misleading or deceptive and thereby contravened s 52(1) of the Act: SOC para 124. I am satisfied that this contravention has been established.
670 I have summarised much of the evidence concerning Mr Foster’s involvement in the SensaSlim business in [126]-[516] above. I will certainly not repeat or attempt to further summarise those matters. Suffice it to say, his involvement was extensive. As I have found at [565], I have no doubt that Mr Foster controlled and directed, in an executive capacity, the way in which the SensaSlim business was carried on. The SensaSlim business was in substance his venture implemented through SensaSlim as the corporate vehicle for that purpose. He was the puppeteer who pulled all the strings in the operation of the business.
671 There are, however, some additional matters to which I should refer.
672 I have referred to “Welcome letters” sent to Area Managers after their appointment. Examples of such letters in the evidence show that they were sent out under Mr Boyle’s name. The evidence plainly shows, however, that Mr Foster directed office staff to prepare and send them. He gave general directions as to what the letters should say. There is evidence that Mr Boyle signed at least some of the letters.
673 The evidence also establishes that Mr Foster used Mr Boyle’s services to obtain the KMB letter and the Robinson Legal letter. There is no suggestion in the evidence that KMB or Robinson Legal were aware of Mr Foster’s involvement in the business or had any knowledge other than that the SensaSlim business was an apparently genuine one and that the directors of SensaSlim were Mr Boyle and Mr O’Brien.
Mr Foster’s involvement
674 The applicant alleges that Mr Foster was knowingly concerned in or party to the contraventions I have found at [578]-[579] above: SOC paras 125 and 127.
675 I am satisfied that Mr Foster caused SensaSlim to issue the Disclosure Document. Further, as stated at [569], I am satisfied that the Disclosure Dcument was prepared by Mr Foster or under his direction. It was his decision not to disclose in that document his involvement in the SensaSlim business.
676 I am satisfied that Mr Foster knew that:
the Disclosure Document stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the Disclosure Document represented that no person other than Mr Boyle and Mr O’Brien were involved as officers (or associates) of SensaSlim;
this was a representation with respect to a material aspect of SensaSlim’s business activity, and
the failure to disclose Mr Foster as an officer of SensaSlim, particularly as a person who was making or participating in making decisions that affected the whole or a substantial part of the SensaSlim business, was, in the circumstances, a material matter.
677 I am therefore satisfied that Mr Foster was knowingly concerned in, and party to, each contravention found at [578]-[579] above.
678 The applicant also alleges that Mr Foster contravened s 52(1) of the Act and s 18(1) of the Australian Consumer Law, as a principal: SOC para 126. This allegation was not developed in submissions apart from the applicant’s stated reliance on the extended operation of the Act under s 6(3) thereof. The statement of claim particularises Mr Foster’s conduct to be his communications by telephone and email with Area Managers, potential Area Managers and others in which he represented himself to be Mr O’Brien: SOC para 78. The applicant’s case is that, by misrepresenting himself as Mr O’Brien, Mr Foster was concealing his own involvement in the SensaSlim business. This is undoubtedly true. But this conduct was inextricably part of SensaSlim’s conduct of the SensaSlim business. It was a fundamental aspect of its modus operandi. When engaging in this conduct, Mr Foster was acting as the company, just as he was acting as the company in, for example, preparing or directing the preparation of the Disclosure Document and causing it to be issued to prospective franchisees: Hamilton v Whitehead (1988) 166 CLR 121 at 126-129. In my view, this conduct is properly attributable to SensaSlim and would have constituted contraventions by SensaSlim of s 52(1) of the Act and, in relation to such conduct occurring on and after 1 January 2011, s 18(1) of the Australian Consumer Law, had those contraventions been pleaded. However, those allegations do not appear to have been pleaded. I should add that I am satisfied that Mr Foster was knowingly concerned in and party to that conduct although, once again, that allegation also does not appear to have pleaded. Therefore, I am not satisfied that the contravention pleaded in paragraph 126 of the statement of claim has been established.
Mr O’Brien’s involvement
679 The applicant alleges that Mr Foster was knowingly concerned in or party to the contraventions I have found at [588]-[590] above: SOC para 128 and 129.
680 I am satisfied that Mr Foster caused SensaSlim to issue the Disclosure Document and the Area Manager Proposal. Further, I am satisfied that the Disclosure Document and the Area Manager Proposal were prepared by Mr Foster or under his direction. He decided what was to be stated, and what was not to be stated, in those documents. I am satisfied that it was his decision to represent in the Disclosure Document and in the Area Manager Proposal that Mr O’Brien was involved in the SensaSlim business as Operations Director and that, as Operations Director, Mr O’Brien had the role described in the Disclosure Document.
681 Further, I am satisfied that Mr Foster knew that:
the Disclosure Document and the Area Manager Proposal, collectively and individually, stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the identification of Mr O’Brien as Operations Director, and the description of his role in the Disclosure Document, represented that Mr O’Brien was actively involved in the SensaSlim business in that capacity;
this was a representation with respect to a material aspect of SensaSlim’s business activity;
Mr O’Brien was not actively involved in the SensaSlim business as Operations Director as described in the Disclosure Document,
Mr O’Brien’s non-active involvement in the SensaSlim business as Operations Director was, in the circumstances, a material matter.
682 I am satisfied, therefore, that Mr Foster was knowingly concerned in and party to each contravention found at [588]-[589] above. The same conclusion ensues in relation to the contravention found at [590] above with respect to s 53(d) of the Act. For the avoidance of doubt, I am satisfied that Mr Foster knew that Mr O’Brien did not have the affiliation with SensaSlim that SensaSlim had represented.
The worldwide trial of the SensaSlim product
683 The applicant alleges that Mr Foster was knowingly concerned in or party to the contraventions I have found at [608]-[611] above: SOC paras 130, 133 and 137.
684 I am satisfied that:
the worldwide trial of the SensaSlim product was a fabrication by Mr Foster intended to lead prospective franchisees into the false belief that the efficacy of the SensaSlim product as a weight loss product had been established scientifically;
this was done with the ultimate aim of inducing prospective franchisees to become Area Managers and to purchase stock of the SensaSlim product for supply to retailers;
the Institute said to have been involved in the worldwide trial of the SensaSlim product was also a fabrication by Mr Foster, created to achieve the same ends;
Mr Foster was responsible for, and had control over, the making of the SensaSlim DVD and that the scripts for Mr Murphy and each of the actors appearing in the SensaSlim DVD were prepared substantially by Mr Foster. The SensaSlim “story” as told in the SensaSlim DVD, and in other materials supplied to prospective franchisees, including the Area Manager Proposal, was Mr Foster’s creation;
Mr Foster was responsible for, and had control over, the making of advertorials (including the advertorials described at [600]-[602]) as well as the production of other promotional materials used by SensaSlim to advertise the SensaSlim product;
the Area Manager Proposal and the newsletters issued by SensaSlim were prepared by Mr Foster or under his direction, and
Mr Foster caused SensaSlim to use the SensaSlim DVD, the Area Manager Proposal, the newsletters and the advertorials as promotional aids.
685 I am satisfied that Mr Foster knew that:
the SensaSlim DVD and the Area Manager Proposal, individually and collectively, stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in the business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the existence of the SensaSlim product as a product whose efficacy as a weight loss product had been established by a worldwide trial was a representation with respect to a material aspect of that business activity;
the SensaSlim product had not been tested in a worldwide trial that had established its efficacy as a weight loss product, and
the fact that the SensaSlim product had not been tested in the worldwide trial and was not thereby shown to be an efficacious weight loss product was, in the circumstances, a material matter.
686 I am satisfied, therefore, that Mr Foster was knowingly concerned in and party to each contravention found at [608]-[611] above.
687 The applicant also alleges that, in relation to certain conduct concerning the asserted worldwide trial of the SensaSlim product, Mr Foster contravened the Act or the Australian Consumer Law as a principal: SOC paras 131, 132 and 136.
688 In that connection it alleges that, in a telephone conversation with Mr Evans, Mr Foster represented that he had travelled to Switzerland and seen the research facility where the worldwide trial had been conducted: SOC para 131. The evidence does not fully support that factual contention: see [327] above. Although Mr Evans gave evidence that “Mr O’Brien” told him that he (“Mr O’Brien”) had travelled to the “facility in Switzerland”, and although I am satisfied that in this and in other telephone conversations Mr Foster was posing as Mr O’Brien, this conversation, as given by Mr Evans, does not extend to a separate and distinct representation that the SensaSlim product had been tested in a worldwide trial that had established its efficacy as a weight loss product.
689 I accept that the conversation may have reinforced the representation about the worldwide trial previously made by SensaSlim in, for example, the SensaSlim DVD. Mr Evans was shown the SensaSlim DVD. If that was the case, I do not think Mr Foster’s conduct, in that regard, can be seen as standing apart from the representation that SensaSlim itself had otherwise made concerning the worldwide trial of the SensaSlim product. In short, Mr Foster’s conduct in this regard should be considered as an aspect of SensaSlim’s conduct that I have already found to have contravened the Act.
690 The applicant also alleges that, as Mr Foster substantially prepared the content of all the newsletters and sent or caused the newsletters to be sent to Area Managers by email, Mr Foster contravened s 52(1) and s 53(a) of the Act and s 18(1) and s 29(1)(a) of the Australia Consumer Law: SOC para 132. In oral submissions, the applicant sought to advance a case that Mr Foster was liable under different provisions of s 53 of the Act and s 29 of the Australian Consumer Law. On reflection, and after considering the statement of claim, the written submissions, and the transcript of argument, I think this was an error. Ultimately, this does not matter because, in my view, the correct analysis of this conduct is that it is attributable to SensaSlim as a principal, not to Mr Foster as a principal. I repeat the observations I have made at [678] above. Mr Foster’s liability in relation to this aspect of the case concerning the preparation and sending of newsletters properly arises as an accessory, as I have found at [686] with specific reference to paragraph 115 of the statement of claim: SOC para 133.
691 Similarly, the applicant alleges that Mr Foster contravened s 18(1) and s 29(1)(g) of the Australian Consumer Law by making the representation that the SensaSlim product had an approval that it did not have, namely that provided by a worldwide trial (which had not been conducted) whose results had been collated an analysed by experts appointed by the Institute in Switzerland (which did not exist): SOC para 136. Once again, I am of the view that this conduct is properly attributable to SensaSlim as a principal, not to Mr Foster as a principal: see [678] above. Mr Foster’s liability in relation to this aspect of the case properly arises as an accessory, as I have found at [686] with specific reference to paragraph 117 of the statement of claim: SOC para 137.
692 Finally, the applicant alleges that Mr Foster contravened s 52(1) of the Act by substantially preparing the content of Newsletter No 5 (which represented that Mr Adams had met trial participants) and by sending that newsletter or causing it to be sent by email to Area Managers. Alternatively, the applicant contends that Mr Foster was knowingly concerned in or party to such a contravention by SensaSlim: SOC paras 134 and 135.
693 Once again, the conduct of sending newsletters to Area Managers by email was SensaSlim’s conduct, although I accept that Mr Foster was knowingly concerned in and party to that conduct. The case pleaded against SensaSlim, however, is that, by publishing certain newsletters, including Newsletter No 5, SensaSlim represented that Mr Adams had met with participants in the worldwide trial of the SensaSlim product and thereby represented that the trial had been conducted. It can be seen, therefore, that this conduct by SensaSlim does not stand outside the contravening conduct I have already found. It is an aspect of SensaSlim’s conduct of falsely representing that the SensaSlim product had been tested in a worldwide trial that established its efficacy as a weight loss product: see [612] above.
Projected earnings
694 The applicant alleges that Mr Foster was knowingly concerned in or party to the contraventions I have found at [624] and [626] above: SOC para 138. Those findings were made on an application of s 51A(1) of the Act in the form that the Act took prior to 1 January 2011. That provision does not relieve an applicant from the burden of proving the requisite knowledge on the part of a person whose liability is alleged to arise under s 75B(1)(c) of the Act in relation to a contravention occurring before 1 January 2011: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [11] and [15].
695 In the present case, the burden is on the applicant to establish that Mr Foster had knowledge that the representations referred to in [621]-[622] above were made and that, as found against SensaSlim, they were misleading on the basis that SensaSlim had no reasonable grounds for making them.
696 I am satisfied that the applicant has established that Mr Foster knew that the representations referred to in [621]-[622] were made. I am not satisfied, however, that the applicant has established that Mr Foster knew that the representations were misleading because there were no reasonable grounds for making them.
697 In this latter connection, the applicant relies on the fact that, at the time the representations were made, no person had been involved in distributing the SensaSlim product. I accept that to be the case. But it does not follow from that fact alone that there were no reasonable grounds for making the representations.
698 I am not satisfied, therefore, that the applicant has established that Mr Foster was knowingly concerned in or party to the contraventions I have found at [624] and [626] above.
The buy-back guarantee
699 The applicant alleges that Mr Foster was knowingly concerned in or party to the alleged contraventions concerning the buy-back guarantee pleaded in paragraph 120 of the statement of claim: SOC para 138.
700 For the reasons given at [637]-[638] above, I am not satisfied that the applicant has established that, by making the representation of a “buy-back guarantee”, SensaSlim contravened s 52(1) and s 59(2) of the Act. It follows that no claim of accessorial liability on the part of Mr Foster can be maintained in relation to that matter.
Mr Boyle’s involvement
701 The applicant alleges that Mr Foster was knowingly concerned in or party to the contraventions I have found at [645]-[647] above: SOC paras 139 and 141.
702 I am satisfied that Mr Foster caused SensaSlim to issue the documents referred to in [640] above. I am satisfied that the Area Manager Proposal, the Disclosure Document and the newsletters were prepared by Mr Foster or under his direction. I am satisfied that the “Welcome letters” were prepared under his direction. I am satisfied that Mr Foster procured Mr Boyle to obtain the KMB letter.
703 I am satisfied that Mr Foster knew that:
the Disclosure Document, the Area Manager Proposal and the KMB letter, individually and collectively, stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in the business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the identification of Mr Boyle as Senior Director and the description of his role in the Disclosure Document as well as the description of Mr Boyle’s ostensible working relationship with his “operations team” and with KMB in the KMB letter, represented that Mr Boyle controlled and directed the SensaSlim business and that he was actively involved in it as Senior Director;
this was a representation with respect to a material aspect of SensaSlim’s business activity, and
Mr Boyle’s lack of control or direction of, and non-active participation in, the SensaSlim business as Senior Director were, in the circumstances, material matters.
704 I am satisfied, therefore, that Mr Foster was knowingly concerned in and party to each contravention found at [645]-[646] above. The same conclusion ensues in relation to the contravention found at [647] above concerning s 53(d) of the Act. For the avoidance of doubt, I am satisfied that Mr Foster knew that Mr Boyle did not have the affiliation with SensaSlim that SensaSlim had represented.
705 The applicant also alleges that, by preparing or approving the contents of Newsletters Nos 1 and 2, and by sending those newsletters by email, or causing them to be so sent, Mr Foster contravened the Act as a principal by representing, through those newsletters, that Mr Boyle controlled or directed the SensaSlim business and was actively involved in it: SOC para 140.
706 In my view, these are aspects of SensaSlim’s contraventions as a principal. Mr Foster’s liability, in relation to this aspect of the case, arises as an accessory, as I have found at [704] above.
Newsletters Nos 1 and 2
707 The applicant alleges that Mr Foster was knowingly concerned in or party to the contravention I have found at [651] with respect to s 52(1) of the Act. It also alleges that Mr Foster was knowingly concerned in or party to the alleged corresponding contravention of s 53(d) of the Act: SOC para 143.
708 I am satisfied that Mr Foster was knowingly concerned in and party to the contravention I have found at [651]. Mr Foster caused SensaSlim to issue those newsletters to Area Managers. The newsletters were prepared by him or under his direction. He was the author of them. Mr Foster knew that Mr Boyle did not prepare those newsletters or approve their contents, in the sense I have described at [648].
709 As to Mr Foster’s involvement in the alleged corresponding contravention of s 53(d) of the Act, I repeat my observation at [651] that I am unable to see how s 53(d) is engaged independently of the contravention of that provision I have already found respecting Mr Boyle’s involvement. Similarly, I am unable to see how Mr Foster’s liability as an accessory is engaged independently of the liability I have already found at [704] above.
710 The applicant advances an alternative allegation that, by preparing or approving the contents of Newsletters Nos 1 and 2, which Mr Foster sent or caused to be sent to Area Managers by email, Mr Foster contravened s 52(1) and s 53(d) of the Act as a principal: SOC para 142. In my view, these were aspects of SensaSlim’s conduct that contravened s 52(1) of the Act as a principal. Mr Foster’s liability, in relation to this aspect of the case, arises as an accessory, as I have found at [708].
Mr Boyle’s intention to resign
711 The applicant alleges that Mr Foster was knowingly concerned in or party to the contravention I have found at [669]: SOC para 144.
712 By no later than early October 2010, Mr Foster knew that Mr Boyle wished to resign as a director of SensaSlim. It was at Mr Foster’s urgings that Mr Boyle delayed his resignation. Mr Foster knew that Mr Boyle would resign soon after the Area Managers’ Conference.
713 I am satisfied that Mr Foster knew that Mr Boyle would attend the Area Managers’ Conference to give the appearance that he (Mr Boyle) controlled and directed the SensaSlim business and would continue to be, in the foreseeable future, actively involved in the business as Senior Director. I am satisfied that Mr Foster knew that Mr Boyle’s continued involvement in SensaSlim as a director (indeed, as Senior Director) was a material consideration for Area Managers, particularly in regard to the payment of the balance of moneys due at the time of the Area Managers’ Conference for products and point of sale materials yet to be supplied by SensaSlim. I am satisfied that Mr Foster knew that Area Managers had a reasonable expectation that they would be informed in a timely way if Mr Boyle intended to resign as a director.
714 I am satisfied that Mr Foster was knowingly concerned in and party to the contravention I have found at [669].
Generally
715 In my summary of the evidence, I have referred to the true nature of Mr O’Brien’s involvement in the SensaSlim business: see, for example, [150], [193]-[195], [239], [242] and [384].
716 The applicant submits that there is a significant circumstantial case that Mr O’Brien was knowingly complicit in Mr Foster’s adoption of his (Mr O’Brien’s) identity for the purpose of carrying on the SensaSlim business.
717 The applicant refers to Mr Emerton’s evidence that, on many occasions, he saw Mr O’Brien wandering into the office at the Norseman Court house, including when Mr Foster was on the telephone, and that Mr O’Brien was present and involved at the time when the SensaSlim business was being set up. The applicant also refers to the evidence that Mr O’Brien was photographed with Mr Adams at the SensaSlim office and that Mr O’Brien was present at the Area Managers’ Conference. Further, the applicant refers to the evidence that Mr O’Brien was present at the lunch at Omeros Brothers restaurant when Mr Driscoll sought to raise the concerns of certain Area Managers about some aspects of the conduct of the SensaSlim business.
718 I am satisfied from the description in the evidence of Mr O’Brien’s activities in relation to the SensaSlim business that Mr O’Brien knew that Mr Foster controlled and directed the business and that, for that purpose, Mr Foster had assumed Mr O’Brien’s identity. I am satisfied that Mr O’Brien acquiesced in Mr Foster doing so.
719 Further, I am satisfied that Mr O’Brien knew that he was being represented as the Operations Director of SensaSlim. Mr O’Brien’s attendance at the lunch at Omeros Brothers restaurant, ostensibly to deal with Area Managers’ concerns about the way in which the SensaSlim business was being conducted, is a manifestation of that knowledge. Significantly in this regard, the applicant also contends that Mr O’Brien signed the Disclosure Document as a director of SensaSlim. More accurately stated, the Franchisor’s Solvency Statement (the solvency statement), which is part of the Disclosure Document, bears what purports to be Mr O’Brien’s signature as a director.
720 There is no direct evidence that Mr O’Brien signed the solvency statement. However, there is direct evidence that he signed, on behalf of Sensaslim, the agreement which compromised Mr Emerton’s claims against the company. The latter agreement bearing Mr O’Brien’s signature is in evidence. In the absence of a deeming provision, such as s 152 of the Evidence Act 1995 (Cth) (the Evidence Act), I have compared the signature on the solvency statement with the signature made by Mr O’Brien on the agreement with Mr Emerton. The two signatures are not identical. Nevertheless, there are significant similarities between the two, such as to lead me to conclude that they are, as a matter of substance, the same. Moreover, on the present state of the evidence, I am satisfied that, more likely than not, Mr O’Brien signed the solvency statement, as represented on the face of the document itself. Independently of the conclusion I have reached on this matter, I note that Mr O’Brien has not sought to contest the fact that his signature appears on the solvency statement.
721 I am satisfied that Mr O’Brien’s signing of the solvency statement is another manifestation of his knowledge that he was being represented as the Operations Director of SensaSlim. I am also satisfied that, at the same time, Mr O’Brien knew that his true role in the SensaSlim business was not as Operations Director as described in the Disclosure Document.
Mr Foster’s involvement
722 The applicant alleges that Mr O’Brien was knowingly concerned in or party to the contravention I have found at [579]: SOC para 146.
723 As stated, I am satisfied that Mr O’Brien signed the solvency statement. As the solvency statement is an integral part of the Disclosure Document, I am satisfied that Mr O’Brien also knew that the Disclosure Document disclosed his and Mr Boyle’s involvement in the SensaSlim business, but not Mr Foster’s involvement.
724 Further, I am satisfied that Mr O’Brien knew that:
SensaSlim would issue the Disclosure Document to prospective franchisees;
the function of the Disclosure Document was to provide information that a prospective franchisee would need in order to make an informed decision about whether to enter into a franchise agreement with SensaSlim, and
by signing the solvency statement in the Disclosure Document, he was participating in providing such information.
725 Further, I am satisfied that Mr O’Brien knew that:
the Disclosure Document stood as an invitation in trade or commerce to persons (prospective franchisees) to engage or participate in a business activity requiring the performance by them of work, or the investment of moneys and the performance of work by them associated with that investment;
the representation in the Disclosure Document that no person other than Mr Boyle and Mr O’Brien were involved as officers (or associates) of SensaSlim was a representation with respect to a material aspect of SensaSlim’s business activity, and
the failure to disclose Mr Foster as an officer of SensaSlim, particularly as a person who was making or participating in making decisions that affected the whole or a substantial part of the SensaSlim business, was, in the circumstances, a material matter.
726 I am therefore satisfied that Mr O’Brien was knowingly concerned in and party to the contravention I have found at [579].
727 The applicant alleges, alternatively, that, this regard, Mr O’Brien contravened s 52(1) of the Act and s 18(1) of the Australian Consumer Law as a principal: SOC para 145. The applicant did not actively pursue this aspect of its case in final submissions: Transcript 448-449. It was correct not to do so. In any event, in my view, Mr O’Brien’s liability, in relation to this aspect of the case, arises as an accessory, not as a principal.
Mr O’Brien’s involvement
728 The applicant alleges that Mr O’Brien was knowingly concerned in or party to the contraventions I have found at [588] to [590]: SOC paras 147 and 148.
729 In addition to the findings I have already made concerning Mr O’Brien’s knowledge, and the true nature of his involvement in the SensaSlim business, I am satisfied that Mr O’Brien knew that:
his identification as Operations Director, and the description of his role in the Disclosure Document, represented that he was actively involved in the SensaSlim business in that capacity;
this was a representation with respect to a material aspect of SensaSlim’s business activity, and was false or misleading, including in a material particular, and
he did not have the affiliation with SensaSlim that had been represented.
730 I am satisfied, therefore, that Mr O’Brien was knowingly concerned in and party to the contraventions I have found at [588] to [590].
Generally
731 In my summary of the evidence, I have referred to Mr Adams' involvement in the SensaSlim business: see, for example, [148], [236]-[237], [242], [273]-[274], [276], [280], [283]-[284], [286], [340], [344], [351], [360], [363], [366], [382] [383]-[384], [409], [479] and [495]. Other evidence shows that Mr Adams was involved in setting up the SensaSlim website and participated in organising the advertising and promotional campaign for the SensaSlim product, including the advertorials to which I have referred at [600]-[602].
732 Mr Adams was examined under s 155 of the Act. He made admissions which were tendered against him: see Administrative Exhibit 5. These admissions included the following:
Mr Adams was the "Operational Manager" in relation to the SensaSlim business. He dealt with "manufacturing, packaging and product". He liaised with Area Managers. His title changed to General Manager at the time of the Area Managers' Conference, but his duties did not change.
Mr Adams knew that SensaSlim's newsletters to Area Managers were sent out as “coming from” him. The newsletters were sent every Friday evening by email.
In relation to the preparation of the newsletters, Mr Adams would provide a brief explanation to Mr O'Brien of "what I have done for the week, what has been happening in my week". He said that this was "a brief paragraph".
For example, in relation to Newsletter No 5 (see [593] above), Mr Adams' "input" was in relation to a section dealing with credit card facilities. With respect to the asserted worldwide trial of the SensaSlim product referred to in that newsletter, Mr Adams accepted that he did not have contact with any person in Australia who had been involved in the trial, notwithstanding statements to that effect in the newsletter. In particular, he had not met a girl called Zara who had participated in the trial. When he received a copy of this newsletter, he did not seek to correct that statement.
In relation to Newsletter No 21 (see [594] above) in which he was credited with saying that he had had the pleasure of meeting several more participants in the worldwide trial, Mr Adams confirmed that he had not met such persons.
733 Importantly, Mr Adams admitted knowing Mr Foster. When asked how he knew Mr Foster, Mr Adams replied:
I know him through the Gold Coast. Basically, who on the Gold Coast doesn't know Peter Foster?
734 In later answers, Mr Adams admitted that he had met Mr Foster in about December 2009 or January 2010 at a bar on the Gold Coast called Moo Moos.
735 Given the nature and extent of Mr Adams' involvement in the SensaSlim business and his admitted personal knowledge of Mr Foster at a time before he commenced working in the SensaSlim business, and given my findings in relation to the extent of Mr Foster’s and Mr O’Brien’s respective involvement in the business, I am satisfied that, when Mr Adams says he was communicating or liaising with Mr O'Brien in relation to operational aspects of the SensaSlim business, he was in fact communicating or liaising with Mr Foster. I am satisfied that Mr Adams knew that to be the case, particularly in relation to the production of newsletters.
736 The evidence shows quite starkly Mr Adams’ personal contact with Mr Foster in relation to the business. For example, Mr Woolley gave evidence about attending a meeting with Mr Foster, Mr McMullan and Mr Adams at Carrara on about 12 November 2010 to discuss the editing of a video called “All Together Now”, which was to be used as a motivational tool at the Area Managers’ Conference: see [280] above. There is no suggestion in the evidence that, on that occasion, Mr Foster was posing as Mr O’Brien or that Mr Adams thought that Mr Foster was Mr O’Brien.
737 This is not to say that Mr Adams did not also communicate or liaise with Mr O'Brien. The evidence shows, for example, that Mr Adams was photographed with Mr O'Brien at the SensaSlim office. He attended Omeros Brothers restaurant with Mr O'Brien when meeting Mr Driscoll. Mr Adams was also present with Mr O’Brien when the settlement with Mr Emerton was “negotiated” at the Broadbeach Sofitel. I have no doubt that there were many other occasions in the day-to-day conduct of the SensaSlim business where Mr Adams’ and Mr O’Brien’s paths crossed.
738 I am satisfied, however, that Mr Adams knew Mr O'Brien's true role in the SensaSlim business and knew that it was Mr Foster who controlled and directed the business. I am also satisfied that Mr Adams knew that Mr Foster had assumed Mr O'Brien’s identity in the operation of the business when dealing with prospective franchisees, Area Managers and others.
739 In this connection, I am satisfied that, on occasion, Mr Adams actively took steps to conceal Mr Foster’s involvement in the SensaSlim business. For example, Mr James gave evidence that when he and Mrs James sent an email on 4 February 2011 to Layla at SensaSlim asking about the possibility of Mr Foster’s involvement with SensaSlim, he received an email from Mr O’Brien and an email from Mr Adams. The email from Mr Adams contained a denial that Mr Foster was involved with SensaSlim: see [409]. It is possible, indeed likely, that Mr Adams sent the email under Mr Foster’s direction. Be that as it may, I am satisfied that Mr Adams knew the true position and deliberately concealed the fact of Mr Foster’s involvement by the denial that he gave.
740 Mr Adams did not contest the evidence that had been adduced against him. He did, however, make submissions in relation to that evidence and, more generally, in relation to the case brought against him by the applicant. The general thrust of his submissions on matters of evidence was that there is “no reliable evidence on which [the Court] ought order relief sought” by the applicant.
Mr Foster’s involvement
741 The applicant alleges that Mr Adams was knowingly concerned in or party to the contraventions I have found at [578]-[579]: SOC paras 150 and 152.
742 The applicant’s case against SensaSlim in this regard is based on the publication and provision of the Disclosure Document to prospective franchisees. There is no evidence that Mr Adams was involved in the publication or provision of the Disclosure Document to prospective franchisees. Moreover, I am not satisfied that it has been shown that he knew its contents. In this connection, I am not persuaded that I should infer that he had knowledge of the contents of the Disclosure Document simply because he was, from about June 2010, involved in the day-to-day conduct of the SensaSlim business as “Operational Manager” or, later, as General Manager. It is possible that he did have such knowledge. It is equally possible that he did not. The evidence suggests that Mr Adams’ involvement in the SensaSlim business did not extend to the selling of franchises but was largely in relation to dealing with Area Managers, after their appointment, and to other operational aspects of the business.
743 I am not satisfied, therefore, that the applicant has established that Mr Adams was knowingly concerned in or party to the contraventions I have found at [578]-[579].
744 Separately, however, the applicant alleges that Mr Adams contravened s 52(1) of the Act and s 18(1) of the Australian Consumer Law as a principal by concealing from Area Managers Mr Foster’s involvement in the SensaSlim business: SOC para 151. The statement of claim particularises Mr Adams’ conduct to be his communications with Area Managers, potential Area Managers and third parties in which Mr Adams represented that the person with whom these Area Managers, potential Area Managers and third parties were communicating as “Peter O’Brien” was Mr O’Brien whereas, in fact, they were communicating with Mr Foster: SOC para 78. The applicant alleges, therefore, that, in this way, Mr Adams concealed Mr Foster’s involvement.
745 In submissions, the applicant relied on Mr Adams’ specific and direct denial of Mr Foster’s involvement in the SensaSlim business in the email he sent to Mr and Mrs James on 4 February 2011. Plainly however, this is not a communication with respect to a misrepresentation as to the identity of Mr O’Brien. It was a denial of Mr Foster’s involvement in the SensaSlim business in the context of an email that did not have any reference to Mr O’Brien. In its pleaded case, the applicant did not rely on this communication with Mr and Mrs James as constituting conduct alleged against Mr Adams.
746 The applicant also relied on Mr Adams answering a telephone call from Mr Bubb, who wished speak to Mr O’Brien. Mr Bubb’s evidence was:
I recall on one occasion, on a date … that I cannot recall, I telephoned Mr O’Brien and Mr Adams answered his phone. He said “Peter’s on another call. I’ll ask him to call you back”. A short while later, Mr O’Brien rang me back.
747 I accept that, more likely than not, the person returning Mr Bubb’s telephone call was Mr Foster. I also accept that, more likely than not, Mr Adams passed on Mr Bubb’s call to Mr Foster, who then returned the call. However, I regard this event to be no more than an incident in the conduct by SensaSlim of its business and that Mr Adams was acting as the company. In this regard, I repeat the observations I have made at [678] above. It follows that Mr Adams’ conduct, properly characterised, is conduct that is attributable to SensaSlim as a principal. I would accept that Mr Adams was knowingly concerned in and party to that conduct. However, that allegation does not appear to have been pleaded. Nor does it appear that the applicant has pleaded a discrete allegation of contravention by SensaSlim in this regard. Therefore, I am not satisfied that the contravention pleaded in paragraph 151 of the statement of claim has been established.
Mr O’Brien’s involvement
748 The applicant alleges that Mr Adams was knowingly concerned in or party to the contraventions I have found at [588]-[590]: SOC paras 147 and 148. As I have noted, this contravention is based on the Area Manager Proposal together with the Disclosure Document making the alleged representation: SOC para 26.
749 As I have noted, there is no evidence that Mr Adams was involved in the publication or provision of the Disclosure Document to prospective franchisees. Moreover, I am not satisfied that it has been shown that he knew its contents.
750 In his s 155 examination, Mr Adams’ admitted that he had seen the Area Manager Proposal and that a copy had been given to him by Mr O’Brien – I infer, by Mr Foster – about a week after Mr Adams commenced working in the SensaSlim business. Mr Adams put the date at about July 2010. His admission went no further.
751 There is no evidence that Mr Adams had any significant knowledge of the contents of the Area Manager Proposal, beyond the fact that prospective franchisees “signed a document, which was located in the back”. Once again, it is possible that Mr Adams knew that the Area Manager Proposal stated that Mr O’Brien was the Operations Director of SensaSlim, but it is equally possible that he did not know that fact. Perhaps more importantly, there is no evidence that Mr Adams was involved with the use or distribution of the Area Manager Proposal. He certainly liaised with Area Managers after their appointment and engaged in other operational activities, but the evidence does not suggest that he dealt with prospective franchisees or, more specifically, used the Area Manager Proposal for that purpose. This appears to have been the role of others.
752 In the circumstances, I am not satisfied that the applicant has established that Mr Adams was knowingly concerned in or party to the contraventions I have found at [588]-[590].
753 The applicant alleges that Mr Adams was knowingly concerned in or party to the contraventions I have found at [609]-[611]: SOC paras 157, 159 and 161. The applicant originally alleged that Mr Adams was also knowingly concerned in or party to the contravention I have found at [608]: SOC para 155. However, in the course of oral submissions, the applicant properly volunteered that such a case could not be maintained against Mr Adams: Transcript 454.
754 The applicant pleaded an alternative case in relation to this subject matter, namely that Mr Adams contravened the Act and the Australian Consumer Law as a principal: SOC paras 156, 158 and 160. However, in oral submissions, the applicant accepted that Mr Adams’ alleged liability was better characterised as an accessory rather than as a principal: T455. I would add that, once again, the observations I have made at [678] above concerning acts that are to be taken as conduct of the company, apply equally here.
755 There is no doubt that Mr Adams was prepared to acquiesce in the making of the statements in the newsletters that he had met participants in the worldwide trial of the SensaSlim product. It is also clear that he had a role in the production of advertorials which contained interviews with people said to have been participants in the worldwide trials. Mr Adams admitted that he had not met anyone in Australia who had participated in the worldwide trials. But his admission went no further than that.
756 The case brought by the applicant against SensaSlim, and the contraventions I have found, concern conduct in which it was falsely represented that the SensaSlim product had been tested in a worldwide trial that had established its efficacy as a weight loss product. Although Mr Adams was prepared to acquiesce in falsehoods about having met trial participants, I am not persuaded that I should take the next step and find that he knew that there had been no worldwide trial of the SensaSlim product or that its efficacy as a weight loss product had not been established by such a trial. There is certainly no direct evidence that Mr Adams had knowledge of either of those things. It is quite possible that he genuinely believed that there had been a worldwide trial of the SensaSlim product and was prepared to go along with Mr Foster’s editorial creations in the newsletters that Mr Adams had met some of the participants. Mr Adams’ acquiescence in these statements, when he knew them to be false, does not speak well of him. However, it is not sufficient to establish that he is liable as an accessory in relation to the contraventions I have found at [609]-[611].
757 A related aspect of the contravention found at [611] is that the trial was one whose results had been collated and analysed by experts appointed by the Institute in Switzerland. There is no evidence that Mr Adams knew that the Institute was a fabrication.
758 In the circumstances, I am not satisfied that the applicant has established that Mr Adams was knowingly concerned in or party to the contraventions I have found at [609]-[611].
Mr Boyle’s involvement
759 The applicant alleges that Mr Adams was knowingly concerned in or party to the contraventions found at [645]-[647]: SOC paras 162 and 164. These contraventions concern the representation that Mr Boyle controlled and directed the SensaSlim business and was actively involved in it. The contraventions were established by SensaSlim’s use of the Area Manager Proposal, the Disclosure Document, the KMB letter, the “Welcome letters”, and Newsletters Nos 1 and 2.
760 I am satisfied that Mr Adams knew that Mr Foster, and not Mr Boyle, controlled and directed the SensaSlim business and that Mr Boyle was not actively involved in it. So much must have been apparent from Mr Adams’ day-to-day involvement in the business. However, as I have found, there is no evidence that Mr Adams was involved in the publication or provision of the Disclosure Document or knew of its contents. Similarly, there is no evidence that Mr Adams was involved with the use or distribution of the Area Manager Proposal, although he had been given a copy of it. Even then, I am not persuaded that the evidence establishes any more than that he had limited knowledge of its contents: see [751] above.
761 Further, there is no evidence that Mr Adams knew of the KMB letter or its contents.
762 Newsletters Nos 1 and 2 were sent to Area Managers on 1 July 2010 and 9 July 2010, at about the time Mr Adams commenced to work in the business. However, there is no evidence that Mr Adams was involved in sending these particular newsletters or had relevant knowledge of their contents at the time they were sent.
763 As to the “Welcome letters”, it is certainly possible that Mr Adams knew that these were sent to new Area Managers, but there is no evidence to suggest that he had relevant knowledge of their contents or that he was involved in sending them.
764 In these circumstances, I am not satisfied that the applicant has established that Mr Adams was knowingly concerned in or party to the contraventions found at [645]-[647].
765 In submissions, the applicant advanced a contention that Mr Adams, by his own admission, “took part … in the deceptive newsletters which also gave the false impression that [Mr Boyle] controlled and directed and was actively involved in” the SensaSlim business. This contention was based on Mr Adams’ admission in his s 155 of his examination that he had read all newsletters. It is also based on the fact that Mr Boyle is mentioned in some of them. In my view, the fact that Mr Adams had read the newsletters, which the evidence makes clear were prepared substantially by Mr Foster, does not mean that he is liable for anything or everything said in them, absent further evidence implicating him in SensaSlim’s use of them. I am not satisfied on the evidence that Mr Adams had any significant involvement in the newsletters beyond what seems to have been his meagre contribution to their content, which does not seem to include anything about Mr Boyle or Mr Boyle’s involvement with the SensaSlim business. Certainly, the evidence does not establish that Mr Adams had any involvement in the preparation or publication of Newsletters Nos 1 and 2. What is more, the evidence suggests that the newsletters were sent from the address headoffice@sensaslim.com.au by others working in the SensaSlim business, not by Mr Adams. I am satisfied that the newsletters were sent at Mr Foster’s direction.
766 The applicant pleaded an alternative case based on Mr Adams acting as a principal in relation to publication of the newsletters: SOC para 163. It is not necessary for me to discuss this aspect of the applicant’s case against Mr Adams, as it cannot be sustained for the same reason that a case of accessorial liability cannot be sustained against him. Nevertheless, I repeat the observations I have made at [678] above concerning acts that are to be taken as conduct of the company.
Generally
767 The nature of Mr Boyle’s involvement in SensaSlim and the SensaSlim business is considered generally in Dr Waters’ and Mr Emerton’s evidence, which I have summarised. I have already discussed the significance of that involvement when dealing with Mr Boyle’s intention to resign as a director, in the context of the case against SensaSlim: see [652]-[669] above.
768 As I have also noted, Mr Boyle did not give evidence, although he produced documents under s 155 of the Act. I have already referred to some of those documents. Mr Boyle was also examined under s 155 of the Act on two occasions.
769 One significant issue in the case against Mr Boyle is his knowledge of, and involvement in the circulation of, important documents, namely the Disclosure Document, the Area Manager Proposal, the KMB letter, the “Welcome letters”, and Newsletters Nos 1 and 2 that were published under Mr Boyle’s ostensible authorship.
770 At the outset, it is necessary to say something about the proof of Mr Boyle’s signature, and the appearance of what is represented as Mr Boyle’s signature on various documents. A substantial plank in Mr Boyle’s defence is the contention that the applicant did not prove his signature or prove, subject to some exceptions, that Mr Boyle had affixed his signature to relevant documents. A related plank in Mr Boyle’s defence is that, contrary to the applicant’s allegation, he did not authorise documents by affixing his signature to them. This particular allegation is made by the applicant in relation to the Disclosure Document and page 1 of the Area Manager Proposal: SOC para 23.
771 Objections were taken to some parts of the evidence in this regard. Rulings were made. On 4 September 2012, I made a ruling that an Area Manager Proposal exhibited to Mr Emerton’s affidavit be provisionally admitted under s 57(1) of the Evidence Act. At that time, I noted that, unless Mr Boyle’s signature was proved, the signature purporting to be Mr Boyle’s signature appearing on the tendered document would lack probative value and would be liable to rejection under s 135 of the Evidence Act.
772 In his s 155 examinations, Mr Boyle was taken to a copy of an Area Manager Proposal purporting to bear his signature. He was asked whether it was his signature. He said:
It looks a lot like my signature. I would assume it is. It’s not any easy signature to copy, so I would assume it’s mine …
773 In my view that answer does not reveal any significant reservation about the matter. I am satisfied, on the balance of probabilities, that the signature appearing on the Area Manager Proposal is Mr Boyle’s signature. In making that finding, I have borne in mind the serious nature of the allegations made against Mr Boyle. But, from the answer given, I do not think Mr Boyle himself expressed any real doubt about the fact that his signature appears on the Area Manager Proposal.
774 This then raises the question whether documents bearing that signature are documents that were signed by Mr Boyle, or are documents to which Mr Boyle affixed a facsimile of his signature or had authorised others to do so.
775 The applicant accepts that, in relation to both the Disclosure Document and the Area Manager Proposal, each purportedly signed by Mr Boyle, the signature has been affixed electronically. I am satisfied that these documents were prepared by Mr Foster or under his direction. In the circumstances, I am satisfied that Mr Boyle’s signature was affixed electronically to them by Mr Foster or under Mr Foster’s direction. The evidence does not show that Mr Boyle gave his prior approval for this to be done.
776 On 7 July 2010, one of Mr Boyle’s colleagues sent him the first page of the Area Manager Proposal containing the sections “MEET OUR SENIOR DIRECTOR”: see [66] above and “PERSONALLY SPEAKING”: see [67] above. The copy showed that Mr Boyle’s signature had been affixed to the “PERSONALLY SPEAKING” section.
777 On 14 July 2010, Mr Boyle sent an email to the address pobrien@sensaslim.com.au. I am satisfied that Mr Boyle knew that he was communicating with Mr Foster. He told Mr Foster that “another two colleagues” (I infer from UBS) had received phone calls from people asking about Mr Boyle’s involvement with SensaSlim. Mr Boyle asked Mr Foster to “double check with the salesman that they are not refering [sic] to UBS”.
778 The email continued:
I have had one email me the bio about me included in the prospectus.
I understand you need to make a refence to my job but can we please remove the info on who UBS is and my role in wealth management.
I understand that you need to reference UBS once but this seems to emphasis this.
I have left a message with Paul and will advise when I can speak to him.
Michael
Sent from my iPhone
779 Given the proximity in time between Mr Boyle receiving the extract from the Area Manager Proposal and his sending of the email to Mr Foster, I infer that Mr Boyle’s reference to “the prospectus” is to the Area Manager Proposal.
780 This evidence plainly shows that Mr Boyle was concerned about his stated association with UBS. It does not reveal any concern whatsoever on Mr Boyle’s part about his portrayal as Senior Director of SensaSlim or about the way in which any other biographical details had been stated. Further, it does not reveal any concern on Mr Boyle’s part that his signature had been affixed to the Area Manager Proposal, when that fact must have been apparent to him. In light of the concern expressed by his UBS colleagues, it is highly likely that Mr Boyle would have carefully considered the extract of the Area Manager Proposal that had been sent to him.
781 The explanation for Mr Boyle’s apparent lack of concern regarding his portrayal in the Area Manager Proposal (other than in respect of the emphasis given to his association with UBS) is most likely found in much earlier communications between Mr Foster, Dr Waters and Mr Boyle about the public portrayal of Mr Boyle’s involvement in SensaSlim. In an email from Mr Foster (using the email address william.e.duffy@hotmail.com) to Dr Waters on 3 September 2009, Mr Foster said:
Morning Chris,
Hope you both had a good sleep as you both looked whacked.
Advice back from London is that there would be no problem with Michael’s equity in the UK entity being held by another
non-UK resident company, which would be named as the other member. This would provide anonymity.
This could also be the situation with you, Chris, if you chose not to be seen as a Uk member. Individuals do not need to be members of the LLP partnerships, they can both be off-shore companies. That would remove your name from all corporate records.
I am now receiving specific advice as to the tax consequences, but it is my understanding that there is no impediment whatsoever in Michael having the Australian rights and being a director, and still having his interest in the worldwide sales agency rights.
The only consideration is not the legality, because it is perfectly above board and legal. It is whether Michael wishes to put himself up as the Australian owner that is a question for him. The back end story makes sense. A swiss company, he hears of the worldwide trials over 2 years, he buys the rights as he sees it as a goldmine, the obesity epidemic etc.
I am confident that our advisors can create the corporate structures that provide a legal framework within to work, that at the same times provides protection and anonymity. That is what lawyers and accountants do. However they can’t make the decision as to whether Michael wants to be the front man owning Australia. Even though he would have a General Manager and Sales Manager run the business, he is still ultimately the director and would appear on ASIC records as such. This is a matter he must consider.
I am happy to meet and discuss again at your convenience. In the mean time, I expect a detailed written advice by tomorrow.
Best,
me
782 This email was forwarded by Dr Waters to Mr Boyle on 6 September 2009. Mr Boyle replied on 7 September 2009, saying:
Mate,
That all makes sense, we can make a final decision once we receive further advice from the lawyers and Jordans.
With regards to our meeting with Paul next Thursday, I would like to send him an email this week outlining the structure. William will have already put this together for Jordans, so in order to ensure that what we are discussing is accurate I think it would be best if we can get a copy of that. I can then add in our queries with regards to the Australian taxation.
Chat soon,
Michael
783 I infer that Mr Boyle’s reference to “Paul” is to Mr McGettigan of KMB.
784 This response is evidence of Mr Boyle’s preparedness “to put himself up as the Australian owner” and to participate in “the back end story” as alluded to by Mr Foster. I am satisfied that Mr Boyle, either directly or through Dr Waters, gave Mr Foster his (Mr Boyle’s) imprimatur to proceed in this way. Other evidence, which I record below, shows that from at least mid-April 2010, Mr Boyle knew that there would be a “sales pack” given to prospective franchisees. I am satisfied that Mr Boyle supplied his biographical information to Mr Foster knowing that it would be used to promote the SensaSlim business to prospective franchisees, including in “sales packs”.
785 It is possible (I cannot tell from the evidence before me) that Mr Boyle might not have seen a copy of the Area Manager Proposal before it was first used by SensaSlim. However, by no later than mid-July 2010, Mr Boyle certainly:
knew of the existence of the Area Manager Proposal (although perhaps not under that name);
knew what the Area Manager Proposal was saying about him;
knew that the Area Manager Proposal was being used by SensaSlim to solicit applications from prospective franchisees to become Area Managers; and
knew that his signature had been affixed to the Area Manager Proposal.
786 As I have noted at [780] above, Mr Boyle raised no objection or manifested any concern about these matters, save for the emphasis that had been given in the Area Manager Proposal to his association with UBS. Even then, his concern only appears to have been the result of the interest that Mr Boyle’s description in the Area Manager Proposal was arousing within UBS itself. The evidence persuades me that Mr Boyle regarded his portrayal in the Area Manager Proposal as unsurprising and consistent with his own expectations that had been formed much earlier.
787 By 30 September 2010, Mr Boyle’s concerns about his stated association with UBS in the Area Manager Proposal had reached a stage where he sent an email to Mr Foster (once again to the address pobrien@sensaslim.com.au) in which he said:
Hi Peter
How are things going? I have an issue I need assistance with. Essentially there has been a query into UBS with regards to how the bank is involved with Sensa Slim. Yesterday I was called into a meeting with our head of legal and quized as to whether or not UBS’s name has been used in any marketing material or in any discussions during the sales process. At the meeting they had a copy of the original offer document with my bio.
I have assured them that there is no reference to UBS at any stage and that the bio was amended in July to limit the company being mentioned – as per our discussions at that time.
Furthermore they have questioned my involvement – I have explained that it is only as an investment and that I am not directly involved in the day to day operations.
As it stands I have to meet with them again on Wednesday next week and provide evidence to support this.
I will be in Brisbane tomorrow and would like to meet to discuss this with you. As I am sure you can appreciate I need to ensure that I can provide comfort to UBS on Wednesday as the issue has been escalated to such a level.
I have tried calling earlier but had no luck getting through, I am in transit today so email is probably the best option. I will be able yo [sic] get to the coast in the afternoon tomorrow
Thanks
Michael
Sent from my iPhone
788 Once again, Mr Boyle’s only concern about his portrayal in the Area Manager Proposal was his stated association with UBS.
789 As to the “Welcome letters”, Mr Boyle admitted in his s 155 examinations that he signed 10 to 12 such letters.
790 A “Welcome letter” exhibited to Mr Evans’ affidavit, purportedly signed by Mr Boyle, was provisionally admitted under s 57(1) of the Evidence Act, subject to proof of Mr Boyle’s signature. In final submissions, Mr Boyle sought to make much of the fact that there was no way of knowing whether this letter was signed by him. I am satisfied that this letter bears Mr Boyle’s signature. There is no suggestion that the signature has been affixed electronically. In the circumstances, I am satisfied, on balance, that Mr Boyle signed the letter. He admitted to signing others. I am also satisfied that Mr Boyle knew that the “Welcome letters” he signed represented that he controlled and directed the SensaSlim business and that he was actively involved in that business.
791 As to the newsletters, I am satisfied that Newsletters Nos 1 and 2 bear Mr Boyle’s signature. I am not satisfied that he affixed those signatures. I am satisfied that those signatures were affixed electronically. Once again, I am satisfied that those newsletters were prepared by Mr Foster or under his direction. In the circumstances, I am satisfied that Mr Boyle’s signatures were affixed electronically to those newsletters by Mr Foster or under Mr Foster’s direction. The evidence does not show that Mr Boyle gave his prior approval for that to be done.
792 Finally, as I have noted at [673] above, Mr Foster used Mr Boyle’s services to obtain, amongst other things, the KMB letter. On 14 April 2010, Mr Foster (using the address bill.imom@gmail.com) sent an email to Mr Boyle, which, relevantly, said:
Subject: accountant reference
Hi Mike.
Appreciate our accountant is busy but if you can remind him again of the reference letter as it could be the difference between getting a couple of deals past the post.
Thanks
793 On the same day, Mr Boyle sent an email to Mr McGettigan in which he said:
Subject: Fwd: accountant reference
Hi mate sorry to pester on this one but any chance of getting that letter sooner they seem to be wanting it to help the sale
Appreciate your help will owe you a lunch
Mick
794 Mr McGettigan responded to Mr Boyle by referring Mr Boyle to an extract from KMB’s website. Mr Boyle’s response the next day was:
Thanks mate that is great thanks. Just hopeing you can add in that you know me to be a director of sensa slim – I think their trouble is that the potential buyers want to validate my position as a director and know that they have a contact in kbm. I think Peter is after a leter which he can include in the sales pack which briefly explains kbm and you services and also refernces your knowledge of me as a director
Hope that makes sense give me a call anytime if it doesn’t
Cheers mate
Sent from my iPhone
795 As I have foreshadowed above, this email clearly shows Mr Boyle’s knowledge that there would be “a sales pack” to prospective franchisees in which his association with the SensaSlim business would be portrayed and, indeed, validated by a testimonial from SensaSlim’s accountants, KMB.
796 Mr McGettigan then drafted the following response to Mr Boyle, which is reflected in the KMB letter:
Here we go.
KMB Business Advisors provides the administration platform to SensaSlim Australia to ensure a complete support is available to you the Distributor.
We do this in conjunction with Michael Boyle, the Managing Director and founder of SensaSlim in Australia.
Michael established SensaSlim with our assistance in November 2009 and we work hand in hand with Michael and his operations team.
Let me know if this works for you.
Cheers
Paul
797 Subsequently, Mr Boyle asked Mr McGettigan for a PDF version so that the KMB letter could be included in “the packs”. I am satisfied that Mr Boyle knew that the KMB letter he had procured represented that he controlled and directed the SensaSlim business and that he was actively involved in that business.
Mr Foster’s involvement
798 The applicant alleges that Mr Boyle was knowingly concerned in or party to a contravention of s 59(2) of the Act by SensaSlim, “constituted by concealment of Mr Foster’s involvement in the SensaSlim business by publication of the Area Manager Proposal without reference to Foster”: SOC para 165.
799 This alleged contravention differs from the one I have found at [578], which is based on the failure to disclose, in the Disclosure Document, Mr Foster’s involvement in the SensaSlim business.
800 There is a threshold question whether, by publishing the Area Manager Proposal, SensaSlim contravened s 59(2) of the Act in the way envisaged by paragraph 165 of the statement of claim. The pleading of this particular allegation is beset with the difficulty that the particulars given are substantially directed to the Disclosure Document and its use. This reflects the reality that, as originally pleaded, Mr Boyle’s accessorial liability in this regard was expressed as relating to the contravention I have found at [578]. The present pleading of paragraph 165 of the statement of claim arises from an amendment that was foreshadowed immediately before the commencement of final submissions, which I allowed. With the benefit of closer analysis, I now doubt that my decision to allow the amendment in that form was the right decision to make given the content of the particulars said to support the allegation.
801 It is true that the Area Manager Proposal does not refer to Mr Foster’s involvement, but the applicant does not contend that the Area Manager Proposal stands as a disclosure document under the Franchising Code. Unlike its pleading of the alleged contraventions relating to the Disclosure Document, the applicant has not sought to articulate how, with respect to the Area Manager Proposal, it became incumbent on SensaSlim to disclose Mr Foster’s involvement in the SensaSlim business. Moreover, the applicant has not sought to articulate how, independently of the Franchising Code, it was incumbent on SensaSlim to disclose Mr Foster’s involvement in the SensaSlim business. As I have endeavoured to explain at [547]-[552], the proposition that Mr Foster’s reputation as a conman in relation to weight loss products was a matter that independently imposed an obligation on SensaSlim to reveal his involvement in the SensaSlim business, seems difficult to sustain. Any obligation on the part of SensaSlim to disclose Mr Foster’s involvement in the SensaSlim business really stemmed from the relationship of franchisor and franchisee that was in contemplation between SensaSlim and those who became its Area Managers. SensaSlim’s obligations concerning disclosure to prospective franchisees were those prescribed by the Franchising Code.
802 In these circumstances, I do not think that I should embark on my own journey to discover how or why a separate contravention of s 59(2) of the Act by SensaSlim, concerning the non-disclosure of Mr Foster’s involvement, arises or might arise in relation to the Area Manager Proposal, when the applicant itself has not properly pleaded or otherwise satisfactorily articulated that case. I am not satisfied, therefore, that the applicant has established that SensaSlim contravened the Act as pleaded in paragraph 165 of the statement of claim. It follows that the applicant’s case of accessorial liability on the part of Mr Boyle in this regard has not been established.
803 The applicant has pleaded additional contraventions in relation to this subject matter.
804 The applicant alleges that Mr Boyle contravened s 52(1) of the Act and s 18(1) of the Australian Consumer Law as a principal by representing in emails and telephone communications with Area Managers, potential Area Managers and third parties that the person they were communicating with as “Peter O’Brien” was Mr O’Brien whereas, in fact, those persons were communicating with Mr Foster: SOC para 166. The applicant alleges, therefore, that, by this means, Mr Boyle concealed Mr Foster’s involvement.
805 In this connection, the applicant points to:
Mr Boyle’s email communications with Mr McGettigan and Ms Briscoe, respectively, in which he referred to “Peter” so as to suggest to Mr McGettigan and to Ms Briscoe that, in relation to SensaSlim, he or she was dealing with Mr O’Brien when in fact he or she was dealing with Mr Foster;
the “Welcome letters” which referred to the addressee having impressed Peter O’Brien when in fact the person impressed was Mr Foster. In this connection, I have found that Mr Boyle signed the “Welcome letter” to Mr and Mrs Evans.
806 I am satisfied that, on these occasions, Mr Boyle knowingly represented Mr Foster as being Mr O’Brien, with a view to concealing Mr Foster’s involvement in the SensaSlim business. However, in my view, Mr Boyle’s conduct in that regard is properly attributable to SensaSlim. Here, Mr Boyle was acting for SensaSlim as its representative in relation to either its actual or future trading activities. His acts were SensaSlim’s acts. Mr Boyle was not acting in a personal capacity independently of SensaSlim itself. I repeat the observations I have made at [678] above. In my view, this conduct (which took place before 1 January 2011) is properly attributable to SensaSlim and would have constituted a contravention by SensaSlim of s 52(1) of the Act, had it been pleaded. However, that allegation does not appear to have been pleaded. I should add that I am satisfied that Mr Boyle was knowingly concerned in and party to that conduct although, once again, that allegation also does not appear to have pleaded. Therefore, I am not satisfied that the contravention pleaded in paragraph 166 of the statement of claim has been established.
807 The applicant also alleges that Mr Boyle was knowingly concerned in or party to SensaSlim’s contravention I have found at [579]: SOC para 167. However, that finding is based on SensaSlim’s publication and provision of the Disclosure Document. There is no evidence that Mr Boyle was involved in the publication or provision of the Disclosure Document to prospective franchisees or, indeed, that he knew its contents. I am not satisfied, therefore, that the applicant has established that Mr Boyle was knowingly concerned in or party to the contravention I have found at [579].
Mr Boyle’s involvement
808 The applicant alleges that Mr Boyle was knowingly concerned in or party to the contravention I have found at [645] with respect to s 59(2) of the Act, “insofar as it relates to the Area Manager Proposal”: SOC para 168.
809 This allegation incorporates, as shown by the passage quoted above, another amendment foreshadowed immediately before the commencement of final submissions, which I allowed. I also allowed the applicant to amend its particulars to include reliance on Mr Boyle’s knowledge of the KMB letter and the “Welcome letters”.
810 Once again, with the benefit of closer analysis, I now doubt that my decision to allow those amendments in that form was the right decision to make.
811 The allegation in paragraph 168 of the statement of claim is based on an earlier allegation in paragraph 27:
By the provision of the Area Manager Proposal together with the Disclosure Document to potential Area Managers, SensaSlim represented, in trade and commerce, that Boyle was a senior director of SensaSlim and controlled and directed or was actively involved in the business of SensaSlim.
812 As I noted at [643] above, the relevant allegation against SensaSlim concerning s 59(2) is one based on its provision of the Area Manager Proposal together with the Disclosure Document to prospective franchisees. There are two important matters to note. First, the representation alleged is one arising from the combined operation of the Area Manager Proposal and the Disclosure Document. Secondly, it is only this combination that is alleged to have made the pleaded representation. Representations made, or contributions provided, by other documents are irrelevant to the allegation.
813 By its amendment to paragraph 168 of the statement of claim in relation to Mr Boyle’s alleged accessorial liability, the applicant seeks to carve out from the allegation made against SensaSlim, any involvement of the Disclosure Document, when that document has been pleaded as an element of the alleged contravention against SensaSlim. This is impermissible. By its amendment to the particulars to paragraph 168 of the statement of claim to include reliance on representations made in the additional documents, the applicant also seeks to rely on particulars of conduct that are not relied on as against SensaSlim (namely, the KMB Letter and the Welcome Letters). This is also impermissible.
814 In the result, the contravention I have found against SensaSlim as a principal does not match the contravention for which Mr Boyle is now sought to be made liable as an accessory. That case is not open to the applicant. For this reason alone, this aspect of the applicant’s case cannot succeed.
815 There is, however, an additional matter. In its statement of claim, the applicant pleads that Mr Boyle authorised the Disclosure Document and page 1 of the Area Manager Proposal by being a signatory to each document: SOC para 23. The applicant relies on this act as constituting Mr Boyle’s involvement in the contravention: see the particulars to SOC para 168. As I have noted, the applicant accepts that, in relation to both the Disclosure Document and the Area Manager Proposal, Mr Boyle’s signature had been affixed electronically. As I have found, Mr Boyle’s signature was affixed electronically to each document by Mr Foster or under Mr Foster’s direction. The evidence does not show that Mr Boyle gave his prior approval for this to be done, even though it is clear that from mid-July 2010 Mr Boyle was aware that his signature had been affixed to the Area Manager Proposal and did nothing about it. The point of present relevance is that the particular and only act of involvement pleaded against Mr Boyle (namely, the signing of the Disclosure Document and page 1 of the Area Manager Proposal) has not been established.
816 For these reasons, I am not satisfied that the applicant has established that Mr Boyle was knowingly concerned in or party to the contravention I have found at [645] above.
817 Separately, the applicant alleges that Mr Boyle was knowingly concerned in or party to certain of the contraventions of s 52(1) and s 53(d) of the Act that I have found at [646]-[647]: SOC para 169. As I noted at [643], in relation to those contraventions, the applicant pleads a broader range of conduct, which extends beyond the provision of the Area Manager Proposal and the Disclosure Document to include the provision of the KMB letter, the sending of the “Welcome letters” and the publication of Newsletters Nos 1 and 2, each pleaded as constituting a separate contravention of those respective provisions. The representation, in each case, was that Mr Boyle controlled and directed the SensaSlim business and was actively involved in that business.
818 As to the provision of the Area Manager Proposal and the Disclosure Document, the contravention is one concerning the making of the representation brought about by the combined effect of those documents. As I have found above, there is no evidence that Mr Boyle knew of the Disclosure Document (and hence knew its contents) or that he was involved in its publication or provision to prospective franchisees. It follows that, for this reason alone, the applicant has not established that Mr Boyle was knowingly concerned in or party to the contraventions of s 52(1) and s 53(d) pleaded in relation to those documents. Moreover, as I have noted, the applicant’s case concerning Mr Boyle’s involvement in this contravention is his authorisation of each document by signing them. That case has not been established.
819 As to the “Welcome letters”, I am satisfied that Mr Boyle signed the “Welcome letter” sent to Mr and Mrs Evans. Mr Boyle admitted signing 10 to 12 of such letters. As stated at [790] above, I am satisfied that Mr Boyle knew that the “Welcome letters” he signed represented that he controlled and directed the SensaSlim business and that he was actively involved in that business. I am also satisfied that Mr Boyle knew that he did not control or direct the SensaSlim business and that he was not actively involved in that business. In his s 155 examination, Mr Boyle admitted that he personally posted the signed letters to their addressees. In the circumstances, I am satisfied that the applicant has established that Mr Boyle was knowingly concerned in and party to the contraventions of s 52(1) and s 53(d) of the Act by SensaSlim, insofar as those contraventions are constituted by the issuing of the “Welcome letters”.
820 With respect to the KMB letter, the evidence establishes that Mr Boyle was involved in obtaining this letter, including negotiating its contents, which he knew would be used in “sales packs” to be given to prospective franchisees. Once again, as I have found at [797] above, I am satisfied that Mr Boyle knew that the KMB letter he had procured represented that he controlled and directed the SensaSlim business and that he was actively involved in that business. I am also satisfied that Mr Boyle knew that he did not control or direct the SensaSlim business and that he was not actively involved in it. In the circumstances, I am satisfied that the applicant has established that Mr Boyle was knowingly concerned in and party to the contraventions of s 52(1) and s 53(d) of the Act by SensaSlim, insofar as the contraventions are constituted by the provision of the KMB letter to prospective franchisees.
821 The applicant does not plead that Mr Boyle was knowingly concerned in or party to SensaSlim’s contraventions of s 52(1) and s 53(d) of the Act alleged in paragraph 122 of the statement of claim, insofar as those contraventions are constituted by the publication of Newsletters Nos 1 and 2. Nevertheless, I wish to make clear that had such an allegation been pleaded, it would not have succeeded. I am not satisfied that Mr Boyle knew of the contents of Newsletters Nos 1 and 2 until after they were published. As I have found at [791], although Newsletters Nos 1 and 2 bear Mr Boyle’s signature, I am not satisfied that he affixed his signature to them. I am satisfied that those signatures were affixed electronically by Mr Foster or under his direction. The evidence does not show that Mr Boyle gave his prior approval for this to be done.
Newsletters Nos 1 and 2
822 The applicant alleges that Mr Boyle was knowingly concerned in or party to the contravention I have found at [651]: SOC para 171.
823 Once again, I am not satisfied that Mr Boyle knew of the contents of Newsletters Nos 1 and 2 until after they were published. I am satisfied that Mr Boyle’s signature was affixed electronically to those documents by Mr Foster or under Mr Foster’s direction. The evidence does not show that Mr Boyle gave his prior approval for this to be done.
824 I am not satisfied, therefore, that the applicant has established that Mr Boyle was knowingly concerned in or party to the contravention I have found at [651]. For completeness, I would add that the applicant also alleges that Mr Boyle was knowingly concerned in or party to a contravention of s 53(d). I have not found that contravention by SensaSlim as a principal to have been separately established. It follows, therefore, that this allegation of Mr Boyle as an accessory cannot be sustained in any event.
Mr Boyle’s intention to resign
825 The applicant alleges that Mr Boyle was knowingly concerned in or party to the contravention I have found at [669]: SOC para 170.
826 I have already described Mr Boyle’s knowing involvement in delaying his resignation as a director of SensaSlim until after the Area Managers’ Conference, while at the same time perpetuating the perception of Area Managers at that conference that he was actively involved in, and controlled and directed, the conduct of the SensaSlim business, and that his position within SensaSlim would continue into the foreseeable future. I am satisfied that Mr Boyle knew that his apparent continued involvement in SensaSlim in this way was a material consideration for prospective franchisees, not only when deciding whether to become Area Managers, but also, as Area Managers, in paying the balance of moneys due at the time of the Area Managers’ Conference for the purchase of products and point of sale materials. I am satisfied that Mr Boyle knew that the Area Managers had a reasonable expectation that they would be informed, in a timely way, of any intention on his part to resign.
827 In the circumstances, I am satisfied that the applicant has established that Mr Boyle was knowingly concerned in and party to the contravention I have found at [669].
828 At this stage of the proceeding, the applicant seeks declaratory and certain injunctive relief. The parties have made some submissions on these matters, but I wish to hear from them further on that question after they have had the benefit of considering my findings and reasons. It will also be necessary for directions to be made concerning the further hearing of the proceeding in relation to other relief sought by the applicant, including in respect of penalties, compensation orders and banning orders.
829 The only orders I will make at the present time are that the applicant serve on all respondents, on or before 29 April 2014, a draft of the orders and directions it proposes at the present time. Each respondent is to notify the applicant in writing, on or before 13 May 2014, as to whether or not he or it opposes the making of the draft orders and directions. If any respondent opposes the making of the draft orders and directions, that respondent is to serve on the applicant, at the same time, a draft of the orders and directions that that respondent proposes. Copies of all documents served are to be provided to my Associate by the party serving the document at the time that the document is served.
830 Further, if the applicant is of the view that it has pleaded a cause of action which I have not addressed and determined in these reasons, it is to give written notice of that fact to my Associate and to each respondent at the time of serving its draft orders and directions.
831 The proceeding will be listed on 21 May 2014 at 9.30am for directions only.
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I certify that the preceding eight hundred and thirty-one (831) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. |
Associate:
