FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 6) [2014] FCA 1035

THE COURT DECLARES THAT:

The first respondent

1.    The first respondent, SensaSlim Australia Pty Ltd (in liquidation) (SensaSlim), in trade or commerce, in contravention of s 59(2) of the Trade Practices Act 1974 (Cth) (the Trade Practices Act), made a representation that was false or misleading in a material particular, by publishing a document entitled “SensaSlim – Disclosure Document for Franchisee or Prospective Franchisee” of which there were two versions dated 1 March 2010 and 1 July 2010 (the Disclosure Document) and by providing the Disclosure Document to prospective franchisees of SensaSlim (prospective franchisees), in which SensaSlim represented that no persons other than the third respondent (Mr O’Brien) and the fifth respondent (Mr Boyle) were involved as officers or associates of SensaSlim, when in fact the second respondent (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 (the SensaSlim business) and was, therefore, an officer of SensaSlim.

2.    SensaSlim, in trade or commerce, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular and, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, by providing a document entitled “Area Manager Proposal” (the Area Manager Proposal) together with the Disclosure Document to prospective franchisees, in which SensaSlim represented that Mr O’Brien was actively involved in the SensaSlim business as Operations Director, when in fact Mr O’Brien was not actively involved in the SensaSlim business as Operations Director.

3.    SensaSlim, in trade or commerce, in contravention of s 53(d) of the Trade Practices Act, represented that it had an affiliation it did not have, by providing the Area Manager Proposal together with the Disclosure Document to prospective franchisees, in which SensaSlim represented 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 of Operations Director described in the Disclosure Document, when in fact SensaSlim had no such affiliation with Mr O’Brien.

4.    SensaSlim, in trade or commerce, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular, by providing the Area Manager Proposal to prospective franchisees, and by showing prospective franchisees a promotional DVD (the SensaSlim DVD), in which SensaSlim represented that a claimed weight loss product in the form of an intra-oral spray (the SensaSlim product) had been tested in a worldwide trial (the worldwide trial) and that the worldwide trial had established the efficacy of the SensaSlim product as a weight loss product, when in fact no such trial had been conducted.

5.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act and s 18(1) of the Competition and Consumer Act 2010 (Cth) Sch 2 (the Australian Consumer Law), engaged in conduct that was misleading or deceptive or likely to mislead or deceive and, in contravention of s 53(a) of the Trade Practices Act and s 29(1)(a) of the Australian Consumer Law, falsely represented that goods were of a particular standard or quality, by:

            (a)    providing the Area Manager Proposal to prospective franchisees and showing them the SensaSlim DVD;

           (b)    publishing newsletters to Area Managers of SensaSlim (Area Managers);

            (c)    publishing a website accessible to the public at the URL www.sensaslim.com.au (the SensaSlim website);

            (d)    causing advertorials to be broadcast during the commercial television programs “Mornings with Kerri-Anne” and “The Circle” (the SensaSlim advertorials); and

            (e)    publishing “The Circle” advertorial on the SensaSlim website,

    in which SensaSlim represented that the SensaSlim product had been tested in the worldwide trial and that the worldwide trial had established the efficacy of the SensaSlim product as a weight loss product, when in fact no such trial had been conducted.

6.    SensaSlim, in trade or commerce, in contravention of s 18(1) of the Australian Consumer Law, engaged in conduct that was misleading or deceptive or likely to mislead or deceive and, in contravention of s 29(1)(g) of the Australian Consumer Law, made a false or misleading representation that the SensaSlim product had an approval it did not have, by publishing Newsletter No 30 dated 4 February 2011 in which SensaSlim represented that the SensaSlim product had been tested in the worldwide trial whose results had been collated and analysed by experts appointed by an organisation called Institut de Recherche Intercontinental in Switzerland (the Institute), when in fact no such trial had been conducted and the Institute did not exist.

7.    SensaSlim, in trade or commerce, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular, by causing an advertisement to be published in The Courier Mail newspaper in which SensaSlim represented that a business activity, once acquired by a potential purchaser, had the potential to generate stated earnings, when SensaSlim did not have reasonable grounds for making that representation.

8.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive and, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular, by causing advertisements to be published in The Sydney Morning Herald newspaper and in The Age newspaper, in which SensaSlim represented that:

        (a)    a certain business activity, once acquired by a potential purchaser and after launch of the product to be supplied in that business, had the potential to generate weekly earnings for the potential purchaser in a stated amount (the projected earnings);

        (b)    there was a realistic prospect that the business activity, once acquired by a potential purchaser and after launch of the product, would generate the projected earnings; and

        (c)    there was a reasonable basis for potential purchasers to expect that the business activity would generate the projected earnings,

when SensaSlim did not have reasonable grounds for making those representations.

9.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive and, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular, by providing the Area Manager Proposal to prospective franchisees in which SensaSlim represented that:

        (a)    selling the SensaSlim product had the potential to generate weekly earnings within a stipulated range (the stipulated range);

        (b)    there was a realistic prospect that such sales would generate earnings in the stipulated range;

        (c)    there was a reasonable basis to expect that such sales would generate earnings within the stipulated range,

when SensaSlim did not have reasonable grounds for making those representations.

10.    SensaSlim, in trade or commerce, in contravention of s 59(2) of the Trade Practices Act, made a representation that was false or misleading in a material particular, by providing the Area Manager Proposal together with the Disclosure Document to prospective franchisees, in which SensaSlim represented that Mr Boyle controlled and directed the SensaSlim business and was actively involved in the SensaSlim business as Senior Director, when in fact Mr Boyle did not direct or control the SensaSlim business and was not actively involved in the SensaSlim business as Senior Director.

11.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, by issuing:

        (a)    the Area Manager Proposal together with the Disclosure Document to prospective franchisees;

        (b)    a welcome letter to Area Managers (the SensaSlim welcome letter);

        (c)    a letter from KMB Business Advisors Pty Ltd dated 16 April 2010 to prospective franchisees (the KMB letter); and

        (d)    Newsletter No 1 dated 1 July 2010 (Newsletter No 1) and Newsletter No 2 dated 9 July 2010 (Newsletter No 2) to Area Managers,

by which SensaSlim represented, in each case, that Mr Boyle controlled and directed the SensaSlim business and was actively involved in the SensaSlim business, when in fact Mr Boyle did not direct or control the SensaSlim business and was not actively involved in the SensaSlim business, and thereby, in each case, contravened s 52(1).

12.    SensaSlim, in trade or commerce, in contravention of s 53(d) of the Trade Practices Act, represented that it had an affiliation it did not have, by issuing:

        (a)    the Area Manager Proposal together with the Disclosure Document to prospective franchisees;

        (b)    the SensaSlim welcome letter to Area Managers;

        (c)    the KMB letter to prospective franchisees; and

        (d)    Newsletter No 1 and Newsletter No 2 to Area Managers,

in which or by which SensaSlim, in each case, represented that Mr Boyle was actively involved in its affairs, bringing to SensaSlim the attributes and skills and fulfilling the roles and undertaking the responsibilities, that SensaSlim had ascribed to him as the person controlling or directing the SensaSlim business, when in fact SensaSlim had no such affiliation, and thereby, in each case, contravened s 53(d).

13.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, by issuing Newsletter No 1 and Newsletter No 2 to Area Managers, in which SensaSlim represented that each newsletter was prepared or substantially prepared by Mr Boyle and that Mr Boyle had approved their contents, when in fact Mr Boyle did not prepare or substantially prepare either newsletter or approve their contents.

14.    SensaSlim, in trade or commerce, in contravention of s 52(1) of the Trade Practices Act, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, by failing to disclose to Area Managers Mr Boyle’s intention to resign as a director of SensaSlim until after the holding of an Area Managers’ Conference on 30 November 2010, in circumstances where:

        (a)    Mr Boyle had formed the intention to resign, and communicated that intention to SensaSlim through Mr Foster, by no later than early October 2010; and

        (b)    Area Managers had the reasonable expectation that, if Mr Boyle intended to resign as a director, SensaSlim would inform them of that fact in a timely way.

The second respondent

15.    Mr Foster was knowingly concerned in, and party to, SensaSlim’s contravention of s 59(2) of the Trade Practices Act referred to in the declaration made in paragraph 1 of these Orders in that:

           (a)    Mr Foster caused SensaSlim to issue the Disclosure Document;

          (b)    the Disclosure Document was prepared by Mr Foster or under his direction; and

          (c)    it was Mr Foster’s decision not to disclose, in the Disclosure Document, his involvement in the SensaSlim business,

    in circumstances where Mr Foster knew that:

         (d)    the Disclosure Document stood as an invitation in trade or commerce to 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;

          (e)    the Disclosure Document represented that no person other than Mr Boyle and Mr O’Brien were involved as officers or associates of SensaSlim, which representation was with respect to a material aspect of SensaSlim’s business activity; and

          (f)    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.

16.    Mr Foster was knowingly concerned in, and party to, SensaSlim’s contraventions of s 59(2) and s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 2 of these Orders in that:

       (a)    Mr Foster caused SensaSlim to issue the Disclosure Document and the Area Manager Proposal;

       (b)    the Disclosure Document and the Area Manager Proposal were prepared by Mr Foster or under his direction;

       (c)    Mr Foster decided what was to be stated, and what was not to be stated, in those documents; and

       (d)    it was Mr Foster’s 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,

in circumstances where Mr Foster knew that:

       (e)    the Disclosure Document and the Area Manager Proposal, collectively and individually, stood as an invitation in trade or commerce to 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;

        (f)    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, which representation was with respect to a material aspect of SensaSlim’s business activity;

        (g)    Mr O’Brien was not actively involved in the SensaSlim business as Operations Director as described in the Disclosure Document; and

        (h)    Mr O’Brien’s non-active involvement in the SensaSlim business as Operations Director was, in the circumstances, a material matter.

17.    Mr Foster was knowingly concerned in, and party to, SensaSlim’s contravention of s 53(d) of the Trade Practices Act referred to in the declaration made in paragraph 3 of these Orders, in that:

        (a)    Mr Foster caused SensaSlim to issue the Disclosure Document and the Area Manager Proposal;

        (b)    the Disclosure Document and the Area Manager Proposal were prepared by Mr Foster or under his direction;

        (c)     Mr Foster decided what was to be stated, and what was not to be stated, in those documents; and

        (d)    it was Mr Foster’s 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,

in circumstances where Mr Foster knew that:

        (e)    the Disclosure Document and the Area Manager Proposal, collectively and individually, stood as an invitation in trade or commerce to 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;

        (f)    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, which representation was with respect to a material aspect of SensaSlim’s business activity;

        (g)    Mr O’Brien was not actively involved in the SensaSlim business as Operations Director as described in the Disclosure Document;

        (h)    Mr O’Brien’s non-active involvement in the SensaSlim business as Operations Director was, in the circumstances, a material matter; and

        (i)    Mr Foster knew that Mr O’Brien did not have the affiliation with SensaSlim that SensaSlim had represented.

18.    Mr Foster was knowingly concerned in, and party to, each of the following contraventions:

        (a)    SensaSlim’s contravention of s 59(2) of the Trade Practices Act referred to in the declaration made in paragraph 4 of these Orders; and

        (b)    SensaSlim’s contraventions of s 52 and s 53(a) of the Trade Practices Act, and s 18(1) and s 29(1)(a) of the Australian Consumer Law referred to in the declaration made in paragraph 5 of these Orders; and

        (c)    SensaSlim’s contraventions of s 18(1) and s 29(1)(g) of the Australian Consumer Law referred to in the declaration made in paragraph 6 of these Orders,

in that:

        (d)    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;

        (e)    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;

        (f)    the Institute said to have been involved in the worldwide trial of the SensaSlim product was a fabrication by Mr Foster, created to achieve the ends referred to in sub-paragraph (e);

        (g)    Mr Foster was responsible for, and had control over, the making of the SensaSlim DVD;

        (h)    the scripts for the presenter and each of the actors appearing in the SensaSlim DVD were prepared substantially by Mr Foster;

        (i)    the SensaSlim “story” told in the SensaSlim DVD, and in other materials supplied to prospective franchisees by SensaSlim, including the Area Manager Proposal, was Mr Foster’s creation;

        (j)    Mr Foster was responsible for, and had control over, the making of advertorials, including the SensaSlim advertorials, as well as the production of other promotional materials used by SensaSlim to advertise the SensaSlim product;

        (k)    the Area Manager Proposal and the newsletters issued by SensaSlim were prepared by Mr Foster or under his direction; and

        (l)    Mr Foster caused SensaSlim to use the SensaSlim DVD, the Area Manager Proposal, the newsletters and advertorials, including the SensaSlim advertorials, as promotional aids,

in circumstances where Mr Foster knew that:

        (m)    the SensaSlim DVD and the Area Manager Proposal, individually and collectively, stood as an invitation in trade or commerce to 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;

        (n)    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;

        (o)    the SensaSlim product had not been tested in a worldwide trial that had established its efficacy as a weight loss product; and

        (p)    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.

19.    Mr Foster was knowingly concerned in, and party to, each of the following contraventions:

        (a)    SensaSlim’s contravention of s 59(2) of the Trade Practices Act referred to in the declaration made in paragraph 10 of these Orders; and

        (b)    SensaSlim’s separate contraventions of s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 11 of these Orders,

    in that:

        (c)    Mr Foster caused SensaSlim to issue the Area Manager Proposal, the Disclosure Document, the KMB letter, the SensaSlim welcome letter, Newsletter No 1 and Newsletter No 2;

         (d)    the Area Manager Proposal, the Disclosure Document, Newsletter No 1 and Newsletter No 2 were prepared by Mr Foster or under his direction;

           (e)    the SensaSlim welcome letter was prepared under Mr Foster’s direction; and

           (f)    Mr Foster procured Mr Boyle to obtain the KMB letter,

in circumstances where Mr Foster knew that:

         (g)    the Disclosure Document, the Area Manager Proposal and the KMB letter, individually and collectively, stood as an invitation in trade or commerce to 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;

        (h)    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, which representation was with respect to a material aspect of SensaSlim’s business activity; and

        (i)    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.

20.    Mr Foster was knowingly concerned in, and party to, SensaSlim’s separate contraventions of s 53(d) of the Trade Practices Act referred to in the declaration made in paragraph 12 of these Orders, in that:

        (a)    Mr Foster caused SensaSlim to issue the Area Manager Proposal, the Disclosure Document, the KMB letter, the SensaSlim welcome letter, Newsletter No 1 and Newsletter No 2;

         (b)    the Area Manager Proposal, the Disclosure Document, Newsletter No 1 and Newsletter No 2 were prepared by Mr Foster or under his direction;

          (c)    the SensaSlim welcome letter was prepared under Mr Foster’s direction; and

          (d)    Mr Foster procured Mr Boyle to obtain the KMB letter,

in circumstances where Mr Foster knew that:

         (e)    the Disclosure Document, the Area Manager Proposal and the KMB letter, individually and collectively, stood as an invitation in trade or commerce to 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;

         (f)    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, which representation was with respect to a material aspect of SensaSlim’s business activity;

        (g)    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; and

(h)    Mr Boyle did not have the affiliation with SensaSlim that SensaSlim had represented.

21.    Mr Foster was knowingly concerned in, and party to, SensaSlim’s contravention of s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 13 of these Orders in that:

          (a)    Mr Foster caused SensaSlim to issue Newsletter No 1 and Newsletter No 2 to Area Managers;

          (b)    the newsletters were prepared by him or under his direction; and

          (c)    Mr Foster was the author of the newsletters,

    in circumstances where Mr Foster knew that Mr Boyle did not prepare the newsletters or approve their contents.

22.    Mr Foster was involved in SensaSlim’s contravention of s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 14 of these Orders in that:

        (a)    by no later than early October 2010, Mr Foster knew that Mr Boyle wished to resign as a director of SensaSlim;

        (b)    it was at Mr Foster’s urging that Mr Boyle delayed his resignation;

        (c)    Mr Foster knew that Mr Boyle would resign soon after the Area Managers’ Conference;

        (d)    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;

        (e)    Mr Foster knew that Mr Boyle’s continued involvement in SensaSlim as a director, including 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 to the Area Managers by SensaSlim; and

        (f)    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.

The third respondent

23.    Mr O’Brien was knowingly concerned in, and party to, SensaSlim’s contraventions of s 59(2) and s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 2 of these Orders, in that Mr O’Brien signed the solvency statement in the Disclosure Document in circumstances where he knew that:

          (a)    SensaSlim would issue the Disclosure Document to prospective franchisees;

         (b)    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;

         (c)    by signing the solvency statement in the Disclosure Document, he was participating in providing such information;

         (d)    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; and

         (e)    the representation in sub-paragraph (d) was a representation with respect to a material aspect of SensaSlim’s business activity, and was false or misleading, including in a material particular.

24.    Mr O’Brien was knowingly concerned in, and party to, SensaSlim’s contravention of s 53(d) of the Trade Practices Act referred to in the declaration made in paragraph 3 of these Orders, in that Mr O’Brien signed the solvency statement in the Disclosure Document in circumstances where he knew that:

          (a)    SensaSlim would issue the Disclosure Document to prospective franchisees;

         (b)    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;

          (c)    by signing the solvency statement in the Disclosure Document, he was participating in providing such information;

          (d)    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;

           (e)    the representation in sub-paragraph (d) 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

            (f)    he did not have the affiliation with SensaSlim that had been represented.

The fifth respondent

25.    Mr Boyle was knowingly concerned in, and party to, SensaSlim’s contraventions of s 52(1) and s 53(d) of the Trade Practices Act referred to in the declarations made in paragraphs 11 and 12 of these Orders in so far as those contraventions arise from the conduct identified in sub-paragraph (b) thereof, in that Mr Boyle signed certain copies of the SensaSlim welcome letter and personally posted the signed letters to their addressees, in circumstances where Mr Boyle knew that:

        (a)    the copies he signed represented that he controlled and directed the SensaSlim business and that he was actively involved in that business; and

        (b)    he did not control or direct the SensaSlim business and was not actively involved in that business.

26.    Mr Boyle was knowingly concerned in, and party to, SensaSlim’s contraventions of s 52(1) and s 53(d) of the Trade Practices Act referred to in the declarations made in paragraphs 11 and 12 of these Orders in so far as that contravention arises from the conduct identified in sub-paragraph (c) thereof, in that Mr Boyle was involved in obtaining the KMB letter, including negotiating its contents, which he knew would be used in “sales packs” to be given to prospective franchisees, in circumstances where Mr Boyle also knew that:

        (a)    the KMB letter he had procured represented that he controlled and directed the SensaSlim business and that he was actively involved in that business; and

        (b)    he did not control or direct the SensaSlim business and was not actively involved in it.

27.    Mr Boyle was knowingly concerned in, and party to, SensaSlim’s contravention of s 52(1) of the Trade Practices Act referred to in the declaration made in paragraph 14 of these Orders in that:

        (a)    by no later than early October 2010, Mr Boyle had formed the intention to resign as a director SensaSlim and had communicated that intention to SensaSlim through Mr Foster;

        (b)    at Mr Foster’s request, Mr Boyle delayed resigning as a director until after the holding of the Area Managers’ Conference on 30 November 2010;

        (c)    at the Area Managers’ Conference, Mr Boyle engaged in conduct that 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,

in circumstances where Mr Boyle knew that:

        (d)    his apparent continued involvement in SensaSlim 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; and

        (e)    the Area Managers had a reasonable expectation that they would be informed, in a timely way, of any intention on his part to resign.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    These reasons relate to the granting of declaratory relief following the giving of judgment in Australian Competition and Consumer Commission v SensaSlim Australia Pty Ltd (in liq) (No 5) [2014] 98 ACSR 347; [2014] FCA 340 (the principal reasons). The same abbreviations are used in these reasons.

2    On 8 April 2014, I made an order that the applicant serve on all respondents a draft of the orders and directions it then proposed in light of the findings made in the principal reasons, recognising that, at a later time, the applicant would be seeking other relief including penalties, compensation orders and banning orders. The applicant originally submitted draft orders relating to declaratory relief and certain injunctive relief. The injunctive relief sought seemed to me to be of such a nature that it should be considered at the time that the remaining relief sought by the applicant comes on for hearing. I raised this prospect with the parties at a directions hearing on 21 May 2014. The applicant subsequently acceded to that suggestion. It was not opposed by the respondents.

3    On 8 April 2014, I also made the following order:

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 is to be given to the Associate to Yates J and to each respondent at the time the applicant serves its draft proposed orders and directions.

4    On 29 April 2014, the applicant sent a letter, by email, to my Associate and to each respondent, stating that I had not addressed the allegation pleaded in para 111 of the statement of claim that SensaSlim engaged in certain conduct that contravened s 52(1) of the Act and s 18 of the Australian Consumer Law (in respect of conduct arising on or after 1 January 2011). The applicant said that this failure had flow-on effects in relation to allegations of accessorial liability against the personal respondents.

5    In order to deal with the question raised by the applicant, it is necessary to consider, in some detail, the applicant’s pleading of the allegation in para 111 of the statement of claim, the applicant’s submissions at trial in respect of that paragraph, and my findings and reasons in relation thereto. However, of present significance is the fact that I did deal with the allegation pleaded in para 111 of the statement of claim, finding that SensaSlim had contravened s 52(1) of the Act and that Mr Foster and Mr O’Brien were each knowingly concerned in, and party to, that contravention: see [579], [677] and [726] of the principal reasons. I was not satisfied that the applicant had established that Mr Adams and Mr Boyle were knowingly concerned in, or party to, that contravention: see [743] and [807] of the principal reasons.

6    With respect to the present question, Mr Adams and Mr Boyle submit that the applicant’s cause of action again SensaSlim pleaded in para 111 of the statement of claim, as well as its causes of action pleaded against them for accessorial liability in that regard, have been addressed and determined in the principal reasons and that the matters raised in the applicant’s letter of 29 April 2014 are beyond the scope of the order quoted at [3] above. They submit that the applicant’s letter raises no more than its disagreement with the findings I have made.

7    On 21 May 2014, I made orders for the service of submissions on the question raised by the applicant’s letter of 29 April 2014 as well as on, amongst other things, the appropriate form of declaratory relief that should be granted.

The applicant’s pleading

8    The question raised by the applicant concerns its case in relation to SensaSlim’s failure to disclose Mr Foster’s involvement in the SensaSlim business. My consideration of that case is to be found at [546]-[579] of the principal reasons. In the statement of claim, this case culminated in the pleading of paras 110 and 111. In order to understand the setting for the allegations pleaded in those paragraphs, it is necessary to refer to earlier paragraphs of the statement of claim.

9    In para 21 of the statement of claim, the applicant pleaded:

21.    By the provision of the Franchise Documents and showing them the Promotional DVD, Sensaslim invited potential purchasers to participate in a business activity requiring the performance by them of work or the investment of moneys and the performance of work associated with the investment, within the meaning of s 59(2) of the TPA.

10    The expression “Franchise Documents” refers to the Area Manager Proposal, the Disclosure Document and the Frequently Asked Questions document described at [64]-[85], [92]-[94] and [91], respectively, of the principal reasons: see also SOC para 20. The reference to the “Promotional DVD” is to the SensaSlim DVD described at [20]-[62] of the principal reasons.

11    In paras 28-32 of the statement of claim, the applicant pleaded:

28.    Foster had an involvement in Sensaslim by: (i) making or participating in the making of decisions that affected the whole, or a substantial part of the business of Sensaslim; or (ii) providing instructions in accordance with which the directors of Sensaslim were accustomed to act; and/or (iii) assuming the role of a director and in circumstances where Foster’s relationship with Sensaslim was relevant to the system of Sensaslim Franchises, including supplying goods, real property or services to the Area Managers.

Particulars

(i)    The applicant repeats the matters and particulars referred to in paragraphs 3(a) above.

(ii)    Foster developed and caused to be implemented the system for the Sensaslim Franchise.

(iii)    Foster received substantial cash and non-cash benefits from the business of Sensaslim.

29.    Sensaslim was and is required by ss 6 and 6B of the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) (Franchising Code of Conduct) to maintain and give a current disclosure document to prospective Area Managers which accorded with annexure 1 of the Franchising Code of Conduct.

30.    A current disclosure document which accorded with Annexure 1 of the Franchising Code must, at 2.5, disclose the name and address of each associate of the franchisor that is not a body corporate.

30A.    A current disclosure document which accorded with Annexure 1 of the Franchising Code must, at 2.6, disclose, for each officer of the franchisor – name, position held and qualifications (if any). By clause 3(2) of the Franchising Code of Conduct, ‘officer’ and ‘director’ have the same meaning as that given by the Corporations Act 2001 (Cth).

31.    By reason of the matters pleaded at paragraph 28, Foster was an associate and/or an officer of Sensaslim for the purpose of the Sensaslim Franchises and his role as anassociate [sic] and/or an officer was required to be disclosed.

32.    By publication of the Disclosure Document and provision of the Disclosure Document to potential Area Managers, which did not disclose Foster as an associate and/or officer of Sensaslim, Sensaslim represented, in trade and commerce, that Foster i) was not making or participating in making decisions that affect the whole, or a substantial part of the business of Sensaslim; and/or ii) was not providing instructions in accordance with which the directors of Sensaslim were accustomed to act; and/or iii) was not a director of Sensaslim and did not have a relationship with Sensaslim which was relevant to the system of Sensaslim Franchises, including supplying goods, real property or services to the Area Managers.

12    In paras 75-80 of the statement of claim, the applicant pleaded:

False or misleading conduct or representations – Foster’s involvement

75.    The representation at paragraph 32 was a representation with respect to a material aspect of the business activity, within the meaning of s 59(2) of the TPA.

76.    By reason of the matters pleaded at paragraphs 21, 28 to 32 and 75, the representation by Sensaslim at paragraph 32 that Foster did not have an involvement with Sensaslim was a representation that was false or misleading in a material particular because Foster had an involvement with Sensaslim.

77.    At all material times, Foster, O’Brien, Adams and Boyle were aware of Foster’s involvement in the conduct of the business of Sensaslim.

78.    Sensaslim, Foster, O’Brien, Adams and Boyle concealed from Area Managers and potential Area Managers, Foster’s involvement in the conduct of the business of Sensaslim.

Foster, in his communications over the telephone and by email with Area Managers and potential Area Managers, and with various other third parties, represented that he was O’Brien.

O’Brien allowed Foster to assume his identify [sic] over the telephone and on email communications.

Adams and Boyle, in their communications with Area Managers and potential Area Managers and third parties, including by telephone and by email, represented that the person that the Area Managers, potential Area Managers, or third parties were communicating with was O’Brien, and thereby concealed Foster’s involvement.

79.    Area Managers deciding whether to participate in the Sensaslim Franchise had a reasonable expectation that Foster’s involvement would be disclosed.

Particulars

Potential purchasers of a Sensaslim Franchise had a reasonable expectation that the identity of any directors, officers (as those terms are defined in the Corporations Act 2011 (Cth)) or associates (as that term is defined in the Franchising Code of Conduct) who will be acting in the role of director or officer and will be involved in controlling or directing the business of the company or whose relationship with the franchisor is relevant to the franchise system, including supplying goods, real property or services to the franchisee will be disclosed in the disclosure document required under the Franchising Code of Conduct.

The applicant relies on the notoriety of Foster in relation to the matters pleaded at paragraphs 3(b) to 3(e) above.

80.    The failure by Sensaslim, Foster, O’Brien, Adams and Boyle to disclose to Area Managers the involvement of Foster in the business of Sensaslim and the conduct in concealing Foster’s involvement referred to in paragraph 78 in circumstances where potential Area Managers deciding whether to acquire and participate in a Sensaslim Franchise had the reasonable expectation referred to in paragraph 79, was conduct that was misleading or deceptive or likely to mislead or deceive.

13    In that setting, the applicant pleaded in paras 110 and 111 of the statement of claim:

Contravention by Sensaslim – Foster’s involvement

110.    By reason of the matters referred to in paragraphs 21, 28 to 31, 75 and 76 above (including matters referred to in the paragraphs referred to therein), by making the representation alleged at paragraph 32, Sensaslim made a representation that was false or misleading in contravention of s 59(2) of the TPA.

111.    By reason of the matters referred to in paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein), by engaging in the conduct alleged at paragraphs 78 and 80, Sensaslim engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (in respect of conduct occurring prior to 1 January 2011) and s 18 of Schedule 2 of the CCA (ACL) (in respect of conduct occurring on or after 1 January 2011).

14    It can be seen that the allegation pleaded in para 111 of the statement of claim is directed to paras 28 (also referred to in para 110) and 78-80 of the statement of claim, as quoted above.

15    Paragraph 78 of the statement of claim is a pleading against SensaSlim and the personal respondents as principal contraveners. The case against the personal respondents was that they actively concealed Mr Foster’s involvement in the SensaSlim business in the ways particularised in para 78 of the statement of claim. In the case of Messrs Foster, Adams and Boyle, this was by certain representations in telephone and email communications. In the case of Mr O’Brien, this was by permitting Mr Foster to assume his (Mr O’Brien’s) identity in telephone and email communications. There is no allegation in para 78 that, in relation to the particularised conduct, the personal respondents were acting other than as principals. The personal respondents could not be acting as both principals and as accessories in relation to the same conduct.

16    No particulars are given in para 78 in relation to SensaSlim’s concealment of Mr Foster’s involvement in the SensaSlim business. What, then, was its conduct? Paragraph 79 of the statement of claim pleads that Area Managers had a reasonable expectation that Mr Foster’s involvement would be disclosed. This allegation is particularised by reference to, firstly, the requirements of the Franchising Code. This can only be seen as an allegation concerning SensaSlim’s obligations under the Franchising Code. It cannot be read as concerning conduct of the personal respondents because they were not subject to any relevantly pleaded obligation under the Franchising Code.

17    Secondly, the allegation in para 79 of the statement of claim is particularised by reference to Mr Foster’s alleged notoriety. As developed in submissions at trial (see [547]-[552] of the principal reasons), the allegation in para 79 of the statement of claim is directed to a case of misrepresentation by silence, which was brought against SensaSlim, not against the personal respondents.

18    The significance of para 28 of the statement of claim, referred to in both paras 110 and 111, should not be overlooked. That paragraph alleges the facts by reference to which the applicant claimed that Mr Foster was an officer of SensaSlim or a director (and hence an associate) of SensaSlim, and, therefore, a person whose identity and role in the SensaSlim business should have been disclosed by SensaSlim in the Disclosure Document, as required by the Franchising Code.

19    Paragraph 80 of the statement of claim is an allegation of misleading or deceptive conduct, once again by SensaSlim and the personal respondents as principals, not in other capacities. Textually, para 80 refers to two species of conduct: the failure to disclose Mr Foster’s involvement in circumstances where, for the reasons given in the particulars to para 79, there was an obligation to disclose, and the conduct of concealing Mr Foster’s involvement by reference to the particulars in para 78. Although paras 78 and 80 of the statement of claim refer to SensaSlim and the personal respondents compendiously, it is necessary to tease out of the pleading the conduct for which each respondent is alleged to be liable as a principal. The particulars to para 78 of the statement of claim only identify the conduct of the personal respondents for which it is alleged they are liable as principals. There is no conduct particularised for SensaSlim. And as I have noted, the pleaded failure to disclose Mr Foster’s involvement, for the reasons given in para 79 of the statement of claim, is an allegation that could only be made against SensaSlim because, in the circumstances of this case, only SensaSlim was subject to the obligations imposed by the Franchising Code. Thus, it can be seen that the allegation relating to concealment/non-disclosure in the context of the Franchising Code is one that is specific to SensaSlim and simply does not relate to the personal respondents.

20    Thus, so far as para 111 of the statement of claim is concerned, “the matters referred to in paras 28 and 78-80” concerning SensaSlim (as opposed to the personal respondents) were that it concealed from Area Managers and potential Area Managers, Mr Foster’s involvement in the conduct of the SensaSlim business (SOC para 78) where Area Managers had a reasonable expectation that Mr Foster’s involvement would be disclosed because of SensaSlim’s obligations under the Franchising Code and, relatedly, because of Mr Foster’s “notoriety” (SOC paras 28 and 79), and that the failure of SensaSlim to make relevant disclosure, was misleading or deceptive or likely to mislead or deceive (SOC para 80). Hence, according to para 111 of the statement of claim, SensaSlim contravened, relevantly, s 52(1) of the Act and s 18(1) of the Australian Consumer Law. As this case came to be developed in submissions, SensaSlim’s concealment of Mr Foster’s involvement by its failure to disclose that involvement in the Disclosure Document, contrary to its obligations under the Franchising Code, and contrary to an alleged obligation arising because of Mr Foster’s “notoriety”, were aspects of the one case of misrepresentation by silence.

The case advanced at hearing

21    The construction of para 111 of the statement of claim set out in [20] above, is precisely how the applicant put its case against SensaSlim at the time of final submissions.

22    The applicant’s written submissions (omitting footnotes) were:

Foster’s involvement: s 59(2) and s 52 TPA: FASoC [110] & [111]

4.    Sensaslim was required, pursuant to ss 6 and 6B of the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) (Franchising Code) to provide certain disclosure in relation to its associates and officers.

5.    Foster controlled and directed the business of Sensaslim: see the conduct outlined at [6] – [100] below. In summary, Foster:

a.        developed and caused to be implemented the system for the Sensaslim Franchise;

b.    prepared and either placed or arranged to be placed advertisements in various newspapers advertising for area managers to distribute the Sensaslim Solution;

c.         prepared a DVD for the purpose of promoting the conduct and company to prospective area managers, the Area Manager Proposal, the FAQ and the Disclosure Document that were shown to area managers;

d.    represented himself in emails and on the telephone to area managers as “Peter O’Brien”; and

e.         was, in the circumstances, an “associate” of the franchisor pursuant to regulation 3 of the Code in that he was a shadow director of Sensaslim Australia Pty Limited.

6.    Sensaslim did not disclose Foster’s involvement in its business to area managers, potential area managers or relevant third parties, such as KMB Business Advisors (KMB) and Robinson Legal; see e.g. paras 2.5 and 2.6 of the disclosure document (an example is V7 CB19, Mr Evans’ affidavit at p2314).

7.    In failing to disclose that Foster was an associate and/or an officer of Sensaslim in the Disclosure Document it represented that Foster:

a.        was not making or participating in making decisions that affect the whole, or a substantial part of the business; and/or

b.    was not providing instructions in accordance with which the directors of Sensaslim were accustomed to act; and/or

c.        was not a director (see definition of director (b) in s 9 Corporations Act 2001 (Cth)); and/or

d.    did not have a relationship with Sensaslim,

    which was relevant to the system of Sensaslim Franchises and a material aspect of the Sensaslim business.

8.    Thus, in making that misleading and deceptive representation that is false in a material particular in that Foster was an associate and/or a director [and/or an officer] and had a relationship with Sensaslim, Sensalim contravened s 59(2) of the TPA.

9.    In addition, area managers deciding whether to purchase a Sensaslim area had a reasonable expectation that Foster’s involvement would be disclosed. The Franchising Code specifically required it, as did Foster’s notoriety, especially in relation to weight loss products. In failing to disclose Foster’s involvement Sensaslim contravened s 52 of the TPA. People such as Mr James would not have become involved if they knew Foster was.

    [Emphasis added]

23    It can be seen that these submissions dealt with the allegations arising under paras 110 and 111 of the statement of claim, together. No distinction was drawn between the case brought under 110 and the case brought under para 111 in terms of the underlying factual substratum, although para 110 alleges a contravention of s 59(2) of the Act and para 111 alleges contraventions under s 52(1) of the Act and s 18(1) of the Australian Consumer Law. Paragraph 9 in the above quote, dealt specifically with the contravention of s 52(1). Plainly, that paragraph referred to SensaSlim’s obligations under the Franchising Code and the failure of the Disclosure Document to disclose Mr Foster’s involvement. That particular paragraph also referred to Mr Foster’s “notoriety”. As I have noted, these are the two matters particularised in para 79 of the statement of claim that were developed as a case of misrepresentation by silence.

24    It should also be noted that, so far as para 111 of the statement of claim is concerned, the applicant only pressed a case under s 52(1) of the Act and not under s 18(1) of the Australian Consumer Law, despite reference to the latter provision in para 111 of the statement of claim. I shall return to discuss the significance of the applicant confining its case in that way.

25    At the hearing, the applicant’s oral submissions closely followed its written submissions on this question: see T407-416. There was no material departure therefrom. At the commencement of the applicant’s oral submissions, I was taken to various provisions of the Act and the Australian Consumer Law. I was also taken to various passages of Miller RV, Miller’s Australia in Competition and Consumer Law Annotated (34th ed, Thomson Reuters, 2012) concerning silence as misleading conduct, including references to and quotations from Winterton Constructions v Hambros Australia (1992) 39 FCR 97 and Fraser v NRMA Holdings Limited (1995) 55 FCR 452 (referred to in [551] of the principal reasons). Counsel for the applicant stated (at T410):

Now, if I can interpolate there to say that we submit that the Area Manager’s proposal and the Disclosure Document are not unlikely prospectus in that they are inviting – certainly the Area Manager’s proposal is inviting persons to invest into a business and persons receiving that document would expect and be entitled to receive full and frank disclosure of all material matters pertaining to that investment opportunity and to leave out of it critical matters such as the involvement of Mr Foster and other matters, we submit with respect means that the Area Manager’s Proposal is misleading…

26    After dealing with the passages in Miller, counsel said (at T411):

…So with that in mind I then just now turn back to the submissions and deal with the contravention that we allege against the first respondent with respect of Mr Foster’s involvement. Now, Sensaslim was required, pursuant to the Trade Practices Industry Codes for franchising regulations to provide certain disclosure. Now, your Honour will recall that I took your Honour to the Franchising Code…

27    I was then reminded of various provisions of the Franchising Code (at T411-414). Counsel for the applicant submitted (at T415) that Mr Foster was either an associate or officer of SensaSlim who participated in making decisions that affected the whole or substantial part of the business of SensaSlim, whose identity should have been disclosed. At T415-416 counsel for the applicant submitted:

Now, if I can just take your Honour to section 59(2) again, of the Act. Now, we submit that the Disclosure Document is an invitation to a person to engage in a business activity requiring the investment of moneys, and therefore Sensaslim was prohibited from making, with respect to any material aspect of the business activity, a representation that is false or misleading. And there were at least a number of reasons why there was an obligation to speak. It was the Franchising Code itself that impose an obligation to disclose, and speak.

But in any event, the relationship between the parties, with respect, we would submit, gave rise to that obligation in accordance with the legal principles that have been set down in the cases that I took your Honour to previously. But in any event, quite clearly the Franchising Code imposed upon the company the duty to make known the involvement of Mr Foster in that document, and therefore gave rise to the obligation, and in our respectful submission constituted a contravention of section 59…

28    Counsel for the applicant then turned to para 9 of the written submissions, quoted above at [21]. He said (at T416):

So even absent the Franchising Code, as I say, there was an obligation imposed on Sensaslim to make known his involvement, and its silence on that matter constituted a misleading representation, and contravention of section 52…

29    Counsel then turned to consider another aspect of the case, namely the nature and extent of Mr O’Brien’s involvement in the SensaSlim business.

30    From this summary, it can be seen that both in written submissions and oral submissions, the applicant’s case against SensaSlim, concerning the concealment of Mr Foster’s involvement in the SensaSlim business, was a case of misrepresentation by silence based on SensaSlim’s failure, contrary to the requirements of the Franchising Code, to disclose that involvement in the Disclosure Document. Related to this, SensaSlim advanced a case that Mr Foster’s “notoriety” also required that disclosure.

Relevant findings with respect to SensaSlim

31    At [518]-[545] of the principal reasons, I identified, in a broad way, the principal allegations that had been made by the applicant. I set out various provisions of the Act and the Australian Consumer Law and discussed a number of legal principles, including those relating to accessorial liability.

32    I also made some general observations concerning the pleading of the statement of claim, including that the statement of claim is not always internally consistent in relation to the allegations pleaded, particularly as to the precise conduct said to constitute the contraventions that have been alleged: see [520] of the principal reasons. At [521] of the principal reasons, I said:

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.

33    At [546] of the principal reasons, I turned to consider the case against SensaSlim, and in particular the case concerning the concealment of Mr Foster’s involvement. In that paragraph I said:

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.

34    After dealing with the applicant’s submission that Mr Foster’s reputation as a conman in relation to weight loss products constituted an independent basis for imposing an obligation on SensaSlim to reveal Mr Foster’s involvement in the SensaSlim business (which I rejected), and after dealing with the provisions of the Corporations Act in relation to the definitions of “director” and “officer”, I concluded that even if not a director (and therefore not an associate) of SensaSlim, Mr Foster was an officer of SensaSlim, because he was a person who made decisions that affected the whole or a substantial part of the business carried on by SensaSlim. I concluded, therefore, that, based on the provisions of the Franchising Code, the Disclosure Document issued by SensaSlim should have identified Mr Foster as an officer: see [566] of the principal reasons.

35    At [574] of the principal reasons, I gave specific attention to the allegations pleaded in paras 110 and 111 of the statement of claim, noting that, at the time of final submissions, the applicant only advanced contraventions of s 59(2) and s 52(1) of the Act. I said:

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 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.

36    With respect to the contravention of s 59(2) of the Act, I found at [576]-[578] of the principal reasons:

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.

37    At [579], with respect to the contravention of s 52(1) of the Act, I found:

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.

The applicant’s contention

38    The applicant contends, in effect, that I misunderstood para 111 of the statement of claim by treating it as dealing with the same underlying conduct pleaded in connection with para 110 of the statement of claim. The applicant submits that para 110 of the statement of claim deals with SensaSlim’s failure to disclose, in the Disclosure Document, Mr Foster’s involvement in the SensaSlim business, contrary to the obligations imposed on SensaSlim by the Franchising Code, whereas para 111 of the statement of claim deals with completely different factual matters, namely the active concealment by the personal respondents (and hence by SensaSlim) of Mr Foster’s involvement in the SensaSlim business by:

    Mr Foster representing himself as Mr O’Brien in telephone and email communications;

    Mr O’Brien allowing Mr Foster to assume his (Mr O’Brien’s) identity in telephone and email communications, and

    Mr Adams and Mr Boyle representing, in telephone and email communications, that “the person that the Area Managers, potential Area Managers, or third parties were communicating with was O’Brien…”.

39    Specifically, in relation to para 111 of the statement of claim, the applicant eschews any contravention of s 52(1) of the Act by reason of SensaSlim’s failure to disclose, in the Disclosure Document, Mr Foster’s involvement in the SensaSlim business, when required to do so because of obligations imposed on SensaSlim by the Franchising Code or because of Mr Foster’s “notoriety”.

40    In its written submissions in relation to the present question, the applicant submits:

17.    The Applicant only alleged that Sensaslim’s failure to disclose Foster’s role in the Disclosure Document was a contravention of s 59(2) of the TPA. The Applicant’s allegations as regards s 52 TPA and/or s 18 ACL were directed towards Sensaslim’s conduct in concealing Foster’s identity from Area Managers and potential Area Managers. By not making a finding against Sensaslim in relation to s 18 of the ACL (based on the fact that there was no evidence to suggest that the Disclosure Document had been distributed after 1 January), the Reasons again appear to be proceeding on the basis that the allegation at paragraph 111 of the FASOC referred to the same underlying conduct as the allegation at paragraph 110 of the FASOC.

41    The applicant also submits (in the context of the principal reasons dealing with Mr O’Brien’s liability):

25.    As a result of finding that Sensaslim’s conduct in failing to disclose in the Disclosure Document, Foster’s role as an officer of Sensaslim was a breach of both s 59(2) and s 52(1) of the TPA, his Honour made a finding in relation to an allegation that the Applicant had not in fact pleaded, namely that:

(a)    Sensaslim had engaged in a contravention of s 52(1) by failing to disclose in the Disclosure Document that Foster was an officer of Sensaslim; and

(b)    O’Brien was knowingly concerned in Sensaslim’s contravention of s 52(1) of the TPA.

Relevant findings with respect to the personal respondents

42    At this point, it is convenient to return to the principal reasons and to my findings with respect to the personal respondents concerning the concealment of Mr Foster’s involvement in the SensaSlim business.

43    With respect to Mr Foster himself, the applicant alleged in para 126 of the statement of claim:

126.    By reason of the matters referred to in paragraphs 28 and 77 to 80 above (including matters referred to in the paragraphs referred to therein), the conduct by Foster alleged at paragraphs 78 and 80 was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (in respect of conduct occurring prior to 1 January 2011) and s 18 of the ACL (in respect of conduct occurring on or after 1 January 2011).

44    At [678] of the principal reasons, I found:

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.

45    The substance of the applicant’s present contention is that it did in fact plead and advance a case that Mr Foster’s email and telephone communications, representing himself as Mr O’Brien, were SensaSlim’s conduct (as opposed to Mr Foster’s conduct) and that the allegation under para 111 of the statement of claim was directed to that case (including corresponding conduct by Messrs O’Brien, Adams and Boyle), and only that case. Its contention is that I failed to consider that case.

46    However, this case was not put to me at trial. I did consider the question of Mr Foster’s accessorial liability in relation to the contravention I found against SensaSlim arising under para 111 of the statement of claim, based on the case put to me at trial.

47    In this connection, the applicant pleaded in para 127 of the statement of claim:

127.    Further and in the alternative, Foster was knowingly concerned in or a party to the contraventions of s 52 of the TPA and/or s 18 of the ACL by Sensaslim alleged at paragraph 111 (for the conduct alleged at paragraphs 78 and 80) within the meaning of s 75B(1)(c) of the TPA, the definition of “involved” in s 2 of the ACL and s 232(1)(e) of the ACL.

Particulars

(i)    The applicant relies on the matters pleaded at paragraphs 28 and 77 to 80 above (including matters referred to in the paragraphs referred to therein).

(ii)    Foster’s knowledge can be inferred from the matters referred to at paragraph 3(a) above (including in the particulars to that paragraph).

48    At [674]-[677] of the principal reasons, I found:

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 Document 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.

49    In oral submissions on the present application, the applicant eschewed reliance on those findings to ground declaratory relief against Mr Foster: see T23. This would seem to have been the logical consequence of its submission that the case it put under para 111 of the statement of claim was not the one I considered, but a different case based on the active concealment by the personal respondents of Mr Foster’s identity. However this approach is contrary to a declaration sought by the applicant (draft declaration 3). I shall return to discuss the declaratory relief sought by the applicant in that regard: see [70]-[71] below.

50    With respect to Mr O’Brien, the applicant alleged in para 145 of the statement of claim:

145.    By reason of the matters referred to in paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein), the conduct by O’Brien alleged at paragraphs 78 and 80 was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (in respect of conduct occurring prior to 1 January 2011) and s 18 of the ACL (in respect of conduct occurring on or after 1 January 2011).

51    At [727] of the principal reasons, I noted:

727.    The applicant alleges, alternatively, that, in 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.

52    I did consider the question of Mr O’Brien’s accessorial liability in relation to the contravention I found against SensaSlim arising under para 111 of the statement of claim, based on the case put to me at trial.

53    In this connection, the applicant pleaded in para 146 of the statement of claim:

146.    Further and in the alternative, O’Brien was knowingly concerned in or a party to the contraventions of s 52 of the TPA and/or s 18 of the ACL by Sensaslim alleged at paragraph 111 (for the conduct alleged at paragraph 78 and 80) within the meaning of s 75B(1)(c) of the TPA, the definition of “involved” in s 2 of the ACL and s 232(1)(e) of the ACL.

Particulars

(i)    The applicant relies on the matters pleaded at paragraphs 28 and 77 to 80 above (including matters referred to in the paragraphs referred to therein).

(ii)    O’Brien’s knowledge can be inferred from the matters referred to at paragraphs 4, 77 and 78 above (including in the particulars to those paragraphs).

54    At [722]–[726] of the principal reasons, I found:

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].

55    Once again, in the present application, the applicant eschewed reliance on those findings to ground declaratory relief against Mr O’Brien: see paras 24-29 of the applicant’s written submissions in relation to its 29 April 2014 letter and [40] above.

56    With respect to Mr Adams, the applicant alleged in para 151 of the statement of claim:

151.    By reason of the matters referred to in paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein), the conduct by Adams alleged at paragraph 78 and 80 was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (in respect of conduct occurring prior to 1 January 2011) and s 18 of the ACL (in respect of conduct occurring on or after 1 January 2011).

57    At [744]-[747] of the principal reasons, I found:

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.

58    I did consider the question of Mr Adams’ accessorial liability in relation to the contravention I found against SensaSlim arising under para 111 of the statement of claim, based on the case put to me at trial.

59    In this connection, the applicant pleaded in para 152 of the statement of claim:

152.    Further and in the alternative, Adams was knowingly concerned in or a party to the contraventions of s 52 of the TPA and/or s 18 of the ACL by Sensaslim alleged at paragraph 111 (for the conduct alleged at paragraph 78 and 80), within the meaning of s 75B(1)(c) of the TPA, the definition of “involved” in s 2 of the ACL and s 232(1)(c) of the ACL.

Particulars

(i)    The applicant relies on the matters pleaded at paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein).

(ii)    Adams’ knowledge can be inferred from the matters referred to at paragraphs 5, 77 and 78 above (including in the particulars to those paragraphs.

60    At [741]-[743] of the principal reasons, I found:

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].

61    With respect to Mr Boyle, the applicant alleged in para 166 of the statement of claim:

166.    By reason of the matters referred to in paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein), the conduct by Boyle alleged at paragraph 78 was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA (in respect of conduct occurring prior to 1 January 2011) and s 18 of the ACL (in respect of conduct occurring on or after 1 January 2011).

62    At [804]–[806] of the principal reasons, I found:

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.

63    I did consider the question of Mr Boyle’s accessorial liability in relation to the contravention I found against SensaSlim arising under para 111 of the statement of claim, based on the case put to me at trial.

64    In that connection, the applicant pleaded in para 167 of the statement of claim:

167.    Further and in the alternative, Boyle was knowingly concerned in or a party to the contraventions of s 52 of the TPA and/or s 18 of the ACL by Sensaslim alleged at paragraph 111 (for the conduct alleged at paragraph 78 and 80), within the meaning of s 75B(1)(c) of the TPA, the definition of “involved” in s 2 of the ACL and s 232(1)(c) of the ACL.

Particulars

(i)    The applicant relies on the matters pleaded at paragraphs 28 and 78 to 80 above (including matters referred to in the paragraphs referred to therein).

(ii)    Boyle’s knowledge can be inferred from the matters referred to at paragraphs 6, 77 and 78 above (including in the particulars to those paragraphs).

65    At [807] of the principal reasons, I found:

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].

Consideration

66    As I pointed out at [544] of the principal reasons, a person cannot be liable as an accessory to another’s contravention unless the other’s contravention has first been established. In that connection, any liability on the part of an alleged accessory must be referrable to the principal contravention pleaded and found, not to some other acts or omissions that might be contraventions, had they been pleaded: R v Goldie; Ex parte Pecklum [1937] 59 CLR 254 at 259-260. The critical question is: what is the contravention that, relevantly, was found against SensaSlim? On the present application, this raises the question: what is the case that the applicant pleaded and brought at trial against SensaSlim in relation to its concealment of Mr Foster’s involvement in the SensaSlim business?

67    The essence of the applicant’s submissions in the present application is that its case under para 111 of the statement of claim was not one based on SensaSlim’s concealment of Mr Foster’s involvement through its non-disclosure of that involvement in the Disclosure Document when it was obliged to do so because of the requirements of the Franchising Code and because of Mr Foster’s “notoriety”. Rather, it says that its case, and only case, under para 111 of the statement of claim was that SensaSlim concealed Mr Foster’s involvement through the acts of Messrs Foster, Adams and Boyle representing in emails and by telephone that Mr Foster was Mr O’Brien, and by Mr O’Brien permitting Mr Foster to make his (Mr Foster’s) representations in that regard.

68    I do not accept that, at trial, the applicant advanced its case against SensaSlim in the latter way. I am in no doubt that the case it advanced against SensaSlim was that SensaSlim concealed Mr Foster’s involvement by failing to disclose that involvement in the Disclosure Document, when it was required to do so by the Franchising Code and because of Mr Foster’s “notoriety”. At trial, the applicant said that it was this conduct that constituted contraventions of both s 59(2) and s 52(1) of the Act.

69    In this connection, I have set out my understanding of para 111 of the statement of claim, read in light of paras 28 and 78-80, insofar as those allegations concern SensaSlim’s concealment (as opposed to the personal respondents’ concealment) of Mr Foster’s involvement, and understood in light of the case against SensaSlim advanced in submissions. I have set out in full the written submissions that the applicant advanced in support of its case under paras 110 and 111 of the statement of claim. I have summarised the oral submissions made on behalf of the applicant in that regard. I do not accept that the applicant relied on a substratum of fact for its case based on contravention of s 52(1) that was distinctly different from the substratum of fact on which it based its case of contravention under s 59(2). Each contravention was plainly put as one arising from SensaSlim’s failure to make disclosure in the Disclosure Document of Mr Foster’s involvement in the SensaSlim business. The applicant did not advance a case that the acts of the personal respondents particularised in para 78 of the statement of claim were to be taken as acts of SensaSlim, as opposed to those of each personal respondent as a principal. As I have noted, para 79 of the statement of claim, which is picked up in para 80, can only be referable to SensaSlim.

70    Indeed, the submission now made by the applicant that its case in relation to para 111 of the statement of claim was advanced only in relation to the conduct of the personal respondents and had nothing to do with SensaSlim’s failure to make disclosure in the Disclosure Document, is not only inconsistent with the way in which it put its case at trial, but also inconsistent with para 79 of the statement of claim itself which, as particularised, directly addresses SensaSlim’s disclosure obligations arising under the Franchising Code and allegedly arising from Mr Foster’s notoriety.

71    Moreover, the construction which the applicant now seeks to place on the contravention alleged in para 111 of the statement of claim is inconsistent with a declaration it asks the Court to make (draft declaration 3), namely:

…that Sensaslim, in trade or commerce in contravention of section 52 of the TPA and section 18 of the ACL, engaged in conduct that was misleading or deceptive or likely to mislead and deceive by failing to disclose to Area Managers, Foster’s involvement of the conduct of the Sensaslim business in circumstances where Area Managers deciding whether to participate in the Sensaslim Franchise had a reasonable expectation that Foster’s involvement would be disclosed.

72    In its written submissions in support of that declaration, the applicant specifically relied on para 79 of the statement of claim. It accepted – indeed, advanced the case – that para 79 is cross-referenced in para 111 of the statement of claim. I refer, in that regard, to the annotations provided by the applicant to the draft orders it proposed. In the course of oral submissions at the hearing of the present application, I pointed out to the applicant what I perceived to be the inconsistency of its position in seeking a declaration in those terms, based on para 79 of the statement of claim, while at the same time arguing that the contravention of s 52(1) it had advanced at trial under para 111 of the statement of claim was a different case based on the active concealment by the personal respondents (and hence by SensaSlim) of Mr Foster’s involvement in the SensaSlim business (ie, a case that had nothing to do with para 79 of the statement of claim): T23-24. The matter was left on the basis that the applicant would consider its position in that regard. However, no submission in reply was made to address that apparent contradiction.

73    At the hearing of the present application, the applicant drew my attention to two matters in the submissions it advanced at trial. First, it pointed to the reference in sub-para 5d of its written submissions quoted at [22] above. In that sub-paragraph, the applicant referred to the fact that Mr Foster represented himself in emails and on the telephone as “Peter O’Brien”. The applicant submitted that this indicates that the case it was advancing at trial was that SensaSlim concealed Mr Foster’s involvement in the business by reason of Mr Foster misrepresenting himself as Mr O’Brien. I do not accept that submission. In that part of its written submissions at trial, the reference to Mr Foster’s conduct is made in support of the factual proposition that Mr Foster controlled and directed the SensaSlim business. In turn, that proposition was made to advance the proposition (stated in para 4 of the submissions quoted at [22] above) that Sensaslim was required under the Franchising Code “to provide certain disclosure in relation to its associates and officers” (i.e., in the Disclosure Document). Thus, sub-para 5d of the written submissions provides no substantive support for the case which the applicant now seeks to make. The reference to Mr Foster’s conduct was directed to another matter – the need for Mr Foster’s involvement to be disclosed in the Disclosure Document.

74    Secondly, the applicant pointed to the statement in para 9 of the submissions quoted at [22] above in which it stated:

People such as Mr James would not have become involved if they knew Foster was involved.

75    The applicant submitted that this statement was a direct reference to an email communication between Mr Adams and Mr James. It then suggested that, in this part of the submissions, it was enlivening the particulars given in para 78 of the statement of claim with respect to Mr Adams.

76    I do not accept that submission. There are a number of reasons why the submission cannot be correct. The reference in the quoted submissions to “people such as Mr James”, is one made in relation to the general proposition that Area Managers deciding whether to purchase a SensaSlim area had a reasonable expectation that Mr Foster’s involvement would be disclosed. This is another allusion to para 79 of the statement of claim. The applicant’s written submissions at trial continued:

The Franchising Code specifically required it as did Foster’s notoriety, especially in relation to weight loss products. In failing to disclose Foster’s involvement SensaSlim contravened section 52 of the TPA.

77    Further, a footnote to “people such as Mr James” makes perfectly clear that the applicant was referring to the following evidence given by Mr James at [48] of his affidavit, which was that, had he known that Mr Foster was involved in the SensaSlim business, he (Mr James) would never have become involved in the business because of Mr Foster’s reputation:

Prior to my involvement with Sensaslim, I was aware of Peter Foster and knew that he had a reputation as a con-man. I knew that he was involved some sort of scandal involving Cherie Blair. 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 2 cents.

78    As given, this evidence was not related to any email communication between Mr Adams and Mr James. The email communication referred to by the applicant was well after Mr James became involved in the SensaSlim business as an Area Manager.

79    As I have already remarked, contrary to the submissions the applicant now makes, at trial the applicant specifically confined its case against SensaSlim under para 111 of the statement of claim to a contravention of s 52(1) of the Act. It abandoned any reliance on s 18 of the Australian Consumer Law. At [574] of the principal reasons, I specifically noted that the case had been so confined in the course of submissions. By confining its case in this way, the applicant placed a temporal limitation on the conduct that it advanced as constituting a contravention under para 111 of the statement of claim. The conduct which it now seeks to argue was captured by para 111 of the statement of claim (namely, the active concealment by the personal respondents of Mr Foster’s involvement, as particularised in para 78 of the statement of claim), extends beyond that temporal limitation. On the other hand, as I remarked in [574] of the principal reasons, the reliance only on s 52(1) of the Act can be understood on the basis that there was no evidence to suggest that the Disclosure Document was issued at a time that would have attracted the operation of s 18 of the Australian Consumer Law.

80    In the present application, the applicant points to those paragraphs of the statement of claim where it alleged that each personal respondent was knowingly concerned in, or party to, the contravention pleaded in para 111 of the statement of claim: see SOC paras 127, 146, 152 and 167. It seeks to draw support from those paragraphs to suggest that the case pleaded in para 111 of the statement of claim concerned subject matter different to that which I have found.

81    I do not think that the pleading of those particular paragraphs provides the support for which the applicant contends. It may be accepted that those paragraphs refer to paras 78 and 80 of the statement of claim. They also refer to “the matters pleaded at paragraphs 28 and 78 to 80” of the statement of claim. But, as I have sought to explain at [15]-[20] above, while paras 78 and 80 refer compendiously to the respondents, it is necessary to tease out of them the specific conduct allocated to SensaSlim, and the specific conduct allocated to the personal respondents, as principals.

82    At the end of the day, the applicant’s reliance on the paragraphs of the statement of claim pleaded against the personal respondents in respect of their alleged accessorial liability simply begs the question of what was pleaded against SensaSlim in para 111. Further, and critically, nothing pleaded with respect to each personal respondent in those paragraphs can alter the way in which, relevantly, the applicant put its case under para 111 against SensaSlim at trial. In light of the case that the applicant put against SensaSlim under para 111, I found that SensaSlim had contravened s 52(1) of the Act.

83    Whilst the pleading can be read with an eye to the applicant’s present construction of para 111, that construction was not put to me at trial. The applicant’s submissions at trial (see [21]-[30] above) both advanced and confirmed the construction upon which I proceeded in the principal reasons, as explained in [521] and [546] thereof: see [32] and [33] above.

84    For these reasons, I am not persuaded that, in relation to para 111 of the statement of claim, the applicant advanced a case against SensaSlim at trial that has not been addressed and determined in the principal reasons. I have considered the accessorial liability of the personal respondents by reference to the contravention I have found against SensaSlim arising under that paragraph. If I am in error in the contravention I have found, or in dealing with the accessorial liability of the personal respondents on that basis, then the applicant’s recourse is to seek appellate correction.

85    I should add for completeness that no application has been made by the applicant to re-open its case.

The form of the declarations to be made

86    The applicant provided a draft of 32 declarations which it said should be made. The draft included proposed declarations against SensaSlim (draft declaration 2), Mr Foster (draft declaration 16), Mr O’Brien (draft declaration 26), Mr Adams (draft declaration 29) and Mr Boyle (draft declaration 30) which were specifically proposed by the applicant in relation to the case which the applicant says I should have considered, but did not consider, against SensaSlim under para 111 of the statement of claim for contravention of s 52(1) of the Act. For the reasons I have given above, I am not satisfied that the case now advanced by the applicant was the case that it pleaded and advanced at trial against SensaSlim in that regard. For that reason, I am not prepared to make those particular declarations.

87    I have considered and determined in favour of the applicant the case pleaded under para 111 of the statement of claim that was advanced by the applicant against SensaSlim at trial. However, the applicant does not wish to pursue declaratory relief – and, I assume, any other relief – in respect of the contravention of s 52(1) of the Act that I have found in that regard: T22-23. Relatedly, at [677] of the principal reasons, I found that Mr Foster was knowingly concerned in, and party to, SensaSlim’s contravention of s 52(1) of the Act which I had found at [579] of the principal reasons. I made a similar finding against Mr O’Brien at [722]-[726] of the principal reasons. The applicant does not wish to pursue declaratory relief in relation to that conduct as well.

88    Draft declaration 3 sought by the applicant sits in a curious position. That draft declaration does reflect the contravention of s 52(1) of the Act I have found against SensaSlim in respect of the non-disclosure of Mr Foster’s involvement in SensaSlim. However, the applicant has made clear that it does not wish to pursue declaratory relief based on the contravention of s 52(1) I have found, because to do so would be inconsistent with the position it has advanced at the present hearing: T22-23.

89    Apart from these matters, I have a number of concerns about the form of the declarations sought by the applicant. I drew attention to some of these concerns in the course of the hearing of the present application: see T19-30. I do not propose to detail or discuss these concerns in these reasons. They are numerous and little point would be served in doing so. In general, they relate to the proper identification of the contravening conduct I have found.

90    Mr Boyle also provided a draft of the declarations which, he submitted, were in appropriate form, if declarations were to be made against him. I am not satisfied that those draft declarations adequately capture the conduct for which I have found Mr Boyle to be liable.

91    Nevertheless, in formulating the declarations which I think should be made, I have been assisted by the applicant’s draft orders and Mr Boyle’s draft orders.

Conclusion and disposition

92    I am satisfied that it is appropriate make declarations with respect to SensaSlim’s contraventions and in respect of the personal respondents’ involvement in those contraventions. The power of the Court to make binding declarations of right is expressed in s 21 of the Federal Court of Australia Act 1976 (Cth). There is no doubt that the Court has power to make declarations in relation to conduct that contravenes a statutory provision.

93    A significant discretionary consideration in relation to the granting of a declaration is whether it will have utility. I am satisfied that the granting of declarations in the present case will have utility. A number of contraventions of the Act and the Australian Consumer Law were alleged. Not all were established. Different forms of conduct were involved. It is desirable that the specific liabilities found, in terms of primary liability and accessorial liability, should be identified. It is convenient to do so in light of the fact that the applicant also seeks penalties and other relief with respect to those liabilities: Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95].

94    Further, this proceeding has a special character because it involves the protection of the public. It is in the public interest that the Court indicate the result of the applicant’s case by making an order binding on the parties thereto: Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 100, 106 and 107; Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2005) 236 ALR 665 at [58]-[59]; Australian Competition and Consumer Commission v P & N Pty Ltd (2014) ATPR ¶42-460 at 17. This is especially so where, as here, the proceeding is complex and the reasons for judgments are, necessarily, lengthy. Further, the granting of declarations will mark the Court’s disapproval of the conduct involved: Tobacco Institute at 100; Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liquidation) [2005] FCA 1212 at [150].

Associate:

Dated:    26 September 2014