Astram Financial Services Pty Ltd v Bank of Queensland Ltd

Astram Financial Services Pty Ltd v Bank of Queensland Ltd - [2010] FCA 1010 - FCA 2010 case summary — Zoe

[14]

REASONS FOR JUDGMENT introduction.......................................................................................................... [1] The principal parties................................................................................................... [1] Mr Ramsey as the fourth applicant........................................................................... [2] Opening remarks........................................................................................................ [5] The OMB Agreement................................................................................................. [13] The pleadings.............................................................................................................. [18] Events before execution of THE OMB Agreement............................ [26] Mr Ramsey's background and experience............................................................... [26] Meeting No 1 - 17 November 2004........................................................................... [27] Meeting No 2 - 9 December 2004............................................................................. [32] Meeting No 3 - 3 February 2005............................................................................... [44] Meeting No 4 - 21 February 2005............................................................................. [54] The business plan........................................................................................................ [66] The OMB Agreement and the security documents.................................................. [84] Independent advice..................................................................................................... [86] Execution of the OMB Agreement............................................................................ [97] The representations deed........................................................................................... [99] Events after execution of THE OMB Agreement............................... [103] Training....................................................................................................................... [103] Meeting 5 - May/June 2005...................................................................................... [106] Mr and Mrs Astridge sell their interest in Astram................................................... [113] Execution of the security documents......................................................................... [125] business term loan................................................................................. [129] business overdraft................................................................................ [130] Fixed and floating charge................................................................ [131] guarantee and indemnity for business term loan............ [132] first guarantee and indemnity for business overdraft..................................................................................................... [133] business overdraft variation......................................................... [134] second guarantee and indemnity for business overdraft..................................................................................................... [135] home loan agreement.......................................................................... [136] mortgage...................................................................................................... [137] Branch operations....................................................................................................... [139] Meeting No 6 - 23 January 2006............................................................................... [143] Remedial measures.................................................................................................... [151] Breach notice.............................................................................................................. [175] Accounting evidence......................................................................................... [192] Mr Darel Hughes........................................................................................................ [192] Mr Fitzpatrick............................................................................................................. [213] Conclusions about the accounting evidence.............................................................. [220] other MATTERS....................................................................................................... [224] The broker book......................................................................................................... [224] Reliance on "tendency" evidence.............................................................................. [231] Mr Ramsey's claims about marketing...................................................................... [245] Witnesses not called................................................................................................... [260] Character and quality of asserted representations................................................... [261] Inducement and reliance............................................................................................. [283] The applicants' pleadings in more detail............................................ [298] The ASIC Act.............................................................................................................. [301] Section 51A of the Trade Practices Act..................................................................... [307] Section 52 of the Trade Practices Act........................................................................ [311] Section 51AC of the Trade Practices Act................................................................. [333] Section 51AD of the Trade Practices Act.................................................................. [343] Breach of contract claim............................................................................................. [355] Conclusion on the applicants' claims......................................................................... [358] the bank's cross claim..................................................................................... [359] Mr Ramsey as trustee................................................................................................ [359] The securities.............................................................................................................. [371] Costs............................................................................................................................. [376] orders......................................................................................................................... [377]

[17]

Opening remarks 5 The franchise which Mr Ramsey sought arose from arrangements put in place by the Bank in 2004 whereby it contracted in New South Wales (as it earlier had in Queensland), with companies established for the purpose of such arrangements, for the operation of new branches of the Bank by franchisees. It was a normal condition of approval of such arrangements that the intended branch manager be a principal shareholder of the franchisee and have adequate prior banking experience. Mr Ramsey did not satisfy that latter condition. However, he found a proposed partner who did, Mr David Astridge. Mr Astridge and his wife, Marie, were proposed as shareholders in the intended franchisee (with a combined interest of 50%). Mr Astridge, who had banking experience, was to be the branch manager. The Bank agreed to entertain a proposal from Mr Ramsey and Mr and Mrs Astridge on that basis. 6 A central element in the Bank's requirement of an intending franchisee was the preparation of an appropriate business plan by its principal(s), based on independent enquiries and research, setting out expected expenses and revenue for the initial years of the franchise. Some of the information necessary to make this assessment was provided by the Bank. However, a critical element in the assessment was a judgment about the volume of new loans of various kinds which would be written by the franchisee in its intended location. The Bank had an underlying expectation that, within a reasonable period of opening, a franchisee should be in a position to write new loan business amounting to $4 million per month. Achievement of that objective would provide a satisfactory return to both the Bank and the franchisee. Mr Ramsay and Mr Astridge prepared and submitted a business plan for a proposed Bank of Queensland branch at Campbelltown, predicting such an outcome. 7 The Bank's position in relation to the franchise arrangement was set out in detail in a number of documents. Some were formal letters (the contents of which were required to be acknowledged before negotiations proceeded further); some were contractual documents. They each bear the appearance of documents drafted from a position of commercial and negotiating superiority but, notwithstanding the availability of criticism of their terms on that account, they were consistently emphatic that entry into a franchise arrangement of the kind which Mr Ramsey and Mr Astridge sought with the Bank was to be based on business judgments made by the intending franchisee, and its principal or principals, and not on assumptions engendered by any conduct of the Bank. The Bank, at the time of entry into the franchise and earlier, expressly disclaimed any liability for the business fortunes of the franchise. Franchisees and their principals were required to acknowledge and accept this feature of the arrangement and agree to absolve and indemnify the Bank from any responsibility for the business fortunes of the franchise, after receipt of legal and accounting advice. Astram, Mr Astridge and Mr Ramsey accepted those terms. 8 The Bank accepted Astram's proposal, based on the business plan submitted by Mr Astridge and Mr Ramsay. A formal contract was executed. Some time later, but before the branch opened, Mr Ramsey and Mr Astridge decided not to continue in partnership and as co-principals of Astram. Mr Ramsey wishedto continue alone. The Bank permitted him to do so provided he employed an experienced banker as branch manager, while he sought another partner, which he agreed to do. 9 Astram's business failed. The case for the applicants, expressed in various ways, is that the business failed because the Bank misrepresented the prospects for success of the business and/or the level of support which it would provide to it. 10 Astram never achieved the targets stated in the business plan by Mr Ramsey and Mr Astridge including writing $4 million in loans per month. The applicants' case is that the Bank assured them that such a target was achievable and knew of no reason why it would not be achieved. Mr Ramsey asserted in his evidence that he relied on the Bank in that regard and would never have entered into the arrangement otherwise. At the heart of the applicants' case lay the premise that the written terms of the documents which recorded the various legal relationships between the Bank and the applicants should be subordinated to a finding that the Bank had promised Astram a successful business. When the business failed, the cause of failure was to be found in the non-fulfilment of the Bank's assurances. The Bank was responsible, not the applicants. As a result (although logical support for this extension of the theme is difficult to find) the applicants should be relieved of all their liabilities to the Bank, including pre-existing debts which the Bank refinanced. 11 It is easy enough to feel sympathy for the position in which Mr and Mrs Ramsey now find themselves. However, the central defect in the applicants' case, which was never satisfactorily addressed, lies in the fact that the commitments which they each made were based on written statements (some contractual) about the rights and obligations of the parties which were clear and relevantly unqualified. In each case the "assurances" upon which the applicants relied were contradicted by the express written contractual terms which they executed, and by intermediate written statements of the Bank's position. Not only the contractual terms, but also the intermediate written statements, were accepted by Mr Ramsey on behalf of Astram and endorsed as understood by him. The applicants' case elevated the asserted contents of introductory discussions (of which there was no written record) to a position of overriding importance. It reduced the significance of every inconsistent or contradictory written statement or contractual term effectively to one of no, or insignificant, weight or legal content. There is no foundation in legal principle, statute or commercial practice for such an approach and the applicants' case was therefore bound to fail. 12 The lengthy discussion which follows, out of deference to the need for an explanation of the preceding summary, will lead only to that same conclusion.

[18]

The OMB Agreement 13 During the course of the proceedings, there was frequent reference in the applicants' case to the "model" which the Bank held out to intending franchisees. It was implicit in the way the term was used that the model was advanced by the Bank as the embodiment of a certain intended standard of success. I do not intend to use the term with that connotation implicit in it. Whether any particular standard of success was anticipated for the model, much less represented, is something which requires separate consideration. However, used neutrally, the term is a useful enough description of the Bank's proposal that the conduct of a significant number of branches in New South Wales be placed in the hands of franchisees. The centrepiece of the model was the "OMB Agreement" ("OMB" indicating owner managed branch). 14 The OMB Agreement, which in Astram's case was executed on 26 April 2005, extended for 46 pages. Schedule 1 occupied a further 11 pages. A 29 page lease was attached. The parties to the OMB Agreement were the Bank, Astram and its directors, who at the time of execution were Mr Ramsey and Mr Astridge. The agreement provided for the conduct of a branch of the Bank at premises which were to be leased by the Bank (although they were in fact to be selected by Messrs Ramsey and Astridge on behalf of Astram). Astram was appointed the Bank's agent to conduct the business of the branch. An upfront fee of $80,000 was payable by Astram. A monthly licence fee of $1,000 was payable after the first year of operation. The agreement was for a term of five years. Astram was to be paid for its services in conducting the branch as the agent of the Bank in accordance with a schedule of commission payments identified in Schedule 1 to the OMB Agreement. 15 Astram was required to appoint a branch manager who would be a director or shareholder of Astram. Approval of the Bank to the appointment of the branch manager was required. Written approval of the Bank was required before any change was made in the identity of the branch manager or in the shareholding or control of Astram. Astram was required to employ other staff and was responsible for meeting all the costs of their employment. It was responsible, generally speaking, for all the operational costs of the branch. Astram was also required to fund the cost of fit-out of the branch premises. 16 Clause 33 of the OMB Agreement contained the following provisions: 33.2 Amendment This Agreement can only be amended, supplemented, replaced or novated by another agreement signed by the Parties. … 33.4 Operation of this document (a) Subject to any contrary provision contained in any Transaction Document, this Agreement contains the entire agreement between the Parties about its subject matter. Any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by this Agreement and has no further effect. 17 The transaction documents to which clause 33.4(a) referred included a fixed and floating charge over the assets of Astram and personal guarantees to secure performance of Astram's obligations to the Bank arising from the franchise arrangements. These will be referred to in due course. These documents did not make any provision contrary to the OMB Agreement. The transaction documents also included a "representations deed" to which separate attention needs to be given. Subject to those matters, the provisions of clause 33.2 and 33.4(a) represented a significant obstacle to the applicants' case, based as it was largely upon suggested representations which preceded the execution of the OMB Agreement.

[19]

The pleadings 18 The pleadings in this matter proceeded in large part by repetition of identical allegations, separated only by reference to different statutory obligations. The result is a dense thicket of intermingled allegations from which it is difficult to extract clear and reliable factual complaints to support clearly identified legal rights. In the circumstances of the present case it will be necessary to deal in some detail with the facts before attempting to examine the pleaded allegations in any detail. 19 Most of the applicants' causes of action arise from the Trade Practices Act 1974 (Cth) ("the TP Act"). They represent three broad accusations concerning the Bank's conduct: A. The Bank committed misleading and/or deceptive conduct (s 52 of the TP Act). B. The Bank committed unconscionable conduct (s 51AC of the TP Act). C. The Bank breached a statutory franchising code of conduct by which it was bound (s 51AD of the TP Act). 20 I will address each of these contentions in greater detail after I have dealt with the factual circumstances against which they must be assessed. However, some very general points may be made at the outset. I will discuss the legal foundation for the propositions distilled hereunder when I return to deal with the pleadings in more detail. 21 Most of the evidence in the applicants' case was devoted to the proposition that, the Bank breached s52 of the TP Act by making representations about the franchise model, and about the prospects for a franchisee, which were misleading and/or deceptive. As a result of the Bank's conduct, the applicants contended, they were induced to participate in (or support) the franchise arrangements with the further result that they lost substantial sums of money, or were exposed to the risk of such loss. 22 A case of that kind must be evaluated bearing some important considerations in mind: • In the case of pre-contractual representations, where the representee seeks to avoid the ordinary legal consequences of a contract, or be released from an overall arrangement, the whole of the conduct of the representor, up to the time that the contract was made, or the arrangement entered into, must be taken into account. • The conduct of the representor, including the representations themselves, must be objectively assessed against the likely impact on a reasonable person in the position of the representee. • In order to succeed in a case for damages or compensation it must be shown that the loss, or risk of loss, was actually caused by the representations in the sense that the representee relied on them and would not otherwise have made the contract or entered into the arrangement. That issue must be assessed bearing in mind the points already mentioned. Questions of inducement and reliance must also be approached objectively, bearing in mind the likely responses of a reasonable person in the position of the representee. 23 The misleading and/or deceptive conduct asserted by the applicants was said to be constituted by oral statements made by officers (or alleged agents) of the Bank at six different meetings. Most of the meetings occurred before execution of the OMB Agreement and the various security documents which the applicants seek to set aside. The great bulk of the factual issues which require determination arise in connection with this part of the case. The six meetings were:

17 November 2004 with Mr Michael Zacharia, the manager of the Menai branch of the Bank (a franchise branch).
9 December 2004 with Mr Garry Allsopp, the officer of the Bank at that time primarily responsible for dealing with persons interested in a franchise.
3 February 2005 with Mr Allsopp.
On or about 21 February 2005 with Mr Graham O'Kell, the manager of the North Parramatta branch of the Bank (a franchise branch).
May/June 2005 with Mr Allsopp (after the OMB Agreement had been made but before the Campbelltown branch opened).
23 January 2006 (after the Campbelltown branch had opened) with Mr Stuart Edwards, a senior officer of the Bank in New South Wales. 24 To succeed in showing that the Bank's conduct was unconscionable the applicants must identify a high level of unethical behaviour on the part of the Bank. That may not be done merely by complaining about the commercial position it took, or the fact that it negotiated with its own interests in mind. 25 One thing to be assessed, if some breach of this kind was established, is whether it would lead to any form of relief. Relief for a breach of a franchising code of conduct must be proportionate to the effect of the breach.

[21]

Meeting No 1 - 17 November 2004 27 In late 2004, as a result of a legal settlement, Mr Ramsey had about $100,000 to invest. In about November 2004 he received a brochure in his letter box which mentioned a special opening branch rate for cash management funds at a local branch of the Bank of Queensland, the Menai branch. The Menai branch was a franchise of the kind which Mr Ramsey subsequently sought. The branch manager was Mr Michael Zacharia. Mr Ramsey made an appointment to see Mr Zacharia on 17 November 2004. As a result of his visit, he opened a cash management account at the Menai branch. During the course of the visit, in what appears to have been a short conversation, Mr Zacharia referred to the franchise nature of the branch. Mr Ramsey, according to his evidence in chief, thereupon asked Mr Zacharia the following questions: I said, is it a good business; I'm looking for a business opportunity? MR KING: And how did he respond to your question?---He said, it is a good business, a profitable business, and if you want to find out more about the franchise you will have to speak to Garry Allsopp. And what did you say in response to that?---I said, can I get Garry Allsopp's details about the franchise, to contact him. And how did he respond?---He then wrote out his name and phone number and gave me a piece of paper. 28 It was part of the applicants' case that this conversation constituted a representation by Mr Zacharia in trade and commerce, as agent for the Bank, about the prospects of success if Mr Ramsey embarked upon a franchise of his own with the Bank. I reject every element of this contention. On Mr Ramsey's own evidence it was a chance conversation involving answers to questions administered by him which were remote from the purpose of his visit. Mr Zacharia was not, in his personal responses, acting as the agent for the Bank for the purpose suggested. There is no substance in the suggestion also made on behalf of the applicants that Mr Ramsey was entitled to, and did, rely upon what Mr Zacharia said as some form of assurance on behalf of the Bank that he would succeed in a similar business. 29 The only real significance of this meeting is that it explains how Mr Ramsey came to make contact with Mr Allsopp, the person to whom he attributed most of the supposed assurances given by the Bank. The proper context in which to view the exchange between Mr Ramsey and Mr Zacharia was elicited from Mr Ramsey in cross-examination as follows: MR COUPER: Mr Ramsey, I'll ask you my question again, please listen to it and answer it. The only result of Mr Zacharia's comments to you was to make you think that it was worth your while to investigate whether a Bank of Queensland agency business, was a worthwhile business for you to go into. Now, that's right isn't it?---Yes. 30 Using the details supplied by Mr Zacharia, Mr Ramsey contacted Mr Allsopp late in November 2004 and arranged a meeting for 9 December 2004. On Mr Ramsey's evidence he explained his request for the meeting by saying that he "wanted to find out more about the Bank of Queensland franchise". In my view, if the issue was not in any event beyond debate, this simple and unremarkable statement is sufficient to dispel any later suggestion that Mr Ramsey was entitled to rely, as a representation, on anything said by Mr Zacharia. On Mr Ramsey's own evidence his inquiries were just beginning. 31 The meeting with Mr Zacharia marks the beginning of a consistent course of conduct by Mr Ramsey during which he pursued the idea of obtaining a franchise for himself. In this meeting, as in subsequent meetings, the impetus was supplied by Mr Ramsey.

[22]

Meeting No 2 - 9 December 2004 32 Mr Allsopp was the officer of the Bank whose task it was to deal with enquiries about the possibility of a franchise and to explain how the model was intended to operate. 33 This meeting was a short one. At an early stage Mr Allsopp terminated the meeting when he appreciated that Mr Ramsey lacked banking experience. Neither Mr Ramsey's curriculum vitae nor his three references identified any banking knowledge or experience. It became clear that this was Mr Allsopp's initial concern. On Mr Ramsey's own evidence, as soon as Mr Allsopp appreciated that Mr Ramsey lacked any banking experience, Mr Allsopp brought the meeting quickly to an end and made it clear that he would not discuss the matter further. When that point was reached, according to Mr Ramsey the following exchange occurred: I said to him, "I'm not a banker." He said, "Well, I won't discuss this issue - the franchise with you any further." MR KING: And what did you say?---I said, "If I get a banking partner, or somebody with a retail banking background, will you continue to talk to us?" And he said, "Yes." 34 However, according to Mr Ramsey's evidence in chief, Mr Allsopp at this meeting made definite, and predictive, statements about the commercial prospects for a Bank of Queensland franchise. Mr Ramsey gave the following evidence: I handed my references and resume to him. Gary Allsopp had a quick look through my references, and then said, 'If you want to look at the Bank of Queensland franchise, to be successful in this business, you'll need to do four million dollars a month, which with the size of mortgages in Sydney, is achievable. And you'll need $100,000 worth of working capital'. MR KING: And did he say anything to you about the plans, or the basis of what was occurring? The plans of the Bank?---He said the Bank had opened up branches at - the Bank had made a decision to do an interstate expansion program, had gone away from its brokers, and was establishing its branch network, and has opened branches at Menai, Parramatta and Dee Why. And you said that he made reference to writing four million dollars per month for a franchise, and did he say anything further about that?---He said, in Sydney, it was achievable, because of the size of mortgages. (Emphasis added) 35 This evidence was given towards the end of the first day of oral evidence in the proceedings. On the following day Mr Ramsey's answer to the first question asked of him (still in evidence in chief) was as follows: MR KING: Mr Ramsey, yesterday afternoon I asked you a number of questions regarding the second meeting, and I just wish to revisit one aspect of that meeting. Do you recall whether or not any reference, any specific reference was made at that meeting to borrowing costs or the like via Mr Allsopp?---Garry Allsopp said if you do $4 million per month which is achievable with the size of mortgages in New South Wales, you will cover your operational expenses and borrowings and give a good return on investment. (Emphasis added) 36 The conditional nature of the statement attributed to Mr Allsopp should be noted. If such a statement was made by Mr Allsopp at this meeting (which, for reasons to be explained, I doubt) there was nothing about it which was misleading or deceptive. The estimate that achieving loans of $4 million a month would give a good return on investment as well as covering operational expenses and borrowings eventually became common ground in the case. 37 Mr Ramsey also asserted that, at the meeting of 9 December 2004, Mr Allsopp said that the Bank was proposing a major marketing campaign targeted to occur when branches were opened. That is a matter I shall discuss in more detail in due course. However, I think it is unlikely that any matter of detail was discussed at this initial meeting with Mr Allsopp. At a later meeting, Mr Allsopp insisted that a confidentiality agreement be signed before such matters were discussed. I think it improbable that Mr Allsopp discussed at this initial meeting with Mr Ramsey matters which, at the subsequent meeting, he was only prepared to discuss after a confidentiality agreement had been signed. Nevertheless, I shall, for the moment, accept that the statements were made. 38 Almost every aspect of the applicants' case was devoted to the proposition that those alleged statements (and ones to similar effect at the next meeting) represented some form of promise or assurance that, come what may, wherever a franchise might be established by Mr Ramsey, and whatever its operating environment, success was assured. Loans of $4 million per month were achievable and he, Mr Ramsey, would achieve them. No allowance was made, in this reconstructed version of events, for the fact that Mr Allsopp had only just met Mr Ramsey, knew next to nothing about him, that no site for a franchise was discussed and that, as Mr Allsopp quickly discovered, Mr Ramsey did not qualify for consideration as a person equipped to manage such a franchise operation. 39 Even if Mr Ramsey's evidence was accepted about what was said at that meeting of 9 December 2004, a number of observations should be made. First, the initial reference to $4 million a month was, even on Mr Ramsey's version of events, expressed as a caveat. Next, Mr Ramsey's evidence about the size of mortgages was not consistent. First he referred to mortgages in Sydney. Immediately upon commencing his evidence the following day, Mr Ramsey said Mr Allsopp referred to the size of mortgages in New South Wales. Arguably, Campbelltown is not part of Sydney. The evidence given the previous day might have been unhelpful. On the second day, without explanation, the references (there was more than one) to mortgages in Sydney were replaced by a reference to mortgages in New South Wales. Thirdly, although the case had been pleaded, and thereafter proceeded for a considerable distance, upon the footing that Mr Ramsey had relied upon the statement he attributed to Mr Allsopp that he would need $100,000 of working capital for the business, this aspect of the pleaded case was later abandoned in the light of evidence that Mr Ramsey himself projected (with Mr Astridge) in their business plan that much more than $100,000 would be required. The insistence by Mr Ramsey in his evidence at various points, that he had relied upon a statement by Mr Allsopp about the amount of working capital which would be needed, was never able to be reconciled with his own contemporaneous estimate of the need for a much larger amount of working capital. 40 Mr Ramsey's suggestion that he relied upon statements attributed to Mr Allsopp at this meeting should also be viewed with caution for another reason. His lack of banking experience presented him with an obstacle to understanding what Mr Allsopp was talking about, assuming the statements were made by Mr Allsopp. In cross-examination about this meeting the following exchange occurred: MR COUPER: When he said you would have to achieve $4 million, did you understand what he was talking about?---Not really. 41 Mr Ramsey also accepted that there was no discussion at this meeting about the nature or amount of expenses which might be involved or the way in which the franchise would earn money from the conduct of the branch. That led to the following exchange: MR COUPER: Mr Ramsey, at the end of that first meeting with Mr Allsopp, you couldn't form any opinion about whether it was worthwhile to proceed with a Bank of Queensland agency franchise or not. Correct?---I thought it was an exciting opportunity to investigate further. HIS HONOUR: That wasn't quite the question you were asked. You were asked whether at that point you were in a position to form an opinion about whether you should proceed or not?---No. No, I didn't have an opinion. You didn't have any information either?---No, that's right. 42 Whatever was said by Mr Allsopp at this meeting it lacked the necessary quality of a representation made in trade and commerce upon which Mr Ramsey could later rely as any form of assurance. The meeting was, at best, plainly introductory. In fact, it ended in rejection. Mr Ramsey was not on the path to a franchise at this stage. Negotiations with the Bank had not yet opened. 43 Mr Ramsey, however, was apparently undaunted. He wanted to pursue the matter. Mrs Ramsey knew Mrs Marie Astridge. Her husband, Mr David Astridge, had a banking background. Mr and Mrs Astridge had recently sold a business. Mr and Mrs Ramsey spoke with them about the Bank of Queensland franchise. Mr and Mrs Astridge agreed to meet with Mr Allsopp and another meeting was arranged for 3 February 2005.

[23]

Meeting No 3 - 3 February 2005 44 This was a longer meeting. Very early in the meeting it appears that Mr Allsopp asked Mr Ramsey and Mr and Mrs Astridge to sign a confidentiality agreement and they did so. Mr Astridge's banking experience was explained. It appeared to be acceptable. Mr Allsopp gave a description of the franchise operation. He said that a business plan would need to be prepared and approved. There was reference to the costs of the fit-out of the branch, which would vary depending on the location and site that was selected. At this stage a possible site for a branch had not been selected, much less any form of business plan prepared. 45 In his evidence in chief Mr Ramsey repeated the suggestion that Mr Allsopp had quantified a desirable level of loans: MR KING: And did he say anything to you about what the capacity or expectation was in relation to the writing of loans?---Garry Allsopp said you are expected to write $4 million a month, if you write $4 million a month that will give you enough income to cover any expenses you have, and/or borrowings in relation to the operation of the business. And did he make any other observation about that figure?---He said that was achievable with the size of mortgages in New South Wales. 46 Mr Allsopp did not give evidence in the proceedings. There was, accordingly, no denial by him that such a statement was made but the character of the statement which Mr Ramsey attributed to him should again be noted. The attributed statement concerned an expectation that $4 million a month in loans would be written. There is support in later material for the idea that the Bank expected that, at least after an initial interval, loans of about that amount would be written by a franchise. And, as earlier indicated, it became common ground in the proceedings that writing loans of that amount would provide an adequate return. 47 Mr Astridge did give evidence. He could not remember Mr Allsopp making any reference to specific levels of loans that might be, or should be, written. Whatever was said by Mr Allsopp obviously did not strike Mr Astridge as any form of assurance about the level of loans that might be written at a location that had not yet been identified. Mr Astridge's recollection was that all the relevant estimates of the amount of business that might be achieved were made by him and Mr Ramsey working together on the business plan. I shall discuss, in greater detail shortly, how the business plan was prepared. 48 At the end of the meeting on 3 February 2005, Mr Ramsey and Mr and Mrs Astridge were provided with a letter dated 3 February 2005 ("the expression of interest letter"). The letter is an important one. The letter stated that it contained important preliminary information. Early in the letter the following was said: Responsibility for Risk As well as being an exciting opportunity, being involved in any kind of business does have its risks. While the Bank obviously provides assistance and support to its Owner Managers, you will retain responsibility and liability for the success and viability of your branch. The Bank cannot give you any assurances or make any predictions about matters like the costs, revenue or future profitability of your branch or the suitability of its location. Because you will need to accept and manage these important risks, you should think carefully before becoming an Owner Manager. (Emphasis in original) 49 Later in the letter the following was said: Site Selection and Lease The location of the new branch is an important issue. While the Bank may help you with selection of the site for your branch and will ultimately enter into the lease of the premises for the branch, the suitability of the site is totally your responsibility. Please note, however, that the Bank retains a discretion to reject a particular site as unsuitable. The Bank will not undertake any detailed investigation or assessment of the suitability of the site proposed for the branch. The Bank expects that you will have satisfied yourself, and obtained expert advice if necessary, as to the suitability of the location of the branch. As mentioned above, if you are offered an OMB®, it will be subject to a lease being entered into for the premises by the Bank and the landlord, satisfactory to you and the Bank. 50 The franchisee was to pay for the establishment of the franchise, pay an upfront fee of $80,000 and a licence fee of $1,000 per month from month 13. It was to take responsibility for selection of the site of the branch, meet the capital and ongoing costs of operating the branch and take the business risk of the branch. Quite detailed information was given in the letter about the nature and extent of other costs and expenses which the branch might expect to face including a standard fit-out cost of between $250,000 and $300,000 as well as the costs for the installation of information technology infrastructure of $15,000 to $20,000. 51 A document setting out the revenue structure for 2004 was also enclosed. No specific reference was made in the letter to the expected level of loans or deposits but the following was said: Sales Targets … The Bank sets all of its branches (both Owner Managed Branches and Bank operated branches) minimum lending and deposit targets to ensure that the Bank is maximising its business performance and profile in each particular location. Obviously, your ability to meet targets will impact upon the Bank's decision whether to renew the term of the OMB® Agency Agreement. 52 The letter extended over ten pages, it was signed by Mr Allsopp and had provision to be countersigned. It was countersigned by Mr Ramsey and Mr Astridge with a date of 11 February 2005. 53 This letter was not some empty formality. Mr Ramsey and Mr and Mrs Astridge had secured acceptance by the Bank of the fact that they were expressing serious interest in a franchise, although a number of matters remained to be addressed, including the preparation of a business plan. The Bank was making an obviously formal statement of its position. I do not see how it can be seriously contended that statements of the kind which Mr Ramsey desired to attribute to Mr Allsopp could survive the sobering and immediate announcement, in the letter which he handed to them at that meeting, that the Bank did not give any assurances or make any predictions about revenue or profitability. The applicants' case treated this letter as trivial and inconsequential. I am satisfied that that was neither its intended effect nor the way in which it should be regarded for the purpose of the proceedings.

[24]

Meeting No 4 - 21 February 2005 54 During the meeting on 3 February 2005 Mr Allsopp provided contact details for Mr Graham O'Kell who managed the North Parramatta franchise and Mr Patrick Chew who managed the Dee Why franchise. Shortly after the meeting between Mr Ramsey, Mr and Mrs Astridge and Mr Allsopp on 3 February 2005, Mr Ramsey and Mrs and Mrs Astridge met with Mr O'Kell, the principal of the franchisee at the North Parramatta branch and the manager of that branch. 55 The meeting with Mr O'Kell occurred around 21 February 2005. It commenced in the North Parramatta branch and then continued over coffee at a nearby coffee shop. It appears that the meeting was not very long and the conversation was general in its nature. For example, Mr Ramsey indicated in cross-examination that Mr O'Kell did not say anything specific about the sources of the income achieved by the North Parramatta branch nor the expenses which it had to meet. What was important to Mr Ramsey was that Mr O'Kell said (as Mr Ramsey recalled it) that the franchise had paid off its debts within six months. He took that to mean that it had recovered the set up costs of the branch and was making a profit, although the basis for that conclusion seems tenuous at best. Mr Ramsey accepted in cross-examination that he did not know how much money had been borrowed to establish the North Parramatta branch. 56 The applicants relied upon what they sought to characterise as representations by Mr O'Kell made as agent for the Bank. The principal statement made by Mr O'Kell which was relied upon for the purpose of the proceedings is reflected in the following passage early in the evidence in chief of Mr Ramsey: I asked - I said to Graham O'Kell, 'Garry Allsopp said you're very successful,' and I said, 'Does the model work and is $4 million a month achievable?' And Graham O'Kell said yes. 57 The conversation with Mr O'Kell should not be regarded as a conversation on behalf of the Bank. What was important to Mr Ramsey and Mr and Mrs Astridge was to obtain Mr O'Kell's personal views about the franchise arrangement. They were contemplating making personal investments, as Mr O'Kell had done. In any event, as will be seen in due course when I deal with the way the causes of action were pleaded, the applicants pleaded that Mr O'Kell was recommended by Mr Allsopp because he was an "independent expert". It was not open to contradict the pleaded case as the applicants sought to do. 58 Furthermore, any statements made by Mr O'Kell were clearly not, nor were they intended to be, representations of the kind suggested by the applicants. Even on Mr Ramsey's version of events, the most that Mr O'Kell did was to respond in a friendly manner to questions about whether the North Parramatta franchise had proved to be successful. Mr O'Kell knew nothing about Mr Ramsey or Mr and Mrs Astridge. He did not know anything about their personal circumstances. He did not know where they might, in due course, wish to establish a franchise. The suggestion that he was extending some general assurance of business success is fanciful. According to Mr Ramsey's evidence, Mr O'Kell (who had worked at the Arab Bank) attributed part of his success to his contacts in the Lebanese community. Mr O'Kell also said that he spent a period of about three months, prior to the North Parramatta branch opening, canvassing for future business full time with a staff member employed for that purpose. No such considerations applied to Mr Ramsey or to Mr Astridge. There was no basis to conclude from the casual meeting with Mr O'Kell that success was assured without satisfaction of a range of other commercial objectives in a chosen location servicing an identified community. 59 Evidence about this meeting was also given by Mr Astridge and by Mr O'Kell. Mr Astridge said that the conversation was a very broad one with nothing specific discussed. Mr O'Kell, he said, "didn't give us any numbers but he just said he was doing quite well, showed us how it was operating and gave us a view of the actual branch". 60 Mr O'Kell's recollection was: It was a general discussion around how the logistics of starting a branch, how - my experiences with customers, etcetera, and, you know, the performance that had been achieved and, you know, just my general views on the franchise model. 61 He also said: MR COUPER: Do you recall was there any discussion about the amount of business that your branch was writing?---There was. As I recall, it was about the number of new loans written and was the topic of the - they were interested in what average results I was achieving and how that was comparing to the million dollar a week figure that was often bandied around as being required to make a branch viable. Right. And what did you say?---Well, I said that I had, on average, been achieving around that figure. Around what figure?---Around the $4 million a month in new loans - up to that point. 62 As will become apparent when I discuss the accounting evidence, that statement was factually accurate. There was also, according to Mr O'Kell, some discussion about a "broker book" and whether it had any significance for the success of the North Parramatta branch. Mr Ramsey denied that Mr O'Kell had said anything about a broker book. This is an issue which will require separate attention and I will deal with it in due course. 63 According to Mr Ramsey's evidence he relied on Mr O'Kell's statements about the results of the North Parramatta branch, and the franchise model, to which I have already referred, as ones which were critical to his decision to go into a franchise. Mr Ramsey's attempt to portray this meeting, and Mr O'Kell's statements, as responsible for his own business decisions descended towards the ridiculous. At this stage Mr Ramsey and Mr Astridge had not formulated the business plan which they would shortly thereafter advance to the Bank for its consideration. They had not chosen the site at which they would propose to the Bank they might set up a franchise. They were in the early stages of examining whether a franchise banking business might yield commercial success and whether they were adequately equipped to take on such a business. Despite that, Mr Ramsey gave the following evidence in cross-examination: MR COUPER: The only results of your meeting with Mr O'Kell, was that you decided it was worth your while to investigate further whether to proceed with Mr Astridge to enter into an OMB agency agreement with the Bank of Queensland. Correct?---No. It was to verify if it was a viable business. The step that you took to verify whether your business would be viable was to produce a detailed business plan? Correct?---No. HIS HONOUR: Mr Ramsey, are you suggesting that what Mr O'Kell said was sufficient for you to commit yourself - - -?---On the representations of both Graham O'Kell and Garry Allsopp it was significant in making our decision. … MR COUPER: If when you had done your business plan, your analysis had shown that you would make a substantial loss throughout the life of the OMB agency agreement, then you would not have proceeded with the OMB agreement, regardless of what Mr O'Kell or Mr Allsopp had to say. Correct?---No, that's not correct. Well, are you saying that if you had done your analysis and it came up showing that this was a bad deal, you would still have gone ahead because of what Mr O'Kell had Mr Allsopp said?---We were influenced - I was influenced by what Garry Allsopp, Mr Garry Allsopp and Graham O'Kell said. … MR COUPER: Mr Ramsey, are you saying that it didn't matter whether your analysis for your business plan might have shown this was a good deal or a bad deal or a terrible deal. You were going to go ahead, come what may, because of what Mr Allsopp and Mr O'Kell had said to you. Is that right?---Yes. Because we were influenced by their - what comments they made. 64 Perhaps Mr Ramsey had developed such enthusiasm for the idea of a franchise that he may have decided to go ahead come what may. If that was his position it was a reckless one. Of much greater significance, and certainly of crucial significance to Mr Astridge, was the analysis which was done shortly thereafter when Mr Ramsey and Mr Astridge together developed their business plan. 65 Mr Ramsey's insistence that he had relied on what was said by Mr Allsopp and Mr O'Kell in February must also be viewed in the light of other evidence he gave during cross-examination. This evidence arose from Mr Ramsey's account of the meeting with Mr Allsopp but it necessarily applies at the time of the meeting with Mr O'Kell. HIS HONOUR: You had not made a decision at this stage, had you, to go ahead?---No, not until March. We had to do a business plan, those types of things, and we were approved in March and then we got our final confirmation later in April. MR COUPER: So Mr Allsopp would have had no idea when, if at all, you might ever open a branch and, if so, where it might be. Is that right? At the meeting in February?---At that meeting, yes.

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The business plan 66 The business plan was done in March and submitted to the Bank. At the time it was prepared, Mr Ramsey and Mr Astridge had received the expression of interest letter dated 3 February 2005 and had each acknowledged its contents. They had clearly been informed in that letter that the business risk was one for them to assess and, if they went ahead, to accept. In addition Mr Allsopp had made statements to that general effect during the meeting on 3 February 2005. Mr Ramsey was asked: MR COUPER: Do you recall Mr Allsopp saying to you and Mr and Mrs Astridge that you would have to go out and assess for yourself whether you would be able to achieve $4 million a month in loans in the area where you were contemplating opening up?---Yes. … Do you recall Mr Allsopp saying to you that you would be unlikely to write $4 million in the opening months of your business?---Yes. Do you recall him saying to you that you would have to do a business plan?---Yes. Do you recall him saying to you that when you had done your business plan, you working out what your expenses would be?---He said to work out the expenses, yes. 67 The business plan presented to the Bank in March 2005 consisted of a five page document in summary form to which was attached a three page spreadsheet and a one page calculation of anticipated wages costs. The written document contained the following headings: Business overview; Mission statement; Market analysis; Site analysis; Business structure; Management; Competitive analysis; SWOT analysis (with sub-headings - Strengths, Weaknesses, Opportunities, Threats); Key objectives; Marketing strategies and Training. The market analysis concentrated on the demographics of the Campbelltown area. Amongst the key objectives were a short term objective to achieve a sales level (i.e. loans written) of $4 million per month by the tenth month and longer term objectives to achieve sales of $6 million monthly in the second year and $8 million monthly in the third year. The spreadsheet contained a month by month projection for the first three years of operation. It projected commission revenue and other receipts based on predicted levels of commercial loans, mortgages, personal loans, deposits received and other services provided on a month by month basis. It set out a detailed schedule of anticipated expenses. The projections showed a total of $4 million in loans (on a monthly basis) in the tenth month of operation and a transition from operating losses to modest and then increasing profits from the 16th month of operation. 68 A good deal of energy was spent in the applicants' case attempting to suggest that the business plan was based on nothing more than Mr Allsopp's representations. This proposition received some, although only slight, support from the evidence of a witness called in the applicants' case, Mr Theo Gofers, who had provided technical help to Mr Ramsey and Mr Astridge in the construction of the spreadsheet. Mr Gofers in his evidence suggested that he had been asked to commence with a $4 million loan figure in the tenth month of operation and make projections back to an initial figure of approximately $200,000 and then forwards to higher amounts. He inferred that the distribution of loans between the various categories was somewhat arbitrary. The overall effect of his evidence was that the spreadsheet was not a genuine pre-estimate of likely trading experience and did not represent any attempt to make such a genuine pre-estimate. 69 If this evidence was accepted it would suggest that Mr Ramsey and Mr Astridge set out to deceive the Bank and that they provided the business plan to the Bank careless as to its content and indifferent as to whether it was realistic or not. Such a conclusion could not help the applicants in the present case. It would provide an independent reason to conclude that the conduct of the Bank was not responsible for Astram's entry into the franchise and that the Bank was not responsible for the consequences of the failure of the franchise. However, I do not accept Mr Gofer's evidence about these matters. It was decisively contradicted, both by Mr Ramsey and by Mr Astridge who each explained the figures appearing in the spreadsheet in a way which denies the proposition that they were a contrivance. They each also denied in their evidence that the business plan was a sham. 70 I propose to set out Mr Ramsey's evidence about these issues in a little detail because the evidence which he gave was substantially destructive of the central thesis in the applicants' case - i.e. that the Bank was responsible for Astram entering the franchise arrangement and that the decisions which were made were the result of misleading or deceptive conduct (or otherwise legally actionable conduct) on the part of the Bank. During the third day of his evidence Mr Ramsey gave this evidence in cross-examination: MR COUPER: Can you tell me how you and Mr Astridge went about compiling the business plan? Who did what?---David Astridge and I put the business plant together. We found out how many - we did research through the local council website and other sites in Campbelltown on the size of the market and worked on the $4 million figure that Garry Allsopp gave us. Say that again: worked on the $4 million figure that Mr Allsopp gave you. Was part of the business plan a series of three years of cash flow projections?---Yes. How did you and Mr Astridge go about preparing the cash flow projections?---We used the $4 million figures for the first year and then increased it to six and eight million in the following years. … You see: Short-term, to achieve a sales level of $4 million per month by the tenth month. [That was a stated short term objective in the business plan] ?---Yes. You don't suggest, do you, that Mr Allsopp ever nominated a month by which you would start to achieve $4 million in sales, do you?---Say that question again, sorry. You don't suggest that Mr Allsopp ever nominated to you a month by which you would start to achieve $4 million in sales, do you?---No. So you and Mr Astridge sat down and did your own analysis and formed your own view about when you might be able, first, to achieve $4 million a month in loans. Is that right?---Yes. That was based upon your own analysis of how many loans you might expect to write and at what sort of value per loan. Is that right?---Yes. That was based upon a lead-in time to get the business up and running, to make contacts, get the business known. Is that right?---Yes. That was a matter of some considerable discussion between you and Mr Astridge. Then the figure under - I think it is under long-term. Let's look at the second line under long-term: To achieve sales in 2006/2007 of $6 million monthly. [That was a stated long term objective in the business plan] Now, that figure didn't come from Mr Allsopp, did it?---No. You and Mr Astridge sat down again, performed your own analysis and worked out your own expectations about how many loans of what sort of size you would be able to write to receive a $6 million per month figure. Correct?---Yes, using a multiplying effect. Well, you have said that twice now. What do you mean by using a multiplying effect?---Using a multiplying effect of growth in the second year. The multiplier that you chose was a matter of discussion between you and Mr Astridge. Is that right?---Yes, I assume. It was based upon the assessment both of you made about what you thought the business was capable of. Correct?---In the second year, yes. Similarly, for the $8 million a month in the year 2007/2008, that was a figure determined by you and Mr Astridge performing your own analysis and assessment. Correct, and Mr Allsopp had no input whatever into that figure. Correct?---Yes. 71 It is convenient, while dealing with Mr Ramsey's evidence about the projections in the business plan, to digress at this point to deal with another matter. In his evidence in chief Mr Ramsey suggested that Mr Allsopp had indicated that working capital of $100,000 would be necessary. He also gave this evidence in chief about that matter: MR KING: And did you have regard to [the required working capital of $100,000] in proceeding to attend to the matters I raised earlier regarding signing up with Mr Astridge, incorporating the company and obtaining approval of an authorised representation, had you known that not to be true?---Sorry, can you repeat that. Had you known that the representation made to you regarding the quantum of working capital necessary of $100,000 to operate the business to meet its expenses that fell due, would you have proceeded?---No, I would not. And would you have signed the OMB agency agreement?---No, I would not. Would you have proceeded to open a branch in August without - or in the circumstances that happened or at all?---No, I would not. 72 As I earlier indicated, a claim in the pleadings based upon this issue was abandoned towards the end of the trial. No doubt that was because the position taken by Mr Ramsey in his evidence in chief on this issue became untenable shortly after his cross-examination commenced. On the first day of his cross-examination the following exchange occurred, shortly after he was asked about the projected loan figures: MR COUPER: As I understand you, you say that if you had known that the business would need more than $100,000 in working capital, you would not have proceeded. Is that right?---Yes. By working capital - sorry, I withdraw that. Do you understand the concept of working capital in this context to mean the sum you would need to have available to conduct the business, at least until it started to become profitable?---Yes. … You and Mr Astridge, on your own analysis, expected to be behind by more than $219,000 at the end of the first year. Correct?---Yes. That would mean that you would need working capital of at least $219,000 to get you through the first year. Correct?---Yes. You understood that when you and Mr Astridge prepared the business plan, didn't you?---Yes. So it was clear to you that you would need more than $100,000 in working capital to go into this business, wasn't it?---Yes. So it is just completely wrong to say that if you had known you would need more than $100,000 of working capital, you would not have gone into the business, Mr Ramsey?---Because we relied again on Garry Allsopp saying that we would need a hundred thousand start-up capital. Is it because you know that you have got to say that to try to make out your case?---No. Well, just explain to me, then, how this works. You and Mr Astridge calculated that to get through the first 12 months you would need more than $219,000 working capital. How could you possibly have relied upon anything said by Mr Allsopp to suggest that $100,000 would be enough?---I can't explain it. 73 Mr Ramsey was asked further about the business plan on the second day of his cross examination. His desire to deflect personal responsibility for his decision to proceed to seek the franchise may be seen from the following question and answer: MR COUPER: Your decision to proceed with this business was based upon your own analysis of your own business plan. Correct?---No. 74 However that position is impossible to reconcile with evidence given both before and after that question and answer, including the following: MR COUPER: You and Mr Astridge, as you told us yesterday, spent some considerable time working out the revenue side and the expenses side of this business projected over three years. Correct?---Yes, we did. All right. You were keen to make it as accurate and complete as you could. Correct?---On the information provided to us, yes. … It's the case, isn't it, that you and Mr Astridge when you had developed your business plan looked at it and thought our business plan indicates that this is a viable business and it's worthwhile us going ahead. Correct?---On the information available to us, yes. … Were you the person who went about investigating to find out the facts and figures set out in the market analysis?---David Astridge and I both did it, yes. All right. The reason you embarked on that exercise was so that you had some idea of what the market was for your bank branch. Correct?---Garry Allsopp said, "You need to do an analysis of the area you're considering to going into." We then did the research on that, yes. You understood the purpose for doing the research was you could see what your market looked like for your branch. Correct?---Yes. All right. That is what you did. You assembled the analysis and gave some careful consideration to what it showed about the available market for a branch of the bank in Campbelltown. Is that right?---We did do the analysis, yes. Yes, That analysis of the demographics of the income and businesses of the area was part of the process you used in working out the achievable revenue figures for your branch of the bank if you opened it in Campbelltown. Correct?---It showed us the potential opportunity. Yes. Your thinking was along these lines, wasn't it, this is the potential opportunity. If we conduct the correct marketing and business development exercises we can achieve the revenues we have projected in our business plan. Correct?---If we get out and promote the business, yes. All right. So the process was this. I'm not suggesting it wasn't a sensible process. You worked out what the market looked like. You worked out the activities you would have to undertake to convert that market into business and you worked out the business you would get from those activities and produced a business plan accordingly. Is that right?---Yes. If you go, please, to page 1033 there is a heading Marketing Strategies. Did you and Mr Astridge discuss the content of that section as the strategies which you would employ to obtain business for this branch of the bank in Campbelltown?---Yes. Now, these were not strategies suggested to you by anybody from the bank, these were strategies that you and Mr Astridge worked out for yourselves. Correct?---Yes. You and Mr Astridge, in consultation, decided that if you used these strategies in the available market, you would be likely to be able to achieve the revenue which you put in your revenue section. Correct?---Yes. At the time you and Mr Astridge produced this business plan, as I understand it, you say you had never heard of a thing called a broker book. Is that right?---Yes. So it is fair to say that when you did your analysis of what business you might be able to achieve you were unconcerned about whether the bank might have given a broker book to somebody else. That formed no part of your consideration, did it?---Can you repeat the question? Yes, your business plan was based upon your own assessment and analysis of the available business in the Campbelltown area. Correct?---Yes. 75 Despite Mr Ramsey's occasional, but insistent, reluctance to accept responsibility for the analysis in the business plan, the evidence given by Mr Astridge confirms the fact that it represented the joint efforts of Mr Ramsey and Mr Astridge to make their own assessment of whether it would make good business sense to propose to the Bank that they conduct a franchise at Campbelltown. The analysis which they did was not derived from representations made by the Bank although, obviously enough, income was calculated by reference to the commission tables provided by the Bank and expenses were calculated by reference also to information provided by the Bank about its requirements. Mr Astridge's evidence included the following: MR COUPER: Mr Astridge, you will see the words, "commercial mortgage and personal." What do those words relate to?---The loans that we estimated that we would generate over a period of time. … MR COUPER: Did you and Mr Ramsey, Mr Astridge, work out the volume of each of the different types of loans which you anticipated could be written?---Yes. All right. Now, how did you go about doing that?---We worked out the size of each of those sort of loans - the sort of loans that we thought we would get. We worked out that there was the two of us, and we estimated what we thought we could get per week and per month. HIS HONOUR: What process did you follow?---We looked at the - for instance, the mortgage loans, we looked at the sort of size that was available. Were you sitting down together? Did you talk ---?---Yes. --- remotely, by telephone?---No, at this time we were sitting down together. And what sort of things did you look at as you did it? Did you have the information in front of you?---We had the information that was provided by the council and by - I can't remember who else. It gave us the, sort of, average loans for our area. And from that basis, we worked it out. Did you ask for information from the Bank of Queensland?---No. … MR COUPER; Mr Astridge, did you and Mr Ramsey discuss the volume of loans that you thought you could achieve on a weekly, monthly or yearly basis?---Yes. … What did you use as a source of information?---The things that were provided by the council, things that we had found out in our investigations about the size of the home loans, that sort of stuff. Did either of you exercise any judgment or make any predictions?---A business plan is predictions. Yes. Well, what were those predictions based upon?---They were based on what we thought we could achieve in building the business. What was the raw material going in for this process which yielded the conclusions?---Again, the council information that we were provided with and the other bits that we found out about - mortgage loans, commercial loans, personal loans, credit cards, whatever. … HIS HONOUR: Can you tell me this, so far as you were concerned, was this business plan a genuine - did this business plan represent a genuine effort to provide a responsible prediction of what might actually happen or was it just an exercise directed at satisfying the bank's formal requirements?---We needed to make sure that we were going to be able to pay ourselves at some stage down the track and the numbers were definitely what we thought we could achieve. Yes?---Or that I thought we could achieve. … Well, what was your estimation about the commercial viability and responsibility of this project at the time that you were making - that you were drawing up this business plan? Did you regard it as, for example, a risky venture or one that was a responsible commercial investment? Whereabouts on the scale - - -?---I wouldn't have gone into it if I didn't think it was a viable project so - I thought the numbers stacked up. I've been in banking a long time. It looked good to me. 76 I am satisfied that, at least so far as Mr Astridge was concerned, the business plan represented a serious and responsible attempt to make a realistic assessment of the business possibilities of a franchise of the Bank in the Campbelltown area. I am also satisfied that the proposal to the Bank, represented by the business plan, did not depend upon predictions, assurances, promises or other forms of representation made by Mr Allsopp, Mr Zacharia or Mr O'Kell. Those conclusions are not inconsistent with the possibility that Mr Ramsey may have been infected with a level of enthusiasm for the project which coloured his own thinking. However, even if that was so, the retrospective attempt represented by the present proceedings to sheet home to the Bank responsibility for the business decisions made by Mr Ramsey and Mr Astridge, and later pursued by Mr Ramsey alone, should be rejected. 77 When Mr Ramsey and Mr Astridge worked on the business plan together, they had a good idea of the expenses they would incur. What they had to assess was the level of income the branch would earn. That was to be calculated by reference to the commission tables for various kinds of loans and other banking activities. They knew what the Bank would agree to pay by way of "upfront commissions", "trailing commissions" and other payments. They had to estimate the amount of business the branch would do. That required a detailed analysis of the volume of various kinds of loans which they estimated would be written at various periods after the branch opened. The analysis was based on market research done principally by Mr Ramsey concerning the Campbelltown area. The Campbelltown area was not chosen by the Bank; it was chosen by Mr Ramsey and Mr Astridge. The Bank did not do the market research. That was done by Mr Ramsey and Mr Astridge. The bank did not provide any assessment of the volume of loans of particular kinds which might be written at various times in the Campbelltown area or anywhere else. That assessment was made by Mr Ramsey and Mr Astridge. It was based on their market research about the Campbelltown area and upon their assessment of their ability to attract business. Mr Ramsey, in particular, seems to have had a high opinion of his own capacity as an entrepreneur although, on the evidence in the present case, it was not reflected by any real capacity to generate banking business of the necessary kind. Even if it had been, on Mr Ramsey's own evidence he was dependant on others to convert customer interest into actual loans, lacking the knowledge and experience to effectively complete many kinds of loan applications himself. 78 It is important to remember that at this point, i.e. at the time of preparing the business plan, no proposal had been accepted by the Bank. A preliminary indication had been given by Mr Allsopp that Mr Astridge would be regarded as a person of suitable and sufficient experience to conduct a franchise operation but neither the Bank, nor Mr Ramsey and Mr Astridge, had committed themselves finally to the project. 79 It was necessarily upon their own assessment of their capacity to generate business in their chosen location that Mr Ramsey and Mr Astridge based their application to the Bank for a franchise. No guarantees had been given by the Bank. On the contrary, the Bank had been at pains to emphasise that it provided no assurance of commercial success. Mr Ramsey had indicated that he understood and accepted that position. The Bank would repeat, and Mr Ramsey would accept, the same position when it responded to the business plan. Before the branch finally opened the same position would be stated by the Bank, and again accepted by Mr Ramsey, with even greater formality in the OMB Agreement in clause 33.4(a) (set out earlier). 80 The next step in the process was represented by a letter from the Bank to Mr Astridge and Mr Ramsey dated 16 March 2005 ("the offer letter"). The letter confirmed that Mr Astridge met the Bank's requirements in relation to the necessity to always have an experienced banker as a director and shareholder of the operating company. It made some comments about the business plan but generally approved it. The letter contained the following statements which are directly relevant: Please note that in reviewing your plan: • The Bank has relied solely on the information you have provided and has not made any other enquiries. • The Bank has not determined the accuracy of your information or validity of your assumptions. • The Bank is not providing you with any professional advice or giving you any assurances in relation to the plan. • The Bank is not giving you any assurance or advice about the suitability, appropriateness or viability of the plan for your own business, legal or financial needs. In particular, the Bank gives no assurances and accepts no responsibility for matters such as the taxation consequences of the business structure you have chosen or for the financial viability of your business plan. The Bank requires you to get independent legal and financial advice in relation to these issues. 81 Mr Astridge and Mr Ramsey were also told in the letter: The Bank sets all Branches (including all OMB®s) a minimum lending drawdown target to ensure that the Bank is maximising its representation in each particular location. Please note that the Bank will expect the new OMB® at Campbelltown to be writing $4 MILLION in lending drawdowns on a monthly basis in the initial 12-month period. A deposit growth objective will be set at $2 MILLION per month. Failing to meet the target will not in itself be a breach of the OMB® Agency Agreement if the Bank determines that the OMB® has used itsbest endeavoursto promote the supply of products on behalf of the Bank. Obviously, the Owner Manger's ability to meet targetswill impact upon the Bank's decision to renew the term of the OMB® Agency Agreement. (Emphasis in original) 82 The letter informed Mr Astridge and Mr Ramsey that all local area marketing would be at the cost of the franchisee. Mr Astridge and Mr Ramsey signed the letter as an acknowledgement of its contents with a date of 4 April 2005. 83 The only sensible construction of the course of dealings to this point between the Bank, on the one hand, and Mr Ramsey and Mr Astridge on the other hand, including the content of the letters which were sent to them, is that at no time was an assurance given that the franchise they proposed to establish, whether at Campbelltown or anywhere else, would succeed in achieving the target volume of lending or that the franchise model would necessarily deliver such a result. On the contrary, both explicitly and by necessary inference, the Bank indicated that this was a matter for assessment by them. Naturally, one may impute to the Bank a view that the target was achievable but that is a very different thing from concluding that any assurance to that effect was given or even that a prediction to that effect was made. The second paragraph in the extract set out immediately above is a tangible indication that "ability to meet targets" was a matter which would depend on the endeavours of the franchise operator and that "failing to meet the target" was well within the contemplation of the Bank at the outset.

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The OMB Agreement and the security documents 84 On 8 April 2005 Mr Ramsey and Mr Astridge were sent a letter by the Bank ("the documents letter") as directors of Astram. The letter was addressed to them, and Astram, at the business address of Astram's accountant, Mr Peter Cavanagh. A number of documents were enclosed for execution. They were not to be returned (or signed and dated) earlier than 26 April 2005, allowing adequate time for independent advice to be obtained. I shall deal with the individual documents later. The letter stated the following: Your Business Structure and Business Plan The Bank has reviewed your business structure and business plan for its own business purposes. The Bank confirms that the business structure and business plan as outlined to it, meets the Bank's current business requirements. Please note that under the OMB® Agency Agreement you will not be able to change your business structure without the approval of the Bank. In reviewing your business plan and structure the Bank has relied on the information you have provided and has not made any independent assessment of the accuracy of that information. The Bank has similarly not assessed the suitability or appropriateness of your business plan or structure for your own business, legal or financial needs. In particular, the Bank gives no assurances and accepts no responsibility for any taxation consequences arising from the particular structure you have chosen or for the financial viability of your business plan. The Bank expects that you will have obtained independent advice in relation to these issues. The Bank accordingly does not give any assurances or make any representations in relation to the business structure, business plan or any other information provided by you, or with regard to any assumptions on which that information is based. 85 Again the Bank made it clear that it gave no assurance of success. This letter was signed by both Mr Ramsey and Mr Astridge and returned to the Bank as an acknowledgement that they had read and understood its contents. The documents which required consideration and execution were listed by the Bank as follows: OMB® Agency Agreement Documents • Franchise Disclosure Document for Owner Mangers; • OMB® Agency Agreement; • Representations deed; • Fixed and Floating charge (charge details and general conditions); • Guarantee and Indemnity (guarantee details and general conditions); • Independent Legal Advice Form; • Independent Financial Advice Form; • EDS charge sheet; • ASIC Forms 350 and 309; • Certificate of Independent Financial Advice (third party) for Marie Therese Astridge to have completed; • Solicitor's Certificate (third party) for Marie Therese Astridge to have completed.

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Independent advice 86 I shall deal shortly with the execution of the OMB Agreement on behalf of Astram by Mr Astridge and Mr Ramsey. I shall also identify in due course the various security documents which were executed by Mr and Mrs Ramsey and upon which they are now being sued by the Bank in its cross claim. However, it is convenient to deal first with the requirement that independent advice be sought about all those transactions. 87 It was a consistent requirement of the Bank that Mr Ramsey (and Mr and Mrs Astridge) obtain independent advice from both a legal practitioner and an accountant before executing the OMB Agreement. Although some attempt was made during the proceedings to raise some issue about the reliability of the certificates which were obtained and provided to the Bank, there is no doubt that Mr Ramsey, for his part, understood this requirement and intended that it be fulfilled. Correspondence to Astram was routinely addressed to it c/o Mr Peter Cavanagh, then Astram's accountant. Mr Cavanagh provided a certificate of independent financial advice. Mr James Marsden of Marsdens Law Group provided a certificate of independent legal advice. As to the certificate of legal advice, in a passage of cross-examination where Mr Ramsey's attention was drawn to the various documents which he executed, including the OMB Agreement, and to the certificate provided by Mr Marsden that he and Mr Astridge had been independently advised about the effect of the documents, the following evidence was given: MR COUPER: Mr Ramsey, did you send this certificate to the Bank of Queensland to comply with their requirement that you give them a certificate of legal advice?---Either I or David Astridge would have. Well, whether you did it yourself or Mr Astridge did it you knew that the bank was going to get this certificate as the certificate of legal advice that they required. Is that right?---Yes. … Did you understand that the bank wanted from you a certificate that you had been advised by a lawyer about these documents?---Yes. You understood what you or Mr Astridge were sending back to the bank was a certificate that you had been advised about these documents by a lawyer. Correct?---Yes. … HIS HONOUR: What you are being asked about is your intention. Was it your intention that each of those documents be sent to the bank?---If that was the requirement of the bank that was the intention. MR COUPER: And you knew the bank wanted a certificate saying that you had obtained advice from a lawyer about those five documents we have just referred to, didn't you? MR KING: I object, your Honour. I withdraw the objection, my apologies. THE WITNESS: I knew the bank wanted a certificate from a lawyer. MR COUPER: And if the bank wanted a certificate of advice from a lawyer, it was your intention that the certificate be obtained and sent back to the bank, correct?---If that was a requirement of the bank, yes. 88 On the next occasion on which he gave evidence, five days later, Mr Ramsey identified the certificate provided by Mr Cavanagh in the following passage: MR COUPER: Mr Ramsey, you should have in front of you a copy of a certificate of advice, to you as agent, by your accountant, dated 7 June 2005. Do you have that document?---Yes. Is that a document that you obtained from Mr Peter Cavanagh?---Yes. Is that a document you caused to be forwarded on to the Bank of Queensland?---Yes. 89 However shortly thereafter Mr Ramsey's memory apparently deserted him and he disclaimed any recollection of a requirement to obtain a certificate of advice from an accountant or a lawyer. He also disclaimed remembering what documents he was required to return to the Bank in order to enter into the OMB Agreement. He was asked: MR COUPER: You don't remember anything at all about what was required in order to enable you to enter into this agreement. Is that right?---Yes, I don't. and: HIS HONOUR: Mr Ramsey, are you telling me you did not understand what the bank required?---They gave us a whole lot of documents and, you know, I'm not really sure what they were after in the end, to be quite frank. MR COUPER: Mr Ramsey, this was a serious business transaction, which involved you committing hundreds of thousands of dollars to a business venture, wasn't it?---Yes. Are you seriously suggesting that you didn't understand what the bank required in order for you to enter into that business transaction?---Yes. 90 I formed the view that Mr Ramsey was not endeavouring to give evidence to the best of his recollection. I am satisfied that his professed inability to recollect stemmed from an attempt to minimise the damage being done to the applicants' case in his cross-examination. 91 Mr Cavanagh's certificate of independent financial advice became an exhibit in the proceedings. The certificate given by Mr Marsden, which Mr Ramsey had identified in his initial, more lucid, answers in cross-examination was not tendered at that time. It was, in due course, to be produced from the Bank's own records. That did not happen. As a result, the contents of the certificate are not in evidence. However, I am satisfied that Mr Ramsey understood that it was a requirement of the Bank that he obtain independent legal advice, that he and Mr Astridge engaged Mr Marsden for that purpose, that Mr Marsden provided a certificate to the effect that he had given them legal advice about the effect of the various documents they had been asked to execute and that such a certificate was sent to the Bank. The substance and effect of the certificate is, in my view, sufficiently clear even if its precise terms are not in evidence. 92 For Mrs Ramsey, the Bank required certificates that she had been advised of the effect of the guarantees that she gave the Bank and the mortgage into which she entered with Mr Ramsey. Again, the certificates were not put into evidence but Mrs Ramsey accepted in her cross-examination that she sat down with Mr James Bell, solicitor, when she executed the first guarantee and the mortgage. She remembered him saying that she was "guaranteeing my house". She also remembered a telephone conversation with Mr Cavanagh in which he had given her advice. 93 Apart from the undoubted existence of the two certificates (although their terms were not in evidence) there is no doubt, on her evidence, that Mrs Ramsey understood the nature of the documents she was asked to execute and their financial effect. As to the first guarantee and the mortgage, the following evidence was given by Mrs Ramsey in cross-examination: MR COUPER: Do you recall sitting down somewhere with Mr Bell, and him explaining to you the terms and effect of the guarantee and mortgage that you were going to sign?---I remember sitting down with him and signing it. I can't really remember him explaining it. I remember him saying to me that I was guaranteeing my house, I don't remember anything else. Well, did he explain to you that by entering into the guarantee and mortgage, that you were putting your house at risk if there was a default on the overdraft loan?---I think he did. 94 She then gave evidence of her recollection of speaking to Mr Cavanagh on the telephone about the documents. Then the following evidence was given: MR COUPER: Now, you were in no doubt, Mrs Ramsey, that by giving this guarantee and indemnity that if the Bank of Queensland business that your husband was going to conduct failed, and he couldn't repay the overdraft, you would be liable to pay up to $150,000. That's right, isn't it?---Could you repeat the question? You understood that by signing the guarantee if the overdraft wasn't repaid because the business failed, you would be liable to pay the Bank of Queensland, $150,000?---Yes. 95 As to a second guarantee the following evidence was then given: MR COUPER: All right. Now, in February of 2006, do you recall our learned friend, Mr King, showed you another guarantee which had a limited of $260,000, is that right?---That's right. and: MR COUPER: At the time you were being asked to increase the level of your guarantee from $150,000 to $260,000, did you discuss with your husband what his expectation was about when the business would start making money?---No, I didn't. Why not?---It didn't occur to me to. It didn't occur to you to? You appreciate you were being asked to commit yourself to a further $110,000 by way of guarantee, didn't you? Did you regard that as being a significant commitment to make?---Yes. Did you regard it as putting your house at increasing risk?---Yes. But you didn't discuss with your husband at all when he thought this business would start making money. Is that right?---Right. 96 I am satisfied, in Mrs Ramsey's case also, that she understood the effect of the documents she was signing and the consequences for her should the business fail.

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The representations deed 99 On 26 April 2005 Mr Astridge and Mr Ramsey, in their capacity as directors of Astram and in their personal capacities, signed a deed which contained a number of contradictory affirmations. First, it was purportedly acknowledged that no statement in a list of possible statements had been made to them. There were ten categories of statements in the list. They included statements about levels of achievable sales, level of profitability, financial risk etc. The next clause contained a statement that Astram had not relied on any statement of the kind described. The two clauses were not expressed as alternatives. The deed then contained an agreement to release the Bank from liability arising out of any statement in the categories described. It also purported to provide an indemnity to the Bank from any liability in respect of which a release was ineffective. 100 I do not see how there can be any satisfactory reconciliation between an acknowledgement that a statement was not made and an agreement that such a statement was not relied on and that the Bank was released and indemnified in relation to the statement. The operative provisions of this deed could not all apply. Some clauses contradicted others but no method was supplied of resolving the contradiction. Statements of the character described were either made or they were not. If they were made, an affirmation that they were not relied upon makes perfect sense. It makes no sense, however, to affirm that particular statements were not made and, at the same time, that such statements (those that were not made) were not relied upon. 101 The notion of an indemnity is even more curious. One possibility is that the Bank was attempting to ensure that Astram (and Mr Astridge and Mr Ramsey) would have to make good to the Bank any liability which the Bank owed to them - e.g. for the Bank's misleading or deceptive conduct. It is difficult to see how such a requirement would survive a finding of misleading or deceptive conduct but that question requires no further attention in the present case. 102 In the end the Bank pressed no claim for relief relying upon this deed. I think that was a wise choice. I need give it no further consideration.

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Meeting 5 - May/June 2005 106 Mr Ramsey's evidence in chief about this meeting was as follows: MR KING: Now, when you were in Brisbane do you recall seeing Garry Allsopp?---Yes, I did see Garry Allsopp. Can you recall approximately what date that was?---No, the date I don't specifically remember. I met him in the lobby of the Bank of Queensland head office, and we went to a coffee shop in the building next door to the Bank of Queensland, which was just on the side of the old building next door. And did you have a conversation with him?---Yes, I did have a conversation with him. I said to Garry Allsopp, I'm having problems with my partner and the business relationship is not working. And he said, well that's not my problem, that's your - that's not the bank's problem, that's your problem. And then what did he say?---He said, well, you have to fix the problem. You either buy him out or he buys you out. And did you have a response to that?---I said to him, I'm not a banker. And what did he say to you?---He said, well, the bank will accept if I employ - engage a banker for six months and after six months I would be accepted as a banker. And did he say - give any reason for expressing, or stating - making that statement to you?---Yes. He said it is not rocket science. What wasn't rocket science?---To be a banker, or a branch manager. 107 This asserted conversation was relied upon by the applicants as evidence of an agreement that Mr Ramsey would be accepted in his own right as a sufficiently experienced banker after six months of branch operations. Aspects of these assertions are inconsistent with other evidence. The inconsistencies are of such a nature that I do not accept that statements were made in the terms asserted or to that effect. 108 The requirement to have an experienced banker in charge of the branch was explicitly stated in the expression of interest letter dated 3 February 2005 in the following terms: One Director to be Experienced Banker Under the terms of the agency agreement that the Bank enters into with Owner Managers, there can be no change to the directors or shareholding of the Owner Manger company without the approval of the Bank. The Bank also requires that at all times at least one of the directors of the Owner Manger Company is an experienced banker and that that director have an appropriate level of shareholding in the Owner Manager Company. This director will also be required to be the Branch Manager and be responsible for the day to day management of the branch. The Bank retains the discretion to decide whether it considers that a particular person is an experienced banker. In making this assessment the Bank will consider, amongst other things: a) the number of years of experience in the banking industry; b) the organisations in which the experience was gained; and c) the positions held in that organisation. 109 Similarly, in the offer letter of 16 March 2005 the following was said: • EXPERIENCED BANKER The Bank requires that an experienced banker must always have an interest as a director and shareholder of the OMB® Company. The Bank must approve any change to the Owner Manager's board of directors or shareholdings. In determining whether a person is an experienced banker the Bank will consider amongst other things the person's: (a) years of experience in the banking industry; (b) Organisation in which the experience was gained; and position(s) held in the organisation(s). The Bank confirms that David Astridge meets the Bank's requirements in relation to the above. 110 The OMB Agreement reserved to the Bank the discretion to approve or withhold approval from any person as branch manager, whether director or shareholder of the agent. Clause 10.2 of the OMB Agreement provided: 10.2 Branch Manager (a) The Agent will appoint a Branch Manager for the Branch. (b) The Branch Manager will be a director or shareholder of the Agent. (c) The Agent will ensure that the Branch Manger is responsible for the day to day operation of the Branch. (d) The Agent will obtain the approval of the Bank before appointing the director or shareholder as the Branch Manger. (e) The Agent will obtain the written approval of the Bank before any change in the identity of the Branch Manager. 111 It is true, as will shortly be seen, that the Bank relaxed its strictly expressed requirement that the branch manager at Campbelltown be a director or shareholder of Astram. On the evidence, it accepted a suitably qualified employee as branch manager, not just at Campbelltown but at one other franchise at least. It is also true, as will be seen, that after six months of branch operations the Bank appeared tardy in insisting upon even a suitably qualified branch manager at Campbelltown. On one level those facts are consistent with Mr Ramsey's assertions. However, even though the Bank is open to the charge that it lacked diligence in its supervision of the management arrangements at Campbelltown that does not provide a sufficient foundation for a conclusion that it waived the need for compliance with the OMB Agreement, as opposed to providing some latitude to Mr Ramsey in the short term. Mr Ramsey's evidence was, furthermore, that at all times after the branch opened he was actively seeking a partner with relevant banking experience acceptable to the Bank. 112 Mr Ramsey's assertions are also inconsistent with things said by him in various documents at around the same time. Those documents indicate clearly, at a time not long after the meeting with Mr Allsopp in Queensland, that Mr Ramsey's understanding of the Bank's position was not as he expressed it in his evidence. I am satisfied there was no understanding reached with Mr Allsopp to the effect claimed by Mr Ramsey. Even if Mr Allsopp had made some casual remark it was quite insufficient to displace the effect of the Bank's formal statements of its requirements and, as I have said, did not represent Mr Ramsey's understanding of the matter when he negotiated, shortly thereafter, with Mr and Mrs Astridge.

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Mr and Mrs Astridge sell their interest in Astram 113 According to Mr Ramsey's evidence, at the time he indicated to Mr Allsopp between 19 May and 9 June 2005 in Brisbane that he and Mr Astridge were having difficulties, he had not spoken to Mr or Mrs Astridge about it. He said in his evidence that he spoke to them when he returned from Queensland. Apparently the issues (about which there was no evidence) were discussed amongst them on 2 August 2005. Mr Ramsey apparently informed them that he could no longer work with Mr Astridge as a partner in the franchise at Campbelltown. There were then some email exchanges in early August 2005. By this time the Bank had taken the lease over the Campbelltown premises. 114 In an email to Mr Astridge dated 3 August 2005 Mr Ramsey proposed three options for consideration by Mr and Mrs Astridge - he sell his interest in the franchise arrangement (presumably to a third party), Mr and Mrs Astridge buy him out or he buy them out. He suggested a sale price (as between he and Mr and Mrs Astridge) of $25,000. Mr Ramsey noted that the Bank would need to consent to any sale/purchase and the terms and conditions attaching thereto. 115 The following day Mr and Mrs Astridge replied agreeing to sell their interest in the franchise to Mr Ramsey for $25,000. They indicated that they would extend their full co-operation and wished him well. Mr Ramsey sent a further email on 9 August 2005 attaching a letter. In his letter he said the following: I am very aware that your willingness is not legally binding on you. In turn I will do my best to respect your position by trying to expedite the various matters which must be in place before we can enter in to the legal arrangement to transfer your interest and obligations in the business venture to me and another. I would think that a legal agreement between us should be in writing and be able to be entered into very close to the time we will be able to settle. The delay in entering into a legal agreement with you arises from matters which must be finalized - approval of finance, settlement of loans and satisfaction of all of BOQ's conditions for commencement of the business venture. None of the above will be of a surprise to you as whoever was to take on the business would have to satisfy BOQ and have finance approved and settled. In my case, you would have been aware of the requirement that I must take in a partner with acceptable banking experience and who is approved by BOQ. I have commenced urgent action to identify such a person. (Emphasis added) 116 Mr Ramsey suggested to Mr and Mrs Astridge that a letter be sent to the Bank in the following terms: Please be advised that it is the present intention of the shareholders of Astram Financial Services Pty Limited that the shares of David and Marie Astridge be transferred to Leicester Ramsey or as he may direct. Please note that no legally binding agreement has been entered into and that no date for the transfer of shares has been set. Legal agreement and settlement date will be determined very promptly after you confirm in writing that your pre-commencement conditions to operate the banking business at Campbelltown have been satisfied and your notification issues in a form which also approves Leicester Ramsey and a person yet to be introduced to you (who is a person who has banking experience and acceptable to you as a partner to Leicester Ramsey in the banking business at Campbelltown) to operate that business. (Emphasis added) 117 Neither the statements to Mr and Mrs Astridge in Mr Ramsey's letter emailed on 9 August 2005, nor the terms of the letter he proposed be sent to the Bank, can be reconciled with Mr Ramsey's assertions that he had been told by Mr Allsopp that the requirement for the franchise to be conducted by an experienced banker could be overcome by employing such a person for six months and thereafter taking over himself. Mr Ramsey was cross-examined about the inconsistency: MR COUPER: You intended to be truthful in what you wrote to Mr Astridge, didn't you?---Yes. And what you told them was that there was a requirement of the bank that you must take in a partner with acceptable banking experience and who was approved by the Bank of Queensland, correct?---Yes, or - - - It was true, wasn't it?---Yes. And you said you had commenced urgent action to identify such a person. Is that true?---Yes. You had no belief that all you had to do was employ a banker for six months and you'll become the approved manager, did you?---No, that's not correct. 118 I do not accept Mr Ramsey's last answer. In my view Mr Ramsey was conscious, before the branch opened, of the requirement of the Bank that the branch be conducted under the supervision of an experienced banker approved by it who would be a director and shareholder in the franchisee. I am satisfied that, at this time at least, Mr Ramsey intended to comply with this requirement. Nothing said by Mr Allsopp had provided the foundation for a contrary belief, nor was such a contrary belief actually held by Mr Ramsey at the time. It follows that he was neither misled by anything Mr Allsopp said, nor did he rely upon it when deciding to proceed without the continued participation of Mr and Mrs Astridge. 119 Apart from the cost of paying $25,000 to Mr and Mrs Astridge and reimbursing them for their outstanding expenses (another part of the arrangement) Mr Ramsey, in deciding not to go ahead with Mr and Mrs Astridge but to go ahead alone, effectively doubled his exposure (and that of Mrs Ramsey) in the event that the franchise did not succeed. Perhaps Mr Ramsey was motivated by optimism in the venture and the prospect of a higher return as the sole principal of Astram. Whatever the explanation for his decision to proceed without Mr Astridge's assistance, experience and financial support I do not see how the consequences of his decision to proceed can be laid at the door of the Bank. There was no evidence that any pressure for him to do so was applied by the Bank. 120 On 22 August 2005 Mr Ramsey sent an email to Mr Allsopp advising him as follows: Dear Gary, I have spoken to Derek Ridley who was recommended by Lauren and Steve Sargent Miranda, if he would be prepared to work as branch manager while I interview potential candidates including himself. He is also agreeable if approved by BOQ. The agreement between David and myself will be finalised this week. I look forward to being a successful owner/manager of the Campbelltown branch with a new BOQ approved partner again. I wish to thank all the BOQ staff for their support, especially yourself in this difficult time. (Emphasis added) 121 Mr Allsopp replied on 23 August 2005: The Bank will allow Mr Ridley to become the recognised Branch Manger and replace David, subject to: 1) Attending the Banks Introduction course that commences next Monday at King street. 2) Mr Ridley can not commence work until all BOQ accreditation is completed. This I believe will require Mr Ridley to complete this work at night as he will [sic] at King street during the day. 3) Your efforts to locate a new banking partner continues. (Emphasis added) 122 Mr Ramsay's acceptance of the Bank's requirement of an experienced banker as a partner was unqualified. Mr Allsopp's statement of the Bank's requirements was clear. The Bank's approval of the arrangement with Mr Ridley to replace Mr Astridge as branch manager was subject to ongoing efforts to locate a new banking partner. Mr Ramsey accepted in his evidence that he did not challenge the requirement which Mr Allsopp stated in his email of 23 August 2005. It follows in my view that, whatever was discussed in Brisbane in late May/early June 2005 with Mr Allsopp, at the time that Mr Ramsey went ahead with the opening of the Campbelltown branch and the employment of Mr Ridley, he did so knowing that he remained under an active obligation to replace Mr Astridge with an experienced banker as a partner who could take over from Mr Ridley as branch manager. I reject any suggestion that Mr Ramsey relied upon a representation by Mr Allsopp to the contrary. 123 Mr Ridley declined Mr Ramsey's offer to become a shareholder and director of Astram. His evidence was, however, that Mr Ramsey continued with his plan to find an experienced banker. Mr Ridley was originally to be employed at the Campbelltown branch for a four week period during which Mr Ramsey would achieve that objective. In the end, he remained for six months. 124 To give effect to their agreement, Mr and Mrs Astridge transferred their 50 shares in Astram to Mr Ramsey. The date of purchase was identified in the transfer form as 2 September 2005. Mr and Mrs Astridge signed the transfer form on 12 September 2005 and Mr Ramsey, as transferee, on 30 September 2005.

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Branch operations 139 The Campbelltown branch opened for business on 29 August 2005. By letter dated 19 September 2005, shortly after the branch opened, Mr Ramsey was advised, and acknowledged, that budgets had been allocated to the Campbelltown branch for the Bank's financial year from 1 September 2005 to 31 August 2006. Mr Ramsey was advised that the branch was expected to obtain lending approvals totalling $43.54m with total draw downs of $39.64m. There were other targets set as well. 140 For a short time, pursuant to his arrangements with Mr Ramsey, Mr Astridge was the notional branch manager while Mr Ridley completed the training required by the Bank and received accreditation. Thereafter Mr Ridley was the branch manager while he remained in employment by Astram. Mr Ramsey evidently regarded himself as involved in and responsible for business development but he accepted in cross-examination that he was seriously impeded in some aspects of the work of the branch. He accepted that he had very little familiarity with some features of the Bank's products, little understanding of how to go about writing a loan application and, in particular, no real idea about how to go about writing a commercial loan application. Mr Ridley was involved in writing loans but had a limited involvement in "going out and getting business through the door". That role was performed mainly by Mr Ramsey. If Mr Ramsey could persuade a potential client to come to the Campbelltown branch to take out a loan it was necessary to arrange an appointment with a member of staff who had sufficient knowledge and experience to assist with the loan application. 141 Mr Ridley's evidence was that Mr Ramsey had very little understanding of how to go about writing a loan application, a position which had not changed very much at the end of six months. Mr Ramsey did not seek that Mr Ridley teach him about Bank products or teach him about how to go about writing loan applications. Mr Ridley's view was that when he (Mr Ridley) left the Campbelltown branch in March 2006 Mr Ramsey was not a person properly qualified to act as the branch manager. 142 Mr Ridley also confirmed that it was not part of his own role to go out and try to develop business as Mr Ramsey saw that as his province. Whatever efforts were being made, Mr Ridley's evidence was that not many loans were written during that period. Although Mr Ramsey gave evidence of a small number of initiatives which were taken by him (some of which he complained were stifled by the Bank) there seems no doubt that the operations of the branch were not conducive to overall business success. Mr Ridley's evidence was that there was some improvement during the period he was there "but not enough". On 18 January 2006 Mr Ridley gave notice that he would leave Astram's employment in early March 2006. At that time the business, according to Mr Ridley, "wasn't going as well as it should be".

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Meeting No 6 - 23 January 2006 143 From January 2005 to June 2006 the New South Wales Regional Manager for the Bank was Mr Stuart Edwards. From June 2006 until 27 March 2009 he was the State Manager for the Bank for New South Wales, the Australian Capital Territory and Western Australia. Accordingly, he held senior positions in the Bank during the period that Astram conducted the franchise at Campbelltown. Mr Edwards was involved in assessing the performance of the Campbelltown branch in the months after it opened. Mr Edwards gave evidence that he also made occasional personal visits to the Campbelltown branch while Astram was the franchisee. 144 The last pleading by the applicants, a further amended statement of claim, identified Meeting No 6 as one which occurred on 23 January 2006 when Mr Edwards met with Mr Ramsey at the Campbelltown branch. The relevant part of the pleading was: 40. At the sixth meeting the Second Applicant informed Mr Edwards of Mr Ridley's resignation and raised with him the question of his confirmation by the Respondent as experienced banker for the branch. Mr Edwards represented in trade or commerce that the Respondent would approve of the Second Applicant as an experienced banker as Mr Ridley will have been employed for 6 months at the time his resignation took effect and as the Second Applicant had been acting as Branch Manager for that time. He further represented that Mr Ridley's leaving was a good thing for the business. 41. Following the sixth meeting at which a performance review of the branch was undertaken Mr Edwards told the Second Applicant that all the right initiatives were in place to make things a success at the branch. 145 Mr Ramsey's evidence in chief about this matter was as follows: MR KING: Now, had you had any discussions with Mr Edwards?---Yes, I did. Was he aware of the arrangement in respect of Mr Ridley?---I spoke to him when Derek Ridley resigned, and said to him, the discussion was that I had with Garry Allsopp, and at the time he said it was a good thing that Derek Ridley was leaving, resigning, because he was costing me - he said he was costing me business. So are you able to inform the court whether or not Mr Edwards was aware, shortly after Mr Ridley resigned, following the conclusion of his six month's role?---Yes. And did he have the objection to that approach?---No. He said, both in a meeting with me and also in an email, that we had all the right initiatives in place to make the branch a success. 146 During his visit to the Campbelltown branch on 23 January 2006 Mr Edwards made some notes. Once such note read as follows: Leicester restructuring branch - Derek resigning and replaced with Karen Leshone. 3 March Derek leaving and enable enough time for Karen to settle in. 147 Mr Edwards also gave the following answer in his evidence in chief: MR MOSES: Did you have a discussion with Mr Ramsey during your time as regional manager concerning whether or not he would be acceptable as an experienced banker to the bank?---No. 148 Later, in his cross-examination, Mr Edwards again denied having a conversation with Mr Ramsey, on the day alleged, to the effect that Mr Ramsey would take over as branch manager: MR KING: And also that Mr Ramsey told you that Karen [Leshone] would be becoming the assistant manager after Mr Ridley left?---I don't know about assistant manager. It was to replace Derek with Karen. Yes. And that he, Leicester, would assume full branch managerial roles?---No, I never made that comment. No, but he told you about that?---No, I can't recall that. If it would be, it would be in that diary note. Yes. And that - - - ?---Oh, that's what Leicester's comment - Mr Ramsey's comments to me were. She was a banker, yes. Yes. And didn't you also say, in the conversation, that "Now that you have - now that the six months is up, or six months will be up - that's when Mr Ridley leaves - you, Leicester, will have enough experience to be treated as the branch manager," and he can look at replacing Derek with a loans officer?---I definitely didn't have that conversation. Or words to that effect?---Definitely not. And it was in that context that Karen Leshone was referred to, isn't it?---I don't know what the context was, but I definitely did not have that conversation with Leicester. HIS HONOUR: Were there other branches where the owner manager was not an experienced banker?---Yes, St Ives branch. What was the arrangement there? Was there an employed manager?---Yes, there was. Similar situation. 149 In fact, Mr Ridley was not replaced by somebody of equivalent experience and it does not appear as though for some time after his departure the Bank made an issue about that. It may be assumed that Ms Leshone brought some expertise to bear but later events suggest that she was not regarded as meeting the Bank's requirement for an experienced banker. There remained outstanding, also, the requirement for the experienced banker to participate in the business affairs of the franchisee although it appears from Mr Edwards' evidence that there was at least one other branch where an employed manager was permitted. 150 The factual assertion concerning Meeting No 6 was not established on the evidence. The applicants bore the onus in relation to this issue, as in relation to other issues. That onus was not discharged in this particular respect, as it was not discharged in other respects.

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Remedial measures 151 Mr Robert Clancy commenced to work at the Bank in 2002. He was first employed as District Business Manager for the Sunshine Coast region and then between September 2002 and February 2005 was employed as the Regional Manager for the north-west Brisbane region. Between February 2005 and April 2006 he was employed as Regional Manager for the North Queensland region. In April 2006 he took up the newly created position of National Manager for Franchise Coaching. His task was to identify the source of difficulties in branches struggling to meet their assigned budgets and to develop a coaching program to attempt to remedy the shortcomings identified. The first step was an evaluation of the business of a particular franchisee. 152 The Campbelltown branch was identified as a branch which might require assistance. Mr Clancy met Mr Ramsey at the Campbelltown branch on 3 May 2006 and spent many hours with him on that day completing an evaluation worksheet. Those procedures, and the conclusions that Mr Clancy might reach as a result of them, were intended, on Mr Clancy's evidence, to assist Mr Ramsey as the following extract illustrates: HIS HONOUR: I take it the focus of this discussion was that it was a joint effort in which you worked together cooperatively and collaboratively to identify areas where Mr Ramsey would benefit from assistance?---Correct. It wasn't - the conversation did not occur with a view to it being translated into a catalogue of criticisms of him?---That's correct, your Honour. 153 It seems clear that, at this stage, eight months after opening, the Campbelltown branch was sinking financially. On 1 May 2006, shortly before the meeting with Mr Clancy, Mr Ramsey sent an email to Ms Donna Quinn (who was Mr Edwards' immediate superior and therefore also in a very senior position) asking to meet with her and Mr Edwards to discuss the future of the branch. He said that funds were becoming limited and "it would be appropriate to look at the options available in the circumstances". He said: "I am at a loss what to do". The email concluded: Unfortunately it is now crunch time and my wife and I need to discuss our options and look for solutions, your time and help will be gratefully appreciated. 154 Ms Quinn, in reply, referred to the meeting which Mr Ramsey was to have with Mr Clancy two days later, reassuring him that the matter would be discussed with her after that. 155 Mr Clancy's conclusions from his meeting with Mr Ramsey on 3 May 2006 appear from the following extracts from his evidence: MR COUPER: Did you, at the end of the evaluation process, form the view about what needed to be done at the Campbelltown branch in terms of an action plan?---Yes, I did. … HIS HONOUR: What view did you come to, yourself, about what was necessary?---Okay, your Honour. The view would be that we had to desperately get some business development into the branch and change the whole concept of what was happening at the branch. The basic fundamentals were, in my view, totally wrong and we had to do a total overhaul of the practices at Campbelltown. MR COUPER: In what respect, in your view, were the fundamentals wrong?---No service standards in place … failure to act on a business plan that had been submitted, no budget for the owner manager or no idea on what he actually wanted to lend, no plan in place for business development, no plan in place to grow the business - had not done any real research on his market. There were a number of things. HIS HONOUR; That all sounds like a conclusion that, from a business point of view, things were a bit disorganised?---Yes, they were, your Honour. MR COUPER: Did you form a view about Mr Ramsey's capacity, with assistance, to properly conduct the business at the Campbelltown branch?---Yes, did. … My view is, without a experienced business banker, I didn't believe he was going to succeed in that business. MR COUPER: And why was that? … THE WITNESS: There just appeared to be no real business acumen involved with Mr Ramsey. There was just nothing in place to suggest he had any idea of running a business or getting the business that he needed to perform. HIS HONOUR: You mean a banking business?---That's correct, your Honour. MR COUPER: all right. We can move on. Did you formulate an action plan?---Yes, I did. 156 On 9 May 2006 Mr Ramsey sent an email to Mr Clancy saying: Further to my email to Donna Quin on the 1-5-06 and our meeting on the 3-5-06 it is necessary again that I emphasis the importance of resolving the matters raised with both yourself and Donna. As my funds are currently limited to $21,000 in the bank with wages to pay and expenses from BOQ including rent it is important to look at your proposal as soon as possible as the funds will shortly run out. 157 As a result of the views which he had formed Mr Clancy proposed to his superior, Ms Quinn, a number of incentives for the Campbelltown branch and its staff members. In addition it was proposed that Mr Jason McKell (one of Mr Clancy's team) would "spend nearly all of his time just in Campbelltown". Implementation of the action plan devised by Mr Clancy required Mr Ramsey to sign a confidentiality agreement. 158 Mr Ramsey gave evidence that he knew what the Bank was proposing because he received a letter dated 12 May 2006 signed by Ms Quinn which set out the incentives in detail, including the provision of the services of a fully trained branch manager for the first month of a business building process. The financial incentives were to last for a six month period commencing 1 June 2006. There was some disagreement between Mr Clancy and Mr Ramsey about whether the letter was actually received by Mr Ramsey. Mr Clancy gave evidence of a second meeting at which Mr Clancy intended to discuss the detail of the proposed program with Mr Ramsey but before doing so asked him to sign a confidentiality deed. On Mr Clancy's evidence Mr Ramsey declined to sign it immediately and Mr Clancy thereupon withheld the letter from him, although Mr Clancy's recollection was that Mr Ramsey was informed of the general nature of the incentives which were proposed. This is consistent with Mr Ramsey's evidence which was that he desired to take legal advice about the confidentiality deed. 159 Despite Mr Ramsey's evidence that he actually received the letter of 12 May 2006, as opposed to learning about the proposed incentives in a more general way from Mr Clancy at their second meeting, I think there is considerable doubt that he did receive it at the time. However, I shall, for the moment, discuss the contents of the letter on the assumption that Mr Ramsey did receive it. That working premise does little to assist him in other respects. Early in the letter the following matters were identified: The major issues that need to be addressed at Campbelltown are: • the sourcing of new loans to get a revenue stream going and build a portfolio of loans, deposits and customer accounts to generate a recurring income base. • the Bank's requirement for you to have an experienced banker as an equity holder in the OMB company has not been complied with. 160 Later in the letter the following was said: The Bank will carry out a review of progress after the completion of the first two month period. If this review is, in the view of the Bank, unsatisfactory, the Bank will insist on the immediate compliance with the Bank's requirement that you find an appropriately qualified banker, satisfactory to the Bank, to become an equity shareholder in your company. 161 Mr Ramsey gave evidence, at one point, that until he received official notification from the Bank on 18 July 2006 that Astram was regarded by the Bank as in breach of its obligations under the OMB Agreement, he had not received any notice from the Bank following the departure of Mr Ridley that there was any problem about him (Mr Ramsey) acting as branch manager, a role which he regarded himself as performing. 162 However in his cross-examination the following occurred: MR COUPER: You understood, as at May 2006, that the bank was still requiring you to have an experienced banker as an equity partner in the company, didn't you?---And I was still looking for an equity partner in the company, yes. You didn't - do you recall telling my learned friend, Mr King, in evidence, I think, now two days ago, that you had had no indication until you received the breach notice, that the bank objected to you conducting the business as branch manager yourself, without an experienced banker as a partner?---Yes. That was untrue, wasn't it?---According to this letter, yes. HIS HONOUR: Well, never mind about according to the letter?---Yes, yes. 163 If Mr Ramsey did receive the letter of 12 May 2006, at about that time, then the evidence which he gave earlier in the hearing was admittedly false. In view of my uncertainty that the letter was received by him I do not propose to draw that conclusion. The significance of the letter is that it shows that the Bank had formulated specific proposals intended to retrieve the position of the branch and assist Astram to survive. Mr Ramsey himself had said it was "crunch time". Evidently, however, that circumstance was not enough to persuade him to sign the confidentiality agreement. 164 In a moment I shall discuss, in a general way, the confidentiality agreement and the changes Mr Ramsey sought to it. It will become clear that I do not have much sympathy for the position the Bank took. However, I cannot, despite those matters, see what harm it could have done to Astram's position to have signed it. Mr Ramsey's refusal to sign it is suggestive of either great inflexibility on his part or the pursuit of a different agenda. There was some evidence that about this time there was a groundswell, amongst some franchisees at least, of dissatisfaction with some aspects of the OMB Agreement and that Mr Ramsey was a participant in discussions about those concerns. Perhaps he did not want to bind himself or Astram not to take action against the Bank or assume any restriction if action was taken. If that was the source of his reservations it would, perhaps, explain the stand he took but it does little to provide a large measure of objective support for rejection of the only lifeline on offer, even if the Bank's terms were strict and unyielding. Whatever his motivation (and I do not need to speculate further about it because his motivation is not ultimately relevant) Mr Ramsey chose not to accept the Bank's conditions and the assistance was not, for this reason, provided. 165 A file note by Mr McKell dated 19 May 2006 recorded that Mr Ramsey was given the confidentiality agreement on 16 May 2006. On 19 May 2006 Mr Ramsey sent an email asking for changes to be made. The confidentiality agreement was drafted in cryptic and heavy handed terms. As appeared typical of the Bank's drafting style the confidentiality deed set out to protect every conceivable interest of the Bank, no matter how remote from the intended objective of providing assistance to the Campbelltown branch. It was as though the Bank had a split personality. There were those like Mr Clancy who were keen to assist the branch and others within the Bank who were equally intent on imposing every conceivable form of legal obstacle to any possible disadvantage or future prejudice to the Bank's position. 166 Mr Ramsey would have been justified in thinking that the terms of the confidentiality deed presented to him for his signature went beyond any description of the kind suggested by Ms Quinn in her intended letter of 12 May 2006, that the deed was "to ensure that the contents of this package are discussed with no other party". Read literally the confidentiality agreement would have had potentially odd results. For example, on a literal reading the confidentiality deed would have prevented Astram from divulging information "in any way connected with" the Bank, even if it had nothing to do with the package of incentives and coaching proposed. No doubt that was just the result of clumsy drafting but there were also restraints, required acknowledgements, disclaimers and indemnities which must have struck Mr Ramsey as stern in their terms. It is not surprising that, despite Astram's straightened circumstances, he sought legal advice. On every other occasion the Bank had required him to obtain independent legal advice. 167 The changes suggested by Mr Ramsey's legal advisers related to the more extreme (and probably unnecessary) aspects of the restrictions and restraints which the Bank sought in the confidentiality agreement. There were not many changes suggested and none would, as it appears to me, have exposed the Bank to the prospect that the package of incentives and coaching it proposed would be compromised or become generally known. One change sought was to make it clear that Astram was not prevented from complying with a subpoena or a requirement for production by the taxation authorities. Perhaps this was strictly unnecessary but it could not be said to be an unreasonable request. I infer that it was just too much trouble for someone in the Bank to give consideration to an adjustment to its own drafting. The Bank had the upper hand and had no incentive to move. 168 The Bank's refusal to countenance any amendment to the confidentiality agreement seems to me to have been unreasonable and perhaps even obdurate. However that is no longer to the point, if ever it was. The Bank was not obliged to agree to changes, any more than it was obliged to offer assistance. There is no general obligation to make concessions to accompany or modify an offer which is entirely voluntary. The confidentiality agreement was not signed and the coaching and other incentives which would have been made available were withheld, even though Mr Ramsey offered to forego all incentives if he could have the general benefit of the coaching program. Mr Clancy's evidence was that he was extremely disappointed because he said that he was "desperate to get in and coach the branch". He was not sure why a confidentiality agreement was necessary. They were instructions which had come from the governance department of the Bank. All that can be said in the Bank's favour about this issue is that it was not obliged to offer the financial incentives and assistance in the first place. 169 All those things having been said it must be observed that there is no particular basis to think that the assistance proposed by the Bank would have made the difference between inevitable failure and likely success. For all his apparent enthusiasm, Mr Clancy seemed very pessimistic that it would be possible to pull the Campbelltown branch back from the brink with Mr Ramsey in charge. At a minimum, he thought an experienced banker was necessary. Mr Ramsey had not been able to find one to join him and never succeeded in doing so. Ultimately, therefore, I do not think that the Bank's withholding of the coaching program made any difference to Astram's commercial fortunes or financial position. 170 It appears from a file note made either by Ms Quinn (or by another person recording Ms Quinn's statements) that Ms Quinn and Mr Ramsey had what appears to have been a very short (four minute) meeting on 1 June 2006. Ms Quinn is recorded as saying that Mr Ramsey would be advised what support could be offered. However, an internal email from Ms Quinn to Mr Edwards the following day suggests that she, at least, had concluded by this time that Mr Ramsey should be served with a breach notice as a result of "his non-fulfilment of his contract around a banker". Ms Quinn was not called to give evidence and Mr Edwards was not asked about the significance of this email. Nevertheless, despite Ms Quinn's apparent decision a further period elapsed before the Bank acted. 171 There is a further aspect of Mr Clancy's involvement in the assessment of the position at the Campbelltown branch which should be mentioned. Mr Clancy formed a view within a short period of time (about two hours) of commencing his discussions with Mr Ramsey on 3 May 2006 that it would be a difficult task to retrieve the fortunes of the Campbelltown branch under Mr Ramsey's management although, according to his evidence, he remained keen to take on the task. However his pessimism about the prospects for Astram was not related to any doubts about the viability of a franchise at Campbelltown. 172 During his cross-examination Mr Clancy gave the following evidence: MR KING: In forming the view that Mr Ramsey would not be able to become a successful owner/manager at Campbelltown on 3 May 2006, did you give consideration to the possibility that one of the reasons for that was a flaw in the model in which he had been invited to become a franchisee?---I can honestly say, not once, no. 173 Just before the end of his cross examination Mr Clancy gave the following evidence: HIS HONOUR: Did you ever give any thought to whether $4 million was achievable at Campbelltown?---$1 million a week I think would be very achievable at Campbelltown. That's my view. … MR KING: And you're not able to say that you would have been able to write turnover of a million dollars a month in that branch because you've told this court that you've never acted as an OMB agent yourself?---Writing business is a branch manager's job as well as an owner managed branch, so if you asked my opinion, I believe I could have done that. 174 Mr Clancy's views about this matter are consistent with those expressed by others with banking experience, namely Mr Astridge and the principal of another franchise, Mr Bridge, whose evidence will be discussed later.

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Breach notice 175 On 7 June 2006 Mr Ramsey had a further meeting with Mr Edwards. Apparently at that meeting there was some discussion about Astram's options, including the possibility of selling its interest in the franchise. Evidently nothing concrete resulted from the discussions but, as will appear from Mr Fitzpatrick's evidence which is yet to be discussed, Astram's financial state by the end of June was parlous. Astram was effectively in a position where it was unable to meet its obligations from its own resources or with the assistance of the facilities which the Bank had provided. The Bank's position, evidently, was that Astram was in ongoing breach of its obligations under the OMB Agreement. Apart from the issue of an experienced banker there were other matters also which excited the Bank's attention. Those various issues coalesced in a formal notice served on Astram alleging breach of the OMB Agreement. The notice was signed by Ms Quinn. Curiously, a covering letter to Astram was dated 10 July 2006 while the breach notice itself was dated 12 July 2006. As will be seen, it was delivered to Mr Ramsey on 18 July 2006. The breach notice alleged four breaches of the OMB Agreement. They were:

that Astram was in breach of clause 10.2 of the OMB Agreement (set out earlier) in that Mr Astridge had not been replaced as branch manager by an appropriate person, a director and shareholder of Astram, who was suitable to the Bank;
that Mr Ramsey, as director of Astram, had made comments to the media without consultation with the Bank in breach of the Bank's policies and in breach of clause 7.1 of the OMB Agreement;
that Mr Ramsey had declared that Astram did not regard itself as bound not to communicate with the media without consultation with the Bank in breach of clause 7.1 of the OMB Agreement; and
that Astram had not produced evidence that it had obtained 'key person insurance' for Mr Ramsey contrary to the Bank's requirement, in breach of clauses 21.1 and 21.4 of the OMB Agreement, advised to it on a number of occasions. 176 The Bank stated in the breach notice that the following action was required: To remedy the breaches the Agent must do the following: a) The Bank will allow the Agent 3 months in which to recruit a new Branch Manager. Please note that the Agent must first seek the Bank's approval as to the suitability of the proposed Branch Manager. b) The Agent must provide updates on their progress in recruiting a Branch Manager to the Bank's State Manager for New South Wales, Stuart Edwards on a fortnightly basis, commencing 7 days from receipt of this Breach Notice. c) The Agent must commit to complying with the Bank's policy and procedures including its policies regarding media contact. This commitment must be made in writing no later than 7 days from receipt of this Breach Notice. d) The Agent must provide the Bank with a copy of the 'key person insurance' policy within 7 days of receipt of this Breach Notice. 177 Some comments may be made immediately. The requirements expressed in (a) and (b) may have left room for debate about the operation and effect of the OMB Agreement and, perhaps, about past discussions concerning the issue of an experienced banker. There may have been room for Mr Ramsey to make representations to the Bank based on the fact that he had for the previous four months been conducting the business himself. There may have been room to dispute the requirement that he provide fortnightly reports. The important thing about these requirements, however, is that Astram was not immediately at risk of losing the franchise. It was afforded an opportunity for compliance. 178 The requirement expressed in (c) was for a "commitment". I doubt that any such requirement was enforceable under the OMB Agreement but, as will be seen shortly, it is likely that this requirement was met by Mr Ramsey on behalf of Astram shortly thereafter. The requirement in (d) was self explanatory and certainly capable of satisfaction in the time allowed. 179 One further point should be made. The breach notice was not a notice of termination of the OMB Agreement. It was a notice which, in its terms, sought compliance with what the Bank said were existing obligations under the OMB Agreement. The final paragraph of the notice, which occurred under the heading "effect of this breach notice" read: e) If the Bank elects to exercise its right to immediately terminate the OMB Agency Agreement it will do so by way of separate notice of termination served on the Agent. 180 In a letter which was undated, but apparently faxed to the Bank on 25 July 2006, Mr Ramsey, on behalf of Astram, referred to receiving the breach notice by hand on 18 July 2006. That is consistent with the evidence of Mr Edwards who deposed that he met with Mr Ramsey on 18 July 2006 and read the breach notice to him as well as handing it to him. In his response Mr Ramsey gave an assurance that Astram would comply with the Bank's policy and procedures concerning media contact. That assurance appears to me to have met the Bank's requirement, even though Mr Ramsey disputed the allegation that the Bank's policy had been breached in the ways alleged. He also disputed the requirement to take out key person insurance and, in any event, asked the Bank to waive the requirement in his case "as being an unnecessary expense at the time when this Branch, and many others, are suffering severe financial pressure". As to the requirement for an experienced banker he responded as follows: In answer to the breach notice generally and to paragraph 4 thereof in particular I advise: a) and b) I have been acting in the role as Owner Manager since the Branch opened in August 2005. In conversations I had with both Stewart [sic] Edwards and Garry Allsopp I was told that if I held the position of Owner Manager for six months the Bank would formally approve of me as a Branch Manager. The Bank has been content for me to act as an unofficial Branch Manager since the Branch commenced. I therefore ask that it reconsider the requirement that another person be brought in to act in that capacity, unless the agent decides to restructure or sell the agency, in which event the Bank's approval will be essential. 181 In a response dated 26 July 2006 Ms Quinn disputed Mr Ramsey's assertion that there had been no breach of the Bank's policy with respect to media contact. She made no comment, however, to the effect that the assurance he had given about future compliance with the policy was ineffective. She indicated that the Bank would not waive the requirement for key person insurance and required a copy of such insurance by 11 August 2006. As to the requirement for an experienced banker she said: a) Experienced Banker Any discussions with Messrs Edwards and Allsopp were always on the basis that the Bank would review its position after you had been in the Branch Manger's role for a period of six (6) months. The performance of the branch is obviously a critical factor as to whether the Bank will approve a person to be a branch manager. Quite clearly the branch is underperforming having written only $2,600,779 in new business in the eleven months since opening. This result is very poor compared with the Agent's undertaking to the Bank in the business plan it submitted in its application for an Agency wherein the Agent intended "to achieve sales in 2005/2006 of $4 million monthly". The Bank will not reconsider its requirement that an experienced person satisfactory to the Bank is identified to take a minimum of 50% equity in the Agent Company. 182 The Bank's requirement that the branch be under the control and direction of an experienced banker, and its policy that a branch manager be a director and shareholder of the franchisee, were not expressed as contractual terms of the OMB Agreement. However, the terms of clause 10.2 of the OMB Agreement reserved to the Bank the discretion whether or not to approve a particular person as branch manager. The Bank, in the expression of interest letter, had made clear its general requirement that one of the directors be an experienced banker, have an "appropriate" level of shareholding in the franchisee, and be the branch manager. The OMB Agreement permitted the Bank to exercise its discretion to grant or withhold approval of a branch manager in accordance with this policy. 183 Although, in response to Mr Ramsey's assertions, Ms Quinn appeared to accept that there had been discussions with either Mr Edwards or Mr Allsopp or both which contemplated that Mr Ramsey might secure approval as branch manager in his own right, I have already expressed the view that no agreement was made with Mr Allsopp to the effect that the Bank would waive its requirement for an experienced banker and I have referred as well to Mr Edwards' rejection of the suggestion in his evidence. Under the terms of the OMB Agreement approval of the branch manager was required to be in writing. Mr Ramsey had never been approved in writing as branch manager. 184 Ms Quinn's rejection of Mr Ramsey's request that the Bank "reconsider the requirement that another person be brought in to act in [the] capacity" of branch manager left the position as one where Mr Ramsey had, in accordance with the breach notice, three months (i.e. until 18 October 2006) "in which to recruit a new Branch Manager" having first sought the Bank's approval as to "the suitability of the proposed Branch Manager". 185 I am also satisfied that, after receiving the breach notice, Mr Ramsey made a further attempt to negotiate an alternative arrangement with the Bank. Mr Edwards made a contemporaneous note of the discussions that he had with Mr Ramsey at the time that he handed Mr Ramsey the breach notice and read it to him on 18 July 2006. Mr Edwards recorded Mr Ramsey's statements that he had been in discussion with the owner/manager of the St Ives branch, Mr George Marcos. Mr Edwards recorded that: I stated I would look into & the only way the bank would consider was if an experienced banker was part of the transaction. Leicester advised he was looking for a commercial lender for at least 6 months without success.
- I stated I would call George & get back to him with the bank's decision. 186 Mr Edwards spoke with Mr Marcos the following day but it appears that Mr Marcos, although expressing some interest in taking an equity in the Campbelltown branch, did not himself satisfy the requirement of "experienced banker". The following day, 20 July 2006, Mr Edwards sent an email to Mr Ramsey saying: Thank you for your time on Tuesday Leicester and as discussed this is to confirm that the Bank will only look at an investor in your business providing you can bring a very experienced banker to the table. The bank would be prepared to consider George Markos in becoming a 50% shareholder providing a suitable banker is obtained prior to these negotiations and providing George is in an acceptable financial position to do so and he wishes to make that type of investment. 187 Mr Ramsey decided, apparently, not to continue his professed efforts to find another partner or attempt further to satisfy the Bank's requirements. He chose a different course. On 8 August 2006 solicitors acting on behalf of Astram wrote to the Bank alleging the following: Our instructions are that there is an agreement between Astram and the Bank that Astram is not required to procure any person other than Mr Leicester Ramsey to hold the position of Branch Manger at the Campbelltown Branch. This agreement came about as follows: a. A Franchise Agreement between the parties was executed on or about 8 June 2005. b. The Bank approved Mr David Astridge, one of the principals of Astram, as the Branch Manager. c. At or about the time of the Campbelltown Branch opening in August 2005, Mr Astridge ceased as a principal of Astram. The Bank agreed to his being retained by Astram as a consultant to act as the Branch Manger until a suitably qualified Branch Manager could be found. d. Astram later procured Mr Derek Ridley, a person acceptable to the Bank to act in the role as Branch Manger. e. Mr Ridley undertook the necessary bank training and acted in the role as Branch Manager for 6 months, after which he resigned his employment with Astram. f. Following Mr Ridley's resignation Mr Leicester Ramsey has fulfilled the role as Branch Manager although his title is "Owner Manager". Mr Ramsey has been a principal of Astram throughout. g. Prior to Mr Ridley being engaged by Astram to act as the Branch Manger it was agreed between the Bank and Astram that Mr Ridley's engagement was a temporary matter only and that as soon as Mr Ramsey had served in the position of Owner Manger for 6 months he would be approved of as the Branch Manager as he would then have sufficient experience. It follows that it would not thereafter be necessary for Astram to procure another person to act as Branch Manger or to take equity in Astram. In your letter of 26 July 2006 to our client you now indicate that the Bank requires that "an experienced person satisfactory to the Bank is identified to take a minimum of 50% equity in the Agent company." In its correspondence of 12 July, 2006 the Bank gives Astram 3 months from 12 July 2006 in which to recruit a new Branch Manager. These requirements indicate that the Bank is not ready and willing to perform the obligations it has under the agreement between the parties in relation to the appointment of Mr Ramsey as Branch Manager. Both this unwillingness on the Bank's part and the requirement that another person be found to take a 50% equity in Astram constitute a repudiation of the agreement between the parties. Astram accepts the Bank's repudiation of the agreement and elects to terminate the performance of the agreement. Astram will vacate the Branch at close of business today. It will today terminate its staff. The Bank may wish to engage Astram's staff on its own account in order to keep the Branch operating and Astram will do what it can to facilitate this. 188 There is considerable confusion in this letter concerning what "agreement" is being spoken about. The "agreement" identified at the beginning of the letter and the "agreement" alleged to have been repudiated concerned Mr Ramsey being accepted as branch manager. The "agreement" purportedly terminated was the OMB Agreement, a different "agreement" altogether. It is upon the termination of the OMB Agreement that attention must remain focussed. The other matters referred to in this letter are obviously intended to provide justification for that action. They do not do so in any legally effective way. 189 The agreement which was alleged to exist about the question of branch manager was, if it existed at all, a separate agreement from the OMB Agreement. Any unwillingness of the Bank to honour the suggested "agreement between the parties in relation to the appointment of Mr Ramsey as Branch Manager" could not justify an allegation that the OMB Agreement had been repudiated. The position announced in the letter of 8 August 2006 could provide no justification for Astram to terminate the OMB Agreement or to refuse to honour its own obligations under the OMB Agreement. Secondly, the breach notice was insufficient to justify any conclusion that the Bank would not honour its obligations at the time they were required to be honoured. On the contrary, the breach notice had, as its essential purpose, a statement that the Bank required the OMB Agreement to be performed, rather than suggesting that it would not be performed. The breach notice provided no occasion, whatever the parameters of the debate about the position of branch manager, for an announcement of termination of the OMB Agreement on the basis that it (or any other agreement) had been repudiated by the Bank. 190 The true position, in my view, is that Astram abandoned the business on 8 August 2006. It did so in breach of its obligations under the OMB Agreement. It exposed itself to liability for breach of that agreement. 191 On Mr Edwards' evidence the Bank then employed the staff who had themselves been abandoned by Astram and by Mr Ramsey. There is no evidence that they had been afforded the consideration of any form of advice by Mr Ramsey about their own positions.

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Mr Darel Hughes 192 Mr Darel Hughes is a chartered accountant. He provided a report in support of the applicants' case in which he attempted to calculate a loss of expected profit from the franchise operation at the Campbelltown branch between 29 August 2005 and 8 August 2006. To that expected profit he added what he regarded as a calculation of actual loss to come to a total economic loss figure which he then projected forward until 2020. 193 There were significant problems exposed in relation to Mr Hughes' report, not the least of which was the fact that it proceeded upon fundamental assumptions which the evidence did not establish. Mr Hughes recorded in his report that he was advised as follows: 7 Prior to the Applicants acquiring and opening an OMB branch of BoQ in Campbelltown NSW, a number of meetings took place between the Applicants and representatives and/or agents of BoQ, as outlined in the Statement of Claim, at which a number of representations were made to the Applicants. 8 The key representations made to Applicants during the meetings referred to above, were as follows: 8.1 to succeed in a BoQ franchise the business would have to write loans of $4,000,000 per month; 8.2 having regard to the size of mortgages in NSW, writing loans of $4,000,000 per month was achievable at the Campbelltown branch; 8.3 the writing of loans of $4,000,000 per month would be sufficient for the intended franchisee to pay all expenses to operate the business, all borrowing costs, appropriate salaries for principals and to give a good return to the franchisee on the investment; 8.4 working capital of $100,000 was needed to operate the business to meet its expenses as they fell due and to give a good return on the investment, and 8.5 it was a condition of approval as a franchisee that one of the principals in the venture must have retail banking experience and must hold at least ½ of the equity in the venture. 8.6 the working capital could be provided in cash by the intending franchisee or an overdraft facility from BoQ would be made available; 8.7 a franchise fee of $80,000 was payable to BoQ for the grant of a new franchise. 8.8 the new business was liable for all fit out costs but that these would vary depending on the location selected; 8.9 the branch operated by Mr O'Kell of the BoQ North Parramatta franchise branch was a typical example of a successful BoQ franchise of the type the Applicants should reasonably expect to become. 8.10 BoQ will undertake a major marketing and advertising campaign on television, radio and in newspapers to assist franchisees in New South Wales particularly during the start up phase of the business with a view to improving brand awareness of BoQ in New South Wales including promotional activity tailored to the Campbelltown branch to build interest and bring new business to the branch. 194 Mr Hughes stated: For the purposes of this report it has been assumed that the loss flowed from the conduct complained of in the statement of claim. 195 He also said: The starting point to my calculations has been the representations that the franchise business for the Campbelltown Branch of BoQ would be able to achieve a level of lending of $4,000,000 per month and in particular "that the Bank will expect the new OMB at Campbelltown to be writing $4,000,000 in lending drawdowns on a monthly basis in the initial 12-month period." 196 In fact Mr Hughes assumed that the Campbelltown franchise would write loans of $4 million per month by month seven of its operations. 197 Mr Hughes accepted in cross-examination that his calculations had proceeded from the basis that the representations he referred to as the starting point for his calculations involved a promise to the applicants. That position is captured in the following passages: MR COUPER: Have you proceeded on the basis that there was some form of promise to the applicants, that Astram Financial Services would write $4 million a month in loans, commencing from month 7 and continuing?---Yes. So this is, in effect, being treated by you as some sort of breach of warranty approach. Is that right?---Yes. … ---The representation that induced someone to go into a contract creates, as I understand it, an expectation that not only will the profits be made now, but into the future. The calculations that I have done are on the basis that a certain level of income would have been achieved based on the $4 million. It would have then been adjusted by various factors and that having been induced to acquire that business one would have a future expectation of profitable activity. That is the basis upon which I have calculated the losses. 198 The first problem for the applicants' reliance on Mr Hughes' report is that his fundamental assumptions were not made good by the evidence. All the calculations that proceeded from those unsustained assumptions have no significance for the disposition of the proceedings. 199 There were other problems with his approach also. In calculating his theoretical profit Mr Hughes had taken into account a list of expenses set out in a report of Fitzpatrick and Associates, Accountants, prepared for the purpose of earlier, unsuccessful, mediation proceedings. I am satisfied that the expenses listed were not actual expenses. They were estimates of some kind and themselves theoretical. After taking those theoretical expenses into account in the calculation of the theoretical profit, and reaching a net profit figure, Mr Hughes added to that figure the actual losses incurred by the franchise at Campbelltown. In my view that involved a form of double counting, although it may be consistent with Mr Hughes's underpinning assumption that the applicants were promised a certain level of return. 200 Amongst the actual losses which Mr Hughes had attempted to bring to account were expenditure for fit out costs and the franchise fee. When challenged he accepted that those matters at least were double counted: MR COUPER: The initial expenditure included, for example, fit out costs and franchise fee, didn't it?---Yes. You're adding back into the profit figures which include the fit out costs and franchise fee, aren't you, in this calculation?---Yes. So you're working on the basis that the profit is earned without any expenditure for things such as fit out costs and franchise fee, correct?---Correct, you are right. I concede that point, yes. I don't concede, I agree with that, that point on reflection, there is a double count in there. 201 However that was just an example of the defect in the approach taken. What Mr Hughes did was to make an allowance for theoretical costs (lower than actual costs) but then add back even higher figures to obtain his final result. That produced a result where no allowance at all was made for ordinary operating costs. 202 Mr Hughes' approach eschewed a calculation based on restoring the applicants to the position they would have been in had they not gone into the franchise. It involved not only making good their losses but calculating a guaranteed profit in addition as the following passage shows: HIS HONOUR: The reason why you don't just calculate loss on the basis of putting somebody back in the position that they would have been in had they not gone into the business is because you have assumed that they had lost entitlement?---Yes, a future entitlement to - they contracted - - - The right to make money?---Yes, well - yes, I suppose so, yes. But they have lost the opportunity which they were promised. Pursuant to a certain ---?---Pursuant to a certain - - - A certain model?---Model, that's right yes. What I've done with that model is tried to make it a little more real by adjusting it for various factors. MR COUPER: Yes, Mr Hughes, let's deal with that … is your starting point in effect a promise that the writing of $4 million per month in loans was achievable at the Campbelltown branch?---Yes. At the end - you've also - in working out what you say - - - ?---Well, I beg your pardon. Right at the start. HIS HONOUR: Not just achievable, but would in fact have happened?--- Would have happened - - - MR COUPER: Yes, your Honour is quite right?---Would have happened, given the ramp up period. [That] it had that potential. Well, from month 7 onwards, $4 million per month in writing loans would have happened. That's your starting point?---Yes. 203 This approach took no account of the actual operating experience of the business. It proceeded by reference to a subsidiary set of assumptions which were theoretical in nature as the following cross-examination reveals: MR COUPER: Is what you've done in essence, Mr Hughes, to make two assumptions? First, the mandatory assumption that $4 million in loans per month will be written. That is the one you're obliged to make for this purpose?---There was an expectation of $4 million subject, of course, to the ramping up, etcetera. Yes. But then you've made a second set of assumptions that in all other respects the business would be conducted in what you perceived to be an ordinary manner. Is that right?---Yes. So you have divorced your approach entirely from any examination of the actual conduct of the business. Correct?---Yes. … MR COUPER: But it has been no part of your process, Mr Hughes, to make any attempt to assess the business management competence of the actual operator of the branch or to make any actual assessment of whether the expenses of operation of the branch were dictated by ordinary circumstances applicable at the time in Campbelltown?---No, I have not. 204 There was no support in the evidence for the proposition that the actual operating expenses at Campbelltown should be disregarded. Mr Clancy's evidence was to the effect that he did not regard the expenses which came to his attention as being out of the ordinary. The difficulty faced by the Campbelltown branch was its failure to generate revenue through new business. In my view it was not correct to substitute Mr Fitzpatrick's theoretical figures for actual experience. It was not correct to propose that actual losses should be recouped and added to a theoretical profit figure. 205 Mr Hughes also assumed that, from a starting point of $4 million in loans at month seven, loans would be written at a non diminished rate affected only by general lending conditions. He assumed that those conditions would have remained reasonably constant during the period over which his projections were made - 15 years. Over that period he assumed a reliable correlation between the general inflation levels and increases in borrowing and bank deposits across Australia. He also assumed a constant level of inflation of 2.4%. He assumed that at Campbelltown specifically levels of borrowing and of bank deposits would increase as they would across the whole of Australia to match the assumed level of inflation of 2.4% for 15 years. I asked him this question: HIS HONOUR: Is it normal to make a calculation of this kind based upon predictions for which there is no real objective support? In other words, that one has to cast around for general indicators about what might happen?---Absolutely. Absolutely. It is normal in this forensic accounting business, yes. In what sorts of cases?---In virtually every case I've looked at. 206 I am in no position to contradict Mr Hughes' assertion about the sorts of cases in which he has been involved. However the approach which he took was not one which, in the present case, yielded a satisfactory method of making an assessment of the applicants' circumstances. I agree with observations which fell from counsel for the respondent during the course of Mr Hughes' cross-examination. Had the applicants been able to make out a case for some form of relief it would not have been measured as a loss of opportunity. The applicants' case, at base, was that Astram would not have entered into the franchise but for certain representations having been made to Mr Ramsey. I leave aside for the moment the difficulty that, at the relevant time, Astram was under the control not just of Mr Ramsey but also of Mr and Mrs Astridge and that no case was ever made out that they were misdirected by the matters of which Mr Ramsey complained. Had a case been made out that Astram would not have entered into the franchise but for the representations which had been made then the appropriate measure of damages would most likely have been a level of compensation which attempted to put Astram (and, I will assume, the other applicants) into a position as though the franchise had not been taken up. That is a tentative view because no occasion arises to attempt to assess damages in this way in the present case but damages would certainly not have been calculated based on Mr Hughes' theoretical projections. Mr Hughes assumed that the case was a breach of warranty case. It was not. 207 Mr Hughes attempted to defend his calculations by referring to the assumed representations upon which the calculations had been made. This approach led him into difficulties. MR COUPER: Mr Hughes, is it the case that in arriving at your discount figure you have made no allowance for the risk that monthly lending might not increase at the 2.4 per cent per annum, which you've used in your calculations?---I haven't included a risk factor for that, no. I have assumed, clearly in my report, that the level of lending would have been the represented figure of $4 million, plus or minus the various adjustments that I've made. In other words, you have assumed that the figures you've arrived at, by making the various adjustments in the primary calculations, are 100 per cent guaranteed. Is that right?---Are as represented. Yes, that is 100 per cent?---Yes, yes. That's not appropriate, is it?--- In making these calculations on the assumptions that I've made, yes, it is wholly appropriate. and, a little later: HIS HONOUR: With - yes, can I also ask you this while I have you, Mr Couper, interrupted, you've referred on a number of occasions to the representations?---Yes. What do you know about representations?---The representation that $4 million was achievable. What do you know about that?---All I know is that I read it in the documents. That's based on an assumption you've been asked to make, is it?---That is correct, yes. MR COUPER: Mr Hughes, you've taken the assumption that $4 million was achievable as a basis for saying that your starting point is, $4 million per month, was in effect guaranteed to be written. Is that right?---That is the basis of the assumption, yes. 208 Mr Hughes also expressed opinions based upon the circumstance that the North Parramatta branch, whose commission receipts he had analysed, had the benefit of commissions generated by the broker book. I will deal with the broker book issue in more detail a little later. Mr Hughes made calculations which suggested that possession of broker book accounts by the North Parramatta branch (Mr O'Kell's branch) generated a highly favourable position for that branch which made it unreliable as an example offered to Astram of the franchise arrangements. Mr Hughes accepted that he had made no inquiries about the cost of administering the broker book. As will become clear I am satisfied that the cost of administering the broker book at the North Parramatta branch substantially counter-balanced any benefit deriving from it. Despite his lack of knowledge of these matters Mr Hughes offered the opinion in his report that any comments made by the managers of Menai or North Parramatta branches (Mr Zacharia and Mr O'Kell respectively) "are likely to have been influenced by [the] level of Broker book commission". Mr Hughes' statement about this matter led to the following exchanges: MR COUPER: Can I take you back to paragraph 73 of your report at page 22. Just one moment. On what basis do you, as an expert, profess to express a view about what motivated assumed comments by managers of a branch of the bank?---Sorry, can you be more specific. Yes. Look at the last sentence in paragraph 73. On what basis do you, as an expert, presume to comment upon what motivated assumed comments by managers of branches of the bank? … HIS HONOUR: What's the foundation for that observation?---The foundation is that I understood that the applicants had meetings with both North Parramatta and Menai branches. If those branches had available to them a source of commission generated from the broker book and they accepted that, that their comments on the success of their branches would have been influenced by that source of income generated from the broker book. That is all. Can you tell me where that assumption is recorded in your report? ---No. It's an observation, your Honour. Sorry?--- It's an observation not necessarily an assumption. What I've said is--- No, no, no. I'm asking you about the foundation from which it proceeded, namely that meetings have been held and certain things said. Is that something you were asked to assume?---No. It was --- Is it something you were told which you've not recorded in the report?---It is something in the documents which I have referred to in the report, in the statement of claim. There's a series of meetings set out in detail in the statement of claim to - which I have referred to in the documents that I have seen. That is the foundation for that particular comment. MR COUPER: So let us just be clear, Mr Hughes, your instructions contain no assumption about what, if anything, was said by any branch manager to any representative of the applicants. Is that right?---Sorry, I didn't hear you. Your instructions recorded in your report contain no assumption about anything which was said by any branch owner to anybody on behalf of the applicants, correct?---Not in the instructions that I received, no. … HIS HONOUR: Well, let me just ask you this, Mr Hughes. I'm not sure why, on the basis of the instructions you were given, concerning the financial performance of the Campbelltown branch and the question of damages, you thought it necessary to enter an area foreshadowed by the pleadings about what certain people may or may not have said, how did that come about?---Well, it comes about by looking at the impact of the broker book, on North Parramatta branch and the Menai branch. It is simply an observation on the basis that these two branches had the benefit of a broker book and any comments that they may have made, which possibly form part of the inducement to enter into the OMB agreement--- What inducement? Why are you concerning yourself with questions of inducement?---Because it's a matter that flows from the figures. Yes?---But, your Honour, in paragraph 76, it sets out the level of broker book allocation. Now, the Campbelltown branch got $1.7 million, it would appear to me from the documents that I've seen. North Parramatta and Menai got considerably more than that. Yes?---Now, if I were a business adviser, or if I were an accountant advising a client, and that client came in to me and said, "Look, I've gone and spoken to two branches," one of the first things I would inquire about is, what is the basis of that, the income being generated by those branches. Now, part of the pleadings in this matter, as I understand it--- Well, why are you concerning yourself with the pleadings?---Well, they are the circumstances relating to this whole claim. Well, why are you concerning yourself with the claim, as opposed to the matters to which your attention was directed for expert report?---Well, this opinion flows from the analysis of the figures which covers the area of my expertise. MR COUPER: Did you regard paragraph 73 of your report as being a matter of assistance to the applicant's case, Mr Hughes?---No, it was a general observation. An observation you weren't invited to make by your instructions. Is that right?---My instructions covered any other matters of importance relating to the performance of the Campbelltown branch. 209 In my view Mr Hughes allowed himself to move beyond the realm of an expert witness and entered the arena on the side of the applicants. His opinions, I regret to say, I found of no assistance. I thought they were unreliable, not least because they were not neutral. 210 However there are certain other conclusions that might be drawn from the objective material attached to his report about which no issue was taken. That material included an analysis of the revenues of the Menai and North Parramatta branches. As I have indicated, I will deal with the question of the broker book a little later. However one of Mr Hughes' central theses was that the benefit of the broker book at North Parramatta was of considerable assistance to that branch and allowed it to outperform a normal franchise. Another thesis was that $4 million per month would be written consistently at that branch as a result. I asked Mr Hughes about those matters when his re-examination had finished. HIS HONOUR: I've got one matter I would like to ask you about, Mr Hughes. I gather it is your view that the existence of the substantial part of the Brokers Book would have been of benefit in writing new loans as well?---Yes. If you have a look at schedule 8, with the figures that you've there got for North Parramatta Branch?---Yes. Well, with the assistance of the Brokers book or not, it seems clear that in the first year of business, that branch did fairly well in terms of writing loans. Writing new business?---Yes. Yes. In the second year however, the performance was---?---Less than that, yes? Less than that, substantially less?---Yes, yes. Does that not suggest that the premise from, the basic premise from which you proceeded, namely that $4 million a month would be written is questionable---?---For which branch? For any branch. I appreciate that that's the assumption that you've used as the basis for your calculations?---Yes. But with the benefit of these figures for North Parramatta, does it suggest that there might be reason to question the assumption? MR KING: Can I just ask: which assumption does your Honour mean? HIS HONOUR: The assumption that $4 million a month would be written consistently. THE WITNESS: I think it would give very good reason to question whether even a branch like North Parramatta would be able to achieve the $4 million per month. I have been asked to assume that $4 million would have been written in the circumstances of my report. … Well, what is puzzling me at the moment, and this is really directed to the $4 million assumption, is why it's not open to question in circumstances where a branch with all the advantages which you have identified sees its actual lending performance [fall away] in the second year of operation in the form revealed by schedule 8?---What I'm saying is that the broker book, the introduction of the broker book was a one off situation. Yes?---And that the levels that were achieved in the second year, they may have been somewhat influenced by the existence of a broker book. Well, let me ask you in a more general sense?---Mm. What do you say about the reliability of an assumption that a bank branch would write $4 million month in and month out on average over years?---I think that would be reasonable. What is that opinion based on?---Well, it's the business of a branch to lend money and continually lend that money. The basis of my belief is, particularly in this circumstance, where you have a document from the bank itself which says, "This is what we expect month in, month out". 211 The figures provided by Mr Hughes showed that the North Parramatta branch consistently wrote loans in the order of $4 million per month or more in the first year of its operation but that it did not sustain that performance in the second year of operation. On the evidence, the effect of the broker book would have been a more gradual one than would explain the performance in the initial months at least. Furthermore, the postulated benefit of the broker book would, if Mr Hughes was correct, have carried over into the second year and have sustained the levels of lending. The actual experience at the North Parramatta branch was contradictory both of Mr Hughes' thesis that the broker book was of substantial assistance and of his assumption that $4 million per month would be written on average regardless of external circumstances. One thing, however, was clearly established by the figures which he provided - namely that Mr O'Kell was on firm ground in his statements to Mr Ramsey and Mr and Mrs Astridge in February 2005 that the business of the North Parramatta branch was, at that time at least, a good and profitable business. The success of the branch is not explained by any influence from the broker book. The broker book figures bear no apparent correlation to the new business lending performance of the branch. Mr O'Kell's direct evidence, which I accept and will discuss later, was that the financial benefit of the broker book in terms of generating commissions and new business was outweighed by the expense of administering it. 212 In the result, Mr Hughes' evidence lends no support to the applicants' case. It does, on the contrary, provide some objective support for the proposition that any view held by the Bank in December 2004 and February 2005 that a target lending figure of $4 million per month was realistic, received substantial objective support from the performance of the North Parramatta branch.

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Mr Fitzpatrick 213 Mr Fitzpatrick's firm, Fitzpatrick and Associates, became the accountants for Astram in about July 2005. It also prepared tax returns for Mr and Mrs Ramsey. In 2007 Mr Fitzpatrick prepared a report on the instructions of the applicants' solicitors for use in a mediation. It was this report which was treated by Mr Hughes as some guide to expenses which might be incurred by a franchise such as the Campbelltown branch. Although Mr Fitzpatrick made some attempt to suggest that, in some cases at least, actual expenses were taken into account in the figures provided, I am satisfied that the report was not one stating actual expenses. The applicants pressed its reception into evidence. After some debate I admitted the report because I did "not feel able to conclude at the moment, that there is no respectable possibility [that] the content of the report could not play a legitimate part in the applicants' case". I emphasised that "proof of the premises, assumptions and bases for the report will be necessary for the conclusions to have any weight in due course". 214 The report has no evidentiary value. Mr Fitzpatrick elected to disregard actual expenses, which were available to him, and advance estimates. The effect of that approach was to postulate reduced costs and increased theoretical profits. The report also proceeded upon the assumption that $4 million a month in loans would have been written. The report was evidently intended to generate an apparently respectable foundation for a claim from which negotiations could proceed. Those negotiations, whether in the form of mediation or otherwise, were not successful. I do not understand why the contents of Mr Fitzpatrick's report were adopted by Mr Hughes, played any part in Mr Hughes' analysis or were advanced in the present proceedings. The report was, as a matter of evidence, unreliable and ultimately irrelevant. 215 The unsatisfactory foundation for the report emerges from the following passages: HIS HONOUR: This report was prepared after the business had - after Astram had ceased to operate the business, and you knew what had actually happened. Why did you not make your---?---Well, we were asking for projections. They asked us to project income they could expect to make. If - on what basis?---On the basis of our knowledge of what a similar bank, be it a bigger bank, would be expecting to write in proportion, in finance. So you proceeded upon the basis of assumptions you knew to be contrary to the facts?---Correct. MR COUPER: Mr Fitzpatrick, was what you were trying to do this: to ignore entirely how this branch had performed and assume that it would have performed well and work out what profit it would have made if it had performed well?---Correct. and: Was it just too much trouble to use the actual figures?---More than likely, yes, easier to do an estimate. This was an estimate you were doing for the purpose of mediation. Is that right?---Correct. You knew what it would be used for was to produce a figure as a negotiating tool. Correct?---Correct. 216 There was uncertainty also about the reliability of the actual accounts maintained under Mr Fitzpatrick's supervision. The books and records of Astram showed Mr Ramsey drawing a wage of $52,800 in the period from 15 August 2005 to 30 June 2006. They showed that tax withheld of $13,244 had initially been remitted to the Australian Taxation Office as tax payable on that wage. However, at the conclusion of the financial year ending 30 June 2006 the tax remitted was re-credited to Astram on Mr Fitzpatrick's instructions. Correspondingly Mr Ramsey's tax return for the financial year ended 30 June 2006 did not show him receiving any wage from Astram. In his evidence, Mr Fitzpatrick first tried to explain the adjustment by saying that Mr Ramsey had made a loan of working capital to Astram and the entries in the books of Astram represented partial repayment of the loan. Such a loan did not show in the balance sheet of Astram as at 30 June 2006. Those circumstances led to the following questions and answers in Mr Fitzpatrick's cross-examination: MR COUPER: Let's have a look at the balance sheet at page 2606, the balance sheet as at 30 June 2006. Did your firm prepare that document, exhibit A27?---Yes, we did. All right, now, this is the document where we expected to see a loan from Mr Ramsey to the company of working capital, correct?---Yes. Where is it?---It's not there. No. It's not there because you didn't treat Mr Ramsey as having made a loan of working capital to the company, did you?---Well, not on the face of this, no. Right, and this was intended to be an accurate balance sheet of the assets and liabilities of the company, was it?---Yes, it was. Can you tell me this? When, in relation to the preparation of these balance sheets - this balance sheet and profit and loss statement, was Mr Ramsey's 2006 income tax return prepared?---It would have been prepared after the accounts. How long after?---Well, more than likely simultaneously. Simultaneously?---Mm. So at the same time your firm was preparing accounts showing that there is no loan from Mr Ramsey to Astram Financial Services, and preparing Mr Ramsey's taxation return on the basis there is a loan from Mr Ramsey to Astram Financial Services. Correct?---Correct. How could that come about, Mr Fitzpatrick?---Well, I'm not sure yet. 217 Whatever the true explanation, those decisions seem to have been driven by Astram's financial circumstances as the end of the financial year approached. Mr Fitzpatrick explained: HIS HONOUR: … you reversed the wages and didn't pay the tax, because the company was not in a position to pay it?---That's right. There would have been a liability there that they wouldn't have been able to pay. MR COUPER: Mr Fitzpatrick, if you look at this payroll activity summary, for the period up to 31 March 2006, you see there's a column for taxes, third column over, and the total of that column is $11,928. Are you suggesting that none of that tax was remitted to the Tax Office, or only that Mr Ramsey's was not remitted?---Once again I'm going from memory. Basically what would have happened is that we would have been lodging BASs with that amount of tax on there. I would assume early in the time that the tax would have been paid, because we did have funds there to pay it, but towards the end, when we were running out of funds, there could well have been a liability with the tax unpaid, and I'm pretty certain in the last quarter that was the case. Well, is it your recollection that before the last quarter, the tax was being remitted to the Tax Office on all wages?---It was, yes. You know, don't you, that from day one, a wage was being attributed to Mr Ramsey?---Yes. It follows, doesn't it, that at least in the early stages tax was being remitted on Mr Ramsey's wage? Correct?---It would have been, yes. Now, are you maintaining that no step was made to recover that tax paid from the Tax Office on Mr Ramsey's behalf?---It would have been when we did the final adjustment, the tax shown on the June quarter bas[e] would have only included - it would have been balanced out to include everyone with the exception of Mr Ramsey. 218 In an overnight break in his cross-examination Mr Fitzpatrick resiled from his earlier explanation although the underlying imperative remained to the forefront of the explanation he then offered. Mr Fitzpatrick decided that the moneys taken by Mr Ramsey now had to be treated as a loan to him, rather than as repayment of a loan made by him. The change in position is reflected in the following passages: HIS HONOUR: In any event, you now treat it as a loan?---Correct. For which he must account?---Correct. … MR COUPER: Your position yesterday was this, wasn't it? Mr Ramsey should be regarded as having lent money to the company, and the money he received, which had been called wages, should properly be treated as a repayment of the loan which he had made to the company. That was your position yesterday, was it not?---It was, yes, looking at that. You have changed your mind overnight, have you?---Well, I'm now aware that there was no MR KING: I object. I object. HIS HONOUR: On what basis? MR KING: On the basis that my friend has - my friend's question proceeds on an assumption which the witness hasn't accepted. HIS HONOUR: What, that he gave that evidence? MR KING: No, not that he - that he has changed his mind overnight. HIS HONOUR: Well, have you changed your mind overnight?---I haven't changed my mind overnight but I'm reading this. Obviously what I said yesterday was that he was owed money at that time, and having looked at the accounts, he wasn't owed money at the time. MR COUPER: Do you accept then, that there was no loan from Mr Ramsey to the company which was being repaid by the sums which were originally characterised as wages?---Yes, I do. Right. Please then explain how it is that the sums originally characterised as wages are not properly regarded as wages?---Well, you can treat them as wages or you can treat them as loan. There's nothing to stop a company loaning money to a director. Well, this company in fact treated them as wages, didn't it?---It did initially, yes. When, if at all, did the company, as opposed to you, first treat the sum as being a loan to Mr Ramsey by the company?---They probably didn't. So you've never had any instructions from the company that the sum paid to Mr Ramsey was a loan to him by the company, correct?---Correct. … MR COUPER: I will ask again to be sure. You had no instructions from the company to treat the wages figure as a loan from the company to Mr Ramsey, did you?---That's correct. Then please explain to us why, when you had no instructions from the company to do so, you have treated figures recorded in the company's books as wages, as a loan by the company to Mr Ramsey?---My instructions are always, for all clients, to minimise their taxation. If I can feel that in any instance, I can minimise their taxation by suggesting to them that payments such as this should be treated differently, then that's what I would do and then, as I've already said, these haven't been approved by Mr Ramsey, so that's the position I would take to him and put forward that case. … You had books and records of Astram, which showed Astram paying fortnightly wages to Mr Ramsey, correct?---Correct. Mr Ramsey did not suggest to you that those payments were not wages, did he?---No. He didn't. You told him he would be better off for tax purposes, to call that figure a loan from the company to him rather than wages. Correct?---Correct. He, notwithstanding what was in the company's books and records, decided he would take your advice and treat the wages paid to him as a loan paid to him, is that right?---Correct. HIS HONOUR: Yesterday you suggested there might have been a more pressing and earlier circumstance, namely the fact that Astram arrived at a point where it could not pay the tax on the wages it was showing in its books as paid to Mr Ramsey? Is that right?---Correct. MR COUPER: Was that part of your process of advice, Mr Fitzpatrick, that to get the company out of its problem with the Tax Office that it could not pay PAYG remittances on wages, the best thing to do was to re-characterise Mr Ramsey's wage as a loan?---Correct. So that that was a decision taken by Mr Ramsey after the event on your advice that his wage would no longer be called a wage; is that right?---Correct. Backdated to - right to the start when he had, in fact, been receiving wages?---Correct. … MR COUPER: Mr Fitzpatrick, the re-categorisation of the wages paid to Mr Ramsey as a loan to him was solely for the purpose of avoiding a tax problem. Correct?---It was - you may classify it as avoiding a tax problem. I would say what I was attempting to do was to assist the company, it was obviously in distress, and reduce their liabilities so they could survive. A consequence of that, yes, it did reduce their tax liability. HIS HONOUR: Depending on how you dealt with it, the company was either - was arguably insolvent?---Well, the company wasn't insolvent, because I mean, once again trying to categorise insolvency is extremely difficult. I mean, obviously they were trying to come up with more capital, they were looking for business, another business partner at the time. There was a number of things happening that hopefully could have pulled the company out. They could have started writing $4 million a month in loans. MR COUPER: I take it from your answers that you've given that you have a recollection of the conversation with Mr Ramsey where you went through this explanation that there was a problem with the company being able to pay its PAYG tax and the way to approach was to treat his wages as a loan to him by the company. Is that right?---Correct. If you had that recollection why did you yesterday give an entirely different explanation for the failure to treat the wages as wages. MR KING: I object. My friend's proposition proceeds on the contestable fact that it is entirely different. He hasn't put to the witness. HIS HONOUR: Yes, all right. I'll allow the question. MR COUPER: If you had a clear recollection of the advice you gave Mr Ramsey that his wage could be treated as a loan from the company to him, why yesterday in your evidence, did you give a different explanation as to why this sum was not treated as wages?---I don't know. 219 Mr Fitzpatrick's admitted preparedness to recharacterise the business affairs of Astram, and of Mr Ramsey, for the purpose of avoiding known taxation obligations renders any prediction he might have made about Astram's likely commercial fortunes unreliable. His evidence, generally speaking, has no value for the purpose of the applicants' case. However there is one further aspect which I should mention. Mr Fitzpatrick seemed clear in his recollection that he had advised Mr Ramsey that Astram risked trading while insolvent if the franchise continued to operate. He gave the following evidence: MR COUPER: Mr Fitzpatrick, do you recall giving advice to Mr Ramsey, perhaps through Mulally Mylott that in about August 2006, that if they continued to trade they faced the prospect of trading whilst insolvent?---I would have, yes. and: HIS HONOUR: Just tell me this, Mr Fitzpatrick, I understand your evidence to be that as you can recall matters now, you would have advised Mr Ramsey that if the business continued, then there was a risk that it would trade while insolvent?---Yes.

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Conclusions about the accounting evidence 220 In Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 McHugh, Hayne and Callinan JJ pointed out (at [46]) that it is central to the assessment of loss or damage caused by misleading or deceptive conduct that: … the plaintiff has sustained (or is likely to sustain) a prejudice or disadvantage as a result of altering his or her position under the inducement of the misleading conduct. and (at [48]): A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted. 221 The applicants set out to establish an evidentiary case that, but for the statements made to Mr Ramsey by Mr Allsopp, Mr O'Kell and Mr Zacharia, none of the applicants would have entered into, or financially supported, the franchise arrangement between Astram and the Bank. 222 Had the applicants succeeded in making out any part of their case, and it had been necessary to assess any figure by way of damages or compensation, I would not have felt able to do so on the basis of the evidence of Mr Hughes or Mr Fitzpatrick. I am inclined to think that the only method of making any such calculation, had it been necessary, would have been to attempt to estimate what would be necessary to place the applicants as nearly as possible in the situation they would have been in but for the franchise arrangement but it is not necessary or appropriate to do more than express that tentative view. Any such approach would not have involved any notion of making good a promise or expectation. Nor would it have provided a basis for any form of relief from pre-existing obligations, such as the home loan already in existence, or money borrowed to buy a second car. 223 The further significance of the accounting evidence is: first it provides support (in the form of Mr Hughes analysis of revenue) for the proposition that the branch at North Parramatta was in fact writing new loans of about $4 million per month at the time of the meeting with Mr Allsopp on 3 February 2005; and, secondly Mr Fitzpatrick provided a graphic illustration of the fact that, by the time of the breach notice (which Mr Ramsey received on 18 July 2006) Astram was in no position to continue in the franchise.

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The broker book 224 It was part of the applicants' case that Mr Zacharia, Mr Allsopp, Mr O'Kell and the Bank represented to Mr Ramsey that the Menai and North Parramatta branches were typical franchises, whereas each of them had a substantial undisclosed benefit which made the difference between success and possible failure. That benefit was the "broker book". 225 During 2004 the Bank decided to discontinue a practice of using brokers to obtain lending business for it. Under those earlier arrangements the brokers were paid a commission. The Bank allocated accounts from these arrangements to various branches. In New South Wales the bulk of the accounts were allocated to the North Parramatta and Menai branches. A small number were in due course allocated to the Campbelltown branch as well. Allocation to the North Parramatta branch commenced in August 2004 and peaked in December 2004. Allocation to the Menai branch commenced in October 2004 and peaked in December 2004. Mr Hughes' thesis was that at each of those branches the combined value of "trailing commissions" on the accounts, and the presumed tendency of a borrower to return to a branch where the account was administered for future borrowings, generated substantial business advantages for those branches. The thesis was based on assumptions made by him and calculations concerning the levels of commission generated. 226 A central defect in this analysis was that no account at all was taken of the cost of administering the broker book. Another difficulty was that the presumed benefit from any tendency to seek further facilities at the branch administering the account did not take into account a number of factors. First, the brokers who had lost the business were actively competing for new business on behalf of other lenders. Their previous clients had a pre-existing relationship with the broker which was at least as strong as that with the Bank, or any branch of the Bank to which their account had been unilaterally assigned. Secondly, renegotiation of an existing loan resulted in commission being paid by the Bank only on the increased facility, but with the consequence that the commission already being generated by the loan was lost. In other words, commission was paid on the difference between the old and the new facilities and not on the new total. Despite the fact that both an upfront and a trailing commission were generated by this arrangement it had little, if any, positive impact in many instances. 227 Mr Hughes made no attempt to test his assumptions by reference to reality. However the respondent called direct evidence about this matter from Mr O'Kell. That evidence included the following: MR COUPER: Now, again, could I ask you about your understanding: if a customer who was part of the broker book wished, shall we say, to increase their loan and which is at - through your branch, what process were you required to follow to make an application for the increase?---That was - it was treated as if it was an entirely new loan application and all the information that was sought and processing was the same as a new loan. When the new loan was drawn - documented and drawn, the old loan was extinguished, and the new loan was drawn which was drawn on our balance sheet. I was - the bank only paid on the increase of funds, so I got a relatively - any commission that was due for the balance transferring this re - clawed back by the bank and - basically those small sorts of increases were quite a nightmare, because they required the full resources of a new loan, but the amount of commission received did not cover the cost of writing it. … The impact was most of those transactions were either slight value to le[n]ders or at best break even on the commission paid at the settlement of the loan and it was really a matter of preserving the relationship and hoping that that would justify that effort down the track. … MR COUPER: Right, and let us confine ourselves to the first couple of months, say August and September 2004; to what extent was the new business you were writing coming from the broker book in those first two months?---I would have to refer to records, but my opinion is virtually nil. … HIS HONOUR: And when was the peak?---Well, the peak was December '04, January '05, your Honour. I would need to refer to records, but that is approximately when it was, and it just has - it ran off from there. And, apart from the trailing commissions, it was a case of going out and getting new business from those customers, was it?---Yes. ... … It did not really accelerate; it plateaued and round the levels that were experienced in late 2004. The reason for that is that most of the customers who had a request were talking to their broker and the broker was refinancing the loan elsewhere, as evidenced by the dramatic run off of the loan balances over the first couple of years. … The broker book produced virtually nil commercial loans in the time I have had it. … Well, presumably, those customers already had a sense of loyalty to the Bank of Queensland itself, because they had had a business relationship with it?---They were broker introduced loans and their primary relationship was with the broker. Some of them had an allegiance to the bank, although I would not say it was anywhere near the majority. 228 At one point Mr O'Kell made an estimate, for his own purposes, of the financial benefit to the North Parramatta branch of the broker book as compared with the cost of administering it. His calculations, which he made after about 18 months of operation, suggested an average administration cost of just under $12,000 per month ($11,967). For the same period Mr Hughes' calculations showed a monthly trailing commission on the broker book accounts of just under $9,500 ($9,499) per month on average. Mr Hughes' analysis suggested that the commission on broker book accounts peaked at between $12,000 and $13,000 per month. 229 I accept Mr O'Kell's evidence that there was no overall benefit at the North Parramatta branch from the broker book. He was unshaken about that in cross-examination. His evidence about this issue has a further significance also. Mr O'Kell said that he was "almost certain" that the matter was discussed with Mr Ramsey and Mr and Mrs Astridge at the meeting in February 2005. He was asked: HIS HONOUR: Why are you almost certain?---Well, I cannot recall word for word, but at the time, it was so dominant in my managing of the business, and the impacts and interruptions were so great, that I'd find it extremely unlikely that I would not have brought up that impact. The impact being a positive impact or a negative impact?---A negative impact, your Honour, with trying to deal with the service issues of those customers who had not had service for some period of time. 230 Part of the applicants' case was devoted to the proposition that the Bank had failed to disclose the allegedly beneficial impact of the allocation of the broker book to the North Parramatta branch. It was suggested, in various ways, that the North Parramatta branch had been provided with an advantage which was denied to the Campbelltown franchise and that the existence of the broker book explained why the North Parramatta branch might be able to achieve a high rate of success writing loans whereas a branch denied the broker book would not be able to do so. No element of this proposition was made good on the evidence. The existence of the broker book, despite Mr Hughes' calculations, was not shown to have had the claimed effect at the North Parramatta branch. As I already have indicated, the allocation of broker book accounts appears to have had no correlation with the lending success of the North Parramatta branch. In any event, Mr O'Kell's evidence dispelled any assumption that it was overall beneficial in net revenue terms.

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Reliance on "tendency" evidence 231 Before the hearing the applicants served notices in accordance with s 97 of the Evidence Act 1995 (Cth) ("the Evidence Act") of their intention to call "tendency" evidence from Mr Darren Scott and Mr Patrick Bridge, the co-proprietors of a franchise of the Bank which had been conducted at Kellyville in New South Wales from 5 September 2005 to 2 July 2008. The evidence sought to be adduced was that Mr Allsopp had, at a meeting on 13 January 2005, made a series of representations to them of the same kind asserted by Mr Ramsey to have been made to him by Mr Allsopp. In particular the evidence sought to be adduced was generally to the effect that Mr Allsopp had told Mr Scott and Mr Bridge (and another person who accompanied them) that New South Wales OMB agencies would be required to write $4 million in loans on average per month, that such a requirement was achievable, that working capital of $100,000 would be needed and that the Bank proposed to engage in an extensive marketing campaign which would assist such branches. 232 When Mr Scott was called the parties agreed that I should make a ruling about whether the evidence proposed to be adduced was admissible in accordance with s 97 of the Evidence Act. Such a course is permitted under s 192A of the Evidence Act. Having heard argument I ruled that the evidence was not admissible under s 97 of the Evidence Act although, as will be seen shortly, I determined at the same time that I would admit it provisionally for a different reason. 233 Section 97(1) of the Evidence Act provides, relevantly, as follows: 97 The tendency rule (1) Evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person's character or otherwise) to act in a particular way, or to have a particular state of mind unless: (b) the party seeking to adduce the evidence gave reasonable notice in writing to each other party of the party's intention to adduce the evidence; and (c) the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value. (Emphasis added) 234 There are other features of that part of the Evidence Act in which s 97 appears (Part 3.6) which should be mentioned. Section 95 provides that evidence which is not admissible under the Part to prove a particular matter must not be used to prove that matter even if relevant for another purpose. This excludes the normal position that evidence admitted for one purpose may be used for some other purpose. Its effect is that the applicants may not rely upon evidence given by Mr Scott or Mr Bridge to prove any suggested tendency in Mr Allsopp unless the evidence is explicitly admitted for that purpose. 235 Section 97(1) was amended by the Evidence Amendment Act 2008 (Cth). The effect of s 97(1), in its earlier form, was summarised in Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51 ("Jacara") by Sackville J (with whom Whitlam and Mansfield JJ agreed) at [48]: "… tendency evidence is excluded only if the Court forms the view that the evidence would not have significant probative value." (Emphasis added - the words emphasised repeat the language of the previous provision.) 236 The legislative device adopted to accomplish the amendment was to repeal s 97(1) in its entirety and replace it with the present s 97(1). On the view expressed in Jacara of the effect of the earlier provisions, the amendment significantly changed the test to be applied for admitting tendency evidence and, in a practical sense, reversed the onus which previously applied. However, there are reasons to think that the way s 97 of the Evidence Act was generally applied, particularly in criminal cases, accorded with the effect of the present statutory formulation (see e.g. Raven Mad: "Scientific Reasoning": "tendency" and "coincidence" evidence (2009) 31 Aust Bar Rev 308). 237 The amendments made in 2008 were based on the report of the Australian Law Reform Commission (Uniform Evidence Law (ALRC 102, 2005)). In its report the Commission made clear its view "that no change should be made to the definition of tendency evidence in s 97" and did "not recommend any amendment to the definition of tendency evidence in s 97" (see 11.11). Although it referred to some expressions of concern regarding operation of s 97 (that it was too loose or, alternatively, too stringent) the Commission said (at 11.17): "Experience of the legislation suggests that the concerns expressed are not warranted. The Commissions remain of the view that ss 97-101 provide an appropriate combination of rules for controlling the admissibility of tendency evidence." (Footnotes omitted) 238 No specific reference was made to the amendment, or its purpose, in the Second Reading Speech of the Attorney-General, the Honourable Robert McClelland, on 28 May 2008. However, the Explanatory Memorandum which accompanied the Bill also suggested that no change to the substantive law was intended. The relevant item (Item 42) stated as follows: "118. Item 42 repeals and replaces current subsection 97(1). The amendment replaces the word 'if' with 'unless' in subsection (1), and 'or' with 'and' in paragraph (a), thereby removing the current double negatives. This item implements recommendation 11-3 of the Report. 119. Existing subsection 97(1) states the tendency rule. The amendment does not change the substantive law, but makes the provision easier to understand." 239 I need not be concerned with whether the statements in Jacara properly reflected the tests earlier applied, or whether there has been a change in those tests. The present legislative formulation is sufficiently clear for my purpose. 240 The test I was required to apply when I made the ruling was that tendency evidence is only admissible if the Court forms the view that the evidence will have significant probative value. At the time that Mr Scott's evidence was sought to be adduced it had not been established that his evidence would have significant probative value and on that basis I ruled that s 97 rendered it inadmissible. A similar ruling was made when Mr Bridge commenced his evidence, although Mr Bridge's evidence extended to other matters to which s 97 did not apply. However, at the time the debate took place concerning Mr Scott's proposed evidence counsel for the applicants referred to and relied upon s 57 of the Evidence Act which permits evidence to be admitted as provisionally relevant. It appeared to me that there was a sufficient foundation for the contention that Mr Scott's evidence might be relevant even if not, at that time, admissible under s 97 of the Evidence Act and I therefore permitted it to be adduced upon the footing that the applicants' right to seek in due course to rely upon it as tendency evidence was reserved if the conditions stated in s 97 of the Evidence Act were later met. The respondent's right to dispute the relevance of the evidence in due course was also reserved. 241 No application by the applicants was subsequently made to rely upon the evidence of Mr Scott or Mr Bridge as "tendency" evidence. As will be seen, even if the evidence from Mr Scott and Mr Bridge is evaluated as though it was admissible as tendency evidence and formed a legitimate part of the applicants' case in that respect, it does not assist the applicants. 242 Mr Scott and Mr Bridge both gave evidence to the effect that Mr Allsopp said to them that writing $4 million a month in loans would be "easily achievable" and that there would be an extensive marketing campaign launched by the Bank towards the end of 2005. I do not need to spend any time on their evidence about the expected volume of loans which they should write if granted their own franchise. It did not differ materially from what Mr Ramsey said and about which I will say enough in that context. However, some discussion of the marketing campaign issue is called for. In addition, both Mr Scott and Mr Bridge gave relevant and admissible evidence of their own assessment of the volume of loans which they believed they could write, to which I shall refer shortly in another context. 243 Both Mr Scott and Mr Bridge said in their evidence that, in the meeting they had with Mr Allsopp on 13 January 2005, Mr Scott raised with Mr Allsopp the question of whether there was adequate brand knowledge of the Bank of Queensland in New South Wales. They said that Mr Allsopp stated, in response, that there would be an extensive marketing campaign later in the year designed to operate for the benefit of owner-manager branches. The context which they suggested was that Mr Allsopp responded to a specific matter raised by Mr Scott rather than advancing, independently, any statement about marketing. A letter provided to them on 13 January 2005 at the end of their meeting with Mr Allsopp included a statement as to what would happen initially so far as marketing was concerned. It made clear that such local marketing as occurred would be at the expense of the branch. It made no mention of a more extensive or more general advertising campaign. Any representation made by Mr Allsopp about the question of marketing more generally, if it was accepted that he made one, was necessarily additional to matters referred to in the letter which was in similar terms to the expression of interest letter given on 3 February 2005 to Mr Astridge and Mr Ramsey. 244 The statements which Mr Scott and Mr Bridge suggested were made to them about marketing are not the same as the statements attributed by Mr Ramsey to Mr Allsopp. Their evidence would not, therefore, be probative of any "tendency" in Mr Allsopp to make the statements asserted by Mr Ramsey, even if admissible for that purpose. There is no doubt that something was said about marketing, as I shall shortly discuss. The evidence of Mr Scott and Mr Bridge is not necessary, and does not assist, to come to a general conclusion of that kind. Taking all those things into account, their evidence about marketing was not relevant and would not advance the applicants' case even if admissible on the issue.

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Mr Ramsey's claims about marketing 245 Mr Ramsey gave evidence that, at the meeting with Mr Allsopp on 3 February 2005, Mr Allsopp spoke about the Bank's plans for a major marketing campaign as he had in the earlier meeting on 9 December 2004. Both at the meeting on 3 February 2005 and at the earlier meeting on 9 December 2004 those statements were alleged to have been made in the following context: I said to him, Bank of Queensland as a name in New South Wales, you know people are quite parochial, and about the brand name, and I said, are they going to change the name to BoQ? He said, no they would not change the name, that they would be doing a radio/TV and television marketing campaign and they would tailor it also to the branches that were opening. 246 Mr Astridge's evidence was to a different effect. In cross-examination about the meeting on 3 February 2005 he gave the following evidence: MR KING: And he also told you that they would conduct a radio, TV and television marketing campaign tailoring it to the opening as was expected of a significant number of branches at or about the same time?---No. He said that that would be conducted when there were enough branches in New South Wales to justify it. and: MR KING: But you agree that he did indicate there would be a major radio, TV and television marketing campaign associated with the opening of the branches?---No, we were just going to have an opening ceremony. There would be an opening ceremony in your particular branch but associated with the opening of the branch, in order to promote the brand name in New South Wales, as part of the expansion program there would be a major radio, TV and television marketing campaign?---Again, I believed that to be the case when a sufficient number of branches were in New South Wales. 247 Mr Ramsey's evidence alone is insufficient to establish that any statement was made by Mr Allsopp which could be regarded as some form of assurance that a franchise operation subsequently approved for Mr Ramsey and Mr Astridge (or Mr Ramsey alone), conducted by a franchisee not yet established, at a location not yet selected, commencing on some unspecified date in the future if all other conditions were met, would be supported by a marketing campaign tailored to it. 248 Allegations that the Bank, through Mr Allsopp, had promised a major marketing campaign were not originally relied upon by the applicants. Although the proceedings were commenced in December 2006, the allegations about marketing formed no part of the pleadings in the applicants' case until they were raised for the first time in mid 2009, about one month before the hearing was to commence. In support of an application to amend the pleadings Mr Ramsey swore by affidavit that he had overlooked the issue until his recollection was prompted by questions asked of him by his legal representatives during the course of preparing for the hearing. 249 There was an obvious similarity between the way in which Mr Ramsey said the issue of marketing arose and the way it arose in the meeting attended by Mr Scott and Mr Bridge. In his evidence Mr Ramsey also said that it was he who had raised the issue of knowledge or awareness of the Bank's "brand" with Mr Allsopp and gave evidence to the effect that Mr Allsopp said in response that there would be a major advertising campaign. Like the evidence of Mr Scott and Mr Bridge, this suggests that the context in which the asserted statement was made was as a response to a matter raised with Mr Allsopp rather than by him. Mr Ramsey's reference to the Bank's "brand", the same term as attributed by Mr Scott to his own discussion, may have been coincidence. Alternatively, it may have been something added by Mr Ramsey to his case to bolster it. His professed recollection of the detail of the suggested question and Mr Allsopp's response is difficult to reconcile with his suggestion he had overlooked this part of the discussion until shortly before the hearing commenced. 250 Mr Ramsey was asked about that delay in cross-examination. His explanation was unconvincing: MR COUPER: As I understand you, you say that statement by Mr Allsopp was a matter of such importance to you that if you had known that a marketing campaign would not take place, you would not have entered into the OMB agency agreement. Is that right?---Yes, if we weren't going to get the marketing support to increase the brand awareness, no, we wouldn't have. That must have been a matter which stuck in your mind. A number of the complaints you made during the course of your conduct of the branch were about absence of marketing support. Is that right?---Yes. All right. You gave instructions for the preparation of the statement of claim in this case. Correct?---Yes. You took a good deal of care to identify what you said were the representations that you relied on in decid[ing] to go ahead with this venture. Correct?---Yes. You wanted at the time you gave those instructions to identify everything which was a representation which made you decide to go ahead with this venture. Correct?---Yes. In particular, everything which was a representation of that type which you regard as having been incorrect or untrue. Is that right?---Yes. You know, don't you, that the allegation in your statement of claim that a representation was made about a major marketing campaign and you relied on it were included in your statement of claim for the first time in August of this year?---Yes. … Can you explain how it is that you seem to have completely forgotten about these representations about marketing and your reliance on them until your solicitors brought it to your attention in June of this year?---I just hadn't given it any consideration since I did my original draft. 251 I think it is unlikely that Mr Ramsey could have overlooked a matter of this kind if he had, in truth, relied upon a statement of the kind he attributed to Mr Allsopp, I think it more likely that Mr Allsopp made some general and unfocussed statement of the kind suggested by Mr Astridge. I conclude that it is unlikely that anything specific along the lines suggested by Mr Ramsey was said. 252 Moreover, having regard to the principles I shall later discuss, it would be necessary to take into account the whole of the Bank's conduct before concluding that Mr Allsopp had misrepresented the position. 253 In the expression of interest letter provided to Mr Ramsey and Mr Astridge on 3 February 2005 the following was said about marketing: Marketing The marketing support which will initially be provided by the Bank will be limited to local area marketing activities for the opening of the Branch. This support will be at the cost of the Owner Manager and is likely to be about $10,000. All marketing by the Owner Manager must be approved by the Bank. 254 Apart from the statements made, to which I have already referred, in the expression of interest letter of 3 February 2005 and the offer letter of 16 March 2005, each of which made clear that marketing of the local branch was the responsibility of the operator, clause 18 of the OMB Agreement, which was executed on 26 April 2005 (four months before the Campbelltown branch opened), provided as follows: 18 ASSISTANCE FROM THE BANK 18.1 Bank must assist Agent The Bank must provide the Agent with sufficient assistance, including materials, to enable it to carry out its obligations under this Agreement in relation to marketing, promotions, training and the day to day operation of the Branch. 18.2 Continued provision of assistance The level of, and continued provision of, the assistance provided under clause 18.1 is at the sole and absolute discretion of the Bank. 255 When all these matters are taken into account the applicants cannot sustain the suggestion that some form of promise was made or assurance given about an advertising or marketing campaign which would be necessarily related to the circumstances or interests of a franchise wherever it might be established which is, as Campbelltown had not even been selected, the way it must be put by them. 256 Even if the statements attributed to Mr Allsopp had been made by him and had the quality of some form of prediction, I would, for the reasons which follow, not have accepted that it was shown, on the evidence, to have been influential in Mr Ramsey's decision to pursue the franchise. 257 It was part of the applicants' case that the Bank had failed to make good Mr Allsopp's representation about marketing because, according to Mr Ramsey, there was no major advertising campaign until Astram had left the Campbelltown branch. However, there is no evidence that Mr Ramsey made any form of active protest to the Bank about lack of such support when experience began to show that the branch was operating well below his expectation and predictions. Some such protest was to be expected if he had really relied on statements of the kind suggested. As I have indicated, I also think it unlikely that something upon which Mr Ramsey in fact relied would have been overlooked in the pleadings in the way he suggested. I do not accept therefore that any statement made by Mr Allsopp about marketing was an operative factor in Mr Ramsey's pursuit of the franchise opportunity. 258 Finally, there is no evidence that a general marketing campaign would have had any influence on the performance of the Campbelltown branch. In his evidence, Mr Bridge identified, as a difficulty he perceived for the operation of the Kellyville branch, the fact that the Bank was not well known in New South Wales. However, there was no evidence which would have permitted any assessment of the significance of such a factor, even at Kellyville. Mr Ramsey gave evidence that there was a major marketing campaign undertaken by the Bank in late 2006. That was not mentioned by Mr Bridge and there was no evidence, therefore, of what impact, if any, it had even at Kellyville. 259 Mr Ramsey gave evidence that he organised and paid for local advertising. There was no evidence, even of an anecdotal kind, that it had any particular effect on the volume of new business. There is no basis to conclude that a more general advertising campaign would have had positive financial effects for the Campbelltown branch. Even if some form of misrepresentation had been established, and I was persuaded that Mr Ramsey had relied upon it, there would be no foundation for the grant of any relief arising from those facts so far as the question of marketing was concerned.

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Character and quality of asserted representations 261 It will later be necessary to refer again to the legal elements of the case which the applicants must establish to succeed in their allegations that the Bank engaged in misleading and deceptive conduct. One issue which will arise is whether statements made by Mr Allsopp to Mr Ramsey about matters which then lay in the future were made with reasonable grounds for doing so, and where the onus lies for proving, or disproving that matter. 262 The essential elements of the applicants' case about misleading and deceptive conduct may be reduced to the proposition that Mr Allsopp made the following representations to Mr Ramsey upon which he relied, in the sense that he would not have gone ahead with the franchise had he understood they might not be fulfilled:

The Bank expected a franchise to write at least $4 million in loans each month within a reasonable time after establishment.
At that level of new business the franchise would succeed.
Writing loans of $4 million per month was achievable.
There was (by implication) no reason known by the Bank why a franchise would not write loans at that level.
The Bank would embark on a major advertising campaign, at its expense, tailored to the circumstances of an individual franchise, such as the branch at Campbelltown, at about the time it commenced operations. 263 It is convenient, having dealt in some detail with the factual and other matters relied on by the applicants, to state some conclusions about these suggested representations, based on the evidence I have discussed. I shall deal with the question of reliance separately.
$4 million in loans per month was expected 264 I accept that, in various ways, a target of this kind was set by the Bank. For example, it was clearly stated in the offer letter of 16 March 2005. Although there was some resistance by the Bank to the applicants' suggestion that Mr Allsopp had discussed a figure of $4 million per month in loans at the meetings at which Mr Ramsey was present it would not be surprising if the figure was discussed openly at the meeting on 3 February 2005 at least. I accept that Mr Ramsey and Mr Astridge understood that a volume of business at that level was desirable because it would meet the Bank's general requirements and it would provide them with a commercially satisfactory return for their participation in the franchise. Any statement to that effect was true.
At $4 million per month the business would succeed 265 As earlier indicated, it was common ground in the case that achievement of a target of writing $4 million in loans on a monthly basis would yield a satisfactory rate of return to the franchise. Equally, it would yield a satisfactory rate of return to the Bank itself. Any statement to this effect by Mr Allsopp should be regarded a reliable prediction.
$4 million per month was achievable 266 It was not established by the evidence that a statement to this effect was actually made by Mr Allsopp but not much turns on that. Obviously enough, the matters I have just dealt with, particularly the first of them, would have suggested that the target set by the Bank reflected a view by the Bank that the target was achievable. There was a good deal of evidence in the proceedings which supported the proposition that any statement, express or implied, made in or about February 2005 to the effect that writing $4 million in loans per month was achievable, was based on reasonable grounds. 267 As I earlier mentioned, evidence was led in the applicants' case from the proprietors of the operating company of the Kellyville franchise. The Kellyville franchise opened on 5 September 2005 and ceased operations on 2 July 2008. Mr Bridge was a very experienced bank officer before taking up the franchise at Kellyville. He worked for the Commonwealth Bank in a variety of roles and from 1996 had been the Manager, Retail and the Lending Manager in charge of the Parramatta area, the Blacktown area and the Windsor area. He was finally in charge of lending in the Sydney CBD area. In those roles he had a number of people reporting to him including, finally, 11 personal banking lenders and three business development managers. His evidence, given in cross-examination, was that in the Commonwealth Bank lenders under his control were writing approximately $1 million of loans a week each. At the Commonwealth Bank $4 million a month would have been written by a lender in home loans alone. The Commonwealth Bank itself had a target of $1 million a week for its lenders in the CBD area. These matters all give substance to the achievability of a $4 million per month overall lending figure as a matter of general banking experience. 268 Furthermore, like Mr Ramsey and Mr Astridge, Mr Scott and Mr Bridge worked out their own business plan for the Kellyville branch. According to Mr Scott's evidence he and Mr Bridge worked out, as an assumption for themselves, the average value of a home loan in the Kellyville area at $300,000, the average value of a retail unsecured loan (a personal loan) at $12,000 and the average value of a commercial loan at $300,000. None of those figures were given by Mr Allsopp. Mr Scott and Mr Bridge worked out for themselves how many of each category of loans they thought would be written by a franchise in the Kellyville area each month. Mr Scott's evidence included the following: MR COUPER: This is the case, Mr Scott, isn't it, that what Mr Allsopp said to you at the meeting is that in order for your business to have prospect of long-term viability you would have to be able to write $4 million of loans a month. Correct?---If you didn't write $4 million a month your business model doesn't work. What he said to you was if you didn't think you could write $4 million a month you should stop now. If that right?---That is correct. He then told you that what you would have to do would be to do your own research to satisfy yourselves you would be able to write $4 million a month in the area you were proposing to do business. Correct?---That was part of it. I actually asked him if we could have access to figures from existing franchises. He said that wasn't available due to commercial confidentiality. Well, we will come back to that. But part of what he said to you was you have to go out and do your own assessment of whether you would be able to write $4 million a month in your area or not. Correct?---That is correct. 269 Mr Scott had understood Mr Allsopp to refer to a need to write $4 million a month in total loans. By contrast he and Mr Bridge had calculated that after ten months or so a franchise at Kellyville would write $5 million a month in home loans alone. 270 Mr Bridge gave the following evidence about the conversation with Mr Allsopp: MR COUPER: Did he tell you he didn't know anything about the area you were planning to open up in and you needed to make your own assessment?---Of the area, correct. You understood that he wasn't giving you any indication about whether he thought you would write any particular level of business in the Kellyville area. Correct?---What was that question again? You understood that Mr Allsopp was indicating to you that he was making no prediction about what level of business you might be able to write in the Kellyville area. Correct?---Correct. and: HIS HONOUR: Did you understand that the bank's position from the outset was that the risk was yours?---Yes. 271 Mr Bridge also gave evidence about another matter of which no account was taken in the applicants' case. That evidence was: MR COUPER: One of the things which happened after you had commenced the Kellyville business was this, was it not, Mr Bridge, that there was a significant economic downturn in New South Wales?---Correct. HIS HONOUR: I'm sorry, I didn't hear your answer?---Correct. Yes thank you. MR COUPLER: That significant economic downturn in New South Wales became apparent towards the end of 2005. Was that so?---Approximately, yes. Yes. It wasn't a matter which was apparent to you that the - I'm sorry, I will retract that. The prospect of that economic downturn was not apparent to you when you prepared your business plan in early-2005, was it?---Our - no. You in your role at the Commonwealth Bank, to put it colloquially, were keeping a finger on the pulse of economic activity in New South Wales, weren't you?---Had a plan to meet, correct. Yes. In your position as manager, retail, CBD of the Commonwealth Bank you had no reason to expect in early-2005 that there would be a housing downturn of the size which in fact eventuated. Correct?---Correct. 272 There was no evidence about whether the unexpected economic downturn in New South Wales towards the end of 2005 was likely to have had an effect on the Campbelltown branch. Mr Bridge resisted the suggestion that the downturn explained why the Kellyville branch did not meet expectations. His assessment was that the low profile of the Bank in New South Wales was the reason. Whatever the correct view is about that matter, it does not detract from the fact that, in early 2005, there was ample reason to be optimistic about the prospect of writing loans of at least $4 million per month as each of Mr Scott, Mr Bridge, Mr Astridge and Mr Ramsey all were. 273 To the extent that Mr Allsopp suggested to Mr Astridge and Mr Ramsey that loans of that level were achievable, the task for the applicants (for reasons to be discussed) is to show that there were no reasonable grounds for making such a statement. The evidence of Mr Scott and of Mr Bridge (of Mr Bridge in particular) demonstrates that a statement of this kind was not an unreasonable one to make at the time. Certainly it was not an unreasonable one to make so far as it concerned the Kellyville branch. It matched the assessment made by Mr Scott and Mr Bridge who applied themselves to the task of predicting their own commercial fortunes based on the available information. It was not unreasonable, either, so far as it concerned the Campbelltown branch. It matched the assessment made by Mr Astridge, with his banking experience, and by Mr Ramsey himself who, although not an experienced banker, applied himself to a study of the demographics of the Campbelltown area and made predictions based upon his own assessment of his business capacities. If there was a failure of the expectations thereby generated that says more about the failure of Mr Ramsey's predictions about his own capacities to generate business than it does about the reasonableness of any statement made by Mr Allsopp. 274 At the time of the meeting with Mr Allsopp on 3 February 2005 the trading figures from the initial months of trading at the North Parramatta branch were available. Mr O'Kell's evidence was that he was actually writing loans of at least $4 million per month in that period. Mr Hughes' figures bore that out. That is further evidence that there were reasonable grounds for saying, or implying, that writing loans of $4 million per month was achievable. 275 Finally, Mr Clancy's evidence, to which I earlier referred, also gave support to the view that writing loans of $4 million per month at the Campbelltown branch was achievable under competent management, in May 2006, even after the economic downturn in New South Wales. 276 I emphasise that I am not required to assess whether the assessments to which I have referred were ultimately reliable. The question for present attention is whether there were reasonable grounds upon which Mr Allsopp might have said in February 2005 (or in December 2004) that writing loans of $4 million per month was achievable.
No reason why $4 million per month would not be achieved 277 It was a central premise underpinning the applicants' pleaded case that the franchise model was flawed because a target of $4 million per month in loans was not readily achievable. That proposition did not receive support from any witness in the case. As I have already discussed, a number of people, on the evidence, made an independent assessment in line with the Bank's expectation that this figure was achievable. 278 It was also an essential ingredient in the applicants' argument (and was assumed by Mr Hughes) that Mr Allsopp said, implied or inferred that the target would be met if a franchise was taken up, although this put matters more highly than the case was actually pleaded. I reject the suggestion that Mr Allsopp (or the Bank) gave, or implied, any assurance that $4 million in loans would actually be written. 279 I shall later discuss the need to take into account the whole of the Bank's conduct, including the letters it wrote. However, even if the matter is tested by reference solely to what might have been said by Mr Allsopp the applicants cannot succeed on this aspect of their case. Mr Allsopp told Mr Scott and Mr Bridge that if they didn't think they could write $4 million a month in loans they should stop at the outset. He told Mr Ramsey that an experienced banker was critical to the success of a franchise operation of the kind contemplated by the Bank. The experience at the Kellyville franchise was contrary to the expectations of Mr Scott and Mr Bridge. The experience of the Campbelltown branch involved disregard of a fundamental ingredient conducive to commercial success. It also involved a failure by Mr Ramsey to generate new business. It is not possible, on the evidence, to be satisfied that the failure of the Campbelltown branch under Mr Ramsey's stewardship was due to any flaw in the commercial arrangements represented by the OMB Agreement. 280 The applicants' case was based on the misstated premise that the Bank was required, in effect, to underwrite the commercial performance of the Campbelltown branch in Mr Ramsey's hands. That was not the case. Mr Ramsey does not seem ever to have really appreciated that not only was he dependant on others when it came to basic banking operations but he was not well fitted, despite his optimism to the contrary, to interest potential customers in the Bank's products, much less convert any interest into concluded loans. It was only by writing successful loan applications to the Bank, and obtaining deposits, that the franchise would survive. Mr Ramsey showed a theoretical appreciation of that necessity in his participation in the formulation of the business plan but was never able to convert that theoretical position into a business reality. His business failures provide a much more cogent explanation for the failure of the franchise than the thesis advanced in the applicants' case to the effect that the "model" was flawed. That proposition lacks support in the evidence. It was certainly never established by the applicants on the preponderance of probabilities. 281 That is not to say that the franchise arrangement necessarily represented a good investment. Perhaps it did not. Perhaps the franchise cost was too high or the commissions offered were too low for the business to comfortably succeed, making that assessment with the benefit of hindsight. Perhaps the "Bank of Queensland" was insufficiently known as a brand in New South Wales. However, criticisms of this kind, if they are available, do not satisfy the legal tests which confront the applicants if they are to succeed in the causes of action chosen by them to challenge the various security instruments that were executed and their obligations under the OMB Agreement.
Major marketing campaign 282 I have already rejected the suggestion that Mr Allsopp gave any assurance that the Bank would conduct a major marketing campaign which would be tailored in any sense to the opening of the Campbelltown branch.

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Inducement and reliance 283 If the Bank's conduct was to any extent misleading or deceptive it would still be necessary, in order for the applicants to obtain any relief, to show that the misleading or deceptive conduct had caused them some loss. In a case of the present kind they would need to show that they had been induced to commit themselves financially by the Bank's misleading or deceptive conduct or had, in some relevant way at least, relied upon it to their detriment. 284 At various times during Mr Ramsey's evidence in chief he was asked whether he believed that particular statements attributed by him to Mr Zacharia, Mr Allsopp and Mr O'Kell were true and whether, had he known them not to be true, he would have gone into the franchise arrangement. He said, in each case, that he believed the statement to be true and that he would not have proceeded had he known the contrary to be the case. These almost ritualistic exchanges were intended, no doubt, to lay a foundation for a submission that Mr Ramsey had relied upon the statements made to him when he decided to commit himself financially to the franchise arrangement. Were it necessary to decide the case on the question of whether the applicants actually relied on the matters referred to by Mr Ramsey, as the basis for their decisions and commitments, then the applicants would fail on that issue, as they fail on every other element of their case. 285 In my view the efforts to establish the proposition that Mr Ramsey had relied to his detriment upon misrepresentations made orally to him were entirely unsuccessful. First, it will be apparent from the findings which I have already made that no relevant representation, upon which Mr Ramsey said he relied, was both made and was untrue or was made without reasonable grounds for making it. Furthermore, Mr Ramsey had a practical obligation to make decisions based on his own enquiries and analysis. In part, that is so because of the disclaimers which were issued by the Bank at the time and its instructions that intending franchisees were to make their own inquiries. In part it is because Mr Ramsey was contemplating a major commercial venture requiring a substantial personal capital investment and it would be irresponsible not to take adequate practical steps to look after his own interests. He could not expect the Bank to do that for him. Furthermore, the evidence as a whole (including Mr Ramsey's own evidence) satisfies me that he did not, in fact, rely upon the statements he identified. He relied upon his own assessment. Perhaps his assessment was overly optimistic. Perhaps he was buoyed by a sense of enthusiasm that was not objectively justified. However, the responsibility for his decisions was his and his alone, particularly when he elected to buy the interests held by Mr and Mrs Astridge and proceed with the franchise alone and with double the financial exposure. 286 There are other reasons also, arising from the evidence of both Mr Ramsey and Mrs Ramsey, why I do not accept that either of them relied upon statements or conduct of the Bank, which may be fairly described as misleading or deceptive, in order to make the financial commitments which they each made. Before I discuss those matters in a little more detail it is desirable to say something about Mrs Ramsey's position. 287 Mrs Ramsey's evidence was that she accepted what her husband told her about the statements made to him and she relied upon them when she committed herself to the guarantees and mortgage which she signed. She denied having read the various written disclaimers given by the Bank to Mr Ramsey and Mr Astridge which they each acknowledged in writing. However she did not advance a case that the Bank had failed in some independent duty to her, nor that she had been misled in any material respect by her husband. It is clear from her evidence that she appreciated the nature and effect of the documents which she executed. Her case, in the end, falls to be decided by the same considerations as apply to Astram and Mr Ramsey. That is so both with respect to the relief sought by the applicants and with respect to her exposure to the relief sought under the cross claim. 288 I am satisfied that Mrs Ramsey was a willing participant in the arrangements which were made with the Bank and that she was under no relevant disability when she entered into those arrangements. I have earlier referred to her evidence about her discussions with Mr Bell and Mr Cavanagh and to her appreciation of the financial risk to her if the business failed. It was clear, also, from her evidence that she had a real say in any decision by Mr Ramsey to go ahead with the franchise arrangement. I am satisfied that Mrs Ramsey made her own assessment of Mr Ramsey's plans in this, and other, respects. She appears to have proceeded by making some assessment for herself of the likelihood of success or failure of business ventures. Amongst her evidence were the following passages: MR KING: Do you recall that your husband one day informed you that he had seen Mr O'Kell?---He did. Did you have a conversation with him regarding that meeting?---I always asked him about his meetings. He said that … Sorry, would you just repeat what you just said?---I always asked him about his meetings. Right. Why did you do that?---Because I wanted to know what was going on. Yes, and what did he say?---He said that Graham O'Kell had confirmed what Garry Allsopp said, that they needed to write $4 million in loans and that was achievable and he was capable of doing that, and he told him that his business was doing very well, and that he had paid his business off in six --- Was that important to you?---Well, it was important to me, because I thought even if Graham O'Kell is a really good operator, if David and Leicester did quarter of that, they could pay off their loans in two years. I thought that was still very good. Like, I thought this was going to be a good business for him to go into. Yes, and why was that a concern to you?---Well, I didn't want him to go into a business that was going to fail. and, in cross-examination: MR COUPER: … Ms Ramsey, can I take you back to the conversation you had with your husband after he had met with Mr O'Kell?---Yes. Did you say something to him to this effect, "I hope this is not another one of your schemes"?---He had been looking at lots - no, I didn't say schemes. That is what he said. He had been looking at a lot of different businesses and I didn't like any of them, so I told him not to go ahead. Over what period of time had he been looking at other businesses?---Probably over the last six months before he came across the Bank of Queensland. All right, and you regarded those - well, tell me what the businesses were? I can't remember. You regarded them as being, what, business which were unsuitable for him to operate?---No, businesses that I didn't think would be viable. Well, do you recall what they were?---No, I can't. In any event, if you told him not to go ahead with those businesses, that had the effect of stopping him. Is that right? Your husband had been the subject of an armed hold up late in 2003. Is that right?---That is right. He hadn't worked since then. Is that right?---Right. He was looking for a business as a way of earning income for the family. Is that right?---Right. You were concerned about what type of business he may end up going into?---I just wanted to make sure he didn't go into anything that would fail. Well, that would mean, I take it, that you were keen to look carefully for yourself at all the available information about whatever business he was interested in. Is that right?---No. He just would relay things back to me and I would think, "No, that doesn't sound right", or, "That does sound right". You formed a view about whether you would let him go into businesses based upon incomplete information. How did you make a decision about whether to let your husband go into a business?---Just on what they said. Like, if I didn't think it made sense, I would say, "I don't want you to go into that". 289 I am satisfied that Mrs Ramsey was an active participant in the decision making process and, indeed, that she exercised a significant right of veto. I am equally satisfied that Mr and Mrs Ramsey both set out to persuade the Bank that Mr Ramsey was a suitable person to participate in the franchise and persuade the Bank that, between them, they had sufficient assets and financial standing to offer the Bank dependable security. In other words, they set out to persuade the Bank that Mr Ramsey should be accepted. They did so, in part, by providing unreliable, and even false, information. 290 Some time before Mr Ramsey's chance meeting with Mr Zacharia, Mr and Mrs Ramsey were participants in a franchise business known as Welcome Wagon. They operated it for two years. As a result of their dissatisfaction with that business they brought proceedings against the franchisor based on the assertion that the true position had been misrepresented to them. In the curriculum vitae which Mr Ramsey supplied to Mr Allsopp in support of his expression of interest in a franchise Mr Ramsey made no reference to his participation in that business. He did, however, in a personal financial statement also provided to the Bank, suggest that amongst his assets was a legal settlement of $250,000. I think the fair inference arising from this statement is that such a settlement had been achieved and was expected. The issue was pursued in cross-examination. The following evidence was given: MR COUPER: You were asked some questions by my learned friend, Mr King, two days ago about what your employment and business history had been. Do you recall that?---Yes. You again failed to mention the unsuccessful Welcome Wagon franchise business, didn't you?---Yes. Why did you leave it out from your evidence here two days ago?---No specific reason. Well, do you say you had forgotten about the failed Welcome Wagon business? I'm sorry?---Well, I never even gave it a thought. All right. Did you give it any thought when you were doing your CV in 2005?---The Welcome Wagon? Yes?---No. All right. Can you, please, in folder 2 to page 404 to exhibit A3 your personal financial statement? Are the contents of that document accurate?---Are you referring to the legal settlement? I'm asking you about the contents of the document, Mr Ramsey, are they accurate?---To the best of my knowledge. All right. Now, let us get to where you are; the legal settlement. What is: Legal settlement $250,000, mean?---To do with Welcome Wagon. All right. Well, just explain to me what you intended to convey by putting in your financial statement as an asset: Legal settlement $250,000?---I also included it in my loan application that there had been a legal settlement. I've never received the payment, and I have since found out that the person involved has gone bankrupt. Well, let us think about 2005 when you produced this document to the Bank of Queensland. You intended the bank to think that this was an accurate statement of your assets and liabilities, didn't you?---At that time that was to the best of my knowledge. All right, and this legal settlement, was it what you expected to receive from the proceeds of a judgment which was at that time several years old?---That was - the person involved, John Davies, gave me a letter which said that he would be paying us $300,000 as part of that settlement. It never took place and I never received it. Well, tell me on what basis you included $250,000 as an asset in your statement of assets?---On the basis that I said there was a legal settlement going to come through, and I also included that in my loan application. In my loan application it says that I was expecting $250,000. Well, is this the position, Mr Ramsey? That Mr Davies' a company called Lancaster, wrote to you in November 2004 and told you that they would be depositing $300,000 into your bank account the next day?---Yes. The next day came and there was no money. Correct?---Yes. Then some months went by and there was still no money?---Yes. After Mr Davies' company failed to come good on its statement that you would receive $300,000 the next day you had no reason to expect that Mr Davies ever intended to pay you, did you?---No, that's not correct. Well, on what basis did you think that you might receive $250,000 of the $300,000?---On the basis that he told me he would be paying it to us. When did he tell you that?---He has told me numerous times that. Over many years?---Over many years. So Mr Davies tells you over many years, "I'm going to pay you the judgment sum I owe you". It gets to November 2004 and tells you, "I'm going to pay you tomorrow"; is that right?---I can't remember if the letter says tomorrow. He did say in the letter that I provided a copy of that he would be paying us the money. Despite him--- HIS HONOUR: What money?---From the Welcome Wagon case. How much?---He said he was going to pay us $300,000 because of interest and everything else and the legal costs we had incurred in the case. But you say you have used this figure of $250,000?---Yes. ---in both the financial statement and in a loan application?---Yes, and I said in the loan application that I was hoping to get the $250,000 which I would be looking to pay off on my mortgage. It says it in the loan application. The other $50,000 was towards legal costs that we still owed people - of money I had borrowed. MR COUPER: In fact, I am wrong, Mr Ramsey. What Mr Davies told you on 19 November is that he would remit $300,000 to your bank account on Thursday, 25 November. Look at this letter, please. I won't [sic] look at it, just for the moment. Is that the letter you were talking about, Mr Ramsey?---That is the letter. Now, as we have said, in fact, the money never came?---Yes. So there had been a series of promises for years by Mr Davies to pay you money, none of which caused any money to materialise. Correct?---Correct. But on that basis, you included in your statement of assets to the bank that you had an asset worth $250,000, being a legal settlement. Is that right?---Yes, I did. That was simply an attempt by you to give the appearance of having more assets than you in fact had, was it not?---No. Well, I will invite you to tell me what basis you had as at February 2005 to think that you would ever be paid $250,000 in the foreseeable future?---On the undertaking John Davies had given us over numerous months since he had sent me this letter. I take it it must have been in your mind when you submitted your CV to the bank that you were expecting $250,000 from Mr Davies on this court case. Is that right?---Yes. So it must have been in your mind that the basis for receiving that money was the failed Wagon Wheel franchise. Correct?---No. You somehow compartmentalised your mind, so you forgot about the fact you conducted the franchise, but you recalled that you were going to get money from the court case. Is that right?---Yes. 291 It is clear from this evidence that Mr Ramsey was less than forthright with the Bank in at least two respects. He failed to disclose that he had been involved in a franchise business in the recent past. He represented, without a sufficient basis for doing so, that he expected to receive $250,000 as a legal settlement. I am satisfied that the evidence which he gave disclosed that he did not have a substantial basis to expect that the money would actually arrive. There was no evidence that the settlement was paid at any time thereafter. Mr Ramsey explained the difference between the $300,000 settlement which he alleged was expected and the figure of $250,000 which he gave to the Bank as an asset, as due to the fact that outstanding loans to pay legal costs, of $50,000, would have to be deducted. That liability also was not disclosed to the Bank. 292 Mrs Ramsey became a party to this misrepresentation. In a statement of her personal assets dated 21 July 2005 given to the Bank in connection with an offer to guarantee the debts of Astram she also referred, as an asset, to a legal settlement of $250,000. By the time this statement of assets was signed in July 2005 many more months had passed after the promise to pay the legal settlement upon which Mr and Mrs Ramsey relied had been dishonoured. It seems to me that Mrs Ramsey also actively misrepresented the position. Furthermore, any suggestion that such an entitlement could be counted as her personal asset, in addition to any interest that Mr Ramsey might have had in the settlement, is unsustainable. 293 In the same statement of assets Mrs Ramsey represented that she had a monthly salary of $5,000 ($3,350 after tax) and income from Centrelink of $1,135 providing a total net monthly income of $4,485. At the time Mrs Ramsey was not working. She was not earning income. She was not paying tax. Her cross-examination proceeded as follows: MR COUPER: Do you see in the income section?---Yes. a line item "salary?" You've written under the word "gross," "$5000"?---That's right. Under the words "after tax," $3350. That was a monthly figure, according to that page. Is that right?---Yes, I said that, yes. Well, you see the words "monthly income" above the word "salary"?---Yes, yes. So were you telling the person to whom this form was directed that you were earning a monthly salary of $5000?---I can't actually remember where I got that figure from. Well, you weren't earning any income by way of salary, were you?---No, I wasn't. Are you talking about me or my husband? Is this for me or for my husband? Well, I thought you had agreed with me a couple of moments ago that you were recording in this document your income and expenses. Is that right?---Yes. You were earning no income in July 2005, were you?---Well, I wasn't working. I'm just trying to recall why I put that down. Just so we're clear, your husband was earning no income by way of salary in 2005 either, was he?---He wasn't. Can you think of any conceivable basis upon which you could have honestly put in that document a salary of $5000 per month?---Well, we had to be living off something. That's why I'm trying to think of what we were living off. I can't recall. Well, we can tell about some things, can't we? You weren't working in any occupation which paid you a salary in July 2005. Correct?---That's right. You certainly weren't earning $5000 a month by way of salary, were you?---No, not by salary. Your husband certainly wasn't earning $5000 a month by way of salary, was he?---No, not that I - no, he wasn't. Yes. Your husband was earning no income by way of salary in July 2005, was he?---No, he wasn't. Do you see a little further down the page on that same column on the same said "other income?" You've written in "Centrelink"?---That's right. 1135, is that where your income was coming from, from Centrelink?---No, that's - that was my family tax benefit money. Well, would you agree with me that the statement that you were earning a salary of $5000 gross per month was simply false?---No. I think that that was my parenting payment and money that we were receiving from Centrelink. Where I've got "other income, Centrelink" that's my family tax benefit. So you want to say that you chose to describe your parenting payment from Centrelink as salary. Is that right?---Well, what else would I describe it as? Well, you might have described it, as you did your other payment, as "income coming from Centrelink," perhaps. Would you agree?---Well, I get a group certificate from Centrelink so I would think it was salary, like anyone else who gets a group certificate. But did you pay tax on your Centrelink payment?---No, I didn't. Well, have a look at the item beside $5000. You've got a figure after tax $3350 per month. That couldn't have been you writing about your Centrelink payment, could it?---Well, it could have been. I could have - I - maybe they did take money out. I'm not sure. I can't remember back then. 294 I am satisfied that Mr and Mrs Ramsey set out to pursue the opportunity which they believed the franchise arrangement would provide them. They were prepared, in the process, to exaggerate their financial capacity in an endeavour to persuade the Bank that Mr Ramsey should be accepted as a participant. With his wife's help Mr Ramsey pursued the matter, by persuading Mr Astridge to join the venture with him, even after being rebuffed by Mr Allsopp as lacking the necessary experience. 295 As I have already indicated, I am satisfied that the analysis in the business plan was based on the research and predictions of Mr Astridge and Mr Ramsey. The evidence did not support the attempted attribution of any assurance or prediction to Mr Allsopp about those matters. Mr Ramsey must take a full measure of personal responsibility for them. 296 Mr Ramsey's pursuit of the project continued after he decided he would not pursue the partnership with Mr Astridge. On the evidence of both Mr Ramsey and Mr Astridge, it was Mr Ramsey who decided (for reasons which were never explained) that he could not work with Mr Astridge. Aware of the requirement for an experienced banker, but seemingly oblivious to the practical necessity for it, Mr Ramsey decided that he would take over the proposed arrangements completely. He paid $25,000 to Mr and Mrs Astridge in further pursuit of his objectives. Necessarily, he then accepted sole responsibility for the business plan they had worked on together, and for meeting the various targets the plan contained. Although some effort was made, at least he said so, to find a suitable partner, thereafter Mr Ramsey appears to have regarded himself as taking full control of the branch. On his own evidence he was not equipped to do so. 297 Had it been necessary to determine the present proceedings by asking whether there was a causal relationship between the statements alleged to have been made on behalf of the Bank and the decisions made by Mr and Mrs Ramsey to go forward with the franchise arrangements, I would have concluded that no such causal relationship had been established by the applicants and that the relief claimed by the applicants was unavailable to them for that reason.

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The ASIC Act 301 It is convenient to deal immediately with the proposition that relief might be available to the applicants under the ASIC Act. 302 Section 52 of the TP Act appears in Part V of that Act. Part V of the TP Act does not apply to the supply, or possible supply, of services that are financial services. Specifically, s 52 does not apply to conduct in relation to financial services. Those exclusions are accomplished by s 51AF. "Financial service" is defined in s 4 of the TP Act to have the same meaning as in Division 2 of Part 2 of the ASIC Act. Section 12DA of the ASIC Act deals with conduct in trade or commerce in relation to financial services that is misleading or deceptive or likely to mislead or deceive. It is, in that sense, a counterpart to s 52 of the TP Act. It appears in Part 2 of Division 2 of the ASIC Act. Section 12BAB of the ASIC Act (which also appears in Part 2 of Division 2 of that Act) identifies when a person provides a financial service. A person provides a financial service if, inter alia, they provide financial product advice, deal in a financial product or provide a custodial or depository service. Various subsections of s 12BAB further define and refine these concepts. 303 I am satisfied that the dealings between the Bank and the applicants which related to, culminated in and were represented by the OMB Agreement did not involve the provision of financial services by the Bank within the meaning of Part 2 of Division 2 of the ASIC Act. Those arrangements, and conduct in relation to them, are not actionable under s 12DA of the ASIC Act. Correspondingly they are not excluded from the operation of s 52 of the TP Act. 304 Section 12CC of the ASIC Act prohibits unconscionable conduct in connection with supply and acquisition of financial services but, again, I am satisfied that it has no application in the present case. 305 In the circumstances no claim for relief under the ASIC Act is available. 306 In any event, if s 12DA of the ASIC Act had applied (and s 52 of the TP Act had not), and s 12CC of the ASIC Act had applied, then for the same reasons as developed in relation to the corresponding causes of action under the TP Act, no case for relief under the ASIC Act was established.

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Section 51A of the Trade Practices Act 307 Section 51A of the TP Act provides: 51A Interpretation (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. 308 A number of the statements alleged by Mr Ramsey to have been made to him were statements about future matters. Accordingly, the question whether such statements infringed s 52 of the TP Act is to be assessed bearing s 51A in mind. 309 So far as the operation of s 51A of the TP Act is concerned I am bound by Full Court authority to proceed upon the basis that, if some evidence is adduced by a representor that reasonable grounds existed for making a representation, the onus of showing that a representation was made without reasonable grounds remains with the representee (see McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 ("McGrath") per Emmett J at [44] and per Allsop J at [191]-[192]). I note that a suggestion that the New South Wales Court of Appeal had, in Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58, expressed views inconsistent with McGrath was persuasively rejected by Ward J in Traderight Pty Ltd v Bank of Queensland [2010] NSWSC 139. 310 Evidence was led by the respondent (e.g. from Mr Astridge and in cross-examination of Mr Bridge) to the effect that statements attributed to Mr Allsopp were, if made, ones in respect of which reasonable grounds existed to make them. In those circumstances, the onus of showing that there was an absence of reasonable grounds remained with the applicants.

[59]

Section 52 of the Trade Practices Act 311 Section 52(1) of the TP Act provides: 52 Misleading or deceptive conduct (1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 312 The conduct of the Bank which was alleged to be misleading and/or deceptive (or likely to be so) was said in the final form of the statement of claim, to be constituted by the statements made by Messrs Zacharia, Allsopp, O'Kell and Edwards at the six meetings earlier identified. Those contentions were coupled with allegations that Mr Ramsey relied on the statements, that the statements were erroneous and, in the case of statements about future matters, that they were made without reasonable grounds for making them. To recapitulate, the six meetings were:

17 November 2004 with Mr Zacharia
9 December 2004 with Mr Allsopp
3 February 2005 with Mr Allsopp (with Mr and Mrs Astridge also present)
21 February 2005 approximately with Mr O'Kell (with Mr and Mrs Astridge also present)
May/June 2005 with Mr Allsopp
23 January 2006 with Mr Edwards 313 It is convenient to set out first the statements alleged to have been made by Mr Allsopp at the meeting on 3 February 2005. They were pleaded as follows: 11. At the third meeting after Mr Astridge gave details of his banking experience Mr Allsopp represented in trade or commerce that: (a) to succeed as a franchisee of the Respondent it was necessary for the new business to write $4,000,000 of loans each month; (b) the target of $4,000,000 in loans each month was achievable; (c) the writing of loans of $4,000,000 per month would be sufficient for the intended franchisee to pay all expenses to operate the business, all borrowing costs, appropriate salaries for principals and to give a good return to the franchisee on the investment; (d) working capital of $100,000 was needed to operate the business to meet its expenses as they fell due and to give a good return on the investment on the assumptions in sub-paragraphs a. b. and c. above; (e) the working capital could be provided in cash by the intending franchisee or an overdraft facility from the Respondent would be made available; (f) a franchise fee of $80,000 was payable to the Respondent for the grant of a new franchise; (g) the new business was liable for all fit out costs but that these would vary depending on the location selected; (h) that it was in the interests of Mr Astridge and the Second Applicant to speak to an owner operator about the Respondent's franchise model before proceeding; (i) the owner manager of the North Parramatta branch of the Respondent, Graham O'Kell, was the best person, that is, the most reliable and independent expert available to advise intending franchisees, such as the First or Second Applicant because he was the first franchisee of the Respondent in New South Wales, he had the longest history of being a franchisee in New South Wales and was very successful; (j) Mr O'Kell of the North Parramatta franchise branch of the Respondent was a typical example of a successful Bank of Queensland franchisee of the type a new franchisee such as the First or Second Applicant should reasonably expect to become; and (k) the Respondent will undertake a major marketing and advertising campaign on television, radio and in newspapers to assist franchisees in New South Wales particularly during the start up phase of the business with a view to improving brand awareness of the Respondent in New South Wales including promotional activity tailored to the Campbelltown branch to build interest and bring new business to the branch. (l) That there is no reason of which the Respondent is aware why the First Applicant will not achieve the writing of loans of $4,000,000 per month. (m) That the Bank of Queensland model for owner branches in New South Wales is soundly based. (The matters in (l) and (m) were said to be implications which arose from the preceding representations.) 314 A number of the same statements were alleged to have been made by Mr Allsopp at the earlier meeting on 9 December 2004. A number were said to be supported by statements made by Mr Zacharia on 17 November 2004 and by Mr O'Kell on 21 February 2005. Messrs Zacharia and O'Kell were alleged to be agents of the Bank for the purpose of making statements in those meetings. 315 The statement made at the fifth meeting was alleged to be as follows: Mr Allsopp, as servant or agent of the Respondent, represented to the First and Second Applicants that if the First Applicant should employ an experienced retail banker for 6 months the Respondent would thereafter approve of the Second Applicant as an experienced banker in substitution for Mr Astridge. 316 There was an alternative pleading concerning the fifth meeting which was added to the statement of claim when the last amendments to it were made during the course of the hearing itself. The allegation was that Mr Allsopp represented by his conduct that there was no change to statements made to Mr Ramsey at earlier meetings by Mr Allsopp and Mr O'Kell. No particulars of the conduct relied on to sustain this allegation were given. I do not understand it. Whatever it means, it does not appear to add to the earlier pleadings. 317 The statement made by Mr Edwards at the sixth meeting was said to be: Mr Edwards represented in trade or commerce that the Respondent would approve of the Second Applicant as an experienced banker as Mr Ridley will have been employed for 6 months at the time his resignation took effect and as the Second Applicant had been acting as Branch Manager for that time. He further represented that Mr Ridley's leaving was a good thing for the business. 318 I shall deal initially with the first and fourth meetings (with Mr Zacharia and Mr O'Kell). It was argued that Mr Zacharia and Mr O'Kell could be regarded as agents of the Bank for the purpose of making statements to Mr Ramsey and for the purpose of the causes of action relied upon by the applicants. Section 84(2)(b) of the TP Act renders conduct by an agent of a body corporate the conduct of the body corporate in certain circumstances. However, it must be conduct by a person with the consent or agreement of a director, employee or agent of the body corporate and it must be engaged in on behalf of the body corporate. Those elements were not established in the present case. I am satisfied that Mr O'Kell and Mr Zacharia spoke in their personal capacities. I am satisfied that they did not speak on behalf of the Bank. Although they were each a director of the operating entity of the franchise about which they spoke, and may be taken to have spoken therefore on behalf of that entity, the further connection with the Bank was not made. They spoke from their personal experience. In Mr Zacharia's case his comments were elicited by Mr Ramsey and were clearly not made on behalf of the Bank or with the Bank's knowledge or consent or at its direction. In the case of Mr O'Kell, he was suggested by Mr Allsopp as a person independent of the Bank and I conclude that it was in that capacity that he was approached. The applicants expressly pleaded (in 11(i), set out above) that Mr O'Kell was suggested by Mr Allsopp as an "independent expert". In my view, in light of its pleaded case, it was not open to the applicants to argue that Mr O'Kell was the Bank's agent at the meeting with him on or about 21 February 2005. 319 Next, it is convenient to deal with the fifth and sixth meetings. I have earlier explained why, in my view, the statements attributed to Messrs Allsopp and Edwards in the fifth and sixth meetings were not shown, on the evidence, to have been made by them. There is a further reason why the allegations concerning the fifth and sixth meetings take the case for the first applicant, Astram, nowhere. Those conversations took place after the OMB Agreement was executed on behalf of Astram on 26 April 2005. Mr Ramsey's decision, as a shareholder, to purchase the shares of Mr and Mrs Astridge has no bearing on Astram's position. Astram is a separate legal entity. It remained bound by the terms of the OMB Agreement, including any restrictions on who might be appointed or serve as branch manager. 320 Even if Mr Ramsey attempted to rely upon these alleged representations in his own right, as second applicant, his case faces insurmountable obstacles. The applicants' case never satisfactorily distinguished between their principal complaint that writing $4 million per month was not achievable and some form of subsidiary complaint about the fifth and sixth meetings. The applicants appear to assert that the Bank should have approved Mr Ramsey as branch manager without reservation having regard to the statements allegedly made by Mr Allsopp and Mr Edwards at the fifth and sixth meetings. However, the only significance of the alleged departure from those statements was that, faced with the financial difficulties at the Campbelltown branch, the Bank renewed its insistence that Mr Ramsey engage the services of an experienced banker as branch manager. No loss or damage flowed either from that requirement or from the suggested departure from earlier assurances to the contrary. There could have been no relief available even if these aspects of the case were established, which they were not. 321 Now I can deal directly with the third meeting, with Mr Allsopp on 3 February 2005, upon which the applicants' case really depends for most matters. The same observations will apply (to the extent relevant) to the second meeting. On the evidence a number of the statements pleaded in para 11 were unexceptional and, on no view, misleading or deceptive. They included the statements set out earlier in paras 11(a), (c), (e), (f), (g), and (h). The statement in 11(b) was contentious and will be further discussed shortly. The allegation in para 11(d) was abandoned. The statements in para 11(i) and (j) were contentious in part. The statement in 11(k) was denied. The pleaded implications in 11(l) and (m) will also be discussed shortly. 322 I propose to assume that the statement pleaded in 11(b) was made. That was Mr Ramsey's evidence (although it was not supported by Mr Astridge). It clearly represented the objective of the Bank and, I infer, its commercial judgment. Mr Allsopp was not called to deny that the statement was made and I must infer that if he had been called his evidence would not have advanced the Bank's case in this respect. (That may mean no more, of course, than he may have forgotten exactly what he said at the meeting.) 323 The allegation in para 11(i) was not shown to have been misleading and deceptive, assuming a statement in the terms pleaded (or to that effect) was made. The statement alleged in para 11(j) was said to have been falsified by the fact that the North Parramatta branch had a large number of broker book accounts. I have found that, on the evidence, this was not a material consideration. I do not otherwise accept that any representation was made that, or to the effect that, Mr Ramsey and Mr Astridge would be successful simply because Mr O'Kell was. 324 As to para 11(k), I accept that Mr Allsopp made some statement about a marketing campaign. Mr Astridge's evidence gives support to that proposition. However, according to Mr Astridge, Mr Allsopp said that such a campaign would be conducted when there were enough branches in New South Wales to justify it. I prefer Mr Astridge's evidence to Mr Ramsey's in relation to this matter. On Mr Ramsey's evidence a large scale marketing campaign did occur after he left the Campbelltown branch. I reject the suggestion that any statement was made which referred to the Campbelltown branch or that any marketing campaign would be "tailored to" the opening of specific branches such as Campbelltown. On the evidence, at the time of the meeting on 3 February 2005, the Campbelltown site had not been selected. Mr Allsopp did not know where Mr Ramsey and Mr and Mrs Astridge proposed to establish a franchise if approval for that course was given. Mr Ramsey himself did not know where that might be. At that point in time Mr Astridge had not been approved as a participant in such an enterprise and nor had Mr Ramsey. If any statement about advertising was made I am satisfied that it was general in its terms and not one on which Mr Ramsey was entitled to rely as any form of promise, whether as to timing or otherwise. In any event, the contractual arrangements which were put in place clearly excluded any liability of the Bank for such a campaign. That is a factor to be taken into account in evaluation of the overall conduct of the Bank as I will shortly discuss. 325 As to 11(l) and (m), I am prepared to assume, as I have said, that Mr Allsopp indicated, in some fashion or other, a view on his own behalf and on behalf of the Bank that a target of $4 million in loans each month was achievable. I am prepared to assume, further, that the implications said to arise (as expressed in 11(l) and (m)) are available. Those assumptions are consistent with what the evidence disclosed overall about the Bank's position. The pleaded implications, it should be noted, fell short of a representation that success would be achieved and do not support the assumption made in the accounting evidence upon which the applicants relied. 326 There is no doubt that in the present case the Bank adduced evidence to the effect that any statement made by Mr Allsopp in February 2005, that $4 million in loans was achievable, was a reasonable statement to make at the time. Any such statement could not have been related in terms to Campbelltown, which had not been selected. However, even applied to Campbelltown, such a statement should not be viewed as one made without reasonable grounds. Direct contemporaneous support for an assessment of that kind was given by Mr Astridge's evidence. Once the threshold established by s 51A of the TP Act was crossed other evidence is also available which supports the proposition that any such statement (even expressed generally) was one for which reasonable grounds existed at the time it was made. I have already referred to the evidence of Mr Bridge, Mr Scott and Mr O'Kell in that respect. Support is also provided by the analysis of the operations of the North Parramatta branch carried out by Mr Hughes which, despite other criticisms of his evidence, was not placed in issue. At a point later in time Mr Clancy had the same opinion. The onus with respect to this issue remained with the applicants. They have failed to discharge it by a very large margin, even if consideration of the applicants' case was confined to the matters relied upon by them. 327 There is a further reason why, whatever Mr Allsopp said on 3 February 2005 (or earlier), the applicants could not succeed under s 52 of the TP Act on the evidence in this case. 328 A central and permanent defect in the applicants' case was their insistence on focussing upon particular statements alleged to have been made by Mr Allsopp in, what ought to be regarded as, introductory meetings and attempting to give those statements prominence over all other commercially significant events which then transpired. The approach was seriously flawed. It was uncommercial and contrary to principle. It is well established, for the purpose of the operation of s 52 of the TP Act, that the conduct of a party must be assessed as a whole. The statements made by Mr Allsopp in introductory meetings, before Mr Astridge had been approved as an experienced banker and Mr Ramsey had been approved as a suitable shareholder in the operating entity, cannot be divorced from the whole of the circumstances. Everything relevant which the Bank did up to the time the OMB Agreement was made must be taken into account (see Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ("Butcher") at [39]; see also Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd (as trustee for the Baker Family Trust) (2005) 220 ALR 211 ("Poulet Frais") at [75]). In Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, the High Court (at [102]) pointed out that: References to misrepresentation or reliance must not be permitted to obscure the need to identify contravening conduct (here, misleading or deceptive conduct) and a causal connection (denoted by the word "by") between that conduct and the loss and damage allegedly suffered. and went on, in the same paragraph, to approve the following statements by McHugh J in Butcher at [109]: The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. (Footnotes omitted) 329 The issue of whether the conduct of the Bank was misleading or deceptive is required to be determined by reference to what a reasonable person would have made of its actions and, in particular, the documents which were provided to Astram (see Poulet Frais at [76]). Neither Astram as an entity, nor Mr Ramsey as an individual, was obliged to deal with the Bank. There is no evidence that the Bank pursued Astram or Mr Ramsey. There is considerable evidence that Mr Ramsey pursued the opportunity to take part in a franchise arrangement. His case that the Bank engaged in misleading or deceptive conduct (and Astram's case to that effect) must be assessed by reference to an objective view of the information which was provided to him. I have no hesitation in concluding that that information indicated to him clearly (and to Astram) that the responsibility for assessing the business risk involved in undertaking a franchise operation at Campbelltown was the responsibility of Astram and its principals. I see no room for the arguments which were central to the applicants' case to the effect that Mr Ramsey, or through him Astram, was misled or deceived by the conduct of the Bank. 330 I also reject the suggestion that any of the applicants was induced by the Bank's conduct to make their respective commitments, or that the Bank's conduct caused them any loss or damage which is compensable by reason of s 52 of the TP Act. 331 So to conclude involves no judgment about the commercial aspects of the arrangement. There is no doubt that the Campbelltown franchise failed as a business under Mr Ramsey's superintendence. Other franchises appear also to have been less successful than anticipated. However, businesses fail all the time despite the aspirations of their proprietors. Disappointment of those aspirations does not establish misleading and deceptive conduct. Yet, in the end, there was virtually nothing more to the case advanced by the applicants in the present proceedings. 332 So much of the claims for relief as depend upon allegations of breach of s 52 of the TP Act will be dismissed.

[60]

Section 51AC of the Trade Practices Act 333 Section 51AC of the TP Act prohibits unconscionable conduct in business transactions. For the purpose of the present proceedings it prohibits unconscionable conduct in connection with the supply or acquisition of goods or services to or from a corporation which is not a listed company. A number of matters are listed in s 51AC(3) as ones to which a court may have regard in determining whether s 51AC has been contravened. 334 Section 51AC is one of three sections in the TP Act which prohibit unconscionable conduct in particular circumstances (the others are s 51AA and s 51AB). Section 51AB deals with the supply of goods or services to a person. It lists a number (less than in s 51AC) of matters to which a court may have regard. Section 51AA prohibits unconscionable conduct within the meaning of the unwritten law of the States and territories but does not apply to conduct which is prohibited by s 51AB or s 51AC. 335 Unconscionability, as a concept imported into the TP Act, appears to me to involve the application of a standard, even though in Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132 ("National Exchange") a Full Court observed (at [30]) that the circumstances in which relief might be granted under s 51AC were not confined to the circumstances in which the common law would acknowledge grounds for relief. I accept, in accordance with those observations, that the matters to which regard may be had, which are identified in s 51AC, extend beyond matters to which regard might be had if the common law was being applied or if s 51AA arose for consideration. Nevertheless, it seems clear that a conclusion that conduct is unconscionable requires the identification of a standard of behaviour which is not to be equated merely with a list of factors to which a court may have regard. For example, the first such factor identified by s 51AC(3) is: (a) The relative strengths of the bargaining positions of the supplier and the business consumer. 336 An indication that a court may have regard to such a factor does not import a conclusion that unequal bargaining positions have the consequence that use of a superior bargaining position is unconscionable. In Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 ("Berbatis") Gleeson CJ pointed out (at [11]): A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests. and (at [16]): Parties to commercial negotiations frequently use their bargaining power to "extract" concessions from other parties. That is the stuff of ordinary commercial dealing. 337 In a case where parties have an unequal bargaining position an inquiry is still required concerning whether the conduct of one towards the other infringed the standard which is imported by the notion of unconscionability. In Berbatis, Gleeson CJ also said at [7]: In everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise. 338 In statements approved in National Exchange Spigelman CJ said in Attorney General of New South Wales v World Best Holdings Pty Ltd (2005) 63 NSWLR 557 at [121]: Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was "fair" or "just", it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of "unconscionability" would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises. 339 Applying those observations, I propose to accept, for the purpose of the present case, that the applicants were required to establish that the Bank's conduct involved a "high level of moral obloquy" and was "highly unethical" but it would not matter if a much lower standard applied. The applicants would not succeed in satisfying even a much lower standard in the present case. 340 The pleaded allegation that the Bank's conduct was unconscionable contrary to s 51AC of the TP Act was accompanied by 15 particulars. I see no alternative to setting them out in full in order to illustrate the lack of meaningful content which might go some way to satisfying the legal test for the identification of unconscionable conduct. The pleading was as follows (I shall insert some numbering for later reference): In the premises in trade or commerce the Respondent by its servants or agents engaged in conduct that is unconscionable contrary to section 51AC of the Trade Practices Act 1974 Particulars • [i] The Respondent was in a strong bargaining position in its dealings with the First Applicant and used that strong bargaining position to its advantage when it refused to negotiate changes sought by the Second Applicant on the First Applicant's behalf in relation to a confidentiality agreement which the Respondent required before it would allow the Second Applicant to undertake its mentoring program. • [ii] The First and Second Applicants were required to sign a Representations Deed by the Respondent as a condition of the Respondent proceeding with the OMB Agency Agreement. In view of the terms of the Representations Deed and the Respondents conduct such a condition was not reasonably necessary for the protection of the legitimate interests of the Respondent. • [iii] In refusing to approve of the Second Applicant as the experienced banker and requiring the First Applicant to procure another person with retail banking experience acceptable to the Respondent and for such person to take a 50% equity in the First Applicant the Respondent sought to impose conditions that were not reasonably necessary for the protection of the legitimate interests of the Respondent; • [iv] In representing by its servants or agents at the fifth and sixth meetings that the Second Applicant would be approved of as an experienced banker if Mr Ridley served 6 months as an employee the Respondent engaged in unfair tactics in later requiring a person other than the Second Applicant to take a 50% equity in the business and to have retail banking experience; • [v] In failing to disclose to the First or Second Applicant that the Respondent had a policy of paying a referral fee of up to $10,000 to franchisees such as Mr Zacharia the Respondent engaged in unfair tactics and led the First Applicant into the error of proceeding with the franchise when the Respondent knew or ought to have known that the disclosure of such a matter was a material matter for an intending franchisee to consider and that had it known it the First Applicant might not have proceeded with the franchise; • [vi] In failing to disclose to the Second Applicant that the Respondent had allocated part of the broker book to some franchisees in New South Wales, including those operated by Mr Zacharia and Mr O'Kell, the Respondent engaged in unfair tactics and led the First Applicant into the error of proceeding with the franchise when the Respondent knew or ought to have known that this was a material matter for an intending franchisee to know and one which would or might impact on an intending franchisee's decision to proceed with a franchise. • [vii] The conduct of the Respondent towards the First Applicant was not consistent with its conduct towards other franchisees in similar circumstances for that it permitted other franchisees to receive the mentoring program without signing a confidentiality agreement and it did not require other franchisees to have in place key person insurance whilst insisting on both of these matters with the First Applicant; • [viii] In failing to disclose to the First or Second Applicant that it could or might pay a referrer's fee to Mr Zacharia following the first meeting the Respondent failed to comply with the requirements of an applicable industry code, namely clause 5 of Annexure 1 to the Franchising Code of Conduct, a copy of which is annexed to the Disclosure Document. • [ix] In representing by its servants or agents at the fifth and sixth meetings that the Second Applicant would be approved of as an experienced banker if Mr Ridley served 6 months as an employee the Respondent unreasonably failed to disclose intended conduct on its part which might affect the interests of the First Applicant when it later required a person other than the Second Applicant to take a 50% equity in the business and to have retail banking experience. These requirements were a risk that the Respondent should have foreseen would not be apparent to the First Applicant. • [x] In approving Mr Astridge as an experienced banker although he had no retail banking experience and in approving Mr Ridley as an experienced banker although he held no shares or equity in the First Applicant and was an employee only, both approvals being contrary to the stated requirements of the Respondent, the Respondent failed to act in good faith towards the First Applicant as these actions led the First Applicant into the error of paying a franchise fee of $80,000 to the Respondent and the error of entering into the OMB Agency Agreement; • [xi] The Respondent had no intention as at 9 December 2004 and/or as at January 2005 of providing tailored media support for the Campbelltown branch and did not provide media coverage and support and did not undertake across New South Wales a major marketing and advertising campaign on television, radio and in newspapers or radio to assist franchisees in New South Wales particularly during the start up phase with respect to improving awareness of the Respondent in New South Wales or at all and the Second Applicant would not have proceeded with the franchise had he been aware that the Respondent had no intention of proceeding as above. • [xii] The representations made by Gary Allsopp at the second and third meetings that there would be a major marketing and advertising campaign on television, radio and in newspapers to assist franchisees in New South Wales, particularly during the start up phase with a view to improving brand awareness of the Respondent in New South Wales including promotional activity tailored to the Campbelltown branch to build interest and bring new business to the branch were in error; and the Second Applicant would not have proceeded further with a franchise had the Second Applicant known that the Respondent would not undertake this major marketing and advertising campaign and/or would not provide tailored media support for the branch. • [xiii] In accepting the Second Applicant as an appropriate person to provide financial product advice to retail clients and in accrediting him under the Financial Sector Reform provisions, when in fact the Second Applicant's training and accreditation was not genuine, the Respondent failed to act in good faith and failed in its obligation under section 912A(1)(f) Corporations Act 2001 to ensure the Second Applicant was adequately and competently trained and further, therefore failed to comply with its obligations to have an adequate risk management system under section 912A(1)(h) Corporations Act 2001. • [xiv] The Applicants also rely upon the conduct of the Respondent in causing the Second Applicant to be accepted as accredited to provide financial product advice to retail customers for the purposes of the Corporations Act 2001 Part 7.6 Division 3 and/or as having relevant retail banking experience with knowledge that neither was the case, such that the accreditation was not genuine or bona fide. • [xv] In entering into a franchise agreement with the Applicants, the Respondent made an extension of loan to the First Applicant in the financial arrangements pleaded herein, knowing or having reason to believe that the First Applicant was unlikely to be able to meet the financial obligations that the First Applicant would have under the Franchise Agreement and all Applicants would be unlikely to be able to meet commitments given in the security documents entered into, the Respondent, by its servants or agents, acted unconscionably. 341 I reject the allegations in every respect. What the pleader has done is to use the catalogue of matters listed in s 51AC(3). However, simply juxtaposing one (or even more) of such factors with a factual allegation does not raise a respectable case of unconscionable conduct. The pleading fails altogether to allege material facts which might sustain a conclusion that the Bank acted with a high degree of moral obloquy, in a highly unethical way or in a way which might justify criticism of its commercial conduct sufficiently serious to approach such conclusions. Furthermore, the factual allegations which accompany the recitation of the matters to which regard may be paid are ones which, almost universally, I have rejected on the facts. Nevertheless I shall go through the list and indicate, briefly, why I reject the assertions made: (i) This simply alleges that the Bank was in a strong bargaining position. The pleading is quite insufficient. In any event, the accusation that the Bank refused to negotiate changes sought by Mr Ramsey to the confidentiality deed in May 2006 amounts only to a complaint that it declined to accept the changes he suggested. Despite my earlier criticism of the Bank about this issue it was not obliged to accede to changes sought by Mr Ramsey. It was not unconscionable to decline to do so. The Bank was under no obligation to offer coaching, concessions, incentives or special arrangements to Astram in the first place. When it did offer such things Mr Ramsey took his own course and must take responsibility for it. (ii) Neither Astram nor Mr Ramsey were under any relevant disadvantage when the representations deed was signed. In any event it was ultimately not relied upon by the Bank. (iii) This allegation compounds three different matters which require separate consideration. (A) Mr Ramsey was not an experienced banker. He did not become one by remaining at the Campbelltown branch for six months while Mr Ridley was the branch manager. Any refusal to approve him as an experienced banker was not unconscionable. (B) The immediate requirement that Mr Ramsey procure, to replace Mr Ridley, a person who had banking experience acceptable to the Bank (neither the breach notice dated 12 July 2006 nor Ms Quinn's letter dated 26 July 2006 referred to a person with "retail" banking experience) arose from the service of the breach notice. As discussed earlier that left adequate opportunity for discussion (which occurred) and compliance (which Astram chose not to further attempt). (C) Although Ms Quinn's letter of 26 July 2006 referred to a desire by the Bank that the branch manager take a 50% equity in Astram the breach notice itself did not impose that requirement and the discussions which Mr Ramsey had with Mr Edwards on 18 July 2006 indicate sufficiently that the Bank remained open to an alternative solution. (iv) I have rejected these assertions on the facts. (v) This assertion was not established on the evidence. There was no evidence that Mr Zacharia received such a payment. There was no evidence that there was a policy of paying such a referral fee. A policy which would permit the payment of such a fee appears to have been introduced on 31 October 2005 but it had no application on the facts of the present case and would not, in any event, have applied to the circumstances disclosed about the meeting between Mr Ramsey and Mr Zacharia and the provision by Mr Zacharia of Mr Allsopp's contact details. (vi) It was not established on the evidence that there was any unfairness in Mr Allsopp not telling Mr Ramsey (if this occurred) that part of the broker book had been allocated to the Menai and North Parramatta branches. (vii) This allegation has two aspects. The first aspect of the allegation regarding the mentoring program was not supported by the evidence. Although it never became clear which franchises were referred to the program it seems that the respondent had some grounds to think that the franchises at Maroubra and Hurstville branches were the subject of this allegation. Mr Clancy gave evidence that neither of those branches participated in the franchise coaching program. The second aspect of this allegation had no support in the evidence either. In any event it was not unconscionable to ask for key person insurance. That was a requirement which had not arisen finally for satisfaction at the time that Astram terminated the franchise. (viii) I have rejected this allegation on the facts. (ix) This allegation is almost incomprehensible. I have rejected its factual premise on the evidence. Had the statement been made it would not have represented a failure to disclose something which did not occur until much later. (x) This allegation has no support in the evidence. It seems to suggest that Mr Astridge should not have been approved to participate in the franchise and Mr Ridley should not have been approved as branch manager. In other words Mr Ramsey should have been shut out of the franchise at the outset or when he acquired the interests of Mr and Mrs Astridge in Astram. The Bank owed no obligation of good faith towards Mr Ramsey to prevent him proceeding. This allegation, if anything, emphasises the responsibility which Mr Ramsey himself must bear for the course of events which he set in train. (xi) As at 9 December 2004 and as at January 2005 the Bank had no knowledge that Mr Ramsey intended to participate, if he could, in a franchise at Campbelltown. Mr Ramsey himself did not know that. The allegation proceeds upon a non sequitur. (xii) I have rejected the factual premise upon which this allegation depends. It was not established that Mr Allsopp made the asserted statements. He could not have done so with any reference to Campbelltown. (xiii) This allegation seeks to turn to account Mr Ramsey's avowed manipulation of the online exam which he took while in Queensland between May and June 2005. It appears to suggest that the Bank had an obligation to him to protect him from himself. I reject that assertion. (xiv) This assertion deserves a similar fate. It goes further and suggests affirmatively that Mr Ramsey was not equipped to provide financial product advice and nor did he have relevant retail banking experience. I will not pause to reflect further upon the inconsistency between this assertion and the complaint that Mr Ramsey should have been accepted as having sufficient banking experience to be acknowledged as the branch manager. (xv) This assertion is unclear. The facilities extended to Astram in August 2005 under the business term loan and the business overdraft were provided after the OMB Agreement had been made. In any event there is no support for the assertion that the Bank had reason to believe that Astram would be unlikely to meet its financial obligations under the OMB Agreement or that Mr and/or Mrs Ramsey would be unlikely to meet their commitments in the security documents they gave. 342 Apart from rejecting the specific allegations which were pleaded in support of this cause of action it is, in a more general sense, one without any substance. On the evidence which I earlier discussed there is no basis to conclude that the Bank was responsible for the business decisions, ill advised as they turned out to be, made by Mr Ramsey. On the contrary, it is clear that he pursued the prospect of a franchise with enthusiasm in the optimistic expectation that he would thereby be secured a comfortable return on his intended investment. The fact that things proved to be more difficult than he had assumed does not suggest that there was any unconscionable conduct on the part of the Bank, even if it was astute to protect its own interests in the transaction. Mr Ramsey was on clear and adequate notice (as therefore were Mrs Ramsey and Astram) that it was necessary for the intending franchisee and its principals to make their own assessment of possible commercial outcomes and to proceed accordingly. That requirement, repeatedly announced, was neither unconscionable in any legally meaningful sense, nor did it, when regard is had to the list of matters stated in s 51AC(3) establish, or even raise for serious consideration, a case that s 51AC of the TP Act had been contravened.

[61]

Section 51AD of the Trade Practices Act 343 Section 51AD provides: 51AD Contravention of industry codes A corporation must not, in trade or commerce, contravene an applicable industry code. 344 The applicable industry code which was relied upon was the Franchising Code of Conduct ("the Franchising Code"). The Franchising Code is contained in a schedule to the Trade Practices (Industry Codes - Franchising) Regulations 1998 (Cth). It is a mandatory industry code. 345 The allegations made about this issue were summarised in written submissions for the Bank, which I adopt as an appropriate summary, as follows: 6.2 The Applicants' pleaded case in relation to s.51AD alleges four breaches of the Franchising Code appears to contend that: (a) The Respondent failed to disclose that it must pay Michael Zacharia a recruitment fee in connection with Astram; (b) The franchise agreement was renewed or extended in August 2005 and the Respondent failed to provide a further current disclosure document; (c) The Respondent failed to disclose the length of its experience in operating and offering franchises; and (d) The Respondent provided earnings information and failed to include information from which historical or future financial details of a franchise can be assessed. 346 The Franchising Code applied to the franchise arrangements which Mr Ramsey and Mr and Mrs Astridge sought with the Bank. Under clause 6B of the Franchising Code the Bank was required to provide a disclosure document which, in the circumstances anticipated for an owner managed branch, was required to conform to the terms of Annexure 1 to the Code. Clause 5.1 of Annexure 1 to the Code provided: 5.1 For any agreement under which the franchisor must pay an amount, or give other valuable consideration, to a person who is not an officer, director or employee of the franchisor in connection with the introduction or recruitment of a franchisee - the name of the person. 347 There was no evidence that the Bank was a party to any agreement at the time that the OMB Agreement was entered into which would require it to pay any amount to Mr Zacharia or any other person. As earlier indicated the policy introduced in October 2005 would not, in the circumstances, have led to a payment to Mr Zacharia. It would not have obliged such a payment which, under that policy, remained in the discretion of the Bank in any event. There was a relevant disclosure document provided to Mr Astridge and Mr Ramsey. It was signed by Ms Quinn and dated 11 April 2005 ("the disclosure document"). Clause 4 disclosed that the Bank paid commission of between $3,000 to $10,000 to two recruitment agencies. Those disclosed circumstances, however, had no application to the applicants. The first allegation set out above must therefore be rejected. 348 The second allegation amounts to a suggestion that the Bank was required to serve a further franchise agreement in August 2005 when it agreed that Mr and Mrs Astridge could transfer their shareholding in Astram to Mr Ramsey. The argument is replete with formality. There was no evidence that any further disclosure, if one was required, would lead to a document in different terms, much less that any difference of substance would be involved. It is not the case that any failure to comply with the Franchising Code would render the OMB Agreement a nullity. Relief for a failure to comply with the Franchising Code would need to be tailored so as to be relevant and proportional to the circumstances of the breach (see Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [38]-[39]). On that test no relief would be justified in the present case from a failure to comply with the suggested formality. In any event, the argument is misconceived. The franchisee remained Astram. A change in the shareholding of Astram did not generate any obligation to provide a further disclosure document. There was no new franchise agreement. The OMB Agreement accommodated the possibility that there might be a change in directors or shareholders. It required the consent of the Bank. That consent was provided within the context of the continuing operation of the OMB Agreement. 349 The third assertion was that the Bank failed to disclose the length of its experience in operating and offering franchises. Clause 5 of the disclosure document set out a list of each OMB branch in Queensland, New South Wales, the Australian Capital Territory and Victoria and whether it was operating under previous agency agreements or the same franchise agreement that was proposed to Astram. The information provided sufficiently disclosed that franchises had been offered in Queensland since 1984 under previous agency agreements, in Queensland since 2004 under the same agreement proposed to Astram and in New South Wales, the Australian Capital Territory and Victoria since 2004 under the same agreement proposed to Astram. The relevant obligation of disclosure was set out in clause 3.2 of Annexure 1 to the Franchising Code in the following terms: 3.2 A summary of relevant business experience of the franchisor in the last 10 years, including: (a) length of experience in: (i) operating a business that is substantially the same as that of the franchise; and (ii) offering other franchises that are substantially the same as the franchise; and (b) whether the franchisor has offered franchises for other businesses and, if so: (i) a description of each such business; and (ii) for how long the franchisor offered franchises for each such business. 350 I am satisfied that an adequate compliance with this provision was made by the disclosure document. 351 The final assertion was that the Bank had failed to provide information required by clause 19 of Annexure 1 of the Franchising Code. This assertion cannot be sustained. Clause 19 of Annexure 1 of the Franchising Code contemplates that earnings information for a franchise might be given and, if given, must be based on reasonable grounds but clause 19.4 provides: 19.4 If earnings information is not given - the following statement: The franchisor does not give earnings information about a [insert type of franchise] franchise. Earnings may vary between franchises. The franchisor cannot estimate earnings for a particular franchise. 352 Clause 17 of the disclosure document provided: BOQ® does not provide earnings information about OMB® agents and branches. Earnings will vary between branches. BOQ® cannot estimate earnings for a particular branch. 353 That was sufficient compliance with clause 19 of Annexure 1 of the Franchising Code. 354 None of the pleaded failures to comply with the Franchising Code, or contravention of s 51AD of the TP Act, has been established. The claims for relief based on those allegations will be refused.

[62]

Breach of contract claim 355 The applicants pleaded that the representations made by Mr Allsop at the meetings on 9 December 2004 and 3 February 2005 were warranties in a contract collateral to the OMB Agreement. They claimed those warranties were not met. The particulars in support of the allegations sought to engage the same matters upon which the applicants relied to allege misleading and/or deceptive conduct on the part of the Bank. Each of those allegations has been rejected on the evidence. It is not necessary to repeat the reasons for those conclusions. 356 The applicants also pleaded that the Bank repudiated the OMB Agreement in two respects. First, it was pleaded that the OMB Agreement was repudiated by service of the breach notice dated 12 July 2006 for reason that the Bank had accepted Mr Ramsey as branch manager upon the resignation of Mr Ridley. It was asserted that demanding performance of clause 10 of the OMB Agreement was a repudiation of the OMB Agreement. The pleading is unsustainable. The OMB Agreement was not repudiated because performance of it was sought. Nor was it repudiated because some other agreement (as alleged in the letter from Astram's solicitors dated 8 August 2006) was said to have been dishonoured. The OMB Agreement was terminated by Astram. That termination is not able to be sustained legally upon the basis that Astram accepted a repudiation of the OMB Agreement by the Bank. No breach of contract by the Bank is made out in this respect. 357 The second basis for the suggestion that the Bank repudiated the OMB Agreement was the demand contained in the breach notice that Astram and Mr Ramsey not speak to the media and that he give an undertaking to comply with the Bank's policies in that regard. I have already indicated that there is ample ground to conclude that Mr Ramsey gave the assurance required. The condition sought by the Bank was, in that respect, met. There is no question of the Bank repudiating the OMB Agreement in this respect. No case of breach of contract is made out pursuant to this allegation.

[63]

Conclusion on the applicants' claims 358 I have rejected every aspect of the applicants' claims. Had any particular aspect of the claims been made out it might, but would not necessarily, have been necessary to consider what relief would have been required as a result. Even if I had concluded that statements had been made by Mr Allsopp for which there was an insufficient basis at the time they were made I would not, in light of the other material provided to Mr Ramsey, have concluded that any of the applicants had a case for relief against the Bank on the facts of the present case. More particularly, as the foregoing discussion will have already revealed, I do not accept that the decisions made by Mr Ramsey (or by Mrs Ramsey), or by Astram under Mr Ramsey's joint control and then sole control, were taken in reliance on any particular statement or group of statements made by Mr Allsopp. The meetings which Mr Allsopp conducted were clearly introductory in nature. To approach them as though they involved a transmission of material upon which reliance could be placed to the exclusion of all else (which is, in substance, the effect of the applicants' case) is both commercially unrealistic and legally unsustainable. Despite the obvious commercial circumstance that the Bank was in a position to make a franchise available and that Mr Ramsey desired to take one up, and notwithstanding my distaste for the unnecessary and heavy handed drafting in some of the Bank's documents, there is no basis for any suggestion that the applicants were denied a full and sufficient opportunity to look after their own interests, put themselves in possession of all relevant facts, assess the commercial prospects of the franchise which was under consideration in light of the site which had been chosen and that the Bank encouraged them to do all those things knowing the applicants would bear responsibility for their own decisions. The effect of the applicants' case was that the Bank should underwrite Astram's commercial fortunes and prevent it from failing. There is no legal or commercial principle which sustains that approach.

[64]

Mr Ramsey as trustee 359 Mr Ramsey purported to commence the present proceedings in two capacities - both personally and in his capacity as trustee of the LD Ramsey Family Trust. That is not the style in which he executed the three guarantees signed by him (which was as trustee for the "LDR Family Trust"). I may ignore the discrepancy in the way the suggested trusts were identified in the light of the matters which follow. 360 In its cross claim the Bank initially proceeded against Mr Ramsey personally (as second cross respondent) and also against Mr Ramsey as trustee for the "LD Ramsey Trust" - not the style in which he executed the three guarantees signed by him (as fourth cross respondent). At the hearing the Bank withdrew any claim against Mr Ramsey styled as trustee and pressed its claims against him personally. 361 In its cross claim the Bank pleaded that the guarantees signed by Mr Ramsey were expressed, by clauses in the general conditions applying to those guarantees, to bind him personally and as trustee. The defence to the cross claim opened with a statement that each paragraph of the cross claim was not admitted. The allegation of personal liability pursuant to the general conditions of the guarantees was not otherwise traversed. I do not regard this as a proper pleading (see Federal Court Rules O 11 r 13(3)). The opening paragraph of the defence to the cross claim was liable to be struck out leaving this allegation uncontested. However, no application by the Bank to that effect was made and, for what it was worth, the general statement of non-admission remained. There was no evidence, in the end to support the Bank's pleaded allegation that the general conditions of the guarantees signed by Mr Ramsey expressly bind him personally as well as in any capacity as trustee. Those general conditions were not in evidence. 362 In the final further amended statement of claim it was pleaded by the applicants that the Bank took guarantees for the business term loan and overdraft provided to Astram from the second applicant (i.e. Mr Ramsey personally) and from the fourth applicant (i.e. Mr Ramsey as trustee for the L D Ramsey Family Trust - not the style in which he signed the guarantees). The Bank admitted those allegations. However, apart from the confusion about the name of the trust (which may have no significance) the pleaded exchange did not, in my view, adequately identify the later guarantee given by Mr Ramsey for an overdraft of up to $260,000. 363 Notwithstanding the uncertainties arising from the pleadings and the gaps in the evidence there are, however, other reasons why it should be accepted, as the Bank submitted, that under the general law Mr Ramsey is bound personally by each of the guarantees executed by him. 364 The existence of a trust was never established by the evidence, much less what were its terms. Even if a trust does exist there was no evidence about what the trust assets might be. Under the general law there is no distinction to be made, so far as third parties are concerned, between a trustee in his personal capacity and a trust he administers as trustee. It is not sufficient, to exclude personal liability, that a trustee executes a document with a statement that he does so as trustee. The trustee remains personally liable, even if he may have a claim against the trust assets. 365 In Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773 ("Helvetic") Glass JA (with whom Samuels JA agreed) accepted the following two propositions (at 773):

A trustee who enters into a contract will normally incur unlimited personal liability unless by appropriate language or expressed stipulation such liability is restricted.
A mere description of the capacity in which he contracts as that of trustee is insufficient to exclude full personal liability. 366 Similarly, in Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 Gummow J said (at 253): It is fundamental that the common law does not recognise a trustee as having assumed an additional or qualified legal personality. This means that the liability of the trustee for debts he incurs includes those incurred in the course of performance of the trust. His liability to creditors is not limited or quantified by reference to the extent of the trust assets ... The debts are his debts … clear words are necessary to achieve a result whereby what is prima facie the unlimited personal liability of a trustee is … qualified: Helvetic Investment Corp Pty Ltd v Knight (1984) 9 ACLR 773. 367 In Re Interwest Hotels Pty Ltd (in liq) (1993) 12 ACSR 78 Eames J in the Supreme Court of Victoria also referred to the Helvetic case, saying (at 83): Where a trustee acting on behalf of a trust entered a contract then as a matter of law the trustee would be taken to be personally liable as well as having made the trust liable under the contract. Clear and unambiguous words would be required before the court would accept that the personal liability of the trustee had been excluded … 368 To similar general effect are the observations of Perram J in St George Bank Ltd v Federal Commissioner of Taxation (2009) 176 FCR 424 at [88] (cited with apparent approval by a Full Court in Re CSR Ltd (2010) 265 ALR 703 at [52]): In the case of a trust, the trust has no separate existence - what exists is the trustee and its liabilities are its alone although it has a right of indemnity out of the trust assets. 369 The effect of the principles referred to in these authorities is that Mr Ramsey is personally liable under the guarantees that he gave, regardless of the fact that he signed them in the style of trustee for the LDR Family Trust. 370 The terms of the mortgage which was executed by Mr and Mrs Ramsey also extend, in any event, to secure any liability which Mr Ramsey incurred as trustee.

[65]

The securities 371 Unless there was some basis upon which to relieve the applicants from liability under the documents which they executed (or which were executed on its behalf, in the case of Astram) there is no effective defence available to the cross claim. Astram's debts to the Bank were secured (although not in full) by the guarantees given by Mr Ramsey and by Mrs Ramsey. They are liable to the limits of those guarantees. Liability under the guarantees is further secured by the mortgage which Mr and Mrs Ramsey gave over their property. 372 Evidence was given that an amount realised on the enforced sale by the Bank of Astram's interest in the franchise ($287,000) was credited in Astram's favour. Evidence was given of the amounts then outstanding in relation to the business term loan agreement and the business overdraft facility. Evidence was given of the calculation and amounts of interest due under the business term loan agreement and business overdraft facility provided to Astram until those accounts were closed off as at 12 May 2009. Interest is not claimed by the Bank after that date on those debts. Evidence was given that necessary demands under the various instruments, and notices of default, have been given and not satisfied. 373 The mortgage given by Mr and Mrs Astridge also secures a home loan agreement. That loan is personal to them and interest continues to accrue on it. 374 The specific claims made were distilled in final submissions in the following way: 1. $616,684.55 as against the First Applicant/First Defendant by Cross-Claim, being: (a) $216,976.91 pursuant to the Business Term Loan Agreement; and (b) $399,707.64 pursuant to the Business Overdraft Facility. 2. $882,533.10 as against the Second Applicant/Second Defendant by Cross-Claim, being: (a) $216,976.91 pursuant to the Ramsey Business Term Loan Agreement Guarantee; (b) $260,000.00 pursuant to the LDR Family Trust Business Overdraft Facility Guarantee; and (c) $405,576.20 pursuant to the Home Loan Account plus interest accruing at 6.6% per annum. 3. $665,576.20 as against the Third Applicant/Third Defendant by Cross-Claim, being: (a) $260,000 pursuant to the Mrs Ramsey Business Overdraft Facility Guarantee; and (b) $405,576.20 pursuant to the Home Loan Account plus interest accruing at 6.6% per annum. 375 I am satisfied that those claims have been established and that orders should be made which reflect the amounts identified and interest accrued. It will be noted that only Mr Ramsey is jointly liable with Astram for its debt pursuant to the business term loan agreement, that Mr and Mrs Ramsey are jointly liable to contribute (but only to the extent of $260,000) to Astram's liability under the business overdraft facility and that Mr and Mrs Ramsey are jointly liable with respect to their home loan account.

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