David Scott Emerton
170 Mr Emerton is a former employee of SensaSlim. He was employed from mid-March 2010 to 17 October 2010. He gave evidence that, prior to his employment by SensaSlim, he had been involved in the real estate and car industries and had held positions with various banks and finance companies. He had also been involved as a manager in a betting software business called "Profit Runner". That business failed in the second half of 2009.
171 In December 2009, Mr Emerton was invited by the director of Profit Runner to attend a meeting with Mr Foster at a caf´ on Chevron Island. At that meeting, Mr Foster asked Mr Emerton whether it was easy for a franchisee to get loans for franchise businesses. In the course of that conversation, Mr Emerton gave evidence that Mr Foster said:
I am after a National Sales Manager for a health and beauty product business that I am setting up, and there could be an opportunity for you there.
172 Mr Emerton referred to the meeting as "just a 'meet and greet'". There was no mention of the opportunity being SensaSlim although he knew that the opportunity related to a health and beauty product.
173 After further meetings and discussions with Mr Foster, Mr Emerton had a meeting with Mr Foster at a café in a shopping mall at Southport in December 2009. Mr Emerton said that, at this meeting, he told Mr Foster the results of inquiries he had made concerning the ability of franchisees to obtain funding. Mr Emerton gave evidence that Mr Foster said:
The price I am considering to sell a franchise in this new business is around $60,000.
174 Mr Emerton also gave evidence that, at one meeting, Mr Foster said:
I am waiting for a promotional DVD to be produced which I am in the process of editing. I want to show it to you as it will explain what the business is about. The DVD is being produced by an outfit business located in [a location Mr Emerton could only recall as being either Ballina or Byron Bay], but it is not yet available.
175 Mr Emerton also gave evidence that, on several subsequent occasions, Mr Foster said:
I have been provided with versions of the DVD, but have to send them back to be re-edited, so that they will include the information I want and in the order I want it.
176 Mr Emerton also gave evidence of other meetings and conversations with Mr Foster, including meetings attended by Mr Emerton's wife, Vikki, and Louise Foster.
177 Mr Emerton gave evidence that, sometime during mid-January 2010 (before 19 January 2010), he and his wife were invited by Mr Foster to lunch at the Norseman Court house. Louise Foster and Arabella Foster were present in the house. Mr Emerton said that, at this meeting, the DVD which he had been told about was presented. He said that this was the first occasion on which he and his wife became aware of the SensaSlim product. On viewing the DVD, Mr Emerton noticed that locations in it had been filmed in the Norseman Court house.
178 Mr Emerton said that he was aware of Mr Foster's "background" and "the fact that he had been involved in business opportunities which had problematic histories", as well as Mr Foster's involvement in the sales of slimming products. He said that, after the DVD had been shown, a conversation involving Mr Emerton and his wife, and Mr Foster and Louise Foster, occurred as follows:
Mr Foster said: Do you have any concerns?
Vikki said: Yes. I need to know how the marketing will work. That this is all different from the past.
Mr Foster said: It's all different. I've got new marketing people involved. I've been up writing stuff in support of this for days.
Mrs Foster said: Yes, Peter's very tired. He's been up night after night working on this and the folders of materials to go with it.
I said: I don't want to be involved in anything that's not working.
Mr Foster said: I've done all the overseas trials. This one's different to what I've done in the past. It works. Go and look SensaSlim up on Google.
179 Mr Emerton said that he subsequently searched "SensaSlim" using Google and saw many pages of results, including results which referred to the product as having been developed and trialled overseas.
180 Mr Emerton said that, prior to 25 January 2010, he and his wife were again invited to the Norseman Court house. Mr Emerton said that, at this meeting, one purpose of which was to watch another version of the DVD, or perhaps at an earlier meeting at which his wife was also present, Mr Foster said:
I have previously been in jail, and I am on parole and I can't be a director of a company or involved in a business until [a date which Mr Emerton could not recall].
181 Mr Emerton said that, at around this time, he formed the view that he would "most likely" become involved in the SensaSlim business and that, following an assurance from Mr Foster that it was "alright to use a different name in your business dealings", he decided that he would use another name when involved in the SensaSlim business.
182 Mr Emerton gave evidence that, prior to a subsequent dinner to meet "investors" in the SensaSlim business, he raised with Mr Foster in a text message whether Mr Emerton should use his real name when introduced at the dinner. He said that Mr Foster replied:
Scott. I told you, these are my friends. They can be trusted, so use your name Scott Emerton.
183 Mr Emerton gave evidence that, towards the end of February 2012, he and his wife were invited by Mr Foster to lunch at the Norseman Court house. He said that Mr Foster told him that the purpose of the lunch was to meet the director of the company, Mr Boyle. Mr Emerton said that, at this lunch, he decided to go by the name "David Waller". He said that, at this lunch, Dr Waters, Mr Foster, Mr Boyle and Louise Foster were present as well as Mr Emerton and his wife. He also said that Arabella Foster was present, but did not sit down for lunch. He said that Mr Boyle was introduced as "a director of the company". Mr Emerton said that it was following this lunch that he became "comfortable with the business", that it was "all legitimate" and "above board", and that he would become involved in the national role that Mr Foster had described to him. The evidence shows that, later, Mr Emerton used the name "Scott Waller" in his dealings with Sales Managers, prospective franchisees and Area Managers involved with the SensaSlim business.
184 Mr Emerton said that, in late January or early February 2010, he had a conversation with Mr Foster in which Mr Foster said:
You should communicate with my [sic] by email at william.imom@gmail.com. I like to use gmail addresses. I found out when I was in jail that these addresses can't be traced. You need to set up a gmail or a hotmail account for our communications. Skype phones are also good, as they can't be traced. I'll arrange for the business to get some of these.
185 Mr Emerton said that, up until 9 March 2010, he communicated with Mr Foster using that email address. There is other evidence that shows Mr Foster as the author of an email dated 1 February 2010 that was sent to Mr Emerton from this address. In a subsequent email, Mr Foster said:
PS That previous attachment was for your eyes only as the property section of the document discloses me as the author. If you have to show it to someone cut and paste it into a new word document from your computer or give them a hard copy.
Thanks
P
186 On 9 March 2010, Mr Emerton received an email from Mr Foster asking him to use a new email address: bill.imom@gmail.com. Mr Emerton said that most of his email communications with Mr Foster were either through the "bill.imom" or "william.imom" accounts, or through SensaSlim email accounts, such as peter.obrien@sensaslim.com.au. Mr Emerton said that although, usually, in this email correspondence, Mr Foster did not give his own name, he did receive email correspondence from Mr Foster using the account peter@fosterworldwide.com in relation to the SensaSlim business. There are in evidence two emails, each dated 26 April 2010, to Mr Emerton from this account: one enclosing a link to Australian postcodes (which Mr Emerton said were to be used in working out franchise areas) and one forwarding a credit report on Liana Emberg, who Mr Emerton described as Mr Foster's girlfriend at the time.
187 There was also in evidence another email (dated 9 July 2010) to Mr Emerton from that address attaching a SensaSlim newsletter. I will make further reference to these newsletters below. Mr Emerton said that he was surprised that this email had been sent using this email address. The evidence shows that he replied by asking:
Was that suppose[d] to come from that address?
The response received was:
No just to you only.
188 Mr Emerton said that, on numerous occasions, he would receive emails from Mr Foster from the address pobrien@sensaslim.com.au or sales@sensaslim.com.au or admin@sensaslim.com.au. He also said that he communicated with Mr Foster by telephone to one of two prepaid mobile phones. Mr Emerton's evidence was that one of these was a mobile phone number "which was disclosed to prospective franchisees and other area sales managers, as being the mobile phone for Mr O'Brien". He said that, when he called that number, he generally used a prepaid mobile phone that had been provided to him by Mr Covich, who Mr Emerton described as an associate of Mr Foster who undertook "handyman" tasks around Mr Foster's residence.
189 Mr Emerton said that the second number was not "associated" with Mr O'Brien. He said that this was a number given to him by Mr Foster in an email dated 27 July 2010 using the "bill.imom" address. The email is in evidence. It states:
Scott in future ring me on [a particular telephone number]
Too many people have the other number, so this new number is only given to you and the girls.
190 Mr Emerton gave evidence that the number of this service was stored in the memory of the mobile phone with which he had been provided. His wife marked it with a red dot sticker so that he would not inadvertently use it to call clients. Telephone records in evidence also show Mr Emerton using his personal mobile phone to call Mr Foster on that number.
191 Mr Emerton gave evidence that, on 10 March 2010, he received an email from Mr Foster using the "bill.imom" address offering him the position of National Sales Manager. He said that, two days later, he had a telephone conversation with Mr Foster in which Mr Emerton confirmed that the proposal in that email was acceptable. However, he said that, even before accepting that proposal, he started doing work and undertaking tasks associated with the SensaSlim business at Mr Foster's request. He said that, over these weeks, he was regularly (approximately three to four times per week) at the Norseman Court house working with Mr Foster.
192 He said that this work involved:
Assisting people associated with Mr Foster and SensaSlim in obtaining lines of credit through multiple credit card applications. He said that the purpose of this was to assist the cashflow for the business. In respect of Mr Covich and Ms Emberg, it was to allow them to purchase SensaSlim franchises on their credit cards.
Obtaining alternate office space for the SensaSlim business.
Assisting in preparing sales and promotional materials to be presented to franchisees.
Assisting in developing the sales presentation to be made to prospective franchisees.
193 He said that, during these visits, he would see or deal with the following people: Mr Foster; Louise Foster; Ms Emberg; Arabella Foster (who called herself Alli or Ali or Allie Loretti); Ms Kenny (who was referred to as Layla); Mr Covich; Mr McMullan; Mr O'Brien; Mr Duffy; and other persons he described as friends of Mr Foster and Louise Foster.
194 Mr Emerton gave more detailed evidence about Mr O'Brien and Mr McMullan. Mr Emerton described Mr O'Brien as stocky and overweight, in his late 50s to 60s, with a slightly pockmarked face. He said he was a slow talker. Mr Emerton gave evidence that, on one occasion, he had a conversation with Mr Foster at the Norseman Court house in which Mr Foster said, with respect to Mr O'Brien:
I won't know what to do with him if the media get interested. I suppose I'll have to buy him an expensive suit and dress him and get him to front the media, but he won't be able to open his mouth.
195 Mr Emerton's evidence was that Mr Foster was the person with whom he dealt essentially on a daily basis in relation to his work at SensaSlim. He said he never reported to Mr O'Brien, nor did he ever have any discussions or communications with Mr O'Brien concerning the operation of the SensaSlim business.
196 In relation to Mr McMullan, Mr Emerton said that, shortly before Mr Emerton's appointment as National Sales Manager, he had a conversation with Mr Foster in which Mr Foster said that he had worked with Mr McMullan in the past in other ventures dealing with health products. Mr Emerton's evidence was that Mr McMullan established the Gmail accounts which were used by various people working at SensaSlim and which were needed for the use of Skype phones. On 17 March 2010, Mr Emerton received an email from Mr McMullan advising him of the details of the Gmail account that had been set up for Mr Emerton. Mr Emerton said that he was also involved with Mr McMullan in trips arranged for meeting and interviewing prospective franchisees.
197 Mr Emerton said that, at the Norseman Court house, two office areas had been set up upstairs. One was a main office, and the other was Mr Foster's individual office. These two office areas were separated by a corridor. He provided a sketch of each room in his affidavit evidence. He said that the main office was a large room of about the size of a double garage. It contained desks set against outside walls, as well as a row of desks in the centre of the room, with PCs, laptops, printers and telephones. He said that Arabella Foster and Layla usually sat in the centre of the room in front of pink laptops. Mr McMullan usually sat at a desk along the wall. He said that Mr Foster's office was smaller. He said that, in that office, Mr Foster had two PC screens to the side and another at a side desk.
198 Mr Emerton gave evidence of his dealings with Mr Foster in obtaining card merchant facilities for SensaSlim so that it could process credit card payments to be used to purchase franchises. He also gave evidence of his work in making credit card applications for various persons including his communications with Mr Foster in relation to those applications. The applications were made for Arabella Foster, Ms Emberg, Mr Covich, Dr Waters and Mr O'Brien.
199 Mr Emerton also gave evidence about obtaining new office premises for the SensaSlim business. He said that he had had a conversation with Mr Foster, at some time in February 2010, at the Norseman Court house in which Mr Foster said:
I want to get some commercial premises to work out of. I want to get all the girls out of here and the phones and printers before you go on the road. I don't want anything which links Sensaslim back to Mum's house.
200 He said that, in the period 17 February to 4 March 2010, he assisted in searches for properties in Southport. The premises had to be south-east facing, with no line of sight from another building. He was told by Mr Foster that:
I've started making enquiries in Bill Duffy's name, and the lease will need to be taken out in his name. As you'll also be working there in your own office, I'd like you to inspect the place and meet the agent.
201 Mr Emerton was copied in on email correspondence between "Bill" using the "william.imom" email address and Natasha Perkins, a senior assistant property manager, and Gayle Elliott, a residential property manager, at SPC Residential Management Pty Ltd (receivers and managers appointed).
202 Mr Emerton gave evidence that, subsequently, he assisted Mr Covich and Mr McMullan to load a hire truck with furniture from the Norseman Court house for delivery to Southport Central. Arabella Foster and Layla were using their cars to move some lighter materials. Premises were ultimately leased at a unit development called Southport Central in Lawson Street, Southport.
203 Mr Emerton also gave evidence about the preparation of promotional materials and advertisements used in relation to the SensaSlim business. He said that, on one occasion prior to mid-March 2010, he was in Mr Foster's office at the Norseman Court house when Mr Foster gave him a copy of a draft of the Area Manager Proposal, at which time Mr Foster said:
I've been working on this. Have a look - what do you think?
204 Mr Emerton said that he assisted Mr Foster by proofreading the document when it was near its final stage. Mr Emerton said that, initially, small quantities of the Area Manager Proposal were printed at the Norseman Court house using laser printers. However, when larger numbers were required when the sales were underway, copies were printed at commercial printers at Southport.
205 Mr Emerton also gave evidence of discussions with Mr Foster about how presentations to prospective franchisees would be made. He said that, in these conversations, Mr Foster "developed and refined the sales pitch which he wanted delivered to prospective franchisees". He said that Mr Foster told him:
They will be shown the DVD, but not permitted to take a copy away. However, they will be able to take the Area Manager's Proposal away with them, as well as the Disclosure Documents.
… I've been involved in selling businesses like this before. To get the sale, the presentations need to be carefully structured.
206 Mr Emerton gave evidence that Mr Foster outlined for him how he wanted the "sales pitch" to proceed. He said that Mr Foster prepared copies of the Area Manager Proposal for use by SensaSlim Sales Managers which, by green dots at the side of the page, highlighted the particular items that Mr Foster required the Sales Managers to read and emphasise to prospective franchisees and, by red dots, those parts that did not have to be read word for word but should be "casually mentioned". The marked copy also gave guidance on what sections could be skipped, where something should be written in the prospective franchisee's Area Manager Proposal and how to respond to queries. A series of printed notes were also prepared on "Handling Queries". Examples of these documents are in evidence. The information in the Area Manager Proposal dealing with the weight loss trial is marked with a green dot.
207 Mr Emerton also gave evidence that Mr Foster required the SensaSlim DVD to be played on a large-screen television rather than on a laptop computer. One of the printed guidance notes states as follows:
MOST IMPORTANT RULE
Never, but never ever cut the DVD/video presentation short or fast forward.
It has been written, directed and edited with not just a sales emphasis, but psychological factors considered that it addresses and satisfies.
Allow the DVD/video to do all the hard work for you. Before anyone will become a Area Manager they must become excited about the proposal - and to become excited they must fully understand the concept.
The DVD/video is designed to answer their questions as quickly as they come into their mind - before they have a chance to ask you. Before any issue can become an objection.
By the time they have watched the DVD/video, they will be 100% certain in their own minds that:
• The product is scientifically tested and they now have no doubts it is effective. This eliminates them wanting to take samples of the product home and test it themselves for 4 weeks. Its efficacy is beyond question and no longer an issue.
• They have seen the enormous media interest it has created so they know it is a hot item.
• They have seen it sells out fast.
• They understand what is required of them as a Area Manager.
• They know the company will support them with training and motivation and seminars.
If you don't allow the DVD/video to do its job, there will be parts of the puzzle missing and you won't get a sale.
Play the DVD/video through. Don't interrupt it. Don't talk throughout it. Let it do its job. It will make your job a lot easier.
208 Mr Emerton also gave evidence that Mr Foster instructed him that Sales Managers were to provide pens and pencils to prospective franchisees at certain times during the presentation and encourage them to write down financial information. He said that he and Mr Foster would also engage in a role-playing exercise, with Mr Foster on occasion taking the role of a Sales Manager and Mr Emerton taking the role of a prospective franchisee. Sometimes, the roles would be reversed.
209 Mr Emerton said that Mr Foster prepared the Frequently Asked Questions document. In his affidavit, Mr Emerton also identified an email sent from bill.imom@gmail.com attaching a document dealing with the procedures to be followed when franchisee contracts were signed. I infer that this document was sent to Mr Emerton by Mr Foster and that it was prepared by Mr Foster.
210 Mr Emerton gave evidence concerning newspaper advertisements used as part of the process of selling franchises. He said that, prior to 21 March 2010, when he went on the road selling those franchises, he had had a number of conversations with Mr Foster concerning the content of draft advertisements which had been prepared by Mr Foster. Generally, Mr Foster asked Mr Emerton to obtain copies of newspapers containing the advertisements. Advertisements were also placed on the website seek.com. Examples of advertisements are in evidence. The examples vary in their form and content. Generally, they speak of a "phenomenal new product" or a "revolutionary new product" that is destined to dominate in an industry worth over "$1 billion per annum" that has been spoken of by "the highly respected international news magazine, TIME" in glowing terms. The advertisements refer to the ability of Area Managers to earn in excess of $3,000 or $4,000 per week after an initial investment of $59,950 for the purchase of stock.
211 Mr Emerton gave evidence of his observations concerning Mr Foster's involvement in preparing newsletters sent to franchisees. He gave evidence of telephone conversations with Mr Foster in which Mr Foster referred to his need "to get this newsletter out". Mr Emerton also said that, on occasion, Mr Emerton and his wife edited the newsletters and would provide revised comments.
212 Mr Emerton also gave evidence of what he identified as "some of the business practices which were used at Sensaslim in dealing with prospective franchisees, and to create and maintain the impression that the business was a legitimate business, conducted out of the registered office in Chifley Tower Sydney, and not associated with Mr Foster".
213 First, Mr Emerton gave evidence of what he said were Mr Foster's concerns that "the Sensaslim operation" be presented to prospective and actual franchisees as a Sydney-based business that was not linked to the Gold Coast. The documents relied upon by Mr Emerton show him reporting his own concerns to Mr Foster that certain franchisees or prospective franchisees had been made aware of, or had seen evidence of, an association between the SensaSlim business and the Gold Coast. If anything, this evidence shows Mr Emerton's awareness that this association should not be disclosed, rather than direct evidence of Mr Foster's concerns in that regard.
214 One email (from the address pobrien@sensaslim.com.au) does show Mr Foster's concerns that prospective franchisees were being given the contact details of appointed franchisees. In that email, Mr Foster said:
We have a security risk giving out all the Area Managers numbers to prospective Area Managers. etc
Stuart Watts is now keeping everyone's numbers and ringing them all.
That is why we blind copy email and don't let them talk to eachother.
eg Last week Lorraine Falrve raised with the Peter Foster / slimist issue. I contained that..but now she has raised it with Stuart Watts, who didn't know about it…and now he has raised it with others…
I don't believe we should give out Area Managers numbers to anyone…the risk are too great because one negative comment can spread far too fast…and be too hard to contain, especially between now and the seminar.
215 Given the date of this email (17 August 2010), I infer that the reference to the "seminar" is to the Area Managers' Conference.
216 Mr Emerton gave evidence about the process of "finding and signing" prospective franchisees, and Mr Foster's involvement in that process. Mr Emerton said that the process of identifying and meeting prospective franchisees was "fairly standardised". A Sales Manager would travel to a region. Prior to that time, a newspaper advertisement was published in a local or regional newspaper. The advertisements were placed by "the staff in the office" usually using either Arabella Foster's credit card or Mr Covich's credit card. The advertisements included a "1800" number to a marketing service based in New Zealand, MEP Services Limited, which operated as a message-taking centre. A receptionist would obtain "basic information" from respondents to the advertisements and forward this information in an email addressed to recruitment@sensaslim.com.au or "another Sensaslim email address". The email would be forwarded to Mr Emerton, sometimes from the address bill.imom@gmail.com. In this connection, Mr Emerton said:
… The procedure in place at the Sensaslim office was that the girls in the office were not permitted to provide me with any leads until they had been approved by Mr Foster. I understood this was because Mr Foster wanted to check that none of the leads had previously dealt with him in his prior business ventures, or had not already purchased a Sensaslim franchise. On several quiet weekends, I telephoned Mr Foster, and would ask him to provide me with additional leads for me to pursue. Whilst on the phone, he would review the recent enquiries, and say words to the following effect "I'll just check them against the list in the PC of my previous sales before Sensaslim". He would then give me the details of the leads I could pursue.
217 One email in evidence, which I infer was sent by Mr Foster to Mr Emerton, concerns leads in Cairns and Townsville. The email shows a concern that some of the leads might have had a previous association "with Chaste and Trimit", businesses with which Mr Foster had had a previous association. The instruction in the email was "to double check [these] aren't the same people".
218 Mr Emerton said:
I would make contact with the prospective franchisee, and ask them a series of questions to determine if they were "qualified" to proceed to a meeting with me. … If they "qualified", I would arrange a meeting with them at the hotel or apartment where I was staying. When they arrived, I would provide them with coffee etc; play the DVD; leave the room; let them watch it and come back and talk to them and emphasise particular aspects of the presentation, using the procedures which Mr Foster had instructed me to use. I did not always stick strictly to Mr Foster's instructions, and would sometimes supplement the presentation. The prospective franchisees could then choose if they wished to proceed with the investment. In all cases, I would have told people to undertake their own due diligence. The prospective franchisees could then complete a hard copy application form which could be faxed to Sensaslim's offices, or alternatively, go on to the Sensaslim website and provide information completing an application form which would be submitted electronically. I always encouraged people to go away after these meetings, and to not complete the application form until they had time to consider matters.
219 Mr Emerton also said:
The Sensaslim website was structured so that when people lodged applications through the website, they could tick an option if they wanted one of the directors of Sensaslim to make contact with the franchisee. If a prospective franchisee completed an application (either on-line, or by faxing a handwritten form), that would be received by Mr Foster. Using either the "bill.imom" email address, or the peter.obrien@sensaslim.com.au address or another Sensaslim email address, Mr Foster would usually forward the application to me, and on some occasions provide some commentary about the prospect. …
220 Mr Emerton also said that, after applications had been received from prospective franchisees, he would, on occasion, discuss the prospective franchisee with Mr Foster and obtain his view on "whether they should be proceeded with". He also gave evidence that he regularly discussed prospective franchisees with Mr Foster after Mr Foster had made contact with the franchisee. There are emails in evidence, which I accept are communications between Mr Foster (from various email addresses, such as bill.imom@gmail.com and pobrien@sensaslim.com.au) and Mr Emerton about prospective franchisees, including those with whom Mr Foster had spoken on the telephone. The evidence shows that, for this purpose, Mr Foster used the name "Peter O'Brien".
221 Mr Emerton said:
On some of the emails that would be generated internally, Mr Foster, using his "imom" email address, would send an email to one of the office girls such as Layla, providing them with a copy of a Sensaslim franchise application completed by a prospective franchisee, and giving instructions along the lines that the person had been interviewed by "POB". Those references to "POB" are not references in fact to Mr O'Brien. They are instructions to the office staff, to complete the proforma welcome letter, identifying Peter O'Brien (and whoever else Mr Foster identified) as the person who had interviewed the franchisee. This maintained the fiction that Mr O'Brien was involved in the process of speaking with prospective franchisees and approving their applications. The reference and instructions would be used by Layla when generating the "Welcome" letter to the applicant, in a sentence that would say words along the lines of "I would like you to know that you certainly impressed both Peter O'Brien and Scott Waller" (or whoever interviewed the prospect). In reality, it was a reference to the telephone conversation that Mr Foster had had with the person, in the guise of Mr O'Brien. …
222 If a prospective franchisee "signed up", that person's payment was processed and they would be sent a formal "welcome" letter. Mr Emerton said that the letter was signed by Mr Boyle. I will return to that matter, later in these reasons.
223 Mr Emerton also gave evidence about "[u]nwanted applicants". In this connection, the newspaper advertisements did not disclose the nature of the business opportunity being advertised. Mr Emerton said that, in cases where Mr Foster wanted to reject or discourage an applicant or wanted to "burn off" someone, he would sometimes provide them with information in relation to another business opportunity, called "Anti-Age me" (there are various spellings in the evidence), a business conducted by a Mr Roach. There are a number of emails in evidence which relate to communications from Mr Foster to Mr Emerton concerning prospective franchisees that Mr Foster wanted to "burn off" and who were encouraged to switch to the "Anti-Age me" product.
224 It is clear on Mr Emerton's evidence that Mr Foster had a close involvement in monitoring the progress of applications for franchises. In an email sent to Mr Emerton on 6 May 2010, Mr Foster (using the address bill.imom@gmail.com) said:
I think before we advertise for more salespeople we have to figure where we are going wrong.
Our costs are high and our conversation rate is low.
So far we have only sold 4 areas to three people in 6 1/2, nearly 7 weeks. At the same stage of my last project we had sold 15 areas.
We had roughly 8 leads off the first Brisbane ad and sold 1 area. We have had upwards of 20 leads off the second ad and sold 1. (so far)
I am also noticing a vastly reduced number of applications.
The proposal obviously has attraction otherwise Neil Simpson, Dennis and Lindy wouldn't have bought. But others are hesitant, nervous, they are getting close but then feeling uncomfortable or not excited enough to be convinced.
If we keep going at the closing rate we are, with the costs we're incurring, we won't turn a profit. It's not just because we don't have enough salespeople, but the closure rate has to be greater because the ads are costing $3000 each and only producing one sale, on 20 leads it is a matter of our overheads are too high and it will take too long to achieve our objectives no matter how many salesmen we have working.
I can say that four absolutely genuine buyers have fallen over, being Cairns, Bundaberg, Lismore and Townsville. For whatever reasons they would have made all the difference to our closure rate.
I am not panicking, (although Michael Boyle is) but I can see we do have a problem somewhere..it is just a case of finding out what is going wrong.
225 Mr Emerton gave evidence of communications with particular prospective franchisees. Some of these prospective franchisees have also given evidence. I will deal with these communications when discussing the evidence of these witnesses. It is convenient, however, to deal at this juncture with some communications with Margaret Faint who, when making inquiries about the SensaSlim business after being interviewed by Mr Emerton, sent an email to another address, headoffice@sensaslim.com. In an email dated 11 April 2010, which was addressed "Dear Sensaslim Team", Ms Faint said:
Good Morning from sunny Queensland, Australia. I hope you will be able to assist me with an enquiry.
I have been discussing a franchise opportunity for my area with some gentlemen from Sensaslim Australia Pty Ltd. I am very interested and believe this is a great product and a great opportunity. I do however feel it would be wise to do some research before handing over my hard earned money. It is unfortunate that we do have con men in this day and age, making it necessary to check facts. With those factors in mind, would you please confirm the names of the gentlemen in Australia with whom I should be dealing? I have been in discussions with the National Sales Manager and also with the Operations Director. They are both very well spoken and polite men, and I believe them to be who they say they are, but would like your confirmation.
Naturally I do not wish to cause offence to anyone, so I would also request that you keep this correspondence confidential. Thank you so much for any assistance you are able to offer. I do hope I will be working with the Sensaslim team in the very near future!
226 On the same day, Mr Foster (using the email address pobrien@sensaslim.com.au) forwarded Ms Faint's email to Mr Emerton saying:
We are not suppose[d] to have seen this email so don't say anything. It was sent to Switzerland.
227 In that email, Mr Foster also said:
The legal department at Switzerland will send her an email.
228 The following day, Mr Foster forwarded an email chain to Mr Emerton containing communications between "René Desbois" (from the address legal@sensaslim.com) and Ms Faint. The evidence establishes that the address legal@sensaslim.com was, at that time, associated with an account in the name of Jill Louise Foster. The email, ostensibly sent by René Desbois, is as follows:
Dear Madame Faint,
Thank you for your email which has been forwarded to my office for reply. Yes, we are also sunny this Sunday morning, but it is only 10 degrees here at 10 a.m., so unlike you, no suntanning for us today. Also we must work as we are very busy. (c'est trop fort).
Your email has been re-directed to me by our website for answer on the week-end, and accordingly there is only limited information I have available without speaking to my colleagues on Monday who handle the Asia Pacific region out of the United Kingdom.
We can confirm that the Australian master distributorship license was secured by Mr. Michael Boyle and his business partner, Mr. Peter O'Brien. The exclusive license is for a term of 20 years (with renewal options) and they operate through a company called Sensaslim Australia Pty Ltd.
Prior to assigning the license we needed to satisfy ourselves as to not only their financial stability, but their ability to conduct the business in a professional and forthright manner. Our investigations lead us to believe that they are honest, reliable and trustworthy and are fully capable of meeting their financial commitments and ensuring all business dealings are conducted to the highest standards. We are confident you will find Sensaslim Australia Pty Ltd. dependable and reliable.
As for the two gentlemen you have spoken with, you would have to refer to the Sydney, Australia office to be confident they are employed by Sensaslim Australia Pty. Ltd. Their telephone number is +61 2 9375 2230.
But I believe it is Sunday evening there now, so you may have to wait until tomorrow morning.
Your request for this communication to remain confidential will be respected. I hope everything is to your satisfaction with your enquiries.
Please contact me at legal@sensaslim.com should you require any further information.
Yours very sincerely and respectfully,
René Desbois
Legal Department - International Affairs
Chargé d'affaires
229 Ms Faint responded in the following terms:
Dear René
Thank you so much for your prompt and thorough response. I am so surprised that you were working on Sunday. I'm sure it must be very busy for you at this time, with the launch coming up so soon now. Your reply has been the confirmation I required to move forward - thanks again.
Regards,
Margaret Faint …
230 After receiving this email chain, Mr Emerton telephoned Mr Foster. He said the following conversation took place:
Mr Foster said: Did you like that?
I said: I know some Renée's and it is a French name. Is it used in Switzerland?
Mr Foster said: It's a common name in Switzerland. I even made sure I checked the weather there and the time before I sent it, in case she checks.
231 Mr Emerton gave evidence of other communications between himself and Ms Faint, and between Mr Foster and Ms Faint. It is not necessary to set out the detail of these communications. They show, however, that both Mr Foster and Mr Emerton were prepared to prey on Ms Faint's religious convictions in order to induce her to become an Area Manager. Fortunately for Ms Faint, she eventually decided against becoming an Area Manager.
232 Mr Emerton's evidence revealed other occasions on which prospective franchisees received a communication ostensibly from René Desbois after seeking to investigate the SensaSlim business by making inquiries to overseas websites connected with the SensaSlim business. Mr Foster brought these inquiries to Mr Emerton's attention. The evidence shows that Mr Foster cautioned Mr Emerton that "[w]e are not suppose[d] to know [about these communications]".
233 Mr Emerton said that, over time, he became "disappointed and dissatisfied with the way Mr Foster was running Sensaslim". According to Mr Emerton, initially, the cause was disagreements he had with Mr Foster about the degree of autonomy Mr Emerton would have in the operation of the business and disagreements about the payment of his remuneration, as well as that of other employees and agents who Mr Emerton had engaged and who were working with him. Mr Emerton also said that he became dissatisfied because Mr Foster would not give him the "free hand" he expected in selecting and training sales staff. He said that there were instances where he expressly disagreed with employees that Mr Foster took on. He gave examples of employees who he said had been "pressed upon me" by Mr Foster. When Mr Emerton complained, Mr Foster insisted that his directions concerning these employees were to be followed. Mr Emerton said that, in the period 7 May 2010 to 4 June 2010, his relations with Mr Foster were such that, if Mr Emerton criticised him, Mr Foster "would give me the cold shoulder and not communicate with me other than by email".
234 On 21 May 2010, Mr Emerton was informed by a messenger from Mr Foster that he was no longer the National Sales Manager for SensaSlim. Nevertheless, Mr Emerton remained in the business and continued to sell franchises.
235 In September 2010, Mr Emerton decided to leave the business. His reasons for this decision included his dissatisfaction that "the launch date was continually put off" and his dissatisfaction with the inadequate and unprofessional office and administrative support. His main cause for dissatisfaction was, however, his continuing complaints that he was not being paid by Mr Foster in a timely manner for the amounts that he regarded as being due to him. In this connection, Mr Emerton commenced to air his complaints to Mr Boyle, sending emails to the address boyleboyle1@gmail.com. Mr Foster told Mr Emerton that he had asked Mr Boyle to "inject more money" and that, as soon as Mr Boyle did so, Mr Foster would transfer funds to Mr Emerton. Mr Emerton said:
In these emails, I was seeking to use every means available to me to ensure I would receive the amounts due to me, and for that reason, made unveiled references to Mr Foster's involvement. In previous correspondence, I had been careful to avoid any reference to Mr Foster.
I was communicating with Mr Boyle using the gmail address. I am uncertain whether those emails that I was receiving were from Mr Boyle or Mr Foster. They do refer to Mr Boyle looking after "the investors" but I suspect that during this period, his gmail account may have been co-opted by Mr Foster.
236 Mr Emerton gave evidence concerning his association with other people connected to the SensaSlim business. He gave evidence concerning his knowledge of and contact with Mr Adams, whom he first met with Mr Foster at the Norseman Court house in late March or early April 2010. On one occasion at about this time, during lunch at "Shuck Restaurant Main Beach", Mr Foster told Mr Emerton:
Adam will be joining us. He will relieve some of the pressure from me. He will be liaising with the franchisees, handling any complaints and enquiries, so not as many people will be asking for Peter O'Brien.
Adam will be available to fly interstate and meet with the franchisees if required, so they don't get disappointed by not being able to meet anyone.
237 Mr Emerton said that, sometime between May 2010 and July 2010, Mr Adams commenced working with SensaSlim. However, as Mr Emerton was travelling, he said he was dealing with Mr Foster and "the office staff".
238 Mr Emerton also gave evidence concerning his knowledge of and contact with Mr Duffy. He said that Mr Duffy operated or maintained a bank account which was used to benefit Mr Foster and Arabella Foster. He said that there were cheque books and ATM cards "lying around at Norseman Court" which were in Mr Duffy's name which Mr Foster and Arabella Foster used. He also said that Mr Foster held blank SensaSlim cheques which had been signed by Mr Boyle and a SensaSlim cheque book. He said that the cheque book was kept in the top drawer of a desk at the Norseman Court house.
239 Finally, Mr Emerton gave further evidence concerning his knowledge of and contact with Mr O'Brien. Mr O'Brien was one of the people for whom Mr Emerton obtained credit cards. When completing the necessary forms for these credit cards, Mr Emerton said that he was told by Mr Foster that Mr O'Brien was or would become a director of SensaSlim. He said, however, that Mr Foster was the person he dealt with essentially on a daily basis in relation to his work at SensaSlim. He said that he never reported to Mr O'Brien, nor did he ever have discussions or communications with Mr O'Brien concerning the operation of the SensaSlim business. Mr Emerton said that, on many occasions, he observed Mr O'Brien wandering into the office at Norseman Court and sitting down, even if Mr Foster was on a telephone call. He said that he had observed Mr O'Brien walk in to Mr Foster's office on many occasions when Mr Foster was "going through Sensaslim paperwork".
240 Notwithstanding these appearances, it was Mr Emerton's evidence that Mr Foster assumed the identity of Mr O'Brien when dealing with franchisees or prospective franchisees in emails or telephone conversations. Mr Emerton said:
Regularly I would be present with Mr Foster at Norseman Court and have a query about information provided to a prospective franchisee, or information to be received. On those occasions, Mr Foster would direct Arabella and Layla to check emails received in the peterobrien@sensaslim.com.au account. On occasions when I would call seeking information and Mr Foster was not present, they would check the "peterobrien" emails on Mr Foster's behalf and provide me with the answer to my queries.
241 Mr Emerton said that, on 17 October 2010, a "settlement meeting" was held in relation to his decision to leave the business. He had initially proposed that the meeting be held at the Surfers Paradise Beer Garden. He said that he chose that venue because his son was a bouncer there. He was also concerned to ensure that the meeting occurred in a place that was public or where there was closed circuit television recording the event. He said that he was concerned about his safety.
242 As events transpired, the meeting was held in a private room at the Broadbeach Sofitel. The meeting was to be between himself and Mr Boyle. He said that, when he arrived at the Sofitel, Mr O'Brien and Mr Covich met him and told him to come upstairs where he would "meet Mr Boyle with the investors". When he arrived outside the room, he saw Mr Adams. However, when he entered the room, Mr Boyle was not present. He said that Mick Gatto and John Khoury had entered the room from another door and "a negotiation ensued". Mr Emerton said that he made an audio recording of the meeting. At the conclusion of the meeting, he signed an agreement which Mr O'Brien also signed as a director of SensaSlim, pursuant to which certain funds would be paid to Mr Emerton.
243 Mr Emerton was cross-examined by counsel for Mr Boyle. He was cross-examined on his use of the aliases "David Waller" and "Scott Waller" when working in the SensaSlim business. He denied using these aliases for a dishonest purpose. He referred to the existence of some bad publicity with the Profit Runner business and the publication of his name in relation to that business in The Courier-Mail and later on the internet. His explanation for using the aliases in connection with the SensaSlim business was, in substance, that he did not want the previous bad publicity to come to the attention of SensaSlim's "customers". In this connection, he said that he "wasn't doing it to mislead clients of Sensaslim at all". Rather, he said that he "didn't want them to get the wrong information by reading it on the internet, that had been falsely put up there". I do not accept that explanation. I am satisfied that Mr Emerton used the aliases "David Waller" and then "Scott Waller" to mask his true identity so that he could not be identified as being associated with the SensaSlim business. I should add that I do not believe Mr Emerton's evidence (at [183] above) that he regarded the SensaSlim business to be "all legitimate" and "above board", although I have no doubt that he was "comfortable with the business".
244 Mr Emerton accepted that, from January 2010, he was "perfectly aware of Mr Foster's reputation as a conman". I will return to the subject of Mr Foster's reputation. Mr Emerton also accepted that he knew in April 2010 that Mr Foster was using the name "René Desbois". He obfuscated about his knowledge that Mr Foster was using the name "René Desbois" in email correspondence with Ms Stanistreet. I refer to this correspondence in later paragraphs of these reasons. Mr Foster forwarded that correspondence to Mr Emerton. It is sufficient for me to note at this point that I am satisfied that Mr Emerton knew, contemporaneously, that Mr Foster was using the name "René Desbois" in this correspondence with Ms Stanistreet.
245 Mr Emerton was cross-examined on other topics. These topics are not relevant to the present narrative.