Australian Competition & Consumer Commission v IMB Group Pty Ltd

Australian Competition & Consumer Commission v IMB Group Pty Ltd - [2002] FCA 402 - FCA 2002 case summary — Zoe

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57 Sub-sections 47(6) and (7) have been criticised on the ground that third line forcing is not conduct which is so inherently anti-competitive as to justify per se prohibition and that the "effects on competition" test under s 47(10) should apply. See A Hurley, The Castlemaine Tooheys Case and the Interpretation of the "Third Line Forcing" Provisions (1987) 61 ALJ 415, RI McEwin, Third Line Forcing in Australia (1994) 22 ABLR 114 and J Lipton, Third Line Forcing in Australia: Current Problems and Future Directions (1996) 4 TPLJ 77. Lipton comments (at 78) that "many instances of third line forcing lead to no damage to competition in a market and that such conduct may occasionally lead to benefits in a market". 58 The Hilmer Report (Report by the Independent Committee of Inquiry (Chair: FG Hilmer), National Competition Policy Review (1993) AGPS, Canberra) recommended that the per se prohibition on third line forcing should be removed and that it should instead be subject to the "substantial lessening of competition" test, thereby bringing it "into line with the Act's treatment of other forms of exclusive dealing" under s 47. (See pp xxiii and 52 - 53.) This recommendation was not followed, although, by the Competition Policy Reform Act 1995 (Cth), a procedure was introduced by the new Div 2 of Pt VII the TPA whereby a corporation can notify the Commission that it was engaged or proposed to engage in conduct of the kind referred to in s 47(6) and (7); the Commission can then, if satisfied that the conduct was or would not be likely to be detrimental to competition, issue a notification to that effect. Such a notification by force of s 47(10A) gives statutory protection to the corporation which might otherwise be exposed to action because of its breach of s 47(6) and (7). These provisions are not relevant to the present case, coming into effect only on 17 August 1995. But they do indicate that Parliament's concern in s 47(6) and (7) is with anti-competitive conduct and appear to be a reassertion of the view that many, if not most instances of third line tying will be anti-competitive. 59 As appears from pars 18 and 31(b) and (c) of the pleading, the Commission alleges that the conduct in pars 19 and 20 said to involve exclusive dealing was engaged in in order to induce members of the public to purchase insurance policies and that that conduct contravened not only s 47, but also ss 52 and 53(f) the TPA. Consideration of the last two allegations can be put to one side for the moment.

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62 This was after IMB had assured the Commission it had changed its seminar presentations to make it clear that policy membership was not necessary to acquire the share units and syndicate membership. 63 It is not surprising that the respondents would link the right to the shares and membership in the club to ownership of a policy. It was, from the outset, in early 1991, right up to September 1993, essential to the success of the project that a large number of people take out policies. In the first phase to mid 1992, it was intended that funding to develop each stage of the project was to come from the policyholders taking out a series of loans against their policies and making each lot of loan proceeds available to IMB. IMB initially planned on no other source of funds to pay for construction of the facility. After Cowley came on the scene in mid 1992, IMB evaluated the prospects of ever obtaining sufficient policies quickly enough to be able to rely on policy loan moneys as a source of development funds as being remote and concluded that some other source of funding would have to be obtained. It appears that it was Cowley who suggested that the target of 5,000 policyholders should be reduced to 2,000, a figure no doubt considered to be achievable relatively quickly notwithstanding the poor performance to the end of 1991 of selling only about 450 policies, and who further suggested that 2,000 policies, if assigned to a financier, would be sufficient security to generate loan funds necessary to permit the development to proceed, with such other security over the physical assets of the project as IMB or the proposed public company could offer. The evidence shows that IMB made no provision for persons desirous of taking out shares in supporting the project, but not wishing to take out policies, until August 1993. 64 Following concerns expressed by the Commission about whether the respondents were making representations to the effect that the only way to obtain options to purchase shares in Logan Lions Limited was to sign up for a Legal & General investment policy, McCullough Robertson, solicitors for IMB, wrote to the Commission on 10 August 1993 informing it that changes had been made to the form of the presentation to ensure that members of the public were fully aware that options were available by methods other than obtaining a Legal & General Umbrella Financial Savings Plan. 65 At the seminar held very late in the piece on 8 September 1993, Glenn Ivers put to those attending that one advantage of becoming involved in the scheme by buying a Legal & General Investment Policy and thereby being guaranteed the right, when the proposed company was floated in ten years or so, to take up a parcel of shares at $1 in that company was the advantage of being able to decide whether to take up the $1 shares reserved for them at a time when they would know whether the shares were going to come onto the market at a premium or at a discount to $1. By buying a policy, people attending seminars were thus told that they could obtain that advantage over the position ordinary members of the public interested in acquiring shares in the float would be in at that time. 66 As IMB's then-solicitor Mr P McKnoulty pointed out in his evidence, such an advantage was illusory. The price the market was prepared to pay would only be known after subscriptions closed and the company was listed. The Commission's argument that s 47(6) was infringed by what Glenn Ivers said in September 1993 requires the advantage over ordinary members of the public he said would be conferred by policy ownership to be regarded as a "service", for the purposes of s 47(6)(a) and (7)(a). The term "services" is widely defined in s 4. But, in the context of s 47(6) and (7), it refers I think to services, including benefits, which the tying corporation is then able to supply or which it will be able to supply in the future, on performance of the condition by the offeree, not some service which the tying corporation is not able to supply at the time the conditional offer of supply is made and which it may never be able to supply. The object of s 47(6) and (7) is to prevent the supplier of particular goods or services desired by a consumer from having to take other, perhaps unwanted goods or services from a third party, in order to get the desired product. These provisions are not concerned with representational conduct consisting of statements about what the representer will do, but which it cannot now or may not be able in the future to do. That, as the Commission recognises in its pleading, is the concern of s 52 (and other provisions of Pt V the TPA). The question whether this particular representation infringes s 52 has been raised by the Commission. 67 The Commission also submits that the offer by IMB of life membership (a right of variable content during the period early 1991 to September 1993) in "the syndicate" or in the "Logan Lions Rugby League Club" to people who purchased a policy also amounts to a contravention of s 47(6). This too was an illusory offer. It could not be seen as an offer that IMB would provide life membership or, even after Logan Lions Limited was incorporated, that the latter company would provide life membership to policy purchasers. The "Members Information Portfolio" document, at p 12, identifies "the Club", not yet in existence, as a separate organisation from the company. The document says that the Club facilities will be owned outright by that company and that the company will manage the Club under a management agreement. But it does not suggest that the company is intended to have power under the management agreement to do anything more than operate the Club's facilities. It does not suggest that the Club will merely act as the company's creature in determining such matters as club membership. It is apparent that, in some of the material distributed and information given to potential investors in the scheme, IMB did make statements linking life membership with purchasing (and retaining) a policy, even though the Ivers, in their evidence, acknowledged that the question of life membership was really one which only the Club, after it was formed, could determine. Oral evidence from a number of witnesses, including policy purchasers, also acknowledged that this was their understanding. 68 Life membership could only be offered by the committee of the rugby club yet to be formed. The membership offer could at most, therefore, be an offer by IMB (or perhaps also by Logan Lions Limited, after its incorporation) to use its best endeavours to ensure that persons purchasing a policy at the behest of IMB would be given life membership in the club yet to be formed. A promise by IMB to use its best endeavours to procure membership from another at some time in the future does not, I think, come within the term "services" in s 47(6) and (7) as defined in s 4. As the definition shows, the expression "services" covers such things as rights and benefits which the tying corporation is in a position to supply, either immediately or under an offer if that offer is taken up. "Services" here do not include benefits etc which the tying corporation is or will not be in a position to supply. The problem with the Commission's submission here is emphasised by s 47(7). It is difficult to see that conduct by IMB, constituted by its refusing to make an effort to procure life membership in a club yet to be formed for a person unless that person buys a policy from Legal & General, when there is no certainty that IMB will be able at some time in the future, by its efforts, to procure that membership, can come within s 47(7). As the Commission by pars 18 and 31 of its pleading acknowledged, s 52 is an apt vehicle for dealing with representations made in trade by a corporation as to what it will do in the future that does not have the capacity to make good those representations. There is no need to press s 47(6) and (7) beyond activities they clearly cover into such an area. 69 The Commission, however, did not, in its closing submissions, seek to make good its s 52 case (or its s 53(f) case) based on the conduct in pars 19 and 20 of its pleading. 70 The critical issue raised by the Commission's allegations that the respondents' engaged in third line forcing is whether statements made by the respondents of the kind contained in, eg, the "Members Information Portfolio" document, to the effect that only policyholders were to be given the opportunity to subscribe for shares in the proposed company which would operate the project and that life membership was dependent on policy ownership, involve conduct contravening s 47(6) or (7). 71 The respondents submit that they did not engage in third line forcing:

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Third line forcing - separate products OR A PACKAGE DEAL? 72 In order to establish third line forcing, there must be two discrete products or services, with the supply of the first being conditional on the purchaser acquiring another product or service directly or indirectly from a third person. But the courts have refused to find that exclusive dealing is made out where a single package of products or services is supplied, even though different, unrelated organisations produce the various products or services making up the package and even though there is no reason, apart from the lead supplier's insistence on supplying only a bundled package, why the purchaser could not have made separate arrangements for acquisition of the different components of that package. 73 In Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 ("Castlemaine Tooheys"), s 47(6) was held not to be contravened by the supply of what was characterised as a single product, "delivered beer". The brewery brewed beer in Brisbane. It offered liquor retailers in North Queensland the choice of collecting beer from one of its regional depots in that area or having the beer delivered from the brewery. However, for practical reasons associated with the method of assessment of government licensing fees set out at p 399, retailers generally opted to have the beer delivered to them from the brewery. In this situation, the brewery insisted that it arrange delivery of the beer by its preferred carrier, an unrelated firm. The brewery (not the retailer) contracted with the carrier and was responsible for payment of the carrier's charges and property in the beer only passed to the retailers on delivery. On the brewery's invoices to retailers, however, freight was shown separately from the price of the beer to ensure that the retailers only paid licensing fees on the cost of the beer. A cartage contractor who wished to compete with the brewery's preferred carrier sought to restrain the brewery from supplying beer to retailers on condition that the latter would accept transport services from the preferred carrier on the ground that the brewery's conduct contravened s 47(6) and (7) the TPA. Gibbs CJ (with whom Wilson and Dawson JJ agreed) said (at 400 - 401):

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77 The concept of "sham" is well understood as involving arrangements between parties who intend that the real arrangements between them will be different from those reflected in the documents they present to third parties. It is more difficult to identify what might amount to an "artificially contrived arrangement" which will not escape the reach of s 47(6) and (7). In Castlemaine Tooheys the brewery was able, without infringing these provisions, to insist that retailers could only have its beer if they also accepted delivery by the brewer's preferred carrier (and of course paid the carrier's freight charges over which the retailers had no influence but which were set by agreement between the brewery and the only carrier it was prepared to favour with its business). In Paul Dainty, NTC was able to insist that anyone wishing to hire its venue had to take the venue NTC supplied together with a range of services supplied by others over whose charges to NTC, passed on to the hirer, the hirer of NTC's venue had no influence. Both arrangements denied the purchaser the opportunity to negotiate with others better freight terms and booking fee terms; both gave the brewery and NTC the opportunity to inflate their own profits by insisting on selling only their products bundled with those of their favoured suppliers. The purchasers in both cases would have made their own arrangements if they had been free to do so. They sued for that freedom. Yet neither arrangement can be regarded as an artificially contrived one within that concept as described in Paul Dainty. 78 As these cases show, it is essential to correctly characterise the subject matter of the supply or the offer said to involve a contravention of s 47(6) or (7). There is a good deal of room for judgment in determining whether to characterise an arrangement as involving a package deal offered only by the one supplier and thus outside s 47(6) and (7) or as involving an arrangement between the offeror company and the offeree and a separate arrangement between the offeree and the third party. The arrangement in Castlemaine Tooheys under which the brewery arranged and paid the carrier its freight charges could easily have been characterised as an offer to sell its beer to North Queensland retailers (who for practical reasons had to buy it delivered to their premises) on condition that they acquire the services of the brewery's third party carrier indirectly through the brewery, ie, as conduct within s 47(6). The arrangement in Paul Dainty could, with the same ease, have been similarly characterised. 79 IMB told people that they could only participate in the scheme by having a parcel of shares reserved for them and by acquiring life membership in the club yet to be formed, if they purchased a policy from the particular insurer nominated by IMB. But Castlemaine Tooheys and Paul Dainty show that insistence by the supplier of a product or a service on the purchaser also taking the product or service of a third party is not necessarily sufficient to bring the case within s 47(6) or (7). These decisions might be thought to be explicable on the basis that the supplier offered to enter into a single packaged contract with the purchaser and that the arrangement did not therefore involve the purchaser entering into separate contracts with the tying supplier and the tied supplier. But the courts in Castlemaine Tooheys and Paul Dainty did not base their decisions that there was no infringement of s 47(6) upon that ground. In both cases, the courts looked at the entire factual matrix in which the conduct said to infringe the sub-section occurred and arrived at their determination on an evaluation of that, not on the simple ground of whether the arrangement involved the purchaser contracting with one supplier or two separate suppliers. In Paul Dainty, the court (at 503) identified "the crucial question" as whether services (by way of the sale of tickets to spectators) were being provided by Bass indirectly to PDC for the reason that, if Bass was providing those services to PDC, then they were being forced on PDC by NTC. The court held (at 504) that Bass was not supplying any services to PDC because:

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83 The provisions of Pt IV the TPA are concerned with whether the way business activities are arranged is restrictive of competition (whether the existence of such a restriction has to be the subject of proof or is, in the case of s 47(6) and (7), assumed to exist). Though the contractual form into which business activities may be structured is a relevant consideration in determining whether activities come within a provision in Pt IV, contractual form is not determinative of that. Part IV is concerned with a much wider range of activities than contracts in restraint of trade. 84 To make the application of s 47(6) depend upon the purchaser being required to enter into two separate contracts, one with the lead supplier, the other with the tied supplier, rather than into one package contract with the lead supplier, would also throw open the door to what could truly be said to be contrived arrangements to avoid the application of s 47(6). The tying and the tied suppliers will invariably be co-operating with each other. The tying supplier could, therefore, readily procure the support of the tied supplier to force the latter's goods or services on the purchaser as part of a single package contract offered only by the tying supplier, thereby easily circumventing s 47(6). 85 It is not, however, accurate to describe IMB's actions as comprising of the offer of the opportunity to acquire shares in the company which it proposed to establish and the offer of life membership on condition that the persons to whom these offers were made purchased an investment policy from National Mutual or Legal & General. More accurately, the condition insisted on by IMB was that the persons to whom IMB offered these future benefits had to purchase a National Mutual or Legal & General policy from IMB. It was a critical element of the arrangement that offerees would not just acquire an investment policy from National Mutual or Legal & General, but would purchase that policy through one organisation and one organisation only, viz, IMB, the same organisation that was also offering the benefits of the opportunity to acquire shares and life membership in the future. 86 IMB required policies to be purchased through it not just so that IMB would get the commissions, but to enable it to make available in the future the two benefits it offered. The commissions were necessary to enable IMB to advance the scheme to the stage where purchasers would be able to realise the opportunity IMB was offering them. The commission income enabled IMB to recruit, through what became its elaborate sales organisation, more and more purchasers of policies and thus to increase the aggregate loan or security value IMB needed to fund implementation of the scheme. IMB also had to be the supplier of the policies to purchasers to give it the opportunity to ensure that purchasers would keep them up and would elect to make them available to the scheme as development proceeded: a policy owner was under no enforceable obligation to do either. But a voluntary willingness to do so was essential to fund implementation of the scheme. 87 IMB went to great lengths to persuade policyholders to keep them up. It was able, by various means, to achieve a low lapse rate. The actuary, Mr Wood, gave evidence that statistics produced by the Insurance and Superannuation Commission Life Insurance Group showed that, in the twelve months to June 1991, the whole of industry lapse rate on investment policies of the kind sold by IMB was 19 percent, with the average for National Mutual being 16 percent and for Legal & General, 24 percent. The lapse rate for policies sold by IMB in connection with its scheme was 8 percent, considerably lower than the 19 percent industry average, half the National Mutual 16 percent average and only one-third of the 24 percent average for Legal & General. The memorandum of 18 October 1991 relied on by the Commission deals with the lapsing of thirty-three National Mutual policies in the period between IMB first selling such policies and 18 October 1991. This is nearly the whole of the period during which IMB sold National Mutual policies, 453 in all. Assuming, say, 400 policies had been sold up to 18 October, thirty-three policy lapses is only about 8 percent. IMB put in evidence a record of interview between the Legal & General Queensland State Manager and Commission officers that deals with the lapse rate of Legal & General policies sold by IMB. It refers to the sale to date of 1,600 to 1,700 policies since 1992 and records that: "The lapse rate for the product is quite good, at about 8% or less". Overall, Wood acknowledged that "the lapse experience of policies sold by the IMB Group … prior to the investigation … had been good, in other words, relatively low". (This is so whether the relevant kind of policy be regarded as an "endowment" or an "investment account" policy.) 88 One of the techniques IMB used to achieve these low lapse rates was to establish a public relations division. At one stage, this had five full time staff. Its job was to deal with problems encountered with policyholders. These ranged from a policyholder missing a payment to a policyholder deciding that he or she did not want to continue any more with the policy. It appears that a good deal of assistance was given by these IMB personnel to policyholders who encountered financial difficulties: they arranged reduced premium payments, moratoriums on premium payments and they arranged for some policyholders to take loans out against their policies. Another technique was to keep policyholders informed by newsletters and information seminars of the progress of the scheme. All this may also have assisted IMB in keeping policy owners interested in the project and thus more likely to make their policies available for funding development when called on. 89 Not only did IMB have to keep the level of policy lapses as low as possible, it also had to undertake the onerous task of arranging and administering the large number of policy loans expected under the funding model to mid 1992 and the large number of policy assignments under the second funding model. As it said in one of its brochures about the first funding model, IMB would be responsible for ensuring the "proper maintenance of each of the 5,000 investment accounts" as well as making "all necessary arrangements for the Loan Backs at each of the three stages of development". [Ex C8 tab 5] Implementation of the Logan Lions scheme, based as it was on a large number of policies sold at different times over a period of a couple of years, involved a very substantial logistical effort. No one other than IMB would do that (though the insurer would have to process loan applications sent to it by IMB). That IMB may well have had this logistic capacity is suggested by its ability to enlist the support of so many witnesses for it in this action and its ability to gather and marshal their evidence in presentable form. 90 To say that, because IMB supplied policies as agent for National Mutual and Legal & General, the offerees acquired the policies "indirectly" from the insurers within the meaning of that term in s 47(6) and (7) ignores a critical element of the arrangement, viz, that the ability of IMB to make the promised shares and life membership available was dependent on it, and it alone, supplying the two insurers' policies to the participants in the scheme. What was being offered by the respondents can be more accurately characterised as a single package rather than separate services, some from IMB and others from National Mutual and Legal & General. What IMB offered was the opportunity to acquire shares and life membership on condition that the particular insurance policies IMB needed to sell to generate that opportunity were acquired through it. 91 That these insurance policies were themselves to be supplied by National Mutual and then Legal & General does not stand in the way of IMB's offer, so characterised, being the offer by IMB of a package deal. Section 4C the TPA provides:

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99 I doubt that the "directly or indirectly" dichotomy in s 47(6) and (7) is limited, as Franki J suggests, to acquisition under a contract with the second supplier, on the one hand, and acquisition under a contract made with an agent for the second supplier, on the other, ie, that an agent who supplies the goods of another can only ever be involved in the indirect supply of those goods by its principal and can never itself directly supply those goods. I do not think the term "indirectly" in the context of the old s 47(4) or the new s 47(6) and (7) can be limited so that only acquisitions from an entity in the particular legal relationship of agent to the other supplier are covered. To limit the expression "indirectly" in s 47(6) and (7) to the supply of goods or services by an entity who is the legal agent of the second person, I think, runs contrary to the discernible legislative intent that these provisions, like many of the provisions in the TPA, are to have a wide reach. That appears from the extended definitions of the expressions "goods", "services" and "supply", central to the operation of the provisions of Pt IV the TPA, including s 47(6) and (7). It is plain, I think, from the definition of "supply", from the definition of "services", from the definition of "acquire" (expanded even further by s 4C) and from the terms of s 47(6)(c) and (7)(c), which extends to "giving" or "allowing" discounts etc, that these sub-sections are not confined in their operation to the provision of goods or services under legally binding contractual arrangements only. 100 There is therefore no reason, in my opinion, to say that the concept of indirect acquisition "from another person" in s 47(6) and (7) refers to acquisition only from an entity which is in a legal relationship of agency with that other person. I think the term "indirectly" has the wide meaning it bears in ordinary speech: "coming or resulting otherwise than directly or immediately, as effects, consequences, etc". The Macquarie Dictionary, 3rd ed. In my opinion, when a question arises whether, in the context of s 47(6) or (7), a person has been offered goods or services by corporation X on condition that the person acquire other goods or services of a particular kind or description "indirectly" from Y, the question for the decision-maker is not whether the legal relationship of agency exists between the entity who delivers the goods or services of that kind or description and Y. Instead, the decision-maker must consider the facts of the case to determine whether the acquisition of those goods or services from the intermediate entity can be said to be an acquisition indirectly from Y within the ordinary meaning of that expression. Assume that the organiser of a public event, who does not sell liquor, obtains a payment from a brewery in return for the organiser offering catering outlets at the event to hirers on condition that they sell only X brand beer. The outlet hirers will have to procure that beer from someone other than the events organiser. Whether those hirers acquire their supplies of X brand beer directly from the brewery or indirectly from the brewery's agents or indirectly from liquor outlets that have purchased and own stocks of X brand beer, the organiser would, I think, contravene the sub-section. 101 Even though IMB sold the National Mutual and the Legal & General policies as agent for each insurer, the need for persons to buy those policies from IMB in order for IMB to be able to advance the scheme, I think, justifies the conclusion that the purchasers acquired their National Mutual and Legal & General policies directly from IMB for the purposes of s 47(6) or (7). For this reason, neither provision was infringed here.

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107 A party who wants relief of either kind in relation to a contract of insurance can only seek that relief to the extent that it is available under the Insurance Contracts Act. Section 15, however, does not go beyond that. It does not bar a party to a contract of insurance from relying on another Act to seek relief of any kind other than the kinds the subject of s 15(1)(d) and (e). It does not seek to impose on the parties to a contract of insurance a statutory regime that replaces the contractual relationship entirely. 108 That that is the object of s 15(1) is confirmed by cll 38 to 40 of the Explanatory Memorandum to the Insurance Contracts Bill 1984. Commonwealth and State laws were not uniform in the remedies they gave in respect of harsh and unconscionable contracts, including contracts of insurance, and in respect of making provision for relieving a party who had made a misrepresentation in relation to a contract from the consequences of the misrepresentation, eg, from rescission of the contract by the insurer, where the contract in question was one of insurance. Parts IV and V the Insurance Contracts Act contain numerous provisions modifying the insurer's contractual rights to refuse indemnity under a contract of insurance, either by cancellation or otherwise, including numerous provisions governing the kinds of misrepresentations by insured persons which will entitle the insurer to refuse indemnity. The legislative intention of s 15 was to make the Insurance Contracts Act the sole source of power to grant relief in respect of harsh and unconscionable insurance contracts and the sole source of power to grant relief to insured persons who had made misrepresentations inducing insurers to enter into contracts of insurance which the insurers later sought to avoid because of the misrepresentation. 109 In my opinion, s 15 was amended in April 1994 to clarify that this was the legislative intent from the outset. 110 An Act will provide for relief in respect of unconscionable contracts within s 15(1)(d) the Insurance Contracts Act not only where the contract as concluded contains provisions that operate unconscionably on one party, but also where the contract was concluded in circumstances involving unconscionable conduct by one of the parties. The Contracts Review Act 1980 (NSW), by s 7, empowers a court to provide a range of remedies if it finds "a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made". The expression "unjust" is defined in s 4 to include "unconscionable, harsh or oppressive". Section 9 lists at length the factors to be taken into account in determining whether the contract was unjust at the time it was made. They include many factors affecting the parties during the pre-contract negotiation process. See N Sneddon et al, Cheshire & Fifoot's Law of Contract, 7th Aust ed (1997) Butterworths, NSW at pars 15.20 to 15.22. In West v AGC (Advances) Ltd (1986) 5 NSWLR 610, McHugh JA, Hope JA agreeing, said of the New South Wales Act (at 620):

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111 A contract procured by the unconscionable conduct of an insurer or its agent can, I think, be said to be an unconscionable contract within s 15 the Insurance Contracts Act. By force of s 15 the Insurance Contracts Act, relief under s 7 the Contracts Review Act (1980) (NSW) cannot be claimed in respect of contracts of insurance. 112 Though a contract can come within s 15(1)(d) as an unconscionable contract because of conduct leading up to the making of the contract and not because of any of the provisions of the contract itself, s 15(1)(d) only operates to bar an action under another Act where there is in existence a concluded contract. It does not bar an action under another Act that provides for relief in respect of unconscionable conduct that does not involve the conclusion of a contract. That approach gives proper effect to s 15. Parts IV and V the Insurance Contracts Act are all directed to modifying the rights of the insurer and the insured under concluded contracts of insurance. 113 The TPA was, in the pre-1994 period, an Act that did, in Pt IVA ("Unconscionable conduct") and in Pt VI ("Enforcement and remedies"), provide for relief in respect of unconscionable contracts of insurance in that relief could be obtained from such a contract where the making of that contract involved unconscionable conduct by a party such as an insurer. An injunction restraining enforcement by the insurer of such a contract or a provision of that contract could be obtained under s 80, though no relief in respect of an unconscionable contract of insurance could be obtained under s 87, by reason of s 87(1E). None of the various forms of relief in respect of unconscionable contracts of insurance that would have been available under the provisions of Pt VI (other than s 87) the TPA could therefore be sought under the TPA: s 15 the Insurance Contracts Act barred the bringing of such an action, in so far as relief in respect of an unconscionable contract of insurance was claimed in the action. 114 Section 87(1E) appeared in the TPA until its repeal by the Insurance Laws Amendment Act (No 2) 1994 (Cth) in April 1994, which also made the amendments referred to to s 15 the Insurance Contracts Act. But the existence, to 1994, of s 87(1E) specifically excluding relief under s 87 in respect of unconscionable contracts is not, I think, a ground for holding that, to that date, s 15 the Insurance Contracts Act did not bar an action brought under Pt IVA the TPA in which an injunction was sought under s 80 restraining a party from enforcing an unconscionable contract of insurance. The express exclusion by s 87(1E) of relief under s 87 the TPA, based on conduct of the respondent contravening Pt IVA of that Act in respect of contracts of insurance, is not a sufficient reason for reading down the general words of s 15(1)(d) the Insurance Contracts Act itself in its pre-1994 form so as to exclude its action-barring on all proceedings on contracts of insurance made in circumstances involving unconscionable conduct within Pt IVA the TPA. 115 The TPA, for the reasons given, is an Act within s 15(1)(d) the Insurance Contracts Act and it follows that no action could be brought by the Commission under the TPA for relief in respect of an unconscionable contract of insurance. 116 The TPA is not, however, an Act that provides for relief from the consequences in law of making a misrepresentation with respect to contracts of insurance. By force of Pt V ("Consumer protection") and Pt VI, the TPA gives a range of remedies in respect of various classes of representation made in trade or commerce. But such relief is confined to protecting the person to whom the representation was made from the actual or likely future harmful consequences of the representation. There is no provision in the TPA which gives relief from the consequences in law of making a misrepresentation, ie, relief to a person who makes a misrepresentation, whether in relation to a contract of insurance or any other contract or transaction. Section 15(1)(e) the Insurance Contracts Act in its pre-1994 form therefore did not bar the making by the Commission of any of the claims raised in its originating application that were based on representations made by the respondents that contravened s 52 the TPA.

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118 In its original statement of claim filed in October 1993, with its originating application, the Commission, in pars 18 and 22, made an allegation of unconscionable conduct similar to that now contained in pars 36 and 37 of its current pleading. It was alleged in par 18 that, in order to induce members of the Camu Community to purchase Legal & General investment policies, the fourth and twelfth respondents made certain representations; in par 22, it was alleged that, by reason of the matters there set out, the making of those representations was unconscionable. In the originating application, an injunction was sought against all thirteen respondents restraining them from "making the representations alleged in paragraphs 17 and 18 of the Statement of Claim". [Originating application at par 1] Injunctions were also sought restraining the IMB respondents and Legal & General, first, from promoting investment and, second, from accepting applications to invest in umbrella financial plans as a means to fund the acquisition of any interest in the third respondent. [Originating application at pars 2 and 3] 119 The unconscionability allegations in pars 18 and 22 of the original statement of claim are one of the factual bases relied on to justify all these claims for injunctive relief. No relief, however, was sought against IMB in respect of the small number of contracts of insurance into which a total of about twenty members of the Camu Community entered. The reason, no doubt, is that orders were sought against Legal & General requiring it to interview each person who had invested in one of its umbrella financial plans, through the agency of IMB, including those at Camu, give them certain advice and repay "to any policyholder desirous of terminating an 'Umbrella Financial Plan'" an amount in respect of all premiums paid. [Originating application at par 6] Similar relief was sought against National Mutual. The Court's power to grant the relief sought in par 6 comes from s 87 the TPA. It is available only in respect of conduct contravening Pt V. None of the relief sought in the originating application can be characterised as relief sought in respect of unconscionable contracts of insurance under the TPA, though that is an Act that provides for relief in respect of that kind of contract. 120 The relief sought now in the amended application includes an injunction restraining the respondents from engaging in conduct alleged in the current statement of claim in contravention of the TPA and a declaration that the respondents contravened the TPA in the respects alleged in pars 19 to 37 of the amended statement of claim. The injunction sought thus includes a restraint under s 80 the TPA on the respondents from engaging in unconscionable conduct of the kind the subject of pars 36 and 37 of the Commission's latest pleading. The Commission also now seeks declaratory relief that extends to the Court declaring that, by making certain of the representations alleged in the current statement of claim in or about August 1992 to induce members of the Camu Community to buy investment policies from IMB in the circumstances alleged in par 37 of the pleading, the respondents engaged in unconscionable conduct in contravention of s 51AB the TPA. Section 163A the TPA empowers the Court to make such a declaration, even though the claim in that behalf was only raised during the course of the trial by way of amendment to the application. The relief now sought is all directed to conduct of the respondents, including conduct said to have been engaged in for the purpose of inducing those members of the Camu Community, and others, to enter into contracts of insurance through the agency of the respondents. But no relief is sought in respect of any of the small number of contracts of insurance entered into by members of the Camu Community whether on the ground of unconscionability or otherwise. 121 For the reasons given, s 15 the Insurance Contracts Act, in the form it was then in, did not bar the Commission from commencing these proceedings against the respondents for the relief contained in pars 1 to 3 of the originating application, even though the claims for such relief were based, in part, on what was said to be unconscionable conduct by the respondents with respect to members of the Camu Community. For the same reasons, the claims for injunctive and declaratory relief contained in the current application and raised by way of amendment were not barred by s 15 the Insurance Contracts Act as then in force. 122 The Commission's claims for declaratory relief in relation to the Camu Community, based on Pt IVA, therefore require resolution. 123 Section 52A, inserted into the TPA in 1986, proscribed unconscionable conduct. Section 52A was renumbered as s 51AB and a new subsection (7) added by the Trade Practices Legislation Amendment Act 1992 (Cth), which came into effect on 21 January 1993. At the relevant time, August 1992, s 52A provided:

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125 Camu is an Aboriginal co-operative community which runs two banana farms located approximately ten kilometres north of Cardwell near the township of Kennedy. The Community owns residential units which are rented to its members. It was established in the 1980s by Backo's mother, Mrs Evelyn Scott, who in August 1992 was head of the Reconciliation Council. 126 In about August 1992 Glenn Ivers and Backo visited the Camu Community. Steven Mothe, the administrator of the Camu Community, and Mrs Doreen Shepherd, the Community treasurer/secretary, were both related to Backo. Mothe knew of Backo's reputation "as a famous football player" but did not then "know him to talk to". It was necessary for Ivers and Backo to obtain approval from Mothe or Shepherd before they could speak to members of the Camu Community. In the course of the visit, Backo and Ivers conducted a seminar promoting the 2001 Rugby League Syndicate to thirty to forty members of the Community. Backo took the prominent role at the IMB presentation. Copies of the "2001 Rugby League Syndicate - Members Information Portfolio" document [Ex C8 tab 15] were handed out by Backo to members of the Camu Community. They sold a small number (about five) of the Legal & General policies. Mothe and Shepherd both bought one, as did a group of fourteen individuals who bought a single policy under the name of the "Jabiru syndicate". 127 The Commission submitted that the promotion of the 2001 Rugby League Syndicate, promises of membership benefits, gold card discounts and sale of policies by Backo and Ivers to the members of the Camu Community involved "appalling exploitation". Despite taking this view of the conduct of Backo and Ivers, the Commission elected not to call any evidence of its own in support of the allegations in pars 36 and 37 of the current statement of claim. In the course of the respondents' case it elicited some evidence in cross-examination of Glenn Ivers and Mothe relevant to these allegations and it also put into evidence through Mothe the written statement it had obtained from him in 1993. 128 The Commission submitted that the members of the Camu Community were under a special disability known to the respondents, particularly Backo, in their dealings with Ivers and Backo by reason of:

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133 This was the only evidence of these issues: none of it was contradicted. There is no evidence to establish point (v) and the issues raised by points (iii) and (iv) were but barely touched on in cross-examination of Mothe. 134 While no one suggests that the Community was made up entirely of sharp business people, there is no justification to assume, on the limited evidence before the Court, that the Camu Community conformed to the stereotype of a non-functional indigenous community subsisting on welfare benefits and open to exploitation. If the Commission had established by evidence that the Camu Community was like that, then there would be little doubt that Glenn Ivers and Backo's activities would warrant the Commission's description of "appalling exploitation". Residents, as I have said, were members of an Aboriginal co-operative community engaged in banana growing. Mothe said he joined the IMB scheme, not because of club membership, but because he thought the scheme offered a good investment opportunity. That contradicts point (vi) in the Commission's submission. He was aware, however, that investment success was not guaranteed and that the scheme was still "at the planning stage". The reaction of the thirty to forty of the Community who attended Ivers and Backo's presentation was that about twenty members, including the administrator Mothe and the treasurer/secretary Shepherd, bought a total of about five policies while ten to twenty other members were not persuaded to invest. That does not suggest an obviously gullible audience. The Community's response to the seminar does not appear, on the limited evidence available, to be much different from the reaction of Logan City residents who attended IMB seminars at Springwood. 135 Backo, though available to give evidence, did not choose to enter the witness box. No explanation was offered. But notwithstanding this, the state of the evidence is insufficient to justify a finding that the conduct of Ivers and Backo in promoting the scheme to the Camu Community was unconscionable within s 52A (now s 51AB) the TPA.

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Could the development be funded? 141 The Commission submitted that if this issue is determined against the respondents, it will be unnecessary to determine the remaining questions because it must necessarily follow that there could be no reasonable basis for any of the future representations. 142 The Commission is, I think, correct in submitting that whether the development as represented by the respondents could ever be funded is a fundamental issue in that it pervades most, but not all of the bases on which the Commission alleges that the respondents engaged in misleading conduct by making representations as to future matters. It is an issue raised by par 21 of the latest statement of claim as to whether there were reasonable grounds for the representations as to the future value of the shares in Logan Lions Limited. It is involved also in some of the questions raised in pars 22(b)(iii) and 23(c) about the respondents' expectations for Meakin Park and later, Logan Park (if findings are made that the representations here alleged were in fact made). Whether the project could be funded is central to the issues in par 24 involving commencement and completion of a development of the kind referred to in pars 24(b), 27(a) and 28(a). It is of relevance to par 29 alleging a misrepresentation that finance had already been approved. 143 But whether the respondents engaged in misleading conduct within par 25 by what they had to say about the performance of the policies when they lacked reasonable grounds for making such representations cannot, I think, be governed by a finding adverse to the respondents on the issue of whether there was any prospect of being able to finance the scheme. The representations made about policy performance are a discrete issue for the reason that the respondents emphasised: the point they constantly made in their seminar presentations and in much of the written material they distributed was that people who purchased policies were not obliged to make those policies available to the scheme. It was a central theme constantly emphasised by the respondents that, when the time came, in the early phase, for policy owners to take out loans against their National Mutual policies and make the loan moneys available to IMB and, in the second phase, when the time came for policy owners to assign their Legal & General policies to the lender selected by IMB, they were entirely free to refuse to do that. This message was effectively conveyed to the mass of people to whom IMB marketed its scheme. It is a point constantly made by the witnesses. The representations as to the future value of shares stand in a different position. The respondents could still engage in misleading conduct by making representations as to the future value of the shares, even though they conveyed to people to whom they were marketing the scheme the fact that no one could predict with any degree of reliability the value of the shares ten years' hence, if there was never (or never from a particular point of time) any real prospect of the respondents being able to finance the scheme and so no prospect of them being able to bring it to the stage where shares of the kind spoken about by the respondents would become available: see Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40-940. 144 The respondents rejected the Commission's formulation of the issue as to whether there was any realistic prospect of funding being available and submitted that it should more correctly be formulated as: "Did the Respondents have any reasonable grounds to believe that they would be able to fund construction of the club and associated facilities of the kind described in the representations made by the Respondents". 145 That is correct, I think, so far as it goes. But it must be kept in mind, particularly given the change made in mid 1992 to the respondents' proposals for funding the development, that this question is to be answered not by evaluating whether the respondents had reasonable grounds to believe at any one particular time, such as at the outset in early 1991, that they would be able to fund construction of the development. It is necessary to consider the grounds they had for believing that they would be able to fund construction at the various times they made the representations complained of by the Commission in this action over the period from early 1991 to late 1993. 146 There can be little doubt that the considerations which the Ivers identified when they first formulated their proposal - the demographic profile of Logan City, the imminent development of a national rugby league competition and the imminent introduction into Queensland of poker machines - show that it was reasonable in 1991 to believe (as the respondents say they did believe) that an opportunity then existed for the development of a major rugby league club in Logan City. The Commission's expert, Mr McDougall, a director in the Corporate Finance Division of KPMG, acknowledged as much. The history of the Greenbank RSL Club between 1992 and 1999 eloquently demonstrates that. 147 The respondents pointed to the "remarkable growth of the Greenbank RSL since 1993" as providing significant evidence to show that their belief in the viability of the Logan Lions proposal was well founded. The evidence of Mr Limbrick, General Manager of the Greenbank RSL since late 1992, shows that in 1992, when Greenbank RSL first obtained gaming machines, it had eight staff members, ten machines and 400 members and was operating out of a failed restaurant that it purchased with bank finance for $850,000 that year. By mid 1993, there were 3,000 members and the club embarked on a $1,300,000 expansion. By June 1994, membership was in excess of 6,000 and there were fifty poker machines. By the latter half of 1995, the club had 12,000 members and eighty-nine poker machines. In March 1996, a new $10,000,000 extension was commenced and by the time it opened in December 1996, membership numbers had reached 18,000. By May 1997, the club had 240 poker machines and in excess of 30,000 members. In 1998, the club opened a new $5,000,000 extension and membership reached 62,000. In late 1999, the Greenbank RSL was valued at $26,000,000 and carried $11,500,000 in debt. It had obtained 100 percent finance from the National Australia Bank in 1993 for expansion of the club facilities. Limbrick considered that community support for the club was a factor in its success. Other Brisbane area clubs which increased their poker machine numbers from early 1990s also experienced considerable growth. 148 But such evidence does not go beyond showing that it was reasonable, when the Ivers first formulated their ideas for a rugby league club development in Logan City in early 1991, for them to think that a properly designed and implemented development might be established. The question whether the respondents infringed s 52 the TPA by making the various predictive representations relied on by the Commission has to be resolved taking into account the way the respondents' proposals for the development of their scheme changed between early 1991 and late 1993 and, in particular, how their plans for funding the scheme changed in mid 1992. 149 The respondents' initial idea for funding this development was that the $125,000,000 then thought to be required to construct the development in three stages over a ten year period could be raised by selling 5,000 investment policies of the kind offered by National Mutual. 150 The respondents sought legal advice from McCullough Robertson, a prominent law firm, at a fairly early stage of the project, prior to commencement of marketing of the syndicate. The respondents say that the original syndicate funding concept was developed in conjunction with McCullough Robertson, and is described in their letter to IMB dated 23 May 1991, in which they give their advice in accordance with the Ivers' instructions, "on the appropriate vehicle to be adopted by the proposed 2001 Football Syndicate". The letter describes five stages of the proposed project before considering the various alternative structures which could be adopted by the syndicate:

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152 McCullough Robertson did not themselves attempt to assess the practicability of IMB selling 5,000 policies in sufficient time for each to have the cash values they adopted from the National Mutual model: they just accepted what the Ivers (who had experience as insurance agents) told them in this regard. 153 The cash values of these 5,000 policies three, seven and ten years after they have been sold, stated with such precision in pars 1(b), (d) and (e) of the McCullough Robertson letter, are the estimates contained in a model prepared by National Mutual for the Ivers in connection with the scheme. This model shows National Mutual's estimates of the cash value of the policy of the kind sold by the respondents through 1991 at the end of each year of its twenty year life. National Mutual based this model on a number of assumptions and there is a note to the National Mutual document: "These figures represent illustrations only; future values cannot be guaranted." The key assumption was the rate of investment return that the model assumes would be achieved year by year. The evidence shows that this assumed rate of return, though not stated in the National Mutual document, would have been one of the then current indicative investment rates of return approved by the Insurance Commissioner for use by insurance offices in marketing their products. 154 The respondents state that "[b]ased upon this legal advice, we believed that we had a simple, secure, and most importantly, a legal way for a multi-million dollar development to ultimately be funded by ordinary members of the community". It was a variant of this outline that the respondents described in the promotional material they distributed from mid 1991. 155 The scheme originally proposed by the respondents is set out in their "2001 Rugby League Syndicate" document produced about mid 1991. [Ex C8 tab 3] It reflects the outline in the McCullough Robertson letter. It envisaged the construction of Stage 1 (a large concert auditorium with bars, restaurant, etc) by 1994. The $10,000,000 needed was to come from loans of $2,000 to be taken out in 1994 by each of the 5,000 to whom policies had by then been sold. Stage 2 (consisting of extensions to Stage 1 and the construction of a very large open air amphitheatre) was to be built by 1997 at a cost of $25,000,000; this amount was to be raised by each of the 5,000 policyholders taking out a further loan of $5,000 against their policies. Stage 3 (a football stadium/leagues club and an international hotel/country club) was to be built by 2001 at a total cost of $90,000,000. This amount was to be raised by each of the 5,000 policyholders taking out a third loan in 2001, this time for $18,000 against their policies. 156 In their later brochure of 22 July 1991, the respondents outlined how they proposed to fund the development with policy loan moneys in a little more detail. As the Commission's actuary Wood points out, the cash values of the policies adopted by the respondents in the 22 July 1991 document for the policies in 1994, 1997 and 2001 are based on the estimates of cash value in the model prepared by National Mutual for the respondents in connection with the scheme. It assumes (in the first years) monthly premiums of $102 with premiums indexed at 8 percent per annum compound. The IMB document of 22 July 1991 describes a "contribution $25.00 per week indexed at 8% per annum". Both National Mutual and Legal & General were prepared to lend to the policy owner up to 90 percent of the cash value of the policy at the time of the loan, subject to the policy having been in force for at least two years. The amounts of the loan backs in 1994 and 1997 indicated in this IMB document of 22 July 1991 are both within the 90 percent figure. 157 This proposal, relied on by the respondents through 1991 and into 1992, envisages that 5,000 policies would have all been sold sufficiently far ahead of construction of the first stage some time in 1994 to have all acquired a loan value of $2,000. That, of course, involves making assumptions as to the investment performance of the insurers who issued the policies, a separate matter of contention in the litigation. Though loans to 90 percent of the current cash value of a policy were commonly offered by insurers, including National Mutual and Legal & General, the evidence is that policies of the kind in question would have to be in force for two years before there would be any prospect of them acquiring a $2,000 loan value. More importantly, the evidence is also that they would, in any event, have to be in force for at least two years before insurers like National Mutual and Legal & General would be prepared to make any loans at all against a policy. The need for the insurer to cover the commissions payable to the selling agent out of the first two years' premiums explains in part the reason for this. Documentation issued by National Mutual to the purchaser of a policy of the kind sold by the respondents to the end of 1991 contains the following statements:

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158 Policies sold by IMB early in 1991 might, depending upon investment returns achieved by the insurer, have loan values significantly greater than $2,000 by late 1994, if that was when construction of Stage 1 was to commence. But no loan funds could be raised by IMB from any policies sold after late 1992 to provide construction funding two years after, in late 1994. It may not have been necessary to sell the entire 5,000 policies by late 1992 to generate the $10,000,000 funding necessary for late 1994 Stage 1 construction, if enough were sold at an early stage and National Mutual's investment performance were good enough. But the respondents made no attempt to develop a model of the sales performance they might need to achieve to have any ground for thinking that the pool of policies they needed to sell by late 1992 would provide sufficient loan funds to pay for Stage 1 construction, if that were to be completed or at least commenced by late 1994. All they did was make and then persist for a time in the simple assumption that they would sell 5,000 policies before late 1992 and that each would, two years later, produce loan funds of $2,000 to fund construction of Stage 1, initially envisaged for sometime in 1994. The respondents persisted with this simple funding model into 1992. 159 In late 1991, National Mutual commissioned Coopers & Lybrand to report on the financial aspects of the "2001 Rugby League Syndicate" document being promoted by IMB. The respondents put this report into evidence through Mr Mike Cutlack, former Agency Manager for National Mutual in Queensland. The investigation conducted by Mr Robb of Coopers & Lybrand included meeting with the respondents, Glenn and David Ivers, Backo and McLean. Robb did not carry out any work to substantiate financial and other statements made during this meeting. He identified "the critical issues to the success of the Syndicate" as the final feasibility study by IFC (which was produced two months later) and "the sale of 5,000 LPIO policies". He observed:

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164 No one, none of the respondents, none of McCullough Robertson, National Mutual or IFC (in the feasibility study it produced for the respondents in January 1992), made any attempt to assess the practicability of selling so many policies by late 1992. 165 This goes a long way to establishing that the respondents, during the period from early 1991 to mid 1992, had no reasonable grounds to believe they would be able to fund construction of the project they were marketing. 166 Whether such an arrangement, if implemented, could have been the source of the funding required for the proposed development is one question. But it is clear from the respondents' experience that the notion of selling 5,000 policies in the relatively short time frame envisaged by the respondents of about eighteen months from mid 1991 to late 1992 was impracticable. The respondents never came near to selling 5,000 policies. By the end of 1991, they had only sold about 450. Cowley joined the IMB organisation in mid 1992. He appears to have been instrumental in building up a much more effective sales structure within IMB than the Ivers and their associates had been able to achieve, though some were experienced insurance agents. But, by the end of the second year, November 1992, only a total of about 1,200 policies had been sold. By near the end of the third year, that number had risen only to about 3,200, although IMB had, for some time, been running a very large and sophisticated sales operation involving, among other things, the presentation of numerous, well-organised sales seminars each week attracting up to 100 people each. There is such a disparity between the envisaged sales of 5,000 policies and IMB's actual sales performance as to justify the conclusion that the respondents' original notion of the funding construction, by selling between early 1991 and late 1992 at the latest 5,000 policies which would accumulate an aggregate loan value of $10,000,000 by the latter part of 1994 at the latest, was never realistic. This shows that the simple assumption they made that they could sell 5,000 policies in about eighteen months was not a reasonable basis for them to believe they could fund the project as they represented through 1991 into 1992. 167 It was the realisation by about mid 1992 that the respondents were never going to be able to sell the number of policies they had been counting on as sufficient to fund Stage 1 of the project in the time frame within which work had to start if the scheme was to have any prospect of becoming a reality, that caused the respondents to abandon their original idea for funding the project from policy loans. In mid 1992, they instead decided to seek external loan finance to fund each stage of the project with the assignment of such policies as they had been able to sell to the lender being offered as security (together with such security as could be arranged over the constructed and operating project). 168 From about mid 1992, the respondents began to distribute the "Logan Lions Rugby League Club - A Very Rewarding Investment in Our Community's Future" document. According to the respondents, this was prepared to reflect the change in direction the respondents had determined upon for the funding of the scheme. Unlike the documents produced by the respondents as aids to marketing the scheme in the first eighteen month period when policy loans were to be the source of project funding, this document gives little information about the timing and the funding of the development. It contains only the following statements on these matters:

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174 For good or for ill, the respondents left location of the external lender necessary to enable the project to be implemented to Cowley. There is no suggestion that any of the other respondents made any attempt themselves to identify possible lenders. However, it was not until May 1993 that IMB entered into the consultancy agreement with Cowley under which he assumed, as his primary task, the job of securing funding for the project. Though the respondents decided in mid 1992 to change the method of funding from borrowing against the policies bought by participants in the scheme to funding the project with external loan finance, there is nothing in the evidence to suggest that a potential bona fide lender was ever identified before IMB ceased its operations at the end of September 1993. 175 An insight into the absence of effort made by the respondents to locate the external lender central to bringing the scheme to reality as from mid 1992 is provided by the actions of the respondents in authorising the submission to Logan City Council on 1 October 1992 of IMB's business plan. It identified the principal avenue of funding for the development as being Legal & General. It is apparent that this statement was made to the Council in circumstances where the respondents had never even raised with any person in a position of authority in Legal & General the question whether that company might be interested in funding development of the project. When Legal & General learned what the respondents had told the Council about their possible involvement as project funder, they immediately insisted that the respondents stop making any such suggestions since: "this scenario has never been considered or discussed in the past and is unlikely to be in the future". 176 McDougall, a director in the Corporate Finance Division of KPMG, was called by the Commission to give evidence that, in his opinion, the respondents could not have raised $20,000,000 debt funding for the project in July 1993, ie, when the Logan Lions business plan was given to the Council, for the reasons summarised in par 6.1.4 of his report. In cross-examination he made a number of concessions. He said that assignments to a lender of the insurance policies (by those owners prepared to do that, though under no enforceable obligation to do so) and security over the club operations, constructed as they were to be on land held only under a long lease from the Council, would be regarded by a financier for a variety of reasons as a "less than optimum" form of security to support a loan of $20,000,000. But he said a financier might possibly be found who would be prepared to lend against that security to a club with a strong cash flow. He did not resile, however, from his opinion that the respondents would not be likely to have been able to raise $20,000,000 in debt finance in mid 1993 for reasons that included the unreconciled major disparity between the financial projections in the Logan Lions business plan of July 1993 and the much more conservative projections in the feasibility study prepared in late 1991 - early 1992 by the independent consultant, IFC, and the absence of any independent support for Logan Lions in the form of market research suggesting that the project could reasonably achieve the forecasts set out in its optimistic business plan. 177 McDougall also noted, in contrast to IFC's conservative approach, the failure of the respondents to take into account in the July 1993 business plan the legislative restrictions on the number of poker machines that a particular club could operate. IMB relied in its Logan Lions business plan of July 1993 on these machines to generate a large part of the club's projected cash flow. The July 1993 business plan was based on the assumption that machine numbers would start in 1995 at 200 and increase from 200 in 1999 to 600 in 2000. The July 1993 business plan stated: "NB. This intended structure was developed, to conform with Queensland Gaming machine and licensing regulations". Mr John McKnoulty was called by the respondents as a solicitor expert in licensing matters. He said that the respondents had taken no advice from him as to the requirements of the Gaming Machine Act 1991 (Qld) before making the unjustified representations at seminars and in business plans about the club operating with poker machines far in excess of the maximum permissible number. The Ivers only sought his involvement after IMB had ceased trading in September 1993 to obtain a club liquor licence and a club gaming machine licence for premises at Woodridge for a club with which the Ivers apparently became associated, the Logan Lions League of Junior Sports Inc. In mid 1993, the maximum permissible number of machines was 250. This was amended in 1997 to 300. The evidence indicated that, as at late 1999, the respondents would not have had any prospect of obtaining licences for more than 300 poker machines. 178 The Commission also called a chartered accountant, Mr Rodin, who expressed the opinion that the respondents' initial scheme to finance the development through loans against policies was impracticable. He referred in this context to the difficulties in selling a sufficient number of policies to generate the level of development capital required and to the logistical problems associated with the timing of cash flows from loans of such a large number of policyholders to match the project's capital requirements and also with the logistical problems of administering loan backs from 5,000 policyholders. Mr Mills, State Manager of Legal & General throughout the period of IMB's agency, referred in his evidence to IMB's initial concept of raising development funding by way of a series of loans from 5,000 policyholders. He said that he could see no reason why Legal & General itself could not have "easily and promptly attended to" the processing of such a large volume of policy loan applications within one to two weeks. He was here assuming that 5,000 policies had all been sold and had all accumulated sufficient value to enable loans to be raised on each. There is no suggestion that Mills made any attempt to evaluate the possibility of IMB selling 5,000 policies in a particular period. That IMB may have had the capacity to set up a structure to enable it to do all it would have had to do to organise such a volume of policy loans is suggested by its capacity to marshall evidence from 1,340 witnesses. 179 Rodin also referred to the failure of the respondents to take into account lapses in policies dealt with in the report of Wood which he attached to his own. Wood, an actuary, was also called by the Commission. He said that if 5,000 policies were sold but experienced the industry average lapse rate of 11 percent per annum, then only about 1,600 of the original 5,000 policyholders would still hold policies at the end of ten years. Even if the policies produced $25,000 at the end of that period, the 1,600 policies would only provide about $39,000,000 in funds at the end of that period, as opposed to the $125,000,000 funding described in early versions of the scheme. The July 1993 version of the Logan Lions business plan described the project cost as A$120,000,000. If the lapse rate was only 5 percent per annum, the 3,000 policyholders left from the original 5,000 at the end of ten years, on the same assumption would provide only $75,000,000 of funds at the end of ten years, as opposed to the $125,000,000 suggested. The respondents may, however, have done rather better than 5 percent per annum, with their 8 percent overall average lapse rate. 180 Rodin did not think it likely that IMB would be able to obtain public listing at an early stage in the project's operations because of the absence of a track record of consistent profitability if it was planning to raise funds from the public for a $125,000,000 development in what he considered a high risk industry. The Australian Stock Exchange Listing Rules required that a company proposing to float, in effect, have accumulated profits of $500,000 over the three years preceding the float or assets of not less than $5,000,000 at the time of listing. Rodin also doubted whether the float proposed by the respondents would have attracted underwriting support so necessary to success in achieving a high placement. Mr Peter McKnoulty's evidence was that, before Logan Lions Limited could list, the policyholders would have to contribute from their policies. But when they would be called upon to contribute to the company's capital, they would not have any idea what the shares might trade at. It was impracticable for them to sit back and wait for the company to be listed before deciding whether or not to contribute from their policies, as was represented to be the position at the seminars. 181 If the case was to depend upon whether the scheme, as initially devised in early 1991, was practicable, having regard to how development finance was then intended to be raised, the respondents would face a difficult task in showing that they had reasonable grounds for making the predictive representations about development of the project that they did from early in the piece and through most of 1991. The sales performance they were able to achieve through 1991 culminating in a total of about 450 policies by November of that year must have cast increasing doubt on the reliability of the simple, unexplored assumption they made at the outset that they would sell 5,000 policies between early 1991 and about the end of 1992. The concessions made by McDougall, the evidence of Mills to the effect that the logistical problems emphasised by Rodin would not have been a problem for Legal & General and the demonstrated capacity of the respondents themselves to cope with major logistical exercises, as evidenced by their capacity to marshall the large number of witnesses they did, may have assisted the respondents to show that the initial proposal might have been practicable when it was devised in early 1991. But their poor performance through 1991 in failing to achieve policy sales at the level necessary to generate the loan moneys required to realise the project throws serious doubt on whether the respondents had any reasonable basis for thinking they would be able to fund the kind of project the subject of the respondents' representations in most of the period through 1991 to mid 1992. That question ceases, however, to be of significance from, at the latest, mid 1992 when that form of financing the scheme was abandoned. 182 Whether the respondents might have been able to raise $20,000,000 in debt finance in July 1993 (one of the issues to which McDougall's report was directed) is also largely beside the point. Their conduct between adopting that funding plan in mid 1992 and late 1993, when IMB had to shut its business down, shows they made no attempt to locate such a source of funding other than the very belated reliance they placed entirely on Cowley. There is no evidence that they attempted to identify an Australian lender. So far as the evidence reveals, Cowley confined such attempts as he made to identify a lender to seeking one off-shore about mid 1993. The undoubted difficulties that the respondents would have faced if they had actively sought debt finance for the project, described by, eg, McDougall, coupled with their inaction in seeking such finance, demonstrates the absence of any reasonable ground for making the predictive representations they did about a range of matters referred to by the Commission from mid 1992 to late 1993 concerning the development of the project. It is irrelevant, in my opinion, to that issue that, if the respondents had tried, they may have been able to overcome the difficulties inherent in the assets they had to offer a financier by way of security and obtain $20,000,000 of loan funding: they did not make any serious effort to do that. 183 There is no evidence (other than an unclear comment by Deputy Mayor Ayling in cross-examination, but not followed up) that any of the respondents gave any consideration at all to the possibility of resurrecting the idea of funding the project with loans from policyholders, who numbered only about 3,200 by September 1993, at any time after the respondents abandoned that idea in mid 1992, in favour of seeking external loan finance. There is no evidence on the feasibility in late 1993, when various of the respondents began to have serious doubts about Cowley's bona fides and reliability, of funding the project with policy loans at that stage. None of the respondents suggested in evidence the thought ever occurred to any of them. Nor, despite the long period of inaction in attempting to locate an external financier after the decision had been made to follow that course in mid 1992, is there anything in the evidence to suggest that any of the respondents took any action to put in place arrangements to raise funding by a public offer through a prospectus. So far as the evidence reveals, the only action taken after June 1992 to find funding for the project was the action, if it can be called that, by Cowley already referred to. I reject the closing submission of the respondents that they had good reason, in late 1993, to think that they might be able to fund the project by reverting to the original idea of persuading policyholders to take out loans against their policies and pay over the loan moneys to IMB, perhaps in exchange for shares in Logan Lions Limited, a course which would have required the issue of a prospectus, action never undertaken by the respondents.

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203 The respondents accepted in their closing submissions that the IMB proposed development was such that representations they made in connection with marketing the proposal did need to be qualified and they also accepted that it was appropriate in the circumstances that the possibility of non-fulfilment should also be disclosed. The respondents submitted that "it was a consistent business practice of the IMB presentation to fully and properly qualify statements made with respect to future matters" and that "all representations were properly qualified, that the possibility of non-fulfilment was always stated". 204 It is true that in some, but not all of the promotional material distributed by IMB, qualifications were stated to the effect that the project might not proceed as planned and it is true that, in some seminar presentations, similar qualifications, ranging in the degree of their explicitness, were also made. 205 But whatever may have been the prospects at the outset in early 1991 of funding the scheme as originally envisaged by raising $125,000,000 over ten years to 2001 from loans against 5,000 policies sold in sufficient time to enable the first stage of the three stages of planned development to be undertaken in 1994 at a cost of $10,000,000, as explained above, it should quickly have become apparent that the respondents' original plan to fund development from the rapid sale of 5,000 policies was not going to succeed. They did nothing to implement their revised plan, adopted in mid 1992, to fund development with borrowed moneys, other than to very belatedly engage Cowley in mid 1993 to find a lender. There is an absence of evidence of any effort on his part to identify a bona fide lender. The respondents never had any reasonable ground for thinking that funding might be able to be arranged to enable construction of Stage 1 to commence in 1993 or 1994 or at any time thereafter or to enable the grandiose project they spoke about in their efforts to sell policies ever to be brought to fruition. The representations the respondents made about construction commencing referred to in par 24(a) of the Commission's pleading and the representations about expending between $100,000,000 and $125,000,000 on the completed project referred to in pars 27 and 28 and the representations about the project having on completion the features or attributes as alleged in par 24(b) were made without any reasonable foundation. 206 In my opinion, from mid 1992 at the latest, though the respondents may for a time thereafter have hoped that they would be able to raise the funding necessary to bring the project into existence, they could never have had any belief that the necessary funding would be able to be raised. This, I think, is apparent from the fact that, though it was in mid 1992 that the respondents abandoned the original funding plan in favour of seeking an external lender, they took no action at all for a year that was directed to doing that. Then, all they did in mid 1993 was commission Cowley to find a source of funding. They left that entirely to him and there is nothing in the evidence to suggest that from mid 1993 to late September 1993, when various of the respondents began to have suspicions about Cowley's bona fides, he did anything to entitle the respondents to think that there was a likelihood or even a possibility of the necessary funding being located. Since, for the reasons given, I do not think the respondents had any actual belief (as opposed to a mere hope) that funding might be able to be obtained from mid 1992, it is no answer to the allegations of the Commission here under consideration that, in various ways and with varying degrees of explicitness, the respondents qualified some of the representations made about commencement of construction and the attributes of the completed project by indicating that the project might not, in fact, proceed. In order to avoid a finding that, by making the representations they did, qualified though they sometimes were about commencement of construction and the attributes and worth of the completed project, they contravened s 52, it was necessary for the respondents to expose to those to whom they made the representations from mid 1992 on that they had been unable to identify any lender who might be prepared to finance the project. The problem for the respondents here is not that they may have qualified the representations now in question, but that they failed to disclose the true extent of the risk of the representations not being fulfilled for want of any reason to think that the necessary funding could be obtained.

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208 The Commission here particularised certain documentary material and statements of a number of its witnesses. This was done on the basis that an examination of this mass of evidence would reveal that representations of the kind pleaded were made. The Commission did not, however, rely in its closing submissions on all the material referred to in its particulars. 209 The Commission argues that these representations contravened s 52: firstly, because the respondents had no reasonable grounds for making any of the representations in the particularised material as to what the future value of the policies would be at different times over the ten years following the making of the particular representation because the future value of investment policies of the kind here in question depends upon so many variables that it is impossible to make any prediction about the value of such a policy at any time in the future. Secondly, and inconsistently with this first ground, the Commission says representations that the policies would be worth $25,000 at the end of ten years were misleading in so far as they overstated the ten year values provided by National Mutual and Legal & General in the policy illustration estimates those insurers made and gave to IMB. For example, the National Mutual document showed a ten year cash value of $24,369, on the various assumptions made by National Mutual in calculating that figure, compared with the $25,000 figure after ten years referred to by IMB. 210 The respondents dispute that they made the representations about policy performance in every one of the circumstances referred to in the material identified by the Commission in its "particulars" of pars 25 and 26 of its pleading. But both in written material distributed to members of the public to induce them to buy policies and in statements made by IMB representatives at sales seminars, representations were made in the period March to December 1991 that, by investing $25.00 per week in a National Mutual policy over ten years, the policyholder would accumulate sufficient money to acquire 25,000 shares at $1 in the company that became the third respondent. That is, representations were made that in ten years the policy would be worth $25,000, and also that, in effect, the policy would accumulate sufficient value to enable policyholders to borrow through the loan back facility attached to the policy $2,000 in 1994, $5,000 in 1997 and a further $18,000 in 2001. Similar representations were also made, in a variety of circumstances, in relation to the Legal & General policies during the period from about January 1992 to September 1993, when IMB was marketing them. 211 An early example of the representations made about policy performance are those contained in the promotional video [Ex C3] which IMB handed out to members of the public. The transcript of this video contains the following statements:

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214 The "National Mutual cash value print-out" he referred to is the document in evidence entitled "Investment only premier lifestyle protection plan. (LPIO20)" produced by National Mutual for IMB early in 1991. I accept that this National Mutual sheet was widely distributed by IMB and that it was distributed with this particular video in September 1991: the Commission's witness, Mrs Matlick, was one of the people given a copy of this sheet in late June/early July 1991. Glenn Ivers also said the video was used in conjunction with personal representations made by sales people to explain the position. I see no reason to doubt this. 215 This National Mutual document shows the cash value of such a policy at the end of each year of the twenty year life of the policy, together with other information. The cash value figures applicable to 1994 and 1997 could be thought to comfortably allow the policyholder to borrow $2,000 and a further $5,000 against such a policy in each of those years. The figure applicable to 2001 is $24,369 in contrast to the $25,000 (which includes the $18,000 final instalment) referred to in the video. The National Mutual document contains the note: "These figures represent illustrations only, future values cannot be guaranted". Matlick took out a National Mutual policy in late June/early July 1991. She acknowledged that she saw this note on the National Mutual forecast sheet. But, notwithstanding this note, I think presentation to members of the public to whom IMB gave the video of this National Mutual sheet, without comment, would be likely to reinforce the statements in the video about the policy being able to generate the three instalments totalling $25,000 over ten years to enable purchase then of 25,000 $1 shares in the project. 216 If nothing more appeared in the evidence, there would be substance in the Commission's contention that, by distributing this video, even if it was accompanied by the National Mutual cash value sheet, the respondents thereby made representations that a National Mutual policy of the kind being offered would accumulate sufficient value to support three loans over a ten year period totalling $25,000. If nothing more appeared, I do not think the statements about policy performance made in this video could be brushed aside as taking on the same colour as the numerous optimistic statements about the future of the project also made in the video so that they should be seen as mere puffery, likely to be understood as such by viewers of the video and thus not amounting to misleading conduct in contravention of s 52. 217 But the respondents put on a mass of testimony designed to establish that IMB so presented the policies as vehicles for accumulating the moneys necessary to purchase shares in the planned float as to leave people with the clear understanding that the suggested policy values were indicative only and could not be guaranteed because actual values depended upon a range of market influences. Before turning to that evidence, I should deal with the other material relied on by the Commission to make out its case. 218 The Commission's witness, Mrs Jones, said that, in the course of a meeting at her home with an IMB representative Mr Coe in May or June of 1991, he gave her a copy of Ex C8 tab 3 entitled "2001 Rugby League Syndicate". This document makes, in tabular form, the same statement as that in the video [Ex C3] about a National Mutual policy accumulating value sufficient to support three loans totalling $25,000 over ten years to 2001. But immediately following this table, in the same size print as the rest of the document, the following appears:

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219 Mrs Jones agreed that Coe mentioned something to the same effect to her orally. I do not consider distribution of this document with this qualification, orally reinforced, was misleading. 220 Exhibits C8 tab 4 was first produced, according to Glenn Ivers, in about August 1991 and tab 5 is dated 22 July 1991. They were both used as marketing aids by IMB in mid to late 1991. Both contain unqualified statements about the National Mutual policy accumulating sufficient value to support three loans totalling $25,000 over a ten year period substantially identical with statements made in the video, Ex C3. 221 Exhibit C8 tab 4 was distributed by IMB to members of the public in late 1991. The Commission witness Mr Hansen received a copy. It is designed to interest people in seeking an appointment with an IMB representative for "a full business presentation" explaining the IMB scheme. Glenn Ivers agreed that this document was intended just to whet the interest of people; he said that, if they took up the offer of a full business presentation, they were then told the true position that policy performance could not be guaranteed. The Commission submits that mere distribution of this kind of document constitutes conduct in contravention of s 52 for the reasons given in TEC & Tomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38. There is substance in this. There, the misleading conduct was designed to induce the opening of negotiations to purchase goods rather than the final purchase itself. Section 52 was held to be contravened though the court accepted that a purchaser of this type of product would be likely to make inquiries as to the source of the product and discover the true position before completing the transaction. The court considered there was no reason why such conduct could not contravene s 52, independently of the position at the point of sale. In Stuart Alexander & Co v Blenders Pty Ltd (1981) 3 ATPR 40-244, it was held that the makers of Andronicus coffee were not in breach of s 52, despite the Andronicus container having the same shape and using similar background colours on labels as that of Moccona coffee jars. In holding there was no contravention of s 52, Lockhart J adopted a passage from Cadbury-Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1981) 1 WLR 193 at 205:

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228 A reader, careful enough to detect from a reading of the document at p 4 that the policy is anticipated to produce $25,000 over eleven years from 1993, would also be very likely to understand from p 5 that there was no assurance that the policy would rise to that level of performance. 229 The Commission also relies upon the transcript of a sales seminar prepared by Cowley in March 1993 for presentation to Legal & General. The Commission relies on one passage in the transcript of this video presentation. That passage does not advance the Commission's case. Cowley flags the uncertainty attendant upon the actual performance of the policy he there speaks about. Nor does the Commission's comment that, because this video was prepared for submission for Legal & General in March 1993, it is likely they were careful not to overstate the performance of the Legal & General policies, advance the Commission's case. If this particular video was presented publicly, Cowley's statements about policy performance draw viewers' attention to the uncertainty about that. If presentation of this video was confined to Legal & General representatives, that might well amount to conduct by IMB in trade. But there could be no doubt that Legal & General representatives would fully appreciate the qualification Cowley stated about policy performance. I do not think that Cowley's statement about policy performance, immediately qualified, amounted to conduct that contravened s 52. 230 The Commission also relies upon statements made by Glenn Ivers at the seminar held on 8 September 1993. The Commission submits that, at various points in this seminar presentation, Glenn Ivers makes statements which convey the impression that the Legal & General policies will produce sufficient funds to pay for the shares in ten years' time. Allowing for the need to have regard to the context in which the statements are made, there is substance in the Commission's submission, in relation to the following comments by Glenn Ivers at pp 25 and 26 of the transcript:

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233 Tenboer did not, in her equivocal evidence on this point, accept that this exhibit was a seminar script used by IMB. A number of other witnesses did, as the Commission submits, agree that the material in certain passages in this document put to them in cross-examination was stated at the seminars they attended. But I do not regard this evidence as sufficient to authenticate the document as a script used in its entirety or substantial entirety in IMB's marketing activities. 234 As to Ex C8 tab 18, David Ivers accepted that, though it was a script for seminar presentations prepared by Cowley: "We would have utilised a lot of this document in giving our seminar presentation …". It was used over a period that cannot be identified with any precision. It contains a statement, by way of summing up the investment that the presenter is offering, to the effect that the payment of $25 a week into a capital guaranteed investment fund held by Legal & General will guarantee an investor options on 25,000 $1 shares which could be worth around $100,000 when the rugby league team runs onto the field in 2001. Nothing is stated in this transcript by way of a qualification or warning that a $25 per week investment to 2001 with Legal & General may not yield the necessary $25,000 to purchase the shares. 235 The Commission also relies upon the evidence of four witnesses that statements were made by David Ivers, Cowley and other representatives of IMB as to the values in ten years' time of Legal & General policies of the kind IMB was seeking to sell. I have explained why I am not prepared to accept the evidence of Graham or Dibben. 236 I do not think Mrs Eden's evidence about what Cowley had to say about the need to take out a Legal & General policy in order to reserve options in Logan Lions so that the respondents would have a guarantee that the investor had the funds in ten years' time to exercise those options can fairly be regarded as a statement that the Legal & General policy offered would yield the $25,000 in ten years that Cowley earlier spoke about. But even if what Eden says should be regarded as evidence of such a representation, it is necessary, before accepting that it establishes such a representation was misleading, to evaluate it with all the other evidence to which I have referred. 237 Mrs Colbran says that at the end of an IMB seminar held on 23 June 1993, she spoke with an IMB representative Mr Livesey, who told her that if she was to take out a Legal & General policy and pay $65 per week indexed at 7 percent for ten years, the policy would then be worth $12,500. Livesey repeated this when he called at her home on 7 July 1993 on the occasion she agreed to purchase a policy. Colbran said that when she received the policy documents on 23 July 1993, she noticed that the estimated benefits after ten years were shown as substantially less than $12,500. She says she queried this with an IMB staff member and was assured that her 12,500 shares would be reserved for her until the policy reached the value of $12,500. The respondents were not able to call Livesey. But they called two witnesses, Ball and McCrohon, who purchased policies through Livesey in late June 1993 and April or May 1993. I am not, however, prepared to accept their imprecise evidence as throwing doubt on Colbran's evidence. 238 Statements in some of the material relied upon by the Commission made without any accompanying qualification are capable of constituting conduct contravening s 52. But I do not think that a determination on that issue in relation to those statements can be made by evaluating them in isolation from the mass of evidence called by the respondents which presents a pretty comprehensive picture of how the respondents marketed both the National Mutual and the Legal & General policies. In submitting that the predictions undoubtedly made by IMB as to the National Mutual and Legal & General policies' performance was not adequately qualified, the Commission ignores entirely the evidence from the respondents' Category J sample witnesses and also the evidence of the other thirty-five Category J witnesses who purchased policies. 239 Seventeen of the twenty-two acceptable Category J sample witnesses understood that there was no assurance that the policies they purchased would yield the $25,000 figure mentioned at the seminar they attended. Ten had a clear understanding that whether a particular figure was achieved by the policy at the end of the ten year period was governed by interest rates. The witnesses who had this understanding were Mrs Ward and Duncan, who purchased Legal & General policies in the latter half of 1992; Wainwright, Ms Ashcroft, Mundy, Churchward, Mr Cooper and Brooks, who purchased Legal & General policies in July - August 1993; Mr Duel, who purchased a Legal & General policy in April 1993, and Judge, who purchased a National Mutual policy in October 1991. The other seven witnesses understood that the suggested figure of $25,000 after ten years was approximate only or that there was uncertainty about whether that particular figure would be achieved. All seven purchased Legal & General policies, Ms Moore in October 1992; Mr Lewis, Mrs Cox and Mr Lascelles in February/March 1993; Mr I Beutel in June 1993 and Thomas and Lowe in August/September 1993. Of the other five, four did not deal in their statements with their understanding as to the performance of the policies they bought and were not cross-examined on the matter, while Mr L Nothling, in a brief comment, appears to have suggested he was aware that the $25,000 figure was not assured. (Whitworth, generally a poor witness, was the only one of the Category J sample witnesses who supported the Commission's case here in that she said that her understanding, on the basis of what she was told by the IMB representative Coe when she bought a National Mutual in March 1991, was that a $25 per week investment would give her the money to buy the 25,000 $1 shares in ten years' time.) 240 This analysis of the twenty-two reliable Category J sample witnesses suggests that there was a widespread understanding among people who attended seminars and purchased policies that the figures suggested as the value of the policies after ten years were not assured, with policy performance being governed by movements in interest rates. I regard this body of evidence from the sample witnesses as reflecting the existence of a much larger body of evidence available to the respondents from the general mass of Category J witnesses. There is minimal support only for the Commission's case that people were left by IMB with the belief that the policies would yield a fund sufficient to enable the 25,000 shares (or the 12,500 shares) to be purchased at the end of the ten years. 241 Much the same view emerges from the evidence of the thirty-five Category J witnesses not included in the sample of forty who nevertheless were called by the respondents and from the evidence of three Category J witnesses wrongly included in the sample because they did not attend seminars. Five had such limited recollections of what was said at the seminars as to make their evidence of little use. These were Messrs Michaelian, McCrohon and Fuhrmeister, Mrs Ball, and Mrs J Beutel. Of the remaining thirty-three witnesses, seven, though generally giving useful evidence, either made no comment in their statements or in cross-examination or said they could not recall what was said about policy performance. These were Demaine, Ms Gurling and Messrs Kennedy, Brooks, Craswell, King and Gitsham. Sixteen had a good understanding that the value of the policy they bought after ten years would be dependent upon interest rates. They were Messrs George, Soper, Nolan, Anderson, Quaresmini, Faram, Peterson, de Boer, Martin, K McLean, Taylor, Roche, O'Doherty, Rix, R Finlay and Gaston. Two - Messrs Roycroft and Sillars - came away from the seminar each attended thinking that the policies should be worth approximately $25,000 at the end of ten years. Six understood there was no assurance that the $25,000 figure would be achieved, although some hoped that the policy would cover the cost of buying the shares in ten years' time. This group comprised Foss, Ms McKenna, Mrs Eekelschot, Nicholson, Bolt and Mr Davidson. Only two - Messrs Connor and Thompson - came away from seminars believing that the policies would produce the necessary $25,000. 242 It is necessary that I give proper effect to the weight of evidence available to the respondents from the 439 Category J witnesses, including the thirty-five of those witnesses who were called by the respondents but who were not included in the sample of forty. The mass of this evidence available suggests that most people attending seminars left with an understanding that what was said about future policy values was appropriately qualified. 243 The minimal support for the Commission's case about predictions as to policy performance that comes from the small group of Category J witnesses represented by Whitworth and which includes Connor and Thompson suggests that these persons may have misunderstood or misheard what they were told at the seminars they attended rather than that they are accurate reporters of misleading statements about policy performance made by IMB representatives at a number of seminars. The mass of evidence the other way supports this view of things. 244 Because the overwhelming weight of evidence from a very large pool of witnesses who attended seminars indicates that people generally understood that there could be no assurance that the $25,000 (and associated) figure mentioned during many if not all of these seminars by IMB representatives as the value of the policies in ten years' time was not assured, I am not prepared to find that the unqualified statements about policy performance in the promotional video of September 1991 [Ex C3], Ex C8 tabs 4 and 5, and Ex C8 tab 18 should be accepted as amounting to misleading conduct. I have decided that I should also treat what Glenn Ivers said in the seminar of 8 September 1993 in the same way, ie, as not involving misleading conduct. Two witnesses attended seminars in September 1993. Lowe attended one on 18 September. She left with the understanding that the $25,000 was not assured. Connor, however, believed the figure was an unqualified firm figure. He attended two seminars sometime in September 1993, both being presented by Backo and Glenn Ivers. He attended a third, he thinks the last ever held, later on. There is thus reason to think that his evidence directly supports the Commission's case based on Glenn Ivers' presentation on 8 September 1993. But Connor was only one of a considerable number of people present, if he did in fact attend the seminar of 8 September. I have therefore decided that I should adhere to the view I have formed as to the significance of the mass of evidence pointing to people attending seminars being left with the understanding that policy performance was not guaranteed. 245 It remains to deal with Colbran's evidence. I have accepted that she was told by the IMB representative Livesey and pretty obviously believed that in ten years her policy would be worth $12,500. It may be that, like Livesey, other sale representatives did on occasion make unqualified statements to people about the ten year value of the policies they were selling. But the mass of evidence on this issue to which I have referred suggests that that could not have taken place on anything other than a small scale overall. I am not prepared to find that the statement made by Livesey, out of keeping with the statements made by IMB representatives generally about policy performance, justifies a finding of misleading conduct on this one occasion against all the respondents. The mass of evidence suggests that the respondents did impress upon their sales representatives that they should not make unjustifiable predictions about policy values. 246 The Commission's second argument, that the representations were misleading, is based on the fact that the amounts represented by IMB as future policy values exceeded those published by National Mutual and Legal & General. I have referred to the National Mutual document that shows a ten year value for its policies of $24,369, based on a range of expressed assumptions and other assumptions as to rates of investment return not mentioned in the document, compared with the $25,000 figure represented by the respondents. The Insurance Commissioner authorised insurance offices, including National Mutual and Legal & General, to market their products using investment rates of return fixed by the Commissioner, though (as is apparent from his Circular No 291) the Commissioner was concerned that it was not justifiable to make predictions as to future policy values based on such assumed rates. The insurers knew that. In my opinion, IMB did not engage in conduct contravening s 52 constituted by representing the ten year value of the policies at $25,000. Those misrepresentations were not misleading for the reason here advanced by the Commission, viz, because, by way of example, the $25,000 figure exceeded by a few hundred dollars the ten year figure in the document prepared by National Mutual for IMB. The failure by IMB to adhere exactly to the ten year policy values represented by the insurers is not misleading because of that failure, as the Commission here contends. What is misleading is suggesting that a policy will have a particular value in ten years' time; if that value is stated with apparent precision, rather than as a rounded-off estimate, that reinforces the misleading nature of the statement. But that is not how the Commission put its case on the second ground.

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248 The Commission justified its contention that the respondents engaged in misleading conduct by making the statements they did about the future value of the shares primarily on the ground that all such statements were misleading because of the absence of any prospect that the respondents would obtain funding for the project. The respondents joined issue with the Commission here. 249 In my opinion, representations made about share values after October 1992, when IMB put its business plan into the Council identifying, without any justification, Legal & General as the potential lender to the scheme, were misleading. I think it clear that, from this time at the latest, IMB's inaction in taking any steps to locate a lender, a matter critical to the implementation of the scheme, and its reliance only on Cowley to do that show that IMB and those associated with it had no reasonable ground for believing that they would be able to fund the development. Such representations made after October 1992 (like the similar representations previously made) were qualified to a degree to warn people that there could be no assurance as to the future value of shares, ten years hence. But it was, I think, misleading to make statements about the future value of the shares from October 1992 at the latest, and thereafter, suggesting that the shares could turn out to be worth more than the $1 proposed issue price while warning that they might turn out to be less than that, without going on to inform people of the position in relation to the obtaining of finance. It was not enough just to tell people that share values cannot be predicted. The absence of any prospect of obtaining finance was a matter which, at least from October 1992, also needed to be drawn to the attention of people that the respondents were trying to persuade to join the scheme, if the respondents' qualified marketing statements about further share values were not to be misleading, for the reasons stated by Lee J in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40-940. The risk, for want of finance, that the shares whose possible future values were the subject of various representations, albeit qualified by the respondents, might never become available was such a serious risk that its disclosure was necessary, in my opinion, to prevent what was said about future share values being misleading. 250 I also think that the respondents engaged in misleading conduct within par 21 on the basis pleaded by the Commission. Much of the material generated by the respondents on which the Commission here relies is directed to boosting the scheme by emphasising its potential for generating huge profits, particularly from the poker machines. But the sales presentations, recorded in videos and transcripts, do refer, from time to time, to how much more valuable than the $1 issue price shares in the development when the public company is floated are likely to be. 251 IMB's sales pitch, as recorded in this material, developed over time. The transcript of the video presented by Glenn Ivers at the seminar held late in the piece, on 8 September 1993, contains the developed version of this pitch. Cowley was, I think, the person who devised the sales pitch culminating in that presented on 8 September 1993. The evidence indicates, eg, that he devised the "bricks and mortar" analogy used to persuade people that the "risk free" option to take up 25,000 shares in the project in ten years' time was worth having. I have referred to the evidence that shows the impact Cowley had on boosting IMB's performance in selling policies. The passage focusing on the shares which were being offered at $1 in ten years' time is contained at pp 21 to 25 of the transcript. It is necessary to set out a lengthy portion to get an idea of the way the matter was presented at seminars and how the shares, as a potentially very valuable investment, were worked into the presentation. 252 In the lead up to this section of the presentation, the presenter extols the completed development and emphasises how profitable it is likely to be, particularly given that the first stage will have 480 poker machines and eventually there will be 960. The presenter then mentions for the first time the figure of $100,000 in the context of asking:

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Now as I said, the shares come onto the market at $1.00. It's hard to project and we certainly don't really want to project what the shares will be worth down the track. But 10 years later, you know, the question is, what could an original $1.00 share be worth in that facility? Well we could do a simple analogy. Let's talk about a $100,000 house because it's a little bit simpler and people can grasp it. Just say that a house down the road here on sale for a $100,000 and we go out and we set up a public company. We capitalise that company with 100,000 $1.00 shares, fully paid up and we say "right oh, we'll buy the house". So 1993, we spend $100,000 on that house. Buy as I said $1.00 shares. Now the question I have - I'll ask you a question. Many of you have probably bought and sold houses or bought one and know what it's worth now, but just a question. That house that's worth a $100,000 today, 10 years later, what could it be worth? As I said, no one's right, no one's wrong, depending on the area that you're in or the actual decade we're talking about, probably any one of those could be right, but the point is quite simply this. That if I was one of the original holders of those shares, in 1993 when we bought the house, if it's worth $350,000 ten or so years later, based on the bricks-and-mortar value, what's my original $1.00 share going to be worth? $3.50 Exactly. And in this case, $2.00, in this case a $1.80. So that's simply the point I want to illustrate is that a bricks-and-mortar asset like a house or like a club will always go up in terms of replacement costs because they don't make any more land. But bricks and mortar, we know historically that there's a ten-year growth average or sorry, over the last forty years, there's this average growth in real estate and that's obtained by taking a weighted average of basket from all over the country. But 11.8% compounding is roughly the growth that we'd expect based on history. So based on that history, around $3.00 or $305,000 from the house is what you could expect. So the original $1.00 share in the house, based on bricks and mortar could be on average worth about $3.00, ten years later. That's simply the point.

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254 At this point, the IMB presenter moves on to explain how people can secure the 25,000 options exercisable in ten years' time by taking out a Legal & General policy. But in the passage set out above, the enormous profit potential of the development is repeatedly emphasised. People are, by the "simple analogy" to the house, shown how shares issued at $1 (as it was intended the shares in the scheme company would be) can almost automatically rise three-fold in ten years because "a bricks-and-mortar asset like a house or like a club will always go up in terms of replacement costs because they don't make any more land". The potential for shares in the scheme to appreciate by an even greater amount is then emphasised by reminding people that the proposed club facility has something that a house does not have: "Massive turnover, 960 poker-machines; possibly 100,000 members has the potential to generate a lot of profits, a lot of revenue". Having invited the audience to guess what shares in the club will be worth ten years later on and obtained figures of $6, $10 and $25 from the floor, the presenter suggests, in that context, a highly conservative $4, with the 25,000 options accordingly being worth $100,000 in ten years' time. The presenter does warn the audience that shares and, particularly those to be offered in the scheme, will not necessarily rise at a number of points in this passage, saying: "It's hard to project and we certainly don't really want to project what the shares will be worth down the track" and "Now again, I don't want to try and put figures in your minds and say what these shares could be or would be worth 10 years later …". Towards the end of this section of the sales pitch, the presenter then focuses on the possibility that the project may be a failure and may even not get off the ground. But this is not couched in the form of a caution against assuming that the shares will rise. Rather, it is the lead-in to how, by buying a Legal & General policy, people can secure 25,000 options which, when exercisable in ten years' time, may be very valuable and how even if the project were ultimately to fail, their ownership of the policy ensures that they face no financial risk themselves. 255 Despite the warnings about the absence of an assurance that shares would increase in value over time, this part of the presentation is pitched in a way very likely to leave people with the impression that, though there could be no guarantee, the features of the IMB project were such that the shares in it, which would be available in ten years' time, would very likely be worth a lot more then than the $1 price that people to whom this presentation was made could secure. This part of the sales presentation appears to be designed to encourage people to buy the policies that would ensure they would be able to afford the 25,000 $1 shares offered when they became available in ten years' time. 256 A number of the Commission's witnesses gave evidence of what they were told by IMB representatives about future share values. Mrs Webster, who attended the seminar on 8 September 1993, gave brief evidence that was broadly consistent with the transcript of Glenn Ivers' presentation to that seminar, referring to the comments made about the increase in value of real estate and to these comments by the presenter:

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263 Of this group of nine, Lane and Miss White attended seminars in the latter part of 1991; Duncan in the second half of 1992 and Cox, L Nothling, I Beutel, Thomas, Duel and Lowe between February and September 1993. Four - Mr Judge (who attended a seminar in October 1991) and Elliott, Ashcroft and Mundy (who attended seminars between February and July 1993) - considered in effect that the shares would be worth a lot, that they could not lose on them. Eight - Ward, Moore, Lascelles, Wainwright, Lewis, Churchward, Brooks and Mr Wisby - indicated that the impression they took away from the seminar was that the future value of the shares could not be predicted, that it was a matter of "wait and see". Moore and Ward attended seminars in the latter part of 1992, while the others in this group of eight attended seminars between February and July 1993. Cooper, who attended a seminar in August 1993, had no particular recollection about comments concerning the future value of the shares. A substantial majority of these twenty-two witnesses came away with the impression that the shares would very likely increase substantially in value, though most in this group were aware that that was not guaranteed. Of the eight witnesses who were of the view that no prediction as to future share values could sensibly be made, some, eg, Lascelles, may have been influenced by their own experience as shareholders. The views of this group of twenty-two witnesses reflect, I think, the way the share element of the project was promoted by IMB over the entire period. It reflects what I think to be an approach that culminated in the sales pitch recorded in the transcript of the seminar of 8 September 1993. 264 Thirty-one of the thirty-five Category J witnesses not included in the sample of forty plus the three Category J witnesses wrongly included in the sample who gave what I regard as useful evidence on this issue were a little more optimistic than the twenty-two sample witnesses about future share values. Only six of the thirty-one - Thompson, Martin, Gurling, Taylor, Davidson and Roche - were left with the impression, either based on what they gathered from the seminar they attended or on their own personal knowledge, that future share values could not be predicted. Eighteen - George, Connor, Kennedy, Brooks, Nolan, Anderson, Eekelschot, Craswell, Bolt, Peterson, de Boer, Gaston, Rix, K McLean, Gitsham, Sillars, R Finlay and O'Doherty - were left, as a result of what they were told at the seminars, with a clear impression that the shares would probably increase substantially in value, though they appreciated that there was no guarantee. Seven - Soper, Roycroft, McKenna, Nicholson, Quaresmini, King and Foss - came away from seminars with the impression that the shares were likely to be worth a lot in the future. 265 The evidence of these two groups of witnesses called by the respondents thus tends to confirm the inference to be drawn from the manner in which future share values were represented at IMB seminars culminating in the most developed form of those representations made at the seminar of 8 September 1993. Though I accept words of qualification were used from time to time by the IMB presenters of the various seminars in the context of talking about the potential of the project and the future value of the associated shares, those qualifications had limited effect. A substantial majority of people attending the seminars left with the impression created by the representations made by the IMB respondents that the shares would probably increase substantially in value, even though many were aware that there was no guarantee of that. There is no dispute that there can be no reasonable grounds for representing that shares will increase in value in the future, particularly over as long a period as ten years. That would be the position even if there had been some prospect of the respondents raising the finance necessary to build the project. That is simply a consequence of the unpredictable nature of the share market. But there are numerous other considerations that show the absence of any reasonable grounds for IMB making any representations to the effect that the shares proposed to be issued in ten years' time would increase in value above the proposed $1 issue price. The legislative limitations on the number of poker machines the project could operate falsified IMB's optimism about future share values, which was expressed to be based, in large part, on the profits likely to come from a very large number of machines. As Rodin points out, the relationship between the proposed club and the public company in which the shares would be issued was such as to cast doubt on whether those shares would ultimately be seen as a valuable commodity, even if the club came into existence and operated successfully. IMB's suggestion was that the public company's income from club activities would be in the form of rentals and management fees paid by the club. Rodin also pointed to the restrictions on the capacity of clubs like that envisaged by IMB to distribute profits.

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270 So far as Meakin Park is concerned, the Commission, in closing submissions, abandoned the allegation in par 22(c) as it appears in its pleading of 6 October 1999, but not in the paraphrase set out above, that representations were made that it was IMB's expectation that the project would be constructed there. I do not understand from the closing submissions made by the Commission that it is pursuing the allegation in par 22(a) of its current pleading repeated in the version of par 22 set out above that the respondents engaged in conduct contravening s 52 by making representations to the effect there alleged. 271 It is convenient to deal with the allegations in par 22(b), that the respondents made representations about existing or past matters of fact comprising the Council's support for the development of Meakin Park, its having approved IMB's proposal for that development there and that the Council had agreed to grant a lease over Meakin Park for the development. 272 In so far as the respondents made representations both orally at seminars and in written material produced and distributed by IMB to the effect that IMB had Council support for the development of the project at Meakin Park, that did not, in my opinion, involve any conduct in contravention of s 52 the TPA. 273 From early 1991 to well into 1992, it was, I think, a fair statement of the position to say that the IMB proposal, in so far as it related to the development of Meakin Park, did have Council support. The Commission here does not suggest that it would be misleading or deceptive for a developer to say that its project has Council support unless and until a formal resolution has been passed by Council granting all the town planning and building approvals necessary to permit a project to proceed. As the evidence of Deputy Mayor Ayling demonstrates, that is simply not the way local authorities go about dealing with major development proposals. His evidence shows that, once councillors who are members of the relevant council committees consider that a major development proposal is worth encouraging, Logan City Council, like many other councils, engages in an informal process of discussion and consultation with the developer with a view to identifying the requirements that the developer will have to satisfy before it is appropriate or even useful for the developer to lodge applications for the formal approval of Council. That is what happened here. Deputy Mayor Ayling's evidence and the attitude of various councillors and of the Council itself to the IMB proposal for Meakin Park, as revealed by the events listed in the chronology that took place on 15 May 1991, 3 July 1991, 12 December 1991 and 2 December 1992, show that the respondents were justified in making representations to the effect that their proposed development had Council support. 274 The Commission contended that one respect in which the respondents contravened s 52, as alleged in par 22, was that they continued to make representations of the kind set out in par 22 about Meakin Park after they had decided to abandon Meakin Park for Logan Park. It is not possible to determine just when it was that IMB decided to site the development in Logan Park, rather than Meakin Park. It appears that the impetus for this change came from within the Council. There was a meeting between IMB representatives and the Mayor and the Deputy Mayor in early May 1993 at which those two officials suggested that the development should be relocated to Logan Park for a number of reasons that had been identified within the Council. The Town Clerk, Mr Kellar, could only say that:

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275 He referred to the Logan Lions business plan of July 1993 as being the first documentation on Council files that identified Logan Park, rather than Meakin Park, as the site for the development. Drawings prepared by an IMB consultant, Mr Nelson, dated 7 March 1993 refer to Logan Park. But, as Hansen's evidence, later discussed, suggests, the date on an architect's drawing may not be a reliable indicator of when events have occurred. 276 Against this uncertain background, I am not prepared to accept that, even if Colbran was told as late as June 1993 at a seminar she then attended that the club was to be constructed at Meakin Park, that showed that the respondents engaged in conduct in contravention of s 52 in any of the respects alleged in par 22 of the Commission's current pleading. 277 In this context, the Commission also relied upon the transcript of a training seminar presented by Cowley to IMB sales staff in July 1993 which records the statement that, though there were concerns emerging about the suitability of Meakin Park: "we will still have the opportunity to develop Meakin Park into other sports arenas …". Tenboer, who attended this staff seminar, does not recall any such statement. But even if it was made, I do not, for the same reasons I have given in relation to Colbran, think that this provides a basis for the conclusion that the respondents engaged in misleading conduct of the kind alleged in par 22 by Cowley telling sales staff in early July 1993 that Meakin Park was still involved in the proposal and, by inference, that people who had contact with those sales staff may have been told the same thing about Meakin Park. 278 A number of the Commission's witnesses gave evidence of hearing statements made by IMB representatives at seminars to the effect that IMB had an assured title from the Council to Meakin Park. 279 I have explained why I am not prepared to accept the evidence of Graham and Dibben as sufficiently reliable. 280 Hansen said that at a seminar he attended in April 1991, David Ivers said words to the effect that "[w]e've been promised land at Meakin Park by Council …". He bought a National Mutual policy soon afterwards. (He says he was given the "2001 Rugby League Syndicate" document attached to his statement at that April 1991 meeting, though it includes copies of architect's plans dated "November 1991".) 281 Mrs Jones said that at a sales seminar she attended on 14 September 1991, Backo, in response to a question by a member of the audience at one stage, pointed out the window to Meakin Park and said words to the effect that "[t]he syndicate has a guarantee of this land. The Logan City Council has promised it to the syndicate …". Mr Christie attended what seems to be the same meeting of 14 September 1991 that Mr and Mrs Jones attended: the two families went together to a meeting addressed by both Backo and David Ivers. Both Mrs Jones and Christie speak of each being given a video to take to show friends who might be interested in joining the syndicate. Christie does not mention any comment by Backo of the kind described by Mrs Jones. He, however, refers to a statement by David Ivers to the effect: "Council will let us have the land at Meakin Park for $1 million". Mrs Jones does not mention such a comment. Deputy Mayor Ayling and Roycroft, the respondents' witnesses, were at the same meeting on 14 September 1991 attended by Mrs Jones and Christie. They do not support either Mrs Jones or Christie and recall quite different statements about the extent to which IMB then had security of tenure in respect of Meakin Park. Roycroft's recollection of what he was told of the status of the respondents' dealings with the Council was that certain councillors agreed with IMB's ideas and liked the concept of a multi-sports complex. It is rather unlikely that, if Backo had publicly stated that IMB had "a guarantee of" Meakin Park from the Council or if David Ivers had spoken of an agreement to get the land for $1,000,000, the Deputy Mayor would not have recalled that. 282 Matlick says that she and her husband, in late June/early July 1991, met with an IMB sales representative who told them, among other things, that "they had a 99 year perpetual lease on the Meakin Park Sewerage site land". Glenn Ivers said the IMB representative she dealt with appears to have been Coe. 283 Other Commission witnesses gave more qualified evidence about why they got the impression from what they were told that IMB had a Council assurance of tenure to the land. Colbran may have gained that impression not from being told in so many words that IMB did in fact have Council approval for the land, but because she inferred that they must have had that approval because of what they had to say about Meakin Park being where the club was going to be built. Eden, in her first statement of 14 October 1993, said she gained the impression from what Glenn Ivers told her at a seminar on 4 November 1992 that "Council approval would not be a problem", then saying only that Glenn Ivers added that Mayor Golledge was a founding member. In her supplementary statement of 26 July 1996, she said, however, she gained that impression because he said words to the effect: "Verbal approval has been obtained" and that "we have the land". She made no mention of these matters in her earlier statement as having caused her to get the impression she did about Council approval not being a problem. Rutherford said that, at the seminar conducted in Rockhampton in April 1993 by Backo, the latter gave Rutherford the impression that Logan Lions had been given Council approval for the development at Meakin Park. He does not explain the basis on which he got this particular impression, though it appears he was told by Backo that construction was expected to be under way by Christmas 1993 and, it may be because of this, that he drew inferences about Logan Lions having secured the finance to fund the development (as he said he did) and about having the necessary Council approvals. 284 I accept that these Commission witnesses attempted to give their honest recollections of what was said on particular topics in the course of fairly lengthy meetings with IMB representatives. But assessment of the significance of their evidence cannot be made without evaluating the evidence of the Category J witnesses, both sample and non-sample, who were called by the respondents to give evidence about this issue. 285 The twenty-two Category J sample witnesses, who I have indicated gave evidence which I regard as of use, gave evidence of having a range of understandings with respect to IMB obtaining a lease from the Council over Meakin and then Logan Parks. But all believed that no lease had been granted and no binding agreement to give a lease had been reached at the dates of the seminars they attended between 3 August 1991 and 18 September 1993. The witnesses White, Judge and Lane, who attended seminars in August and October 1991, each said that what they were told was to the effect that, while discussions were under way between IMB and the Council, no lease had then been obtained. The witnesses Ward, Moore and Duncan, who attended seminars in August, October and December 1992, each gave evidence contrary to the notion that those seminars were told that the Council had granted or agreed to grant or had already approved the grant of a lease over Meakin Park. The witnesses Lewis, Cox, Lascelles, Wisby, Duel, L Nothling and I Beutel gave evidence of having attended seminars in February, March, April and June 1993. The evidence given by each, though differing quite widely in its terms, was all to the general effect that, while IMB was hopeful of obtaining Meakin Park, no firm decision had been made and there was no guarantee that they would get it. 286 The witness Churchward, who attended a seminar on 8 July 1993, said that he understood that IMB was awaiting Council approval. He also gave evidence of there being some uncertainty about just where it was then intended to build the complex; he referred to two separate areas, one appearing to be Meakin Park, the other Logan Park, as the two areas then under consideration. The witnesses Ashcroft and Mundy, who attended seminars on 10 and 12 July 1993, gave evidence to similar effect to that of Churchward about there being uncertainty as to the exact site for the development, with no definite decision being made by Council though it was favourably disposed to the project. That these three witnesses who attended different seminars in early July 1999 each recalls being told something of the change from Meakin Park to Logan Park as the site for the development enhances, I think, their reliability as accurate reporters of what was said on each occasion. 287 The witness Brooks, who attended a seminar on 14 July 1993, said, in unchallenged evidence, that his understanding of the status of Logan Lions' application for a long term lease over Logan City Council land was that: "The project was okay in principle, but that there were no guarantees. We understood that all work with Council was preliminary and no agreements were entered into". Elliott, who attended a seminar in February 1993, gave similar evidence. The witnesses Wainwright, Cooper and Thomas attended seminars between mid July and late August 1993. All three gave evidence, again differing in its terms, but to the general effect that a lease had been applied for, but no decision had been made by Council. Lowe gave evidence of attending a seminar on 18 September 1993. She understood that a long-term lease had been applied for by Logan Lions and that as long as the Council's criteria were met, "there was a very good chance that it could be approved". 288 The evidence of these twenty-two sample witnesses suggests that there is a very substantial body of evidence available to the respondents showing that it is unlikely that the respondents made representations with respect to Meakin Park and Logan Park of the kind the subject of the Commission's allegations in pars 22(b)(ii) and (iii) and 23 of the Commission's pleading. 289 So far as the numerous witnesses called in addition to the thirty-three Category J sample witnesses are concerned, the Commission criticises the summaries made in closing submissions of the evidence of a small number of these witnesses and submits that the summaries cannot therefore be relied on. But, apart from this, the Commission does not suggest that the summaries of evidence of the other witnesses are unreliable. The Commission says, eg, that the witness Rix, who according to the respondents' summary gave evidence in relation to the lease approval issue in his written statement that "[t]he status of the application was that it was an application and nothing was yet approved", was not cross-examined. The Commission says this is wrong. However, reference to the transcript said by the Commission to demonstrate this erroneous statement shows that the summary correctly states that Rix was not cross-examined about his understanding of the status of the respondents' title to any Council land. Though he was cross-examined, as the Commission suggests, at transcript p 1286 about some matters touching on the Council's attitude to the project, he was not cross-examined on this particular important evidence. The respondents accurately summarise what the witness Kennedy has to say in his statement about the Council's attitude to the project being that it "was okay in principle but there was no guarantees". The Commission comments simply that "the reference to the evidence of Mr Bernard Kennedy in the 'Logan City Council' column [of the summary] is incorrect". The reference to transcript p 2014 is, as the Commission contends, wrong. However, if one goes to transcript p 2099, Kennedy explains the basis for his opinion in cross-examination. The same criticism is made of the summary of the evidence of Bert George. The summary is accurate, though the transcript reference should be to p 1496. 290 Reference to the evidence of this class of witness generally shows that the summaries of their evidence in relation to the Council tenure issue are accurate and that these witnesses, generally speaking, gave evidence of being told at seminars or by IMB representatives about IMB's optimism at getting tenure from the Council, but also being told, in effect, that there was no guarantee that a lease would be granted or that the matter had got no further than that the Council was considering IMB's application and was favourably disposed to it. 291 There is such a mass of evidence contradicting the limited body of evidence produced by the Commission in relation to the issues concerning Council approval raised in pars 22 and 23 of the Commission's pleading that I am not prepared to find that the Commission has made out any case within pars 22 and 23 of its pleading. 292 The Commission also relies on statements in various of the documents, including transcripts of seminars, prepared by the respondents. It submits that statements made at seminars, including statements about the imminent commencement of construction, also "create the impression that approval had been obtained" from the Council. But it is unclear whether some of this material was ever displayed to any members of the public, while printed material that was publicly disseminated generally records that IMB did not have any unqualified right to use Meakin Park for the project. For example, the "Members Information Portfolio" document used through the first half of 1992 refers, at p 10, to each stage of the project only being undertaken when the approval of the various government and local authorities is in place. At p 12, the document states that the club facilities will be on Logan City Council land "subject to a long term lease to the Company yet to be finalised". Page 8 describes Meakin Park as "the proposed site" and p 9 states: "Negotiations with both Local and State Government have uncovered a groundswell of support for the project". 293 The respondents undoubtedly presented an optimistic view of their prospects of obtaining a lease of Meakin Park from the Council. But, in their written material, they generally put suitable qualifications on their optimistic statements to prevent it being said that they were representing that they had already secured from the Council tenure to Meakin Park.

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295 This is a more limited allegation than that made with respect to "finance approval" in par 29 of the Commission's last pleading, the further further amended statement of claim filed 6 October 1999. The respondents did not object to dealing with the case on this issue, so framed. 296 The allegation here is that the respondents made a representation as to an existing fact, viz, that certain finance had already been arranged. The Commission's case is that that representation was misleading or deceptive because no such finance had been arranged at any relevant time. 297 It was in mid 1992, after Cowley joined IMB, that IMB decided to abandon the idea of using the loan facility of each policy as the source of direct funding for the project and seek external funding secured by, among other things, assignments of the policies to the lender. As is apparent from the statements made in the business plan IMB submitted to the Council three months later, in October 1992, no progress had been made in identifying an external lender for the project. The business plan identified the principal avenue for funding as Legal & General. But the respondents had no basis for thinking Legal & General might seriously consider taking on that role. Immediately after Legal & General learned of the suggestion made to the Council by IMB for its involvement as potential funder for the project, it took action to ensure that IMB would not repeat that suggestion. 298 By October 1992, only about 1,200 policies had been sold. Between November 1992 and September 1993, however, a further 2,000 policies were sold: in this period a major effort was put into persuading people to invest in the scheme by buying policies. But despite this intense and successful activity engaged in by the respondents, they continued to make no progress at all in finding someone prepared to finance the project. It was not until May 1993 that Cowley was engaged on a formal basis as a consultant to IMB. It was only then, according to David Ivers, that Cowley "became virtually full time on the project", with his "primary task" being to secure funding for the project. In June 1993, soon after it had been incorporated, the third respondent submitted its own business plan to Logan City Council. This plan was prepared by Cowley with input from some of the other respondents. In the section headed "The Funds Required - Reason & Route", the document states:

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302 The statements made on 15 September 1993 by Cowley and Agathonoff are the only evidence put forward by the respondents suggesting they had actually been able to identify someone prepared to provide finance for the scheme. 303 But Glenn Ivers says it was at this very time he began to suspect whether Cowley was acting bona fide. On 17 September 1993, the local media reported statements by Cowley about him being confident that the loan would go ahead. The reaction of McLean, Glenn Ivers and John Ivers was to speak with David Ivers about their suspicions as to whether they could have any confidence in Cowley's claims that funding had been arranged. No loan funds ever materialised and, at the start of the trial, the respondents acknowledged that Cowley was a fraud and had never arranged on any basis, conditional or otherwise, any loan funding for the project. 304 It is clear that the respondents never at any time had any ground for representing or for allowing any of the staff of IMB to represent that funding for any part of the scheme was ever in place. 305 The Commission witness Colbran said in her statement of 28 September 1993 that, at the seminar she attended on 23 June 1993, a couple of people spoke about the project. One was Backo. She said that from what she was told by these people, she was given the impression that the IMB group had secured $20,000,000 in overseas funding for the development of the first stage of the complex. She elaborated on this in her further statement of 18 July 1996 by saying that she could recall one of the speakers at that seminar saying words to the effect: "We have got financial backing for $20 million". Colbran was clear in her recollection that what she was told indicated that IMB had definitely got this finance. IMB's witness Fuhrmeister, who attended this same seminar, denies that any statement about IMB having $20,000,000 was then made, though his recollection of the details of what was said at the seminar is, in some respects, poor: he "can't remember" how the project was to be funded. Mr and Mrs Nothling also attended this same seminar. They both denied being told that $20,000,000 of finance had been obtained. Backo, it appears, was present at this seminar and, as I have said, did not give evidence. I do not doubt that Colbran has made an honest attempt to recount what took place at the seminar. But I am not prepared to find that an unqualified statement about finance to the extent of $20,000,000 having by then been arranged was made. She is the only witness who suggests such a statement was made so early in the piece. This seminar took place at a time when all respondents well knew that no progress had been made in identifying a source of any loan funds. It took place at the time IMB put its business plan into the Council, from which it was abundantly clear that no finance had been arranged. I think it unlikely that the respondents would have made or would have permitted staff to make an unqualified statement about finance at that early time. Her evidence is also contradicted by the Nothlings and Fuhrmeister. Colbran may have been unwittingly influenced by the fact that there was a good deal of publicity in the media about IMB, which included a number of statements purporting to come from IMB to the effect that it had a lender prepared to advance the first $20,000,000 needed for Stage 1 of the project in the fortnight before she gave her witness statement to the Commission. 306 The Commission's witness Rutherford does not take the matter any further: he gave evidence of a visit by Backo to the North Rockhampton Rugby League's Club in about April 1993, during which Backo, in effect, conducted a sales seminar. Rutherford said that Backo gave him the impression that Logan Lions had secured capital to fund the development. But he said he only got that impression because of what Backo said about construction getting under way by Christmas 1993. 307 Matijasevic, who worked for IMB as a field interviewer/consultant from the end of June 1993 to the end of August 1993, said in his statement to the Commission of 4 October 1993 that some time in this period he was told by the respondents Musgrave, Stone, the Ivers brothers and other IMB management, that IMB had the $20,000,000 capital for the development. When he learned that Cowley had gone overseas to get the money, he realised that that was untrue. Matijasevic gave a statement to Stone himself dated 27 February 1996. He said in it he could recall being told by another IMB employee, Wilkinson, "and others whom I can't now remember" that "we have the money". He said he was not told anything further about it and simply assumed that that meant the initial $20,000,000 was in place, but the question was not discussed any further. He did not then identify the respondent Stone as one of those "others", though he did that in his earlier statement to the Commission. In a supplementary statement to the Commission of 30 October 1996, he referred to this statement he had given to Stone in which he mentioned being told by Wilkinson during the period of his employment "we have the money". He there gave a more elaborate account of this incident. He mentioned for the first time that he had this conversation with Wilkinson in the context of statements having been made at seminars to the effect that finance to fund the first stage of the development was available. He went on to say that he asked Wilkinson whether IMB had got the $20,000,000, to which she replied in the affirmative. Though I think Matijasevic is in general a reliable witness, I am not prepared to find that the respondents made representations that contravened s 52 to the effect that finance had been secured. I do not accept his evidence as going beyond establishing that Wilkinson told him privately at some time in the July/August period that finance had been secured. 308 I do not accept these Commission witnesses as establishing that during the period between June 1993 and September 1993 the first respondent, or anyone acting for it, made representations to the effect that finance of $20,000,000 had been obtained for the project. But that is not the end of this issue. 309 The Commission witness Stokes gave explicit evidence that, at the seminar he attended on 16 September 1993, conducted for the purpose of persuading as many as possible of the eighty to one hundred people in attendance to purchase Legal & General policies, both the speaker he could not identify and Backo separately gave him the impression that IMB had secured a $20,000,000 bank assurance. He said that: "The speaker said it was announced at the launch at the Beenleigh Rum Distillery on 15 September 1993." There is no suggestion that Stokes attended the launch. But Cowley and Agathonoff there made unqualified statements to the effect that finance in an amount of $20,000,000 had been obtained. Stokes was not cross-examined on what he had to say about this. Backo did not go into the witness box. 310 The Commission witness Webster attended an IMB/Logan Lions seminar a little before Stokes' seminar, on 8 September 1993. She spoke to a Logan Lions sale representative, Sue Bird, at the end of the seminar. Webster said that the presenter she did not identify (though it was not David Ivers or Backo, both of whom she saw there at various times) made an unqualified statement that they had a particular amount of capital to construct the first stage of the project. Though Webster could not recall the figure stated by the seminar presenter in this context, she was certain that "they gave a figure" and "they indicated they had the money". Webster rejected the suggestion in cross-examination that all that had been said at the seminar was that IMB had someone overseas at the moment and they were confident of getting a large sum of money as capital for the first stage of the development. 311 There is evidence coming from the respondents that supports what Stokes and Webster had to say in so far as on both 16 September 1993 and subsequently, various of the respondents made statements that $20,000,000 in finance had been arranged in circumstances in which it can be inferred that the respondents intended those statements to be accepted, though they were not made in the context of sales seminars. In his letter of 16 September 1993 to Legal & General, in which he dealt with the TPC's complaints, David Ivers said:

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312 His statement, that the money was available, is as unqualified as Cowley's statement to the same effect made at the Logan Lions media launch the preceding day. It is highly likely, in view of the Ivers' acknowledged suspicions about whether Cowley had indeed arranged finance, that David Ivers did not believe in the truth of this statement. But it is unnecessary to make any particular finding on the point since representations of the kind made to Stokes and Webster will contravene s 52 if they are misleading or deceptive, even though those responsible for making them honestly but erroneously believe in the truth of what was stated. 313 The Logan Lions Limited expression of interest submission to Logan City Council dated 19 November 1993 and signed by David Ivers and the ninth respondent, McLean, was in large part based on Cowley's business plan of June 1993. But it included some new material. Item 2 of the submission is headed "Financial Viability". It directs the reader to "The Vienna Trust Merchant Bank Ltd. offer to finance". The copy of that document dated 9 November 1993 purporting to have been signed by the authorised officer and bearing the corporate seal of Vienna Trust Company Ltd affixed on 12 November 1993 purports to "confirm the availability of Loan funds to a gross US100,000,000" subject to certain conditions. The document describes the loan as structured in "three separate approval drawdown stages" with Stage 1 being for "US$ 20 million (to take effect immediately subject to the conditions herein)". Whether the respondents had funding for the project was of importance to the Council. Despite David Ivers' denial, he, on behalf of IMB, was quite obviously putting this document before Council to show Council that they had the necessary funding in place, albeit funding that required IMB to satisfy the conditions set out in the letter. This was put to the Council long after the directors of IMB, including Glenn Ivers, had become suspicious of Cowley, though it was only at the start of the trial that the respondents acknowledged that Cowley was a fraud and that this letter from the Vienna Trust Merchant Bank produced by Cowley was also fraudulent. 314 Finally, the Commission tendered a media release dated 24 September 1993 which named David Ivers as the person to contact "for more information". The tenor of this release is encapsulated in the opening statement: "The Logan Lions Rugby League Club would go ahead despite action by the Trade Practices Commission last week, which resulted in the sacking of 77 staff." Ivers then wanted to convey to the public the message that the Commission had caused great harm to IMB. The press release does that. The release also contains the following statements:

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The involvement in the contraventions of s 52 of the fourth to tenth and the twelfth respondents 318 I have found that IMB contravened s 52 by representing on 8 and 16 September 1993 that finance had been approved for the first respondent's development. I have also found that between July 1992 and September 1993, IMB contravened s 52 because representations were made on its behalf as to the commencement and completion of the development and as to its attributes and worth on completion. I have further found that in this same period of a little over a year, IMB also contravened s 52 because representations were made on its behalf as to the future value of the shares to be issued in the public company. The Commission contends that orders should be made against all the abovementioned respondents on the basis that each was directly or indirectly knowingly concerned in, or party to, each contravention within s 75B(1)(c) the TPA. 319 The respondents concede, in their closing submissions, that, with the exception of the ninth respondent, each of the abovementioned respondents was employed by the IMB Group and involved in the promotion and marketing of the IMB syndicate concept and the development proposal. I have referred to the evidence which shows that between July 1992 and December 1993, each of the abovementioned respondents, apart from the ninth respondent, was paid each week a salary, fairly modest but not insubstantial, for the duties each performed for IMB. 320 The fifth respondent was a director of IMB and closely involved throughout in promoting its activities, which included participation in the selling of policies. The twelfth respondent, though not an officer of IMB, probably because his bankruptcy prevented that, was, throughout the period, also closely involved in promoting these activities of IMB. The fourth respondent, from the outset, was closely involved in promoting the first respondent's activities, including the sale of its policies. 321 The other respondents, as well as the fourth respondent, were all directors of the third respondent, Logan Lions Limited. The third respondent was incorporated in June 1993 by those controlling the first respondent in order to further the first respondent's scheme. Prior to that, they all took part in promoting or participating in IMB's activities centred on selling policies. Some were more closely and continuously involved than others. That remained the position after incorporation of the third respondent until the end of 1993. The fourth and the sixth to tenth respondents, as directors of the third respondent, caused or at least allowed that company to be associated with the first respondent's promotion of its scheme from June 1993 to the end of that year. Logan Lions was the company held out by the first respondent as that in which the shares the subject of IMB's promotions was to be issued. The issue of those shares was an integral element of IMB's promotional activities. Because of their actions as directors of the third respondent in allowing it to be associated by the first respondent in that way in the first respondent's activities, I consider that each of the third respondent's directors comes within s 75B(1)(c) the TPA in respect of each one of the contraventions I have found that the first respondent engaged in. 322 The ninth respondent differs from the other natural respondents in so far as he alone did not receive any remuneration from IMB. Further, he, like a couple of the other respondents, lost money which he invested in IMB's activities. He suffered by far the largest loss of any of the respondents in this regard. However, though he did not participate in the day-to-day activities of IMB, he played a role in advancing IMB's business. He attended, with other representatives of IMB, the meetings convened by Coopers & Lybrand on 13 November 1991 and by National Mutual on 3 December 1991. He acknowledged that he attended three meetings of the board of IMB or meetings of senior management of IMB to discuss general matters of IMB's business. He took part with senior IMB representatives, including Glenn Ivers, in the interview with Cowley that led to IMB engaging him. His participation in these management activities of IMB is, I think, sufficient to bring him within s 75B(1)(c) in respect of the contraventions I have found against IMB. But his role as a director of Logan Lions is, of itself, sufficient to produce that result.

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RELIEF TO BE GRANTED 323 The Commission is entitled to declaratory relief in respect of the contraventions in which I have found all the respondents to be involved. 324 Orders are also sought that these respondents disclose to each person who has purchased a National Mutual or a Legal & General policy from IMB and to each person solicited by IMB to buy such a policy information as to the respects in which I have now found those respondents to have engaged in conduct in contravention of s 52 the TPA and also to publish an advertisement containing the same information. 325 I can see no justification for making these disclosure and corrective advertising orders. Policies were sold by IMB to 3,200 people. Many thousands more were unsuccessfully solicited by IMB to invest in such policies. Whether it is now possible for the respondents to comply with the first of these proposed orders is extremely doubtful. I would want to know something about that before contemplating making such an order. In any event, the interest of those who bought policies through IMB in having the opportunity to cancel those policies has long ago been vindicated by the Commission by reason of the action it took against National Mutual and Legal & General and the action those two insurers subsequently agreed to take. 326 The Commission frankly states that it seeks this relief to let all those policyholders who have already supported the Supreme Court action mounted by the Ivers against the Commission, and also those policyholders who might contemplate supporting that action in the future, know that findings adverse to the respondents have been made in these proceedings. I doubt that, to make the orders sought at the behest of the Commission for that purpose, ie, to assist the Commission rather than policyholders, is a proper use of the statutory powers. But the declaratory relief to which I have held the Commission entitled vindicates, to some extent, the Commission's decision to take action against the respondents. 327 The Commission also seeks injunctions restraining the respondents from engaging in the conduct found to have contravened the TPA. Such relief would not, I think, serve any purpose other than to vindicate the public interest in showing that certain of the respondents' conduct contravened s 52 the TPA. In the circumstances of this case, the declaratory relief sought and which I propose to grant will adequately fulfil that purpose.

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Judgment (400 paragraphs)

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Legislation Cited (8)

Cases Cited (13)