Binaray Pty Ltd as Trustee for the Allen Family Trust v RAMS Financial Group Pty Limited [2019] QSC 33

CONTRACT - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - BREACH OF CONTRACT - where defendant franchisor had various sales channels including brokers and franchisees - where plaintiff franchisee and defendant entered into a Franchise Agreement - whether on the proper construction of the Franchise Agreement the defendant was obliged to allocate and provide information about broker-originated customers to the plaintiff - whether that obligation extended to broker-originated customers with existing loans or who had discharged their loans - whether the defendant breached its contractual obligation to allocate and provide broker-originated customers to the plaintiff by not providing the plaintiff with a list of broker-originated customers in its allocated territory - whether access to a 'Loan Viewer' sufficient to discharge defendant's obligation

DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - REMOTENESS AND CAUSATION -LOSS OF PROFITS - where the plaintiff argued that as a result of the defendant's breach it lost the opportunity to sell loans to those customers on the list of broker-originated customers and others - where there were a number of barriers and risks affecting the plaintiff being able to sell loans to broker-originated customers - where some broker-originated customers had drifted to the plaintiff - effect on value of commercial opportunity and valuation of loss - where disputed evidence as to strength of list of broker-originated customers as a lead - where dispute as to conversion rate to be adopted in valuing loss - whether the opportunity lost should include referrals and loans other than broker loans - whether plaintiff established on balance of probabilities that breach caused loss of a valuable commercial opportunity

LIMITATION OF ACTIONS - LIMITATION OF PARTICULAR ACTIONS - SIMPLE CONTRACTS, QUASI-CONTRACTS AND TORTS - where defendant contended part of action for breach of contract statute barred - where proceeding issued more than six years after alleged breach - whether continuing obligation

INTEREST - RECOVERABILITY OF INTEREST - IN GENERAL - whether undue delay by plaintiff - whether interest should not accrue until moneys were payable

Limitation of Actions Act 1974 (Qld) s 10(1)

Civil Proceedings Act 2011 (Qld) s 58

Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570, followed

Badenach & Anor v Calvert [2016] HCA 18; (2016) 257 CLR 440, followed

Baldwin v Icon Energy Ltd [2016] 1 Qd R 397, followed

Bobux Marketing Ltd v Raynor Marketing Ltd [2001] NZCA 348; [2002] 1 NZLR 506, distinguished.

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, followed

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, followed.

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1, followed

Interchase Corporation Ltd (in liq) v Grosvener Hill (Qld) Pty Ltd (No 3) [2003] 1 Qd R 26, applied

IW & CA Price Constructions Pty Ltd v Australian Building Insurance Services Pty Ltd & Ors [2017] QSC 39, followed

LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74, distinguished

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, followed

Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2017] QCA 254, followed

Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd t/as Strathearn Insurance Brokers Pty Ltd [2012] NSWCA 192, followed

Secured Income Real Estate (Australia ) Ltd v St Martins Investments Pty Ltd ( [1979] HCA 51; 1979) 144 CLR 596, followed

Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332, applied

Winky Pop Pty Ltd & Anor v Mobil Refinery Australia Pty Ltd & Anor [2016] VSCA 187, followed

WL Marshall v The Colonial Bank of Australasia [1904] ArgusLawRp 86; (1904) 1 CLR 632 at 647, followed

P Neskovcin QC, with N Andreatidis, for the defendant

[1] RAMS[1] is a well-known brand name associated with a number of financial products and services which are particularly directed to the home loan market. It entered into a written Franchise Agreement with Binaray Pty Ltd (ACN 119 724 211) as Trustee for the Allen Family Trust ("Binaray") on 25 July 2006. At the time the Franchise Agreement was entered into RAMS products were sold through:

• (a) RAMS home loan centres operated by franchisees ("the Franchise Network");
• (b) Brokers, who had to be mortgage brokers accredited by RAMS ("the Broker Channel");
• (c) Direct application via telephone or the internet ("RAMS Direct").

[2] Mr and Mrs Allen were both directors of Binaray and worked in the business. Under the Franchise Agreement, Binary's Allocated Territory was referred to originally as RAMS Home Loans Brisbane Inner-South, encompassing a number of areas referenced by their postcodes.

[3] Binaray had non-exclusive rights to market and sell RAMS products in its allocated territory. RAMS could also market its products through accredited mortgage brokers and market and sell products directly in the allocated territory. The present dispute is whether Binaray should have been provided customer information by RAMS in relation to customers within its allocated territory who had obtained RAMS products through a mortgage broker, so it could market and sell RAMS products to those customers. The customers of mortgage brokers are referred to as broker originated customers ("BOCs"). Whether such an obligation existed or not depends on the proper construction of the Franchise Agreement, which was constituted by a number of documents.

[4] If the Court finds RAMS was obliged under the Franchise Agreement to provide customer information as to BOCs to Binaray, there is a factual dispute as to whether the Franchise Agreement has been breached. Binaray contends it was not provided with such access, whereas RAMS contends there was a means of accessing BOCs through its database which included information about BOCs.

[5] Assuming that there was a breach of the Franchise Agreement by RAMS, Binaray claims it has suffered loss and damage as a result of the loss of the opportunity to sell additional loans to BOCs. RAMS contends that no such loss has been suffered because the opportunity lost was not a valuable opportunity. Even if there was a valuable opportunity, RAMS contends that the amount of such loss is a much reduced amount from that claimed by Binaray.

[10] Between 1996 and 3 January 2008, the operations of the RAMS home loans business were conducted by a number of entities but were principally conducted by RHG Home Loans Pty Ltd ("RHG").[2]

[11] In July 2006, the parties entered into the Franchise Agreement.

[12] Binaray was aware of its potential claim against RAMS in relation to BOCs from at least 15 April 2008 when a notice of dispute was first issued.[3]

[13] On or about 4 January 2008, Westpac Banking Corporation ("WBC") acquired shares in the defendant and the right to conduct the RAMS business in the future. Under that agreement:

"WBC made the acquisition of the Defendant and the RAMS Business on the basis that:

(a) the franchisees, including the Plaintiff, were paid a sum of money that represented a negotiated present day value of the trailing commissions they were to be paid on the value of their loan books as at 4 January 2008;

(b) the customer information relating to all RAMS home loans and other products taken out by customers prior to 4 January 2008 (the RHG Customer Database) was not part of the sale to WBC; and

(c) RHG retained control and ownership of the RHG Customer Database."[4]

[14] After January 2008, RAMS had very limited access to the pre-2008 database as a result of being bought by Westpac. That affected the ability to calculate the size of the pre-2008 BOC database, which had to be estimated by the experts engaged on behalf of the parties. However, from January 2008, the RAMS database accumulated all customer information whether that customer originated through the franchise, a broker or RAMS Direct channels.[5]

[15] On 15 April 2008, Binaray issued a notice of dispute to RAMS, which included the contention that Binaray should have access to BOC information.[6]

[16] Under the Franchise Agreement, a franchisee was entitled to be paid upfront commissions and trail commissions in respect of a loan. From 22 September 2009, Binaray was obliged to repay 100 percent of the upfront commission received if the loan was discharged within the first 12 months, and 50 percent of the upfront commission received if the loan was discharged in the 12 to 18 month period.[7]

[17] On or about August 2011, Binaray exercised an option to extend and extended the Franchise Agreement for a further five year term from 25 July 2011.[8]

[18] Proceedings against RAMS were filed by Binaray on 29 November 2013.

[19] The Franchise Agreement between RAMS and Binaray expired on 24 July 2016.[9]

What were the relevant obligations under the Franchise Agreement?

[20] As to the dispute regarding the rights and obligations under the Franchise Agreement, the question is whether on the proper construction of the Franchise Agreement, RAMS was required to:[10]

• (a) allocate to Binaray customers of RAMS who were BOCs generated through RAMS accredited brokers;
• (b) provide Binaray with access to or the use of customer information of and relating to the BOCs;
• (c) on the proper construction of the Franchise Agreement does the term Customer as defined in clause 33 of the Franchise Agreement apply only to a BOC with an existing relationship with a broker and loan with RAMS or does it extend to a BOC who has discharged their RAMS loan.[11]

[21] The Franchise Agreement between Binaray and RAMS with respect to the franchise consisted of three documents:

• (a) The franchise agreement;
• (b) The Operations Manual; and
• (c) The Disclosure Document.

[22] The Disclosure Document was not the subject of any submissions by Binaray or RAMS, except insofar as both parties submitted that the document was irrelevant to the matters which this Court has to determine. As such, it will not be the subject of any further discussion.

[23] The obligations contained in the Franchise Agreement varied from time to time. Exhibit MFI-A provided by the plaintiff outlines the relevant changes in the clauses in the Operations Manual over the relevant period. I will consider the franchise agreement which was the version of the agreement entered into by the parties in 2006 and the Operations Manual, which is the version as at 17 July 2006.[12] To the extent that any amendments over time need to be considered and are material to this decision, I will address them in the course of these reasons.

[24] The Operations Manual forms part of the Franchise Agreement as if it were fully set out in the agreement.[13] According to clauses 14.3 and 14.8 of the franchise agreement:

"14.3 You acknowledge and agree that the Operations Manual contains the rules you must follow in running your Business including rules about marketing, customer service, hours of opening, security and other rules.

14.8 You acknowledge and agree that we may vary the Operations Manual from time to time and you acknowledge that we anticipate that this will happen at reasonably frequent intervals."[14]

[25] The franchise agreement provides that if there is any discrepancy between the franchise agreement and the Operations Manual, the documents must be "...interpreted and applied in the following order: First the special conditions, second the Operations Manual, and last this Agreement".[15] No special conditions are relevant in the present case.

[26] Binaray relies principally upon clauses 4.1, 4.17, 4.26(c), 4.28, 7.2, 7.17, 7.19 and 13 of the franchise agreement, clauses 8.3, 13 and 17 of the Operations Manual and the terms it contends were implied.[16] RAMS contends that the construction contended for by Binaray is not supported by the clauses relied upon by Binaray, particularly when the clauses relied upon are construed in the context of other provisions in the franchise agreement.[17]

[27] Pursuant to clause 4.1 of the franchise agreement,[18] Binaray was granted the non-exclusive right to operate their Business in the Allocated Territory provided it was done in accordance with the franchise agreement and the Operations Manual.

[28] Under the franchise agreement, a number of obligations were imposed upon RAMS as the franchisor. This included an obligation under clause 4.17 to provide "a technology platform including a mortgage processing system, a system capable of tracking Franchisees' loan applications processing, a commission system to calculate Commissions and ... to provide access to existing Customer information".

[29] The first paragraph of "About this Agreement" in the franchise agreement provides that, "Words that are printed in italics in this Agreement have specific meanings. These meanings are explained in clause 33 of this Agreement".

[30] Clause 33 provides:

"Customer means any person who has or potentially will acquire an Approved Product from us whether through you or otherwise, including any customer who is part of our existing portfolio of customers.

Customer Information means any information whatsoever relating to the Customer or the Customer's affairs."

[31] Customers are referred to a franchisee in various ways. One way is through the Call Centres. Clause 5.4 of the franchise agreement provides that where RAMS refers "a Lead to you [a franchisee] from the Call Centre and you make a sale from that Lead, the Customer becomes part of your Customer Database".

[32] "Leads" are defined in clause 33 to mean "a referral of a potential Customer of Approved Products".

[33] Clause 7 deals with marketing and customer ownership.

[34] Clause 7.1 provides as follows in terms of ownership of a customer:

"We will provide you with a Local Area Marketing Kit to assist you with your Local Area Marketing activities."

"You must conduct Local Area Marketing activities in your Allocated Territory to generate sufficient business to meet the Performance Standards."

"7.4 You must comply with the Operations Manual in relation to your Local Area Marketing activities.

7.5 You will be responsible for your Local Area Marketing and you accept all liability for any action, claim, damages and costs arising out of your Local Area Marketing. We are not liable in any way whatsoever for your Local Area Marketing even if we are aware of it.

7.6 We accept responsibility for the RAMS Material and the marketing templates provided in the Local Area Marketing Kit provided that you use them strictly in accordance with the Operations Manual and any other guidelines issued by us from time to time in relation to use of the RAMS Material."

[37] Clause 7.11(d) and (f) are directed to marketing in a franchisee's Allocated Territory. They provide:

"7.11 Despite clause 4.1, we can carry out the following activities in any Territory (including your Allocated Territory), or appoint a representative to carry them out on our behalf:

(d) Market, develop and advertise our Business and make sales of Approved Products directly to Customers via the internet whether those Customers are within or outside your Allocated Territory.

(f) Permit others (such as mortgage brokers or originators) to sell Approved Products through their distribution networks."

[38] Clause 7.14, 7.17 and 7.18 provide as follows:

"7.14 You agree that we own the Customer and the Customer Relationship at all times. We give you the right to Manage the Customer Relationship on our behalf for the Term to carry on your Business provided you are not in breach of this Agreement, particularly clause 17.

7.17 We agree to provide you with Customer Information in report format from time to time as provided for in the Operations Manual.

7.18 You agree that all Customer Information collected by you is collected on our behalf and you agree to keep proper and adequate records of Customer Information collected by you that is not recorded on the RAMS computer systems and to provide us with copies of that Customer Information if we request it."

[39] Clause 7.19 refers to "Managing the Customer Relationship". "Manage the Customer Relationship" is a defined term and means:

"...to undertake any activity required to ensure that the Customer receives assistance, information and best practice customer service in relation to the Customer's requirements for Approved Products."

[40] Clause 7.20 and clause 7.21 provide as follows:

"7.20 Despite this clause 7, you acknowledge and agree that the Customer can request to be allocated to any Territory for the purposes of Managing the Customer Relationship and that we will comply with any such request.

7.21 No matter where the Customer is allocated for the purpose of Managing the Customer Relationship, the Trailer Income will be given to the Franchisee who sold the Approved Product or, in the case of a Franchise Direct loan to the Franchisee who operates in the Territory in which the Customer resides or in case of joint Customers as advised by Customer."

[41] Clause 11.1.1 of the Operations Manual as amended on 1 July 2008 provides that:

• Proactively market to customers whose loans were originated by a broker or other third party only for the purpose of selling additional RAMS products and non-home loan products such as the RAMS credit card.

• Communicate initially with broker-introduced customers using only the communication tools provided by RAMS Marketing and when approved by the Head of Broker Sales and the Head of Franchising."

[42] Clause 13 of the franchise agreement is addressed to "Commissions and Borrowing against Future Trailer Income and Churning".

[43] Clauses 13.1 and 13.4 provide that:

"13.1 We agree to pay you Commission on the sale of all Approved Products in accordance with the Operations Manual and clause 21 of this Agreement.

13.2 You acknowledge and agree that we may change the Commission payable on the Approved Products from time to time by giving you written notice. We agree to act reasonably when determining Commission. We cannot change the Commission to apply retrospectively.

13.3 You acknowledge that some of the Approved Products are supplied by third parties and that we might not have control over payment of commissions on products supplied by those third parties.

13.4 The Operations Manual sets out the Commissions and the conditions relating to the Commissions."

[44] Clause 13.11 provides that it is a material breach of the franchise agreement to:

"... re-finance an existing Customer loan with an Approved Product in circumstances where a variation to the customer's existing loan would achieve substantially the same outcome for the Customer unless the franchisee has the prior consent of RAMS."

[45] "Variation" is defined in Clause 33 to mean "a change to the loan amount, a change or addition to the loan security, a change to the loan features, transfer to different product type or any combination of these".

[46] Clause 13.12 provides that if a franchisee does re-finance an existing Customer in breach of clause 13.11, the franchisee will not receive any Trailer Income in respect of that _Customer'_s loan.

[47] Clause 3 of the Operations Manual, as amended 17 July 2006, relates to the RHLC Website and describes it as "a secure site that facilitates access to product, customer, marketing, supplier, training information and more that will assist Franchisees and Centre staff to operate and run the business of a RAMS Home Loans Centre". Clause 3.1 states that by accessing the RHLC Website, a franchisee has access to the latest information on matters including "Reports" and "Customer Service". Under the heading of "Reports" in clause 3.1, it states "Find out all of the information that you need to manage your sales, settlements, portfolio, customers and loan status. Access these reports when you need them. Reports are available on a daily, weekly or monthly basis". Further, under the heading of "Customer Service", reference is made to "Access to Loan Viewer, a system that lets you view customer loan details and make requests for information, changes and more".

[48] Clause 8.3.1 of the Operations Manual provides that:

The achievement of Performance Standards by Franchisees is central to the ongoing success of RAMS and all Franchisees. Due to the limited number of allocated territories and thus Franchisees, the requirement for minimum achievement levels is essential. Over the term of the agreement, a Franchisee should expect that RAMS will vary the Performance Standards to ensure that the entire business continues to grow and remain viable for all Franchisees.

Performance Standards for each RAMS Home Loans Centre are required to:

• Ensure RAMS achieves growth and profit as required by RAMS Operating Plan
• Allow RAMS to plan resources to provide acceptable levels of operations support
• Enable RAMS to measure the performance (both qualitative and quantitative) of each RAMS Home Loans Centre

Two areas of the RAMS Home Loans Centre performance will be measured to meet these objectives. Failure to meet these areas could result in serious consequences for the business.

Other areas of the business will be reviewed (as outlined in the Performance Standards - Leading Performance Indicators) with the expectation that Franchisees will meet compliance requirements however a failure to meet these Performance Standards will not lead to a breach in the Franchise Agreement.

Each month, the Franchisee will prepare a Monthly Report tracking the performance of their Centre against the Performance Standards. This report will be used as the basis for discussion with the Franchise Business Manager at the Monthly Franchisee Meeting."

Details the criteria for achieving Performance Standards.

Sets out the format for submission of performance information to the Franchise Business Manager.

[49] Performance standards include the achievement of a number of minimum settled RAMS home loans in the first 6 months of operation and being ranked in the top 80 percent of the total number of settled loans in specified quarters after 6 months of operation.

[50] Clause 8.10 of the Operations Manual relates to Management Reporting Systems ("MIS"). It makes reference to the MIS Reports available through the RHLC Website, which is said to provide information to help run the business and plan local marketing activities. Clause 8.10.2 provides as follows:

• RAMS MIS reports are confidential.
• The Franchisee and all his or her employees must comply with the Privacy Law in respect of use, storage and destruction of customer information. Refer to Privacy Training for detailed information.

• The MIS Reports can be accessed through the RHLC Website.
• If there are any problems or questions relating to MIS Reports consult the MIS Reporting Training Guide."

A self paced training program required to be completed as part of compliance training.

Detailed information about reports, access and management of them.

Policy covering confidentiality and privacy of RAMS information.

[51] Clause 8.10.3 of the Operations Manual sets out standards reports and suggested frequency of use and refers to "Customer Database Report", "At least monthly" and "Generate on an ad hoc basis to support targeted customer loyalty or referral mailings".

[52] Clause 13 sets out the Business Partner Charter. Relevantly, clause 13.1 includes the following:

Each RHLC franchisee is allocated a specific geographic territory. This territory is their base from which to prospect for new customers. They are also allocated all existing RAMS customers in their territory to provide service and assistance. They may also communicate with customers who reside outside their territory only if the customer chooses or if there is an existing relationship with that customer.

A Franchisee will provide service and assistance to all RAMS customers in their territory regardless of how the customer originally came to RAMS.

• Proactively market to customers whose loans were originated by a broker or other third party only for the purpose of selling additional RAMS products and non-home loan products such as the RAMS credit card.
• Communicate initially with broker-introduced customers using only the communications tools provided by RAMS Marketing.

• Proactively market to customers whose loans were originated by a broker or other third party for the purpose of refinancing that loan.
• Actively dissuade a customer from contacting their broker in the future.

Brokers are required to become accredited before they can recommend a RAMS loan and they are expected to comply with the RAMS Customer Charter.

A RAMS broker may not proactively market to customers for the purpose of refinancing that loan to another lender.

RAMS brokers should recognise a customer's right to choose. A broker-originated customer may opt to deal subsequently with a RHLC or directly with RAMS.

A customer may submit a loan application via a telephone contact centre operated or engaged by RAMS, the RAMS Internet site or a RAMS employed sales person.

RAMS does not advocate "churn" in any channel; that is to say, refinancing loans where there is no benefit to the customer to do so.

Agreements are structured to discourage churn and to promote proactive customer relationship management.

A Franchisee is paid commission by the way of trail only. This trail is calculated as a percentage of the loan balance and is paid over time.

A broker is paid commission by the way of a one off up front payment and a trail that is paid over time.

A Franchisee will only generate revenue from a broker-introduced customer by selling them a second loan or by pursuing referrals. Payments are as per the Franchise Agreement.

All commissions are paid by RAMS and no commission costs are passed on to the customer.

Variations include conversions, increases, substitutions, term extensions and release of borrower. For an originator to receive commission, the variation must include an increase. Commission payable on increases is dependent on the increase value and is subject to the agreements."

[53] Clause 17 provides for customer sales and service. Clause 17.1.7 is particularly relied upon by Binaray and provides as follows:

"17.1.7 Principles for allocation of customers to a Territory for Service and Marketing

Customers will be allocated to a Territory for the purpose of customer service and database marketing as detailed in the table below. Customers can elect to move from territory to territory at any time. The allocation of customers for customer service and marketing does not affect commission payments.

The default is the customer is allocated to the Franchisee's territory.

The default is the customer is allocated to the Franchisee's territory.

The default is the customer is allocated to a territory based on the customer's post settlement mailing address postcode.

The default is the customer is allocated to a territory based on the customer's post settlement mailing address postcode.

Loan written by a Franchisee who sells their Franchise.

The customer database will be transferred to the new Franchise owner.

Loans written by Franchise Direct, broker or where a territory has not been allocated.

A customer who has been or will be allocated to an unallocated territory can be marketed to and serviced by RAMS or can be allocated to another territory as determined by RAMS.

The ex HLM/new Franchisee will retain their existing customer database regardless of territory.

The HLM does not retain their existing customer database. These customers will be allocated to a new territory based on the customer's post settlement mailing address postcode.

Currently, the UCS system for tracking movements of customers between territories is not available as a customer database function. We are currently working towards delivering a technology solution, which will facilitate this activity."

[54] The relevant principles to be applied in the construction of the Franchise Agreement were generally not controversial between the parties, save that Binaray sought to rely on subsequent conduct as bearing upon the meaning of clause 17.1.17 of the Operations Manual.

[55] In Electricity Generation Corporation v Woodside Energy Ltd,[19] French CJ, Hayne, Crennan and Kiefel JJ (as the Chief Justice then was) stated in relation to the interpretation of commercial contracts:[20]

Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". (footnotes omitted)

[56] This approach was endorsed in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd,[21] by Kiefel, Bell and Gordon JJ (as the Chief Justice then was) at [16] and [17], where their Honours stated:

[16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it.

[17] Clause 4 is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon cl 4 be consistent with the commercial object of the agreement. (footnotes omitted)

[57] In determining how a reasonable businessperson may interpret the words in question, the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[22] stated as follows:

• [46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
• [47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
• [48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
• [49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
• [50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

[58] Binaray contends that on the proper construction of the Franchise Agreement:[23]

• (a) The defendant was obliged on an ongoing basis throughout the period of the Franchise Agreement:
  • (i) To allocate to the plaintiff customers of the defendant who were generated through RAMS accredited mortgage brokers (referred to in these reasons as BOCs); and
  • (ii) To provide the plaintiff with access to or the use of customer information (as referred to in clause 4.17 of the franchise agreement) of and relating to the BOCs, for the purpose of the plaintiff providing customer service and database marketing;
• (b) The identity of the BOCs to be allocated and the customer information to be provided were confined to those customers whose contracts had settled and whose post settlement mailing address postcode was within the plaintiff's allocated territory (as particularised);
• (c) The obligations in (a) and (b) were subject to the provisions of clause 7.20 of the franchise agreement.

[59] RAMS denies the construction contended for by Binaray. In support of its construction, it relies on the limitations in other clauses of the Franchise Agreement as well as the context and purpose of the Agreement. RAMS admits that there is an implied term in the agreement that the parties would exercise their rights and perform their obligations in good faith, but denies the terms sought to be implied in paragraphs 9(b) and (c) of the Further Amended Statement of Claim. It contends, in any event, that such implied terms are subject to the express terms of the franchise agreement and the Operations Manual and that the parties are not required to go beyond their respective contractual obligations to ensure that the other party enjoys the benefit of the Franchise Agreement.[24]

[60] A critical point of distinction between the parties in their construction of the Agreement arose out of the context and commercial purpose each attributed to the Franchise Agreement. Binaray contends that the Franchise Agreement was a relational contract, where the parties had an interdependent relationship in which both parties were intended to have the potential to profit from the relationship. RAMS does not dispute that the relationship with Binaray was a commercial one where both parties were to potentially profit, but contends that the Franchise Agreement was limited by the fact that the relationship was to operate in an environment where RAMS had three different channels through which it sold its products, which necessarily did not involve the franchisee having access to customer information of mortgage brokers who were competitors of the franchisee.

[62] The franchise agreement[25] contains a section, "Franchise Opportunity and Document Overview". While it is not intended to be part of the legal Agreement, it is said "to provide some background information to the overall offering being made by RAMS so that a person reading this Franchise Agreement can better understand why certain clauses are drafted in the manner that they are". Both parties would obviously have been aware of its content at the time of entry into the Agreement. The overview identified the following matters as existing at the time of the agreement, namely, that:

• (a) A franchisee is allocated a non-exclusive marketing territory in which to operate the franchise business;
• (b) There are others who may sell RAMS products in the franchisee's territory; and
• (c) RAMS itself and brokers may sell in the allocated territory.

[63] The overview further states that:

"Another example of where RAMS products may be sold in your area is through the broker network. While RAMS sees that there may be some potential conflict between the Franchise network and the broker channel, RAMS discloses that it actively promotes the broker channel as a means of further distributing its products in the relevant market while at the same time endeavouring to ensure that the rights of Franchisees are protected as much as possible."

[64] It is obvious that both parties are aware of the overview statements. RAMS submits that both parties were aware of the potential conflicts that existed between the different providers in an allocated territory. RAMS further submits that in that context, the clauses relied upon by Binaray should not be construed to extend the obligations of RAMS to providing information about customers in a territory where they had originated as a customer through a broker.

[65] According to RAMS, the reasonable businessperson would recognise that the co-existence of the different sales channels and the non-exclusive nature of Binaray's territory meant that:

• (a) The sale of RAMS products was an important aspect of the RAMS business;
• (b) The different sales channels would be competing to sell RAMS products; and
• (c) Each of the different sales channels was important to RAMS to achieve sales of RAMS products.[26]

[66] The franchise network and the broker channel had been operating since 2003 or thereabouts,[27] well before entry into a Franchise Agreement by Binaray and RAMS.

[67] RAMS submits that it makes no commercial sense for the Franchise Agreement to be construed to give Binaray the contractual right to information regarding customers who effectively belonged to the brokers, for the purpose of effectively cold-calling the customer with a view to marketing additional RAMS products to the customer. In that regard, RAMS relies upon a number of clauses including the Business Partner Charter in the Operations Manual, the limitations upon marketing, providing or re-financing loans and the circumstances in which commissions were payable. It contends that the Business Partner Charter and commission structure recognised that the customer relationship belonged to the broker. Further, it contends that RAMS actively discouraged franchisees and brokers from engaging in predatory behaviour regarding the opposite channel's customers by prohibiting churning.

[68] According to RAMS, the reasonable businessperson would recognise that, read as a whole, the commercial purpose and objects of the contract were to:

• (a) Promote the sale of RAMS products through the different sales channels whilst ensuring the provision of service and assistance (i.e. post settlement service) to RAMS customers, regardless of whether the loan was originated by a broker, RAMS direct or a franchisee;

"Expectations of loyalty and interdependence mark the formation of the contract and become the basis for the rational economic planning of the parties. The norms of the ongoing relationship, of necessity, tend to supplement the express contractual obligations. Good faith is required to ensure that the requisite communication, cooperation and predictable performance occurs for the advantage of both parties. In short, the obligation seeks to hold the parties to the promise implicit in a continuing, relational commercial transaction." (footnotes omitted)

[85] As part of its contention, Binaray relies upon the fact that there is a shared existing RAMS customer database and the fact that the Franchise Agreement is to allow franchisees to develop and build their own business while RAMS offers support with local area marketing, training, site setup, technology and business development.[37]

[86] Binaray particularly relies on the fact that the interdependency between the franchisor and franchisee was intended to be for the economic gain of both Binaray and RAMS. Binaray contends that RAMS' construction of the Franchise Agreement has little regard to the fundamental features of the Franchise Agreement and gives undue weight to the role of a broker and the market share which a broker may enjoy.

[87] Binaray contends that the interpretation of the Franchise Agreement should proceed on the basis that RAMS conducts a business by which it attempts to secure and service customers through the provision of financial products. Franchisees, including Binaray, have a dual purpose in that they are not only servicing RAMS' customers, but also actively growing their own base of customers from which to derive their own profits. The entire process is commission driven. Customers provide repeat business and refer other customers. Those customers include BOCs. Binaray contends that the fact that the franchisee may be in competition with any number of brokers is not a basis for restricting the entitlements of the franchisee.[38]

[88] Relevant to the context of the Franchise Agreement is the fact that RAMS operated through three different sales channels, where there was potential for conflict between the franchise network and the broker channel.

[89] While the overview of the franchise agreement supports the fact that RAMS actively promoted the broker channel, it does not suggest that the broker channel was given primacy over the franchise network. The fact that the broker channel may have been more successful is not a fact that was established as being known by both parties, such that it is an extrinsic fact relevant to the construction of the Franchise Agreement.

[90] The commercial purpose of the Franchise Agreement is to facilitate the promotion of RAMS products and growth of the RAMS customer and loan base by franchisees, through the application of the RAMS business model. However, the growth of the business of the franchise was not unconstrained. It had to recognise the existence of the broker channel and did not have primacy over the RAMS brokers who were recognised as competitors under the agreement.

[91] Binaray has drawn upon the fact that the contract is a relational contract. In particular they have referred to the decision of Bobux Marketing Ltd v Raynor Marketing Ltd.[39] The judgment referred to by Binaray in Bobux Marketing is that of Thomas J, who was the dissenting judge. In that case, his Honour had regard to the fact that a distributorship agreement for an indefinite period was a relational contract and concluded that the parties were subject to a duty of good faith. The majority, however, consisting of Keith and Blanchard JJ, approached the question of whether there was a right to terminate without cause or on reasonable notice, using what Thomas J recognised was an orthodox approach to contractual construction.[40] Keith and Blanchard JJ did not consider the question of good faith, having determined that there was no right to terminate without cause or on reasonable notice.

[92] In the context of interpretation in the present case, Bobux Marketing is not of great assistance. Characterising the agreement as a "relational contract" may well be apt in the case of a franchise agreement, insofar as the term is used to refer to a contract that involves not merely an exchange but also a relationship between the contracting parties. However, Finn J in did not suggest that special rules of construction applied to such contracts. Nor do I consider is authority for applying special rules of construction to a franchise contract. To the extent that the notion of a "relational contract" has been referred to, it is in the context of it supporting the implication of a duty of good faith more readily in a franchise contract. The nature of the relationship created by the agreement between parties and the purpose of the agreement are matters which are relevant to the interpretation. However, defining a contract as "relational" does not import any special rules of construction that would otherwise not apply.

[94] Binaray principally relies on clause 17.1.7 of the Operations Manual and 7.19 of the franchise agreement as obliging RAMS to provide it with details of BOCs in its allocated territory to which it could market.

[95] The heading of clause 17.1.7 refers to "Principles for allocation of customers to a Territory for Service and Marketing". Clause 17.1.7 also refers, inter alia, to customers being allocated to a territory "for the purpose of customer service and database marketing as detailed in the table below" (emphasis added). That table provides that for loans written by a broker: "The default is the customer is allocated to a territory based on the customer's post settlement mailing address postcode".

[96] Binaray contends that there is a clear correlation between clause 7.19 of the franchise agreement and clause 17.1.7 of the Operations Manual, given that clause 7.19 applies to a Customer who has originated through RAMS Franchise Direct, a Call Centre, the RAMS Internet site or a RAMS accredited mortgage broker. That Customer "will be allocated to the Franchisee operating within the Allocated Territory within which the Customer resides for the purpose of "Managing the Customer Relationship". Binaray contends therefore that the phrase Managing the Customer Relationship in clause 7.19, on a sensible commercial interpretation, relates to the process of "servicing and marketing" referred to in clause 17.1.7. It further asserts that clause 7.19 states that there will be an allocation and it invokes the notion that all customers will be allocated to a franchisee, not just the isolated customers who happen to contact a franchisee to be "managed".

[97] Binaray contends that none of the provisions relied upon by RAMS, in relation to the Business Partner Charter section of the Operations Manual, the commissions payable, churning, and the meaning of "Customer", "Customer Information" and "Managing the Customer Relationship" derogate from the interpretation contended for by Binaray. In particular, it notes that the Franchise Agreement contains no express prohibition on the allocation of BOCs to franchisees for servicing and marketing.

[116] Turning to the other clauses relied upon by Binaray, Binaray contends that if its construction of clause 7.19 is accepted, then clause 4.17 would oblige the provision of access by RAMS to the customer information relating to BOCs.

[117] Clause 4.17 provides that RAMS is to provide a technology platform, including, inter alia, access to "existing Customer information". Only "Customer" is italicised, thus referring to the definition section of the Agreement. The definition of "Customer" is broad in its terms. It is not confined to customers generated by a franchisee as it refers to a Customer who has acquired or may acquire an Approved Product "whether through you or otherwise". RAMS quite correctly, in my view, accepts that the definition is broad enough to include a BOC in the context of that provision.

[118] Binaray contends, however, that the reference to "existing Customer information" extends to customers who had a loan which was discharged, if it is still on the database. It does not contend that it refers to all customers, but rather the commercial construction is that it refers to customers of any type who have taken out a loan and whose address is within Binaray's allocated territory.[50]

[119] RAMS, however, contends that notwithstanding the breadth of the definition of Customer, the term does not always refer to all individuals falling within the definition, but is limited by the commercial purpose and context in which it appears. In particular, clause 4.17 does not refer to the more broadly defined "Customer Information". RAMS contends that all clause 4.17 required was for RAMS to provide a system and means by which Binaray could access information.

[120] RAMS submits that clause 4.17 introduces a temporal concept. It is not to be construed as obliging RAMS to provide any "Customer" information in perpetuity, given it refers to "existing". Further, the reference to "existing Customer information" restricts the information to which access had to be given and excludes information about previous BOCs who had discharged their initial loan.

[132] In summary:

• (a) I construe clause 17.1.7 and the reference to "database marketing" to be a recognition of the marketing which is permitted to be carried out in relation to BOCs in accordance with the Business Partner Charter;
• (b) I do not construe clause 7.19 and the reference to "Managing the Customer Relationship" to extend to database marketing;
• (c) The reference to "database marketing" in clause 17.1.17 recognises that franchisees can market to BOCs in the limited circumstances provided for in the Business Partner Charter;
• (d) "Database marketing" does not provide any broader right of marketing in relation to BOC, but rather recognises details of BOCs is on the database provided pursuant to clause 4.17;
• (e) Clause 4.17 with its reference to "existing Customer information" does provide for the franchisee to have access on an ongoing basis to existing customers' information throughout the life of the franchise agreement. Existing is referrable to the customer. It does not provide any contractual right of access to information about previous BOCs who had discharged their initial RAMS loan;
• (f) Clause 7.17 does not provide an obligation to provide "Customer information" in report format about BOCs to the franchisee; and
• (g) The obligation to allocate BOCs referred to in clause 17.1.7 refers to allocation of BOCs to franchisees not only for the purpose of franchisees providing customer service to the BOCs, under clause 7.19 but also for the purpose of permitting a franchisee to market within the limited parameters of the Business Partner Charter.

[133] The plaintiff contends that a duty of good faith is to be implied into franchise agreements as an incident of that type of contract, as a matter of law.[54] That was admitted by the defendant.[55] In Diab Pty Ltd v YUM! Restaurants Australia Pty Ltd,[56] Bennett J, by reference to the authorities with respect to good faith, stated that the duty generally has been described in terms of good faith and fair dealing and extends to performance of a contractual obligation and the exercise of a power conferred by a contract. That the duty is therefore referrable to the obligations and powers under a contract, rather than itself imposing some separate obligation, is supported by the weight of authority.

Duty to cooperate and do all things necessary to allow the other party to enjoy the benefit of the contract

[134] Binaray alleges there are implied terms of the contract that the parties would:[57]

• (a) Not act in a way that would prevent the other party performing its obligations and enjoying the benefit of the contract; and
• (b) Do all things reasonable necessary to allow the other party to enjoy the benefit of the contract.

[135] RAMS accepts that there is a duty to cooperate to do all things necessary to allow the other party to have the benefit of the contract,[58] which is an implied duty incorporated into every contract. It also accepts that the negative covenant, a duty not to hinder,[59] is implied. However, RAMS contends that it is necessary to identify what RAMS was obliged to provide the benefit of and what was the promise that the contract made in favour of the plaintiff that the defendant was obliged not to hinder. They are not standalone obligations. That is consistent with authority.[60] RAMS correctly identifies that the benefit conferred by the contract in relation to which the implied term would operate would be the provision of BOC information or the allocation of BOCs for the purpose of providing customer service and database marketing.

[136] The duty to cooperate does not impose any obligation to enhance the commercial value to the other party of the contract.[61]

[137] Based on the above analysis, RAMS had to allocate customers to Binaray for the purpose of customer service and database marketing which included BOCs. That obligation did not extend to providing customer information about BOCs in a format report. There was no obligation to allocate and provide information about BOCs who had discharged their loan prior to the Franchise being entered into in 2006. There was an ongoing obligation to allocate BOCs and provide a database with access to information about BOCs up until the sale by RHG to Westpac in 2008. As a result of the sale, the obligation remained but the customers on the database prior to the sale went to RHG, not RAMS.

[138] Binaray contends that in order to 'allocate' customers to it, RAMS was obliged to, at a minimum, identify the BOCs in the plaintiff's allocated territory separately from other existing RAMS customers. Binaray contends it was also obliged to provide to the plaintiff, or authorise the plaintiff, to have access to or use of Customer Information of and relating to the BOCs. This would have required the presentation of some form of accessible list for the purpose of providing customer service and database marketing.

[139] Given my findings above, the extent of RAMS' obligation was to allocate relevantly a BOC to a franchisee under clause 17.1.7. Under clause 4.17, Binaray was to be provided with access to the RAMS database and information relating to a BOC insofar as they were a customer at the time the Franchise Agreement was entered into or became a customer during the life of the Franchise Agreement. There was no provision however, for RAMS to provide "Customer Information".

[140] RAMS contends that even if obliged to give Binaray access to Customer Information and allocate BOCs to Binaray, RAMS discharged its obligation by giving Binaray access to a database that included information about BOCs. RAMS contends that the database included the information of all RAMS customers, including the BOCs in Binaray's territory. That is uncontentious. Prior to 2008, RAMS contends it provided access to BOC information through the "Loan Viewer" electronic platform, insofar as Binaray could enter a customer's loan details or input a letter of the alphabet and one of the postcodes of Binaray's territory and obtain a list of customers for that letter. RAMS contends that if Binaray then scrolled through customer by customer, they could ascertain the BOCs. RAMS submits that could have been done with regularity by a franchisee to ascertain whether there were any new customers who had been added to the list.

Did Binaray suffer a loss of opportunity after the breach?

[149] Binaray claims damages arising from the loss of a commercial opportunity. The commercial opportunity lost is the opportunity to make profits from being able to contact and market to BOCs and introduce the BOC to a product of RAMS and obtain commissions and other income.

[150] According to Binaray's pleaded case, if the defendant had complied with its ongoing obligations pursuant to the Franchise Agreement, the plaintiff would, on an ongoing basis since on or about July 2006 until the cessation of the agreement, have:

• (a) been allocated the broker referred customers;
• (b) been provided with customer information of and relating to BOCs;
• (c) been able to contact BOCs in the plaintiff's allocated territory identified from the database of customer information provided by the defendant from time to time for customer service and database marketing and customer management, and to attempt to obtain business from those customers as permitted by the Franchise Agreement; and
• (d) had the opportunity to obtain business from the BOCs identified from the database of customer information and any further referrals from any of those customers, resulting in the opportunity to obtain commissions in accordance with clause 13 of the Franchise Agreement in relation to that business.[66]

[151] It is alleged by Binaray[67] that as a result of the pleaded breaches by the defendant of the Franchise Agreement, the plaintiff has suffered and continues to suffer loss and damage on an ongoing basis in the course of the franchise business, being:

• (a) The loss of opportunity to market and cause loans to be entered into by the broker referred customers;
• (b) The loss of commissions which would have been generated from obtaining commissions in accordance with clause 13 of the Franchise Agreement from the sale of the defendant's approved products to the broker referred customers;
• (c) The loss of opportunity to contact BOCs within the allocated territory of the plaintiff allocated to for the purpose of managing the customer relationship with the defendant and for customer servicing and database marketing and the opportunity to obtain business from those customers; and

"Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities."

[155] The onus of proving causation is only discharged where a plaintiff can prove that it was more probable than not that they would have acquired a valuable opportunity, not by a finding that there was more than a negligible chance that the outcome is favourable or even by a finding that there was a substantial chance of such an outcome.[72]

[156] Both parties agreed that the approach to be adopted on the basis of the authorities is accurately set out in paragraph 45(a) and (b) of the plaintiff's closing submissions:

"45. It is respectfully submitted, the following can be gleaned from the above extracts:

(a) whether or not a loss of commercial opportunity is compensable requires a two-step process:

(i) first, proof of causation of some loss or damage (determined on the balance of probabilities);

(ii) second, proof of damages (which is not required to be determined on the balance of probabilities). That is, the quantification of the loss or damage ascertained by way of the Court's assessment of degrees of possibilities or probabilities of events occurring.

(b) to satisfy the first step, it must be demonstrated that the breach of contract caused the loss of the commercial opportunity which had some value (not being a negligible value).

(i) To do so, the plaintiff is required to demonstrate, by evidence, to the balance of probabilities standard, that:

(B) had the plaintiff been offered the lost commercial opportunity, the plaintiff would have acted to secure the benefit.

(ii) an opportunity will be valuable if it offers a substantial, not merely speculative, prospect of acquiring the benefit being sought;

(A) To prove the substantiality of a prospect of acquiring a benefit and what would have been the plaintiff's actions if the opportunity had been offered, it will usually be necessary to tender evidence to establish plaintiff's objectives and the contingencies in the way of their achievement. Evidence of that kind will bear upon both the existence and the value of the lost opportunity."

[157] The Court of Appeal handed down the decision of Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited[73] shortly after the parties made their closing submissions. As a result of that decision, the defendant withdrew its submissions as to the approach to be taken to the first step of the Sellars approach.[74] In particular, it withdrew its submission based on Principal Properties at first instance[75] that the highly speculative nature of the commercial opportunity is relevant to both steps and that if Binaray was likely to make a loss, it should be concluded that the commercial opportunity was not a valuable opportunity. It maintained, however, that the highly speculative nature of the commercial opportunity is relevant to the value of the opportunity, taking into account the prospects of success of that opportunity had it been pursued.[76] RAMS contended that the effect of the authorities is that the assessment is undertaken according to the degree of possibilities or probabilities or the chance that the benefit would have been secured. In that regard, RAMS referred to the approach of McMurdo JA in Principal Properties in assessing the value of the opportunity by considering the prospects of the success of the development in that case by reference to the risks that affected the commercial opportunity to develop the land at a profit.[77]

[158] In Principal Properties, McMurdo JA (with whom the rest of the Court agreed), by reference to Sellars reiterated that "There may be a compensable loss of a commercial opportunity, even though there is a less than 50 percent chance that, if pursued, the opportunity would have resulted in a financial return".[78] At [13], his Honour reiterated the relevant principles to be:

"In order to recover substantial, as distinct from nominal, damages upon this basis, a plaintiff must establish that the lost commercial opportunity had some value. If the opportunity had no more than a theoretical or negligible value, then no compensable loss has been caused. The fact that some loss or damage was caused must be proved on the balance of probabilities. If that fact is proved, it is then for the court to assess the extent of the plaintiff's loss. The value of the lost opportunity must then be "ascertained by reference to the degree of probabilities or possibilities" of relevant factual hypotheses, by the approach explained in Malec v JC Hutton Pty Ltd." (footnotes omitted)

[159] As to the interrelationship between the first and second limbs of the Sellars approach, his Honour stated at [23]-[24]:

"If a commercial opportunity has no chance of being profitable, it is an opportunity of no value and its loss could not be compensable. I would also accept that a commercial opportunity which no rational investor would pursue, having regard to the relative probabilities of a profit and a loss and the likely magnitude of each, would be a valueless opportunity.

However, I do not accept that the same may be said whenever it is more likely than not that the pursuit of the opportunity would have resulted in an investor's loss..."

[160] His Honour considered that the relative probabilities for the profit and loss, in a particular case, could be relevant in assessing whether the opportunity has some value.[79] However, his Honour considered that where the provision of the opportunity was the subject matter of the contract, it would be unlikely that "both the likelihood of a profit and the magnitude of that profit are so small that no rational investor would pursue the opportunity with the risk of thereby suffering a comparatively large loss".[80] In that case, his Honour found that a likelihood that the relevant development "would have been a loss making development, did not, as a matter of law, preclude the award of more than nominal damages".[81] His Honour considered the question was "whether the opportunity to profit from the development had a value and that was possible, although a developer's loss was more likely than a profit".[82] Adopting the approach of Brennan J in Sellars, McMurdo JA stated that it would "usually be the same body of evidence that tends to establish both the existence of a loss and the amount to be recovered".[83] His Honour then examined the risks identified by the trial judge which affected the commercial opportunity to determine the extent of the loss suffered.

[161] In Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd t/as Strathearn Insurance Brokers Pty Ltd,[84] Tobias AJA (with whom MacFarlane JA and Barrett JA agreed), in discussing the threshold that needed to be met under the first limb stated that:

"Whether or not a lost chance has some value which is more than just speculative involves an evaluative judgment based on all the circumstances and, in particular, the evidence elicited to support the proposition that the prospects of the chance coming to fruition was sufficient to enable a positive rational assessment of it to be made."

[162] In the present case, the loss claimed by Binaray is the benefit which it would have received had the opportunity to contact the BOCs been taken. Binaray must prove as part of the chain of causation that they could and would have taken the opportunity to make contact with and market to the BOCs within the terms of the Business Partner Charter and that the benefit, namely, business from BOCs through, inter alia, additional loans would then have been yielded.[85]

[163] In Winky Pop Pty Ltd & Anor v Mobil Refinery Australia Pty Ltd & Anor,[86] the Victorian Court of Appeal considered that the trial judge was correct in his approach that the valuable opportunity said to have been lost must be properly identified. In that regard, they stated that without proper identification of the opportunity there can be no basis for determining whether a plaintiff has established, on the balance of probabilities, the existence of an opportunity which had some value.[87] It is then for the plaintiff who asserts the loss of valuable opportunity to establish on the balance of probabilities "not only that the opportunity existed, but that it was lost, and that the breaching party's conduct was causative of the loss".[88]

[164] Binaray frames the loss of opportunity as the loss of opportunity to make financial returns from BOCs, arising from the loss of the ability to contact and market to BOCs in order to secure additional business from them, even when they had discharged their loan, and the loss of the ability to not only secure additional business from the BOCs themselves but by way of referrals from the BOCs. It contends there is no doubt that the list of BOCs provided a commercial opportunity which they could have exploited.

[165] Underpinning Binaray's case is that the opportunity to be provided with the BOCs in order to manage the relationship with them and market to them within the confines of the Business Partner Charter in the Operations Manual was a valuable one because:

• (1) Binaray utilised the RAMS model which was a successful model which emphasised the importance of maintaining contact with potential customers and providing good customer service which enhanced the possibility of the potential customer becoming an actual customer;
• (2) By Binaray applying the RAMS model to BOCs, it could compete with brokers for future business of BOCs;
• (3) Franchisees, such as Binaray, had added incentives to provide customer service to BOCs compared to brokers;
• (4) The pool of potential customers not only included BOCs but referrals from those clients;
• (5) BOCs included those customers who had discharged their loans with RAMS. I have found that on the proper construction of the Franchise Agreement that 'existing Customer information' does not include information about BOCs who have discharged their loan. I will however, address this briefly below;
• (6) The RAMS documentation itself and evidence from Mr Melvin, Mr Fardon and Mr Kirkpatrick support the fact that access to BOCs offered a commercial opportunity to Binaray; and
• (7) Binaray was a strong performer as a franchisee and would be able to exploit the opportunity offered by access to BOCs and had the infrastructure to do so, such that it would have converted the opportunity into business and a financial return.

[166] Binaray rejects the contention that the opportunity is limited to those BOCs who drift through the door or are dissatisfied with their broker.

[179] The evidence as to the nature of RAMS' business and the operation of its business model was not the subject of any real contention. Nor was it in contention that Binaray applied the RAMS business model in operating its business. The particular market which RAMS targeted was first home buyers and the self-employed.[95] Compared to other lending institutions such as the 'big four' banks, RAMS provided loans with a 97 percent LVR as opposed to 95 percent,[96] which was attractive to first home buyers. It offered 'low doc' loans to the self-employed.[97] Franchisees were given non-exclusive rights in an allocated territory. The RAMS business model works on maintaining contact with customers and providing ongoing customer service in order to maintain and build further business.[98] RAMS provided ongoing training to franchisees to provide advice on marketing and the process of securing customers as well as having representatives visit the business from time to time to provide advice on how to improve the business.[99]

[180] Both Mr and Mrs Allen gave evidence on behalf of Binaray. I found both of them to be honest witnesses, however, their evidence suffered from being very general and reliant on anecdotes and guesstimates, rather than the presentation of facts by reference to the operation of their business. Both Mr and Mrs Allen gave evidence that they worked hard to make Binaray's business a profitable one and applied the techniques promoted by RAMS in servicing and marketing to their customers and promoting their business. While they had operated the RAMS franchise profitably and successfully, I consider that their view of where they stood compared to other franchisees was an unreliable one. It was based on their recollection of RAMS conferences with other franchises when they had received recognition from time to time for Binaray's performance as a franchisee. It was not based on an analysis of reports from RAMS, such as commission reports provided by RAMS as to franchisees' performance. I also found the evidence of Mr Allen as to conversion rates and additional loan rates to be unreliable, both in respect of rates and timing. While Mr Allen's estimates of matters such as conversion rates of customers were his best estimates, they were based on his recollection or incomplete data and overestimated the success of Binaray significantly, having regard to the data that was available. While he suggested he had carried out an analysis of commission reports provided to Binaray's expert, Ms Letts, the commission reports were not tendered through him and it remained unproven. In any event, his evidence did not support a number of matters which were part of the instructions provided to Ms Letts. Where there is hard data supporting figures provided to me, I have generally preferred that evidence as more reliable, subject to some qualifications which I will discuss in the context of my consideration of specific factual matters.

"What were the circumstances whereby prior to Westpac you came into contact with broker generated? When they walked in our door.

Right. And why were they - well, are you able to give some information as to why those clients typically were coming to see you? Because they either couldn't contact their broker.

Yes? Or they were dealing with RAMS direct and it was easy to deal with a shop - someone in a shop rather than on the phone or not being able to find their broker.

Right. Was that it, simply not being able to find their broker, or were there other issues as well, at that time? No, that's basically it.

So if they couldn't find their broker what would you do? I would obviously ask them that question, I would get their information, check on their loan.

Right. If you could check on their loan and had brought up where their - who their broker was, did that provide you with any guidance as to whether or not the broker was still around, or you just did not know? Wasn't for me to check on that.

Okay. Now, what then would happen with that customer, typically? Depending on their - what their requirements were, I would assist them best I could. If it was for an increase - and it depended on that loan viewer - - -

Yes? --- - - - where - what that broker was. If it was part of an aggregated group or an - or a company, another franchise company

Yes? --- - - - because there was no remuneration for any of that work, we would refer them back to that company.

Yes. What if they didn't want to go? Well, if they didn't want to go, then - and they'd walked into my door, they were mine.

Right. But do they sign up with you? How does it work? Well, we would find out what their needs were.

Yes? If they had a loan, wanted an increase, I would do it. It's the same process as doing an application. And get no remuneration for it and hope that the goodwill that I had done, I would get previous work - extra work, I should say, by way of other referrals and hope that they would come back to me.

Right. Can we move then from the pre-Westpac time and post-Westpac time. Westpac say is it took over in January '08 and opened its broker channel in May '08, or thereabouts, that [indistinct]? Right.

Did you have dealings with broker generated clients, whether from the Westpac era or prior to the Westpac era, after Westpac took over? Yes.

What were those - first off, in the early period after Westpac took over, what were the nature of the communications? It wasn't pretty. It was ugly.

Right? We would have clients very upset. Their broker had either disappeared; why have we sold their loan book - their loan to somebody else, not understanding the processes."

[186] Both Mr and Mrs Allen gave evidence as to what they would have done if provided with access to BOCs' details in Binaray's territory. The effect of that evidence was:

• (a) That prior to the Westpac acquisition of RAMS, BOCs would have been contacted by way of email or letter using an approved letter to introduce Binaray to the customers and start building a rapport;[114]
• (b) After the initial written contact had been made, the BOCs would have been followed up by a telephone call. Enquiries would have been made of whether Binaray could do anything further for them and Binaray would have informed them that they were there to assist;[115]
• (c) Mrs Allen indicated that when speaking with a BOC, she would enquire as to whether they were happy to be kept on Binaray's CRM database. If they were, then she or any of her staff would confirm the information kept on the RHLC was correct and updated if necessary, which was often the case;[116]
• (d) If contact through email had failed, Binaray's staff may then have sent a letter to the BOC and if that was returned, they may have called the BOC on the telephone;[117]
• (e) Mrs Allen considered that it was to Binaray's benefit to make those efforts because of the fact that the BOC had already utilised RAMS products;[118]
• (f) Following up customers was part of the RAMS culture and was followed by Binaray to the extent that Mrs Allen was asked to run a Best Practice session over what Binary did when they followed up their customers;[119]
• (g) Mrs Allen gave evidence that the plaintiff's franchise staff would treat BOCs in the same way that they treated all of their customers, as that was part of the RAMS culture.[120] By remaining in the forefront of the BOC's mind, Mrs Allen considered that they would then have been sources of referrals and repeat business;[121]
• (h) Mrs Allen considered that they would attract BOCs and secure additional business from them if the broker was bad at his or her job and the customer really liked a RAMS loan; and

"And by a loan to a previous customer, you'd consider a previous customer to include someone who's paid out their loan?It would be both. It would be people who have paid out loans or they're adding additional loans to their facilities.

And you'd include a person who's a previous - I'm talking about who's a previous customer; a previous customer wouldn't have a loan?No.

Yes, so they could have discharged their loan because they paid out the loan?Yes.

And they could have discharged the loan because they've gone to another lender?Yes.

And you'd include that as a previous customer of yours?Yes.

And you'd continue to market to that customer in the way that you would your existing customers; is that right?Yes.

You agree that not all of the plaintiff's customers obtained an additional loan. By that I mean when you have an initial loan that's in place and you obtain an additional loan, a second loan?Yes.

And you'd agree that not all broker customers in the plaintiff's territory would have required or obtained an additional loan?Yes."

[194] Mr Allen agreed that post-2013, broker customers were open game following the receipt of an email from RAMS of September 2013. He was cross-examined about the period prior to that. In the course of that cross-examination, he agreed that prior to 2013:[133]

• (a) All he could do was sell the BOCs an additional loan and review what their facilities and goals and aspirations were;
• (b) At the time they would have received the hypothetical list, the customers already had a RAMS loan and had a broker;
• (c) They would not know until they contacted the customer whether they ever required an additional loan;
• (d) A customer may not be actively seeking an additional loan;
• (e) Binaray hoped that if it made contact with them and built a relationship that when the customer did want a loan, they would come to Binaray for the loan;
• (f) If the customer was seeking an additional loan, a broker would have been competing with Binaray to try to write the business;
• (g) A broker already had a relationship with the customer;
• (h) Some brokers were good at building rapport, establishing relationships and staying in contact with their client, saying "It's very similar to what we would do. The issue there is it's usually the smaller brokers who don't have the infrastructure or abilities to provide those sort of services and updates and keep in contact";
• (i) Brokers who were better brokers would tell customers about new products and changes in interest rates, send them promotional material, provide birthday cards and loan anniversary reminders and regularly contact the clients; and
• (j) Brokers were not prohibited from churning and if they were engaging in that behaviour, they would still seek to maintain contact with their clients in order to be able to then convince the clients to move to a different loan with different lenders.

[195] Mrs Allen was also questioned about how she would approach the counterfactual if she had been provided with the list of BOCs. She gave evidence that the BOCs would have been contacted by way of email or letter, using an approved letter to introduce the plaintiff's franchise to the customers and start building a rapport. They would then have aimed to follow them up with a phone call and would follow them up using the RAMS Best Practice. She gave evidence that she considered consistent with the RAMS model, that education was key and that even if a BOC was not interested in a loan when they first made contact, they could be potential investors down the track, upgrade down the track or refer other people to Binaray. Mrs Allen stated, when asked about the plaintiff's prospects of securing additional business from a BOC, that "if the broker was really bad at his job and the customer really liked a RAMS loan ... or a RAMS facility and wanted further ones, then they wouldn't be going back to their broker who stayed in their pyjamas all day...and worked from the basement".

"I want you to assume that a broker originated lead is a person who has a loan at that time?Yes.

And I suggest to you that, at that point in time, the broker lead or the broker customer lead is just a potential for you, Binaray, to write an additional loan and obtain referrals?Correct.

And you agree that not all broker customers would, in fact, require or ever obtain an additional loan?Correct.

And you agree that some brokers are, in fact, happy with their - with their broker. Sorry, I withdraw that. You agree that some broker customers are happy with their broker?Yes.

And some of them are good at staying in touch with their clients?Yes.

And if the good broker has done all that, they will know the time at which their clients have the need for another loan?Correct.

So that scenario that we've stepped through, Binaray would be competing with the broker to try and secure the new business from or with the broker customer?At that point in time we would not be competing with them because they're happy with their broker.

Thank you. So you see a distinction between broker customers who are happy with their brokers and those that are not?Correct."

[197] Mrs Allen accepted that Binaray's ability to stay in contact with the customer, whether or not they were happy with their broker, depended on the customer not electing to go on a Do Not Mail Register.[139] Mrs Allen accepted that they were relying on marketing opportunities to put themselves at the forefront of a customer's mind but that a good broker would be doing the same thing.[140]

[198] While I consider Binaray would have sought to make contact with all BOCs within their allocated territory, I do not find that they would have pursued the opportunity if the BOC did not wish to be contacted, if they became aware that the BOC was happy with their broker, or if their broker was a part of an aggregator group, unless the BOC of the aggregator indicated that they wished to have Binaray take them on as a customer.

[199] Binaray contends that its performance shows that it was a high performing, efficient franchisee which would be capable of exploiting any opportunity offered by being provided with the BOCs. RAMS submits that Binaray was an average performer.

[200] RAMS did not, however, suggest that Binaray was not a successful franchisee. It had built its loan book such that its gross revenue by the financial year ending 30 June 2015 was $1,165, 898.[141] RAMS' submission that Binaray was an average performer arose out of reports which RAMS prepared regularly, which they used to measure franchisees' performance. Binaray contends that the reports used by RAMS may serve as an internal guide to RAMS about a franchise but could not otherwise be given any weight, because there was no independent statistical analysis and the report did not compare like with like.

[201] Mr Fardon was the RAMS regional manager for New South Wales, Queensland, the Northern Territory and the Australian Capital Territory and had held that role since 2012. Prior to that, he was the state manager for New South Wales and the Australian Capital Territory.[142] Part of his role was to manage franchisee performance. That included an overseeing role of managing the field managers who worked with franchisees on a day to day basis to ensure they were providing the right support to franchisees, as well as ensuring adherence to franchise agreements and the Operations Manual and helping in the performance of their overall business. He reviewed the performance of franchisees by looking at the pipeline report which shows how sales are tracking and trending across franchisees in various states. Mr Fardon met with franchisees on a regular basis. He saw them at least quarterly at the Quarterly Franchisees Meeting and saw every franchisee face to face at least twice a year. He saw poor performers more. Binaray were franchisees which he would have seen twice year, suggesting he did not regard them as poor performers.[143]

[202] Mr Fardon regularly reviewed the 'one on three reports' and 'three on seven reports'. He considered that the one on three report was a very good report to give an early indicator as to a franchisee's performance. The three on seven report tracked three months' worth of leads and tracked the progress of those leads within that three month period through to seven months. Mr Fardon stated that the three on seven report gave insight into ability of the franchise and or lenders with that franchise to convert a lead into an appointment and an application and hopefully a settlement.

[219] One of the significant issues between the parties is whether the pre-existing relationship between a BOC and a broker and the competition between brokers and franchisees for additional business created barriers which could be overcome by Binaray in order to convert BOCs to Binaray in respect of additional or further loans.

[220] Binaray contends that franchisees offered constant service to customers which would be extended to BOCs and had more "skin in the game" and that the relationship between a broker and a customer was not so strong that Binaray would not convert BOCs. They also emphasise that the BOC was already a RAMS customer and therefore familiar with RAMS products. RAMS submits the relationship between a broker and its customer was as strong as that which a franchisee had with its customers, and that brokers engaged in similar marketing strategies to franchisees to ensure they maintained their customer base. RAMS contends that other than those dissatisfied customers who Binaray obtained through natural drift there was no real prospect that Binaray would attract BOCs, particularly given the limitations imposed upon contact with the BOCs by the Business Partner Charter and the fact they already had an existing loan with a broker.

[221] It was accepted by the Allens and it was also the evidence of Mr Kirkpatrick, Mr Melvin and Mr Bowen that franchisees and brokers are in competition with each other.[170] RAMS relies on the similarities between brokers and franchisees and particularly that both seek to maintain and grow their customer base in order to grow their loan book.[171] Binaray however, relies on distinguishing features between the two to support its argument that Binaray could convert BOCs to its own business.

[222] Binaray contends that a RAMS franchise was usually long term and thus had a compelling incentive to maintain the relationship with customers in accordance with the RAMS model. In contrast, they contend that brokers had no such contractual relationship and chose whether or not they maintained ongoing contact with a customer or provided minimum service. I accept that there was a different contractual framework driving a franchisee to maintain its relationships with customers and RAMS, which may not have been the case with a broker who was free to deal with multiple lenders. However, that does not lead to a conclusion that there is a significant point of distinction in terms of the motivation and behaviour of a franchisee and a broker to maintain the customer.

[252] There was not on the evidence any significant controversy that good brokers would adopt similar practices like Binaray and would maintain ongoing contact with their clients, monitor their loans and seek to ensure that they were informing them as to options available for further loans so they would be able to write the business. The broker would also wish to grow the value of his loan book and would take active steps to protect it and seek further work from his customers including through referrals. That evidence was given by Mr Kirkpatrick who had had the opportunity in his position to adopt the practices of both franchisees and brokers. Mr Bowen gave similar evidence as to brokers from his experience. Mr and Mrs Allen did not dispute that good brokers would seek to service their clients and compete to maintain their customer base in a similar way to Binaray and at least accepted that would be true of brokers working through brokers.

[253] I also accept Mr Kirkpatrick's evidence that given the nature of a broker's business whereby they access a number of lenders, the majority of BOCs would have gone to brokers to obtain the most suitable and competitive loan available and would not have loyalty to the RAMs brand, although they may have developed that over time. A competent broker however who maintained that relationship with their client would have been cognisant of that when dealing with their client as to any future loans or other products.

[254] While there was some incentive for brokers to write new loans for customers after clawback provisions ceased, there were also incentives for them to not do so and build the value of their loan book. I do not consider this is significant factor in the present case. While I accept that brokers were not bound to performance standards like the franchisees I accept the evidence of Mr Kirkpatrick and Mr Melvin as to the value of customers to a brokers business and infer that most brokers would wish to grow their customer base and business and maintaining service and contact with customers would also be a priority for the broker. I accept Binaray's contention that the broker would not have the same loyalty as a franchisee to the RAMS brand and its products but I do not consider would have been a matter which weighed significantly in favour of Binaray attracting customers. Customers going to brokers would generally be aware they could facilitate loans through a number of lenders. The more important fact would have been the loyalty the customer had developed with the RAMS brand. Unless the RAMS products were particularly tailored to the need of the customer or the customer developed that view over time because, for instance, they were self-employed or did not earn sufficient income to get a loan from one of the larger banks. I do not infer the customer would have developed greater loyalty to the RAMS brand over and above their broker unless dissatisfied with them. No evidence was given as to the demographic in Binaray's allocated territory.

[260] The question of the appropriate proxy for the conversion rate of BOCs in the counterfactual was the subject of considerable evidence at the trial. RAMS contends RAMS leads are the best proxy whereas Binaray contends self-generated leads should be used.

[261] RAMS leads which were leads directed through the RAMS phone centre or internet to franchisees suffer from the fact there is no filtering. The evidence of Mr and Mrs Allen, Mr Bowen and Mr Fardon support the fact that those leads will often not lead to any business for a franchisee on the basis that the people who are RAMS leads, may not have any ability to be able to qualify for a loan, may be making a random enquiry such that the person concerned is not interested in obtaining a loan at all or may simply be engaged in an information gathering exercise.

[262] Self-generated leads are any leads which are not RAMS leads. They include referrals that are made through other clients, through solicitors, through accountants or through real estate agents. There is no dispute that the referrals, particularly through professionals, are regarded as hot leads. Both Binaray and RAMS also agree that the RAMS leads are not as strong as the self-generated leads. The witnesses called by RAMS regarded RAMS leads as slightly warmer than cold calling because the individual has made the enquiry.

[263] Binaray contends that the BOC list with contact details is not akin to providing the franchisee with an opportunity to cold call clients. That is on the basis that the BOC is already an established RAMS customer, familiar with the brand and the method of operation and has qualified as a borrower at least once. They would generally be in the category of people who had existing home loans. Given they had previously qualified for a RAMS loan, they would have a high probability of qualifying for a loan under the RAMS model and if they had enjoyed an existing loan, they were potentially a person who was in a position to take on a further or additional loan. Binaray therefore submits that they are more akin to the self-generated lead and clearly superior to a RAMS lead. RAMS contends that BOCs are on a colder scale because the BOC is somebody else's customer who may or may not be looking for a loan and who may or may not qualify for an additional loan. Mr Melvin considered in the initial contact with the BOC, the BOC would be someone who would be in the position of being cold called by a stranger, not having any sort of relationship with the franchisee at that point in time, although it would depend on whether or not the customer was looking for an additional loan.

[268] Binaray contends that the conversion rate for self-generated leads was the best comparison to being provided with a list of BOCs, although it concedes self-generated leads are superior. However, while all witnesses accepted self-generated leads were the strongest leads, the collection of information relating to self-generated leads was not consistent. The difficulty in comparing the potential strength of a RAMS lead with that of a self-generated lead is that the same information is not available in order to make a true comparison. Self-generated leads were generally measured from the point of application, rather than the first point of contact, whereas RAMS leads were measured from the first point of contact. While Mr and Mrs Allen considered that the provision of the BOCs would provide a much stronger lead than a RAMS lead because they were already established RAMS customers, as Ms Letts stated in evidence, the strength of the lead would depend significantly on whether the BOCs were wanting an additional loan. The RAMS witnesses considered that the provision of the BOC list was only slightly stronger than the franchisee cold calling clients. RAMS also relies on the fact that RAMS leads are customers who have made contact with RAMS, albeit that a number of them could not be considered a candidate for a loan for various reasons, as a factor which suggests the use of RAMS leads as a comparator is conservative.

[269] Mr Melvin gave evidence that he was very familiar with the different type of leads available to a franchisee. A RAMS lead is a lead that RAMS passes on to the franchisees when a customer contacts RAMS via its 1800 or 1300 RAMS number or via the internet. He was also aware of self-generated leads, which he characterised as any lead that was not a RAMS generated lead. Those leads primarily came from franchisees that had developed referral partners, such as real estate agents, accountants or solicitors but could also include people who walked in off the street.[239] His view of the different leads generally accorded with the evidence given by witnesses called by Binaray and RAMS. Mr Melvin stated that at a general level, about 80 percent of settlements for a franchisee would come from self-generated leads and 20 percent would come from leads that RAMS provided.[240]

[270] Mr Melvin considered from his observations in working with the franchise business that a lead from a broker, real estate agent, accountant or solicitor would be between a range of eight to ten if one was talking about 'hot leads', with ten being the hottest. In contrast, a RAMS generated lead was more likely to be one, two or three on that scale.

[272] After the closing of the broker channel, a broker could not write business for RAMS directly. They had to refer a client to a franchisee if the client wished to obtain a RAMS loan or other RAMS product.[242]

[273] Based on the evidence before me I cannot draw any conclusion as to why the broker channel was closed by RAMS. However, once the decision was made, RAMS subsequently determined that it would seek to expand its business by writing business directly or through the growth of the franchise network.

[274] After the broker channel had closed, RAMS encouraged franchisees including Binaray to approach brokers in order to see if they could enter into a relationship with the brokers.[243] Mr Allen indicated that he did not do so, because he was worried about receiving a breach notice.[244] He considered, however, that it would have been a good thing to do, given the number of broker clients. He stated Binaray did not have any negotiations regarding what referral fees the brokers would have wanted. [245]

[275] In September 2013, RAMS provided a further email.[246] That email stated:

"We have some great news for you in relation to new opportunities from RAMS Customers who have a broker originated loan with us. From this Wednesday, 4 September 2013, when a customer with a broker-originated RAMS home loan calls the contact centre about a Variation, franchisees ... will receive email and SMS notifications to respond to the opportunity. This has been developed in response to the feedback from many franchisees and to provide a better experience to customers who have been referred to RAMS by a broker..."

[276] Mr Allen stated that the process indicated in that email, which was subsequently adopted by RAMS, was successful because Binaray did obtain a number of BOCs, but he could not estimate how many.[247] Mrs Allen's evidence was that they got more customers when the broker channel closed.[248] She stated that they also got more BOCs in 2009 when there were some legislative changes affecting brokers, which resulted in brokers not being available and the customers not being happy.[249]

[277] Binaray attaches significant attention to the closure of the broker channel in 2010, and contends that it is strongly supportive of the market impact of the franchisee.[250] It contends that even if the broker channel was only closed down because of a shortage of funds for lending in 2010, the closure became a long term, strategic decision and showed the success of the franchisee network. Binaray submits that, similarly, the departure of BOCs from brokers was a consequence of the success of the franchise network.[251] It contends that belies the contention of RAMS that a BOC would have been resistant to any communications from a franchisee such as Binaray and have remained with the broker in respect of future business notwithstanding the contact made with them by a franchisee such as Binaray.

[278] Mr Melvin was cross-examined about the closure of the broker channel. It closed prior to his joining the business. He was unaware of the reasons why the channel shut down. His evidence was that his job was to grow the business and, other than direct business, the only distribution channel through which that could be done was the franchisee channel.[252]

[279] Mr Melvin was asked whether he saw any barrier or difficulty with returning to mortgage brokers after the closure of the mortgage channel. Mr Melvin stated that there was always going to be a barrier because RAMS exited from its brokers, and brokers were therefore going to clearly be wary of a company that was in the market and then came out of the market. He stated that RAMS did not need to get back into the broker business because their franchisees were operating well and growing and there was not a need for RAMS to go into the broker business again. Mr Melvin stated from the Westpac Group perspective, some 50 percent of their loans are written by brokers. Binaray submits that given that, RAMS must consider that their business franchisees are an effective tool to grow the RAMS business. There are no doubt a number of reasons for RAMS adopting that position. Mr Melvin stated that they had engaged more franchisees, filled more territories and engaged more people. On his evidence, franchisees were establishing themselves with more 'best practice' and there were more loan writers. Mr Melvin stated that in order to grow the business, RAMS had grown and developed so that the franchise network, led by its good franchisees, had effectively reduced the need to rely on the mortgage broker channel. He stated that mortgage brokers now go through franchisees as opposed to going to RAMS directly.

[283] Mr and Mrs Allen and Mr Bowen all gave evidence as to BOCs becoming their customers and taking out additional loans with them even when their business had been unsolicited and no marketing had occurred. Binaray contends this supports the fact that if it had access to BOCs and their details and had been able to contact and market to them they would have attracted far more BOCs. In particular, Binaray contends it demonstrates that the hold brokers had over their customers was not as strong as contended by RAMS, otherwise customers would not have drifted at all. It also contends that it demonstrates that there are brokers who provided poor quality service. In a hypothetical world, Binaray would have been able to actively market to the BOCs and make contact with BOCs who were dissatisfied with their broker or, by establishing and making consistent contact with them and marketing to them, Binaray would have been able to reach those BOCs who were not particularly satisfied by their broker, and by the time they were ready to take out additional loans those BOCs would have used Binaray because a relationship would have been established and they would have recognised the service offered.

[284] RAMS contends that the Court should infer that, given Binaray's prominent position in the area, Binaray's customers who were customers as a result of natural drift showed the full extent of the valuable opportunity lost to Binaray had the list of BOCs been provided to them and that the remaining value of the opportunity is purely speculative.

[285] I accept the submission of Binaray that an inference can be drawn as a result of the drift of BOCs to Binaray that there were brokers in the allocated territory who had lower standards of customer service than Binaray or disappeared because they did not have a sustainable business. That said, as I stated above on the basis of the evidence in Exhibit 15 and the Allens, I consider it is unlikely to have been no more than 10.3 percent of brokers given the remaining brokers were with aggregators.

[286] I infer that it is likely that there were other BOCs who did not have any queries about their RAMS loan which resulted in them contacting Binaray, or who were unfamiliar with Binaray, or who were dissatisfied customers of brokers, who would have responded to contact by Binaray given their connection with the RAMS product if they had been looking to take out additional loans or other RAMS products at the time of contact or in the foreseeable future. While I do not consider the number of such customers were significant, I do not consider that the BOCs who had already contacted Binaray represented the universe of dissatisfied customers who Binaray may have been able to attract as customers of their own. However, it would also largely have depended on the BOC wanting to take out an additional loan either at the time or in the foreseeable future. This is supported by the fact that when Binaray did actively market to BOCs who were referred by RAMS in 2013, the Allens stated that they obtained a number of additional customers. One would infer that they were looking to take out additional loans by the fact that they had made contact with RAMs and were subsequently a source of further business for Binaray.

[289] Binaray contends that the fact that a commercial opportunity existed by virtue of the fact that there were BOCs in the marketplace is readily supported by the RAMS documentation as well as its own business model.[258] In this regard, they rely on communications that took place in 2004. In an email dated 2 December 2004,[259] George Sattout on behalf of RAMS sent an email to various franchisees including Mr Bowen with respect to initial customer communication to broker customers, describing it as great news. That email stated, inter alia:

"We want to introduce the customer to their local RHLC/Franchisee and warm them to receiving future offers whilst at the same time, acknowledge the originating Broker and their stake in the relationship."

[290] To that end, it was referring to all customers who are allocated to a current franchise under the relationship owner rules and who were originated by a broker. The email went on to state:

"Once this communication is underway, the Broker customer listings will then be released to each franchisee, enabling you to follow up this mailing and communicate with these customers in line with the convention set out in the Business Partner Charter. This is a positive move for Franchise as it gives you an expanded customer data base to market to. Having said this, we must stress, in the best interests of all business channels, that the Business Partner Charter... is read carefully and understood to avoid any conflict or contravention."

[291] The email identified a number of campaign objectives including to pave the way for future "RHLC marketing campaigns/offers to this customer segment" whilst acknowledging the relationship with the originating broker. At the time, RAMS wished to promote the RAMS MasterCard. Provision was subsequently made for the broker customer database to be provided to the franchisees in relation to their particular area.[260]

[292] The fact that RAMS recognised that the provision of BOCs to the franchisees presented an opportunity to them because it provided an expanded customer base was not an admission that the opportunity was necessarily a valuable one, but that it had the potential to be so. That was, however, in the context of there being a new product that was to be marketed, namely the MasterCard. The context is of importance to any evaluation of the value of the opportunity. If the BOC list was provided and the BOC already had a loan with RAMS, but was not looking for an additional loan, the value of the opportunity is considerably different from where a new product was being offered which the BOC may be attracted to take up.

[293] I accept that the email exchange provides evidence that RAMS recognised that the provision of the BOC list would be an opportunity to make contact and were likely to permit contact, but is of little weight in establishing that it was a valuable opportunity.

[294] The above must be weighed against the evidence of the RAMS witnesses when asked about the hypothetical situation and the nature of the opportunity that the provision of the list of BOCs would present. Binaray challenged the admissibility of that evidence. RAMS submits that such opinion evidence can be accepted by the Court. Mr Kirkpatrick, Mr Melvin, Mr Fardon and Mr Ziino had all held senior positions in the banking or financial sector for a number of years. They all had experience in working with franchisees in the finance sector and particularly in assisting them to expand their customer base. Given their experience and specialised knowledge, they were in a position to express informed opinions in relation to the hypothetical. The question of the strength of the list of BOCs and whether a franchisee with a list of BOCs would likely to be convert a BOC into a future customer is a matter which the court would be unlikely to be able to decide without the evidence of those skilled or experienced in the same. I accept that the Court can properly have regard to their opinions, taking into account their lack of independence.

[303] Binaray accepted that its marketing could only occur within the constraints of the Business Partner Charter. RAMS contends that the Business Partner Charter contained contractual limitations that would have presented significant obstacles to being able to convert BOCs into Binaray's customers.[274]

[304] The most significant constraint in the Business Partner Charter was that Binaray could proactively market to a BOC only for the purpose of selling additional RAMS products and non-home loan products. It also provided that a franchisee could "Communicate initially with broker introduced customers using only the communication tools provided by RAMS marketing".[275] Mr Allen in cross-examination agreed that the only communication that Binaray could have with a BOC initially was using a communication tool approved by RAMS.[276]

[305] RAMS contends that during the period of the Binaray franchise, there is no evidence of RAMS approving any form of communication Binaray could have had with a BOC. Little can be inferred from that, given that RAMS would not provide Binaray with access to the BOCs. RAMS submitted that RAMS' witnesses were not cross-examined on Binaray's proposed conduct if it were given BOC details and whether Binaray was likely to have obtained approval for their proposed communication, even if it would have been within the limits set out in the Business Partner Charter. In particular, there was no cross-examination as to whether contact by telephone would be permitted as was proposed by Mrs Allen, who gave evidence that once a BOC was sent a letter the person in question would be followed up with a telephone call.

[306] RAMS contends that Binaray can draw no comfort from Exhibits 23, 24 and 25 as examples of approval given in the past. Those documents were part of a campaign that had occurred a couple of years before Binaray became a franchisee for the purpose of selling a credit card and RAMS had made it clear that the Business Partner Charter had to be complied with, the BOC relationship with the broker was to be acknowledged and the approach was for the BOC to contact the franchisee.[277]

[307] Binaray contends that it can be assumed that RAMS would have taken such steps reasonably necessary within the confines of the contractual relationship to provide the necessary support to the plaintiff in the conduct of the franchise. That support in the hypothetical would have extended to permitting contact to be made by Binaray whether by correspondence or telephone. In the hypothetical world, if Binaray was provided with BOCs and permitted to make contact within the constraints of the Business Charter to sell additional loans or non-home loan products, the evidence of Mr Melvin, Mr Kirkpatrick and Mr Fardon suggests that RAMS would have supported the franchise to grow their business and that approval would have been given for limited contact as permitted by the Business Partner Charter.

[310] RAMS submits quite correctly that the size of the notional BOC database is relevant to the existence of a valuable opportunity or alternatively the assessment of the loss of opportunity. As RAMS correctly submitted, the size of the notional database, additional loan rate and conversion rate are not ascertainable with a high degree of certainty.

[311] Prior to January 2008, RAMS was operated by RHG Home Loans Pty Ltd. Subsequently, RAMS was sold to Westpac, however RHG maintained the customer database. As such, the number of BOCs in Binaray's franchise territory prior to 2008 was not able to be determined with precision.

[312] Ms Letts, the expert called by Binaray, provided two calculations as to the number of the BOCs in the allocated territory prior to 2008.[278] The first was based on the fact that there were at least 449 active customers on the broker customer database at September 2007. That was undisputed, given there were 34,209 customers in the national broker database at the same time. She determined that 449 BOCs represented 1.31252 percent of the total number of broker loans. Using that percentage, her estimate was that there were 23,187 broker customers nationally as at June 2006. She inferred that the number of BOCs in Binaray's territory at June 2006 would therefore be 304.33. Mr Potter agreed with that and accepted that calculation in his subsequent reports.[279]

[313] The second calculation of Ms Letts was that there were 615.78 customers on the database. That figure was calculated on the basis that there were 5,542 loans settled in Queensland on the broker database as at June 2006. At the time there were nine franchise territories in Queensland. Ms Letts considered that dividing that by nine would give an estimate of the size of the broker channel database in June 2006.

[314] RAMS urges that the Court accepts the figure of 304 as the preferred figure, whereas Binaray submits that the figure of 615 BOCs is the more accurate assessment.

[315] In particular, Binaray submits that the 449 BOCs are limited only to those who were active as at September 2007. As such, there must have been additional BOCs who discharged their contract by that time, or who had entered into contracts, or both.

[316] I consider the figure of 304 is to be preferred as the best proxy for the size of the available BOC database as at June 2006. The broker network only began to operate in early 2003 and given that the average life of a loan according to Mr Allen is approximately 4.8 years, which was accepted by both Ms Letts and Mr Potter, it is unlikely that there would have been a significant number of BOCs who had discharged a loan before June 2006. This is supported by the fact that at the time, RAMS imposed early discharge or repayment fees on clients if they discharged their loan earlier than the original term of the contract. Given there is no evidence as to the number of brokers operating in the different territories at the relevant time and particularly in the area allocated to Binaray, the approach of using the number of loans settled in Queensland and dividing it by the number of territories to determine the number of BOCs is tenuous at best.

[317] After Westpac bought the RAMS business in 2008, Westpac had accurate information as to the database post-January 2008. RAMS then retained records relating to its customers which from 2008 included records relating to BOCs in databases maintained by it or on its behalf.[281]

[318] In that regard, evidence was provided by Mr Philip Choo, a RAMS employee, as to the actual size of the database. His evidence was updated just prior to trial. His evidence as to the numbers of BOCs differed from those contained in discovered lists which RAMS informed Binaray were inaccurate in April 2017.[282] Mr Choo was not involved in the production of those lists in discovery.[283] While Binaray was rightfully aggrieved by the late receipt of further evidence from Mr Choo, I do not find that was due to any lack of diligence on his part.

[319] Mr Choo's original estimate of the number of BOCs located in Binaray's territory was that it contained 265 customers, then 267 customers.[284] Following a letter from Binaray's solicitors querying why 17 names did not appear on the list, Mr Choo was asked to make further investigations. As a result of those investigations, he determined that there were 316 BOCs.[285] That resulted from him using the commissions data for every customer located in Binaray's territory who had a loan application. That entailed using a different database from that normally used by Mr Choo and his team, because it was not used for the purpose of reporting.[286] His exercise determined that an additional 49 customers were not in the Solace database as having a broker identity. As a result, he obtained the loan application ID[287] and checked the commission system. The commission system showed a broker code against the application if a broker had been flagged as the originator for the application.[288] Following this exercise, Mr Choo was confident that the 316 BOCs he identified represented the full extent of the list of BOCs because he checked the entire list of customers in Binaray's territory whose loan might have been originated by RAMS or a broker against the commission database.

[332] Mr Choo also prepared a BOC Average Loan Value Report. In the updated report, he identified that there were 44 additional loans taken out among 316 BOCs which equated to approximately 13.9 percent of customers.[306]

[333] He further prepared an updated BOC Non Return Report which identified 277 of the 316 BOCs identified did not return to RAMS for further business up until 27 April 2017, which was approximately 87.6 percent of BOCs.[307]

[334] He further prepared a BOC Frequency Report which identified that 39 BOCs returned to RAMS for further business up until 27 April 2017, of which:[308]

• (a) 30 BOC returned to RAMS for further business once;
• (b) 4 BOC returned to RAMS for further business twice;
• (c) 3 BOC returned to RAMS for further business three times; and
• (d) 2 BOC returned to RAMS for further business four times.

[335] Finally, he prepared a BOC Loan Contract Report which identified that excluding the first loan contract entered into with a RAMS approved broker, the 316 BOCs:[309]

• (a) Entered into 48 further loan contracts with RAMS and 18 of those contracts were originated by Binaray; and
• (b) Of the 48 additional loan contracts there were 44 additional loans, 17 of which were originated by Binaray.

[336] I accept the accuracy of the figures provided by Mr Choo subject to the limitations he identifies. Mr Choo also produced a number of other reports in relation to the commission rates for RAMS leads, of Binaray, for Queensland and on a national basis. I accept those figures are reliable. To the extent Mr Choo's figures were the basis of the work carried out by Mr Potter, I accept that they were proven..

[337] Mr Choo also prepared a self-generated leads conversion rate on national and Queensland bases. RAMS did not collect that data and depended on self-reporting by a franchisee.[310] The underlying data is therefore less reliable than in the case of RAMS leads. Consistent with the evidence of the witnesses from both Binaray and RAMS, it shows, however, that the rate of conversion of self-generated leads to settlement was considerably higher than RAMS generated leads.

[339] RAMS contends that the notional BOC database should be further reduced to take account of the BOCs who were entered onto Binaray's CRM system, to whom Binaray had the opportunity to market and build a relationship with as a result of natural drift.[311]

[340] It was accepted by Binaray that natural drift would, when calculating damages, reduce the pool of BOCs available to Binaray.[312] Ms Letts agreed in cross-examination that it would be reasonable to reduce the loss by the number of BOCs who were on Binaray's database and that it had had the opportunity to build a relationship with.[313]

[341] Surprisingly, Binaray undertook no proper analysis of the BOCs and in particular the success that they had in selling them an additional loan as opposed to the number of BOCs who Binaray had made contact with. While it was submitted by Binaray that they had not had been able to access the CRM database after their franchise came to an end in July 2016, proceedings had already been issued and expert reports, at least the initial round thereof, had been exchanged. Further, Ms Letts in evidence stated that she had not been provided the CRM or been given access to it for her consideration or analysis, despite the fact that she had been briefed in June 2015.[314] While RAMS submit that I should, as a result of the absence of analysis more readily accept the evidence adduced by RAMS, I consider that the general nature of the Allens' evidence and the absence of any analysis based on their own records of converting BOCs into further loans is more appropriately dealt with as reducing the probative value of the evidence given by the Allens.

[342] The real controversy between the parties is not whether the notional BOC database should be reduced to take account of natural drift but rather to what extent it should be so reduced, which is not able to be accurately identified. I consider this further below in the context of expert evidence.

[343] RAMS contends that the probability of Binaray successfully selling an additional product to BOCs in the hypothetical situation is also affected by the fact that BOCs could elect to be placed on the "do not mail" list thus further reducing any notional list of BOCs.[315] Binaray contended that this was not raised by the defence. It was however raised by [14(b)(v)] of the Amended Defence and the Allens were cross-examined about it.[316] While the actual privacy laws were not specifically identified, both the Allens and RAMS witnesses accepted that privacy laws were in place.[317] Reference was made to "Do not Call Register laws" in the Operations Manual of 1 July 2010.[318] Mrs Allen agreed that customers were asked about whether they wished to opt out and not be placed on Binaray's database. The customers' details were not placed on or were removed from the database as appropriate.[319] Exhibit 31 which is a document maintained by Binaray in its business in 2014 had a column which detailed clients who opted out from marketing or being contacted. RAMS contends that is a proxy for the number of BOCs who would have opted out which they calculated to be some 7.9 percent.[320]

[344] Binaray contends that RAMs calculation is inaccurate and the figure was in fact 6.46% but in any event there was no evidence as to Exhibit 31's accuracy and it should not be used as a proxy for the extent to which the notional BOC database should be reduced. Mrs Allen did confirm however, that it was a business record of Binaray. It contends that the figures are such that the privacy legislation did not present any barrier to the plaintiff's prospects of acquiring the benefit sought.[321]

[345] I consider that the privacy legislation did affect the extent to which any BOCs might be open to being contacted by Binaray, particularly given the fact that BOCs were clients of brokers. Naturally if BOCs opted out of being contacted by Binaray it would have prevented it building a relationship with those customers and being able to convert their business to Binaray. It would therefore have reduced the size of the pool available to Binaray. It is a relevant factor which must be considered with the other matters which could have affected Binaray's ability to convert BOCs into a business opportunity.

[348] In order to establish that an opportunity has value the plaintiff who asserts the loss of a valuable opportunity must establish on the balance of probabilities not only that the opportunity existed but that it was lost and that the breaching party's conduct was causative of the loss. The legal principles are not in issue between the parties in this regard.

[349] As set out above, the first matter to determine is whether Binaray if offered the lost opportunity, namely to contact and market BOCs, would have acted to secure the benefit. That was not a matter of any substantial dispute between the parties.

[350] I am satisfied on the basis of the evidence given by Mr and Mrs Allen that had they been offered the lost commercial opportunity the plaintiff would have acted to secure the benefit. Binaray had the relevant infrastructure to operate the business. While neither Mr nor Mrs Allen had prior experience operating as a franchise when Binaray entered into the Franchise Agreement, I am satisfied they had the infrastructure required for the business and the support of the RAMS franchise and particularly the benefit of the RAMS business model. The fact that they successfully established Binaray as a profitable franchise and continued to build revenue throughout the life of the business supports the fact that they had sufficient business acumen and were able to take up the opportunities offered to them through RAMS leads and self-generated leads. While Binaray was characterised as being an average to above average performer, none of the RAMS witnesses suggested that they were not a competent franchisee who had possessed the relevant skills to operate the business. I am satisfied that they would have taken the steps required to secure the benefit by seeking to make contact with the BOCs and, if contact was successfully made, obtaining the BOC;s details and then proactively marketing to the BOCs within the constraints of the Business Partner Charter and in accordance with the RAMS business model.

[351] RAMS did however contend that there was nothing exceptional about Binaray which would enable it to have succeeded in converting BOCs because of those unique skills. I am satisfied that they would have maintained details of BOCs on their internal systems in order to maintain contact with the clients, including at least a number of BOCs in the pre-2008 phase. While the evidence did indicate that the Allens were passionate about the RAMS franchise and applied the RAMS business model effectively, it did not establish that they were more than a slightly above average performer. While Binaray presented a different analysis which showed them to be a high performer compared to areas which they considered were comparable, the fact they were comparable was not established by any evidence. Although some concessions were made by RAMS witnesses as to the differences between different territories and their demographics, they used the same measure for all franchisees by reference to conversion of RAMS leads Australia wide to judge all franchisees and I accept that it was a valid method of comparison.

[368] The proper characterisation of the opportunity is in my view an opportunity to make profits through being able to sell additional loans for BOCs to whom Binaray had the opportunity to market. I have found that opportunity was valuable because on the balance of probabilities I have found Binaray would have carried out the necessary marketing and educative process with BOCs who were willing to engage with them and that there was a substantial prospect of them obtaining a financial benefit by converting that BOC and obtaining additional business by writing additional loans, albeit that was on the basis of evidence that there were BOCs who were dissatisfied customers of a broker or customers of non-contactable brokers, some of whom would be looking for a loan additional to that taken out with the broker.

[369] Although the Business Partner Charter only provided for marketing to BOCs in respect of additional loans or non-home loan products, Binaray sought to characterise the opportunity as one to sell loans other than the BOC loan. RAMS had contended particularly by reference to Ms Letts' evidence that additional loans were confined and did not extend to loans other than the loan that was additional to the existing BOC loan. However, Mr Potter in the Second Joint Expert Report adopted a broader view as to additional loans such that they included a new loan after a customer had been repaid or refinanced.[327] I have acted on the assumption that additional loans may extend to a new loan subsequent to the discharge of the BOC's loan.[328] While Binaray would not have been constrained by the terms of the Business Partner Charter once the broker loan was discharged, having contact with BOCs permitted the possibility of Binaray building a relationship with that BOC so they would obtain any additional business. In the hypothetical there was also the possibility that having converted a BOC they would have repeat business through those BOCs and the evidence of Mr Choo demonstrates that in fact occurred.

[370] I have referred to the relevant principles above. In assessing the value of the opportunity lost, the value is to be "ascertained by reference to the degree of possibilities and probabilities and probabilities" of the relevant factual hypotheses.[329] In the present case, many of the factors which affect that assessment have already been discussed above. Key to the valuation of the loss is the determination of the appropriate conversion rate which reflects the probabilities and possibilities of the hypothetical event and risks involved.

[371] Expert evidence has been presented by both sides. Expert reports have been provided by both Mr Potter and Ms Letts.

[372] Ms Letts and Mr Potter sought to provide reports estimating the loss of profits suffered by Binaray as a result of the loss of opportunity to contact BOCs and convert their business. As was submitted on behalf of RAMS a number of factors that would have confronted Binaray in converting BOCs into customers are the taken into account in the conversion rates that have been adopted by the experts in this case. There are some additional factors which must however be taken into account, which are not factored in in the conversion rate.

[373] Ms Letts prepared 10 scenarios on the basis of a number of different figures and assumptions. Mr Potter provided his assessment of the loss claimed using two methodologies as well as substituting some of his figures for the figures used by Ms Letts for the different scenarios. Using his own calculations, Mr Potter considered that no loss was suffered by Binaray in his scenarios. In five out of the eight scenarios used by Ms Letts, using his figures he calculated that there would be no loss suffered by Binaray. The fact that there is a possibility or indeed probability that Binaray may have suffered loss pursuing the opportunity, does not mean that they have not lost a valuable opportunity for which they must be compensated. Both experts provided updated reports as a result of additional work done by Mr Choo. The second joint report contained calculations with both experts using figures provided by Mr Choo in his latest affidavit.[330] There was no disagreement between the experts as to the calculations contained in their most recent reports.

[374] Both parties objected to various parts of the other side's expert reports. Other than matters which RAMS contended needed to be resolved prior to cross-examination, the objections were made MFIs and the parties were to make any submissions as to the admissibility of the reports.

[375] RAMS submitted that Ms Letts' report was deficient in a number of respects. Those matters were addressed in the defendant's closing submissions in paragraphs 98 to 106. In my view, many of the criticisms of Ms Letts' report were well made. RAMS contends that her report is inadmissible because the assumptions on which her report is based have not been proved. In particular, regarding the assumption that the conversion rate for BOCs was 25 percent, although based on instructions provided through Mr Allen that the conversion rate of BOCs was 20 to 30 percent, evidence to that effect was not given through either Mr Allen or Mrs Allen. Binaray's counsel contended that it was a hypothetical so the figure was not an underlying fact that had to be proved. While that may be so, the failure to have any evidential basis to support the figure used, particularly in circumstances where she agreed that the real question as to whether Binaray would have been in a position to sell depended on whether the customers were wanting to get an additional loan or some sort of loan, which she did not know had been considered by Mr Allen in providing the figure of 20-30 percent, diminishes significantly the probative value of the opinion given. I do not consider that it results in Ms Letts' reports and opinions being inadmissible.

[376] In fairness to Ms Letts, a number of these deficiencies were due to the limitation placed upon her by instructions given or, it appears, by the lack of explanation, according to her evidence, of the significance of documents provided or what was available such as Binaray's CRM database. Even taking those matters into account, I did not find Ms Letts had given proper consideration to the relevant issues in the case and the appropriate way to approach the assessment of the loss of an opportunity in a case such as this. She was unable to justify the appropriateness or reasonableness of the approach adopted in her report in cross-examination but was not prepared to make appropriate concessions or deferred answering questions.[331] I did not regard her evidence as persuasive and generally preferred the evidence of Mr Potter. For example, she was unable to provide a probative opinion on why matters such as the use of the actual rate at which Binaray sold additional loans, which had been a matter addressed by Mr Potter, was not a reasonable proxy. In estimating the conversion rate of 25 percent she simply relied on the instructions provided by Mr Allen that a conversion rate of 20 to 30 percent was appropriate to adopt in relation to the list of BOCs. Although she agreed in cross-examination that whether a BOC was wanting to take out a loan was relevant to the determining the conversion rate but she did not give that matter any consideration in her report. She initially did not carry out any analysis to support the conversion rate of 25 percent for BOCs but simply relied on the unsubstantiated opinion of Mr Allen.

[382] The effective conversion rate is applied to the assumed number of loans on the broker database (after an 18 month time lag[343]) to calculate the number of new loans being written by the franchisee in respect of the BOCs and does not reflect the refinance of BOCs.[344]

[383] In determining whether the opportunity to contact BOCs is a valuable one, the Court must consider the likelihood of Binaray successfully selling an additional product to BOCs in the counterfactual where Binaray had access to BOCs. Given the lack of any data on the success of converting BOCs in similar circumstances, the Court must determine an appropriate proxy for the conversion rate of the hypothetical BOC. In that regard there are competing contentions by RAMS and Binaray as to whether RAMS leads and the rate at which they are converted should be used as a proxy or self-generated leads should be used as a proxy.

[384] The experts adopted significantly different approaches.

[385] Ms Letts adopted a conversion rate of 25 percent based on instructions given to her that the likely conversion rate was between 20 to 30 percent. She then adopted the mid-point.

[386] Mr Potter considered that Ms Letts' assumed conversion rate was vastly overstated because:[345]

• (a) The rate adopted by her was broadly comparable to the rate of additional loans that were achieved by Binaray itself;[346]
• (b) The rate assumed that the additional loans had not been taken out already;
• (c) The rate assumed that Binaray would be able to convert borrowers who had no relationship with them but did with a broker; and
• (d) The ABS statistics for 2011-2012 reflected that 12 percent of households had loans additional to their home loan.

[387] Ms Letts applied a notional conversion rate of 25 percent in her report as the conversion rate that should be adopted. That was based on instructions given to her by way of a written statement by Mr and Mrs Allen.[347] While that statement stated that the estimated conversion rate was between 20 to 30 percent, no evidence was given to that effect by Mr and Mrs Allen supporting that conversion rate nor did Ms Letts carry out any analysis to determine the reasonableness of the rate as though she sought to later assert the reasonableness of the exercise by reference to an analysis of figures provided by Mr Choo. In accepting that Binaray would notionally convert 25 percent of BOCs from the broker database, Ms Letts did not have regard to Binaray's own customers and the rate at which they obtained additional loans. She agreed that in considering a conversion rate, you would have to take into account whether or not a broker customer wants an additional loan or a loan.

[428] There is disagreement between Ms Letts and Mr Potter as to the labour costs that would be incurred by a franchisee in the activity of obtaining and servicing the additional customers expected from the marketing to the mortgage broker database and the writing of those loans.

[429] Ms Letts assumed variable costs of labour of 33.5 percent to all of the upfront commissions received for each year. She relied on the statement of Mr Allen who referred to potentially an additional employee being needed and an analysis of the average labour costs for the years relevant to the revenue received from the upfront commissions, which was 66.4 percent.[397] Mr Potter assumed additional labour costs equal to the greater of the minimum fixed cost of $5000 per annum or $750 per loan written.

[430] Mr Potter contends that Ms Letts' calculation of labour costs fails to include labour costs that would have been incurred in obtaining any additional income. She relied particularly on the instructions of the Allens that in 2006 they would have had no difficulty in contacting clients while the business was starting up and that they personally would have worked the necessary hours to build the client base. She also accepted their evidence that the staff costs were higher than usual and reduced the labour costs accordingly. Ms Letts considered that Mr Potter's approach was flawed and particularly noted the difference if the calculation was made on the basis of $750 per loan rather than the amount of $5,000 per annum which is set out in a table in her second report.[398] Mr Potter reviewed the labour costs incurred by the franchisee for the period 2007 to 2014. He calculated the franchise incurred labour costs of between $748 to $2,160 per loan written, with an average labour cost per loan of $1,631.[399] He considered that the average labour costs incurred by the franchise over the period 2007 to 2014 provided a sound proxy for the costs that would have been incurred by the franchise.

[431] Mr Potter considered Ms Letts' assumption that because the franchise was owner-driven it was not necessary to include as a separate expense additional labour costs ignored the reality of what had occurred in relation to the operation of the business without the additional hypotheticals. He contended that it would be unsound to assume that any incremental activity undertaken by the franchise would be performed by Mr Allen or Mrs Allen, rather than third party labour being employed. He did, however, accept that if additional loans were written, additional labour costs may not have been incurred or may not have been incurred to the same extent as was actually incurred by the franchise on a per loan basis. He therefore adopted the lowest annual labour costs that he had calculated to be $748, which was rounded to $750, and adopted that assessment of the incremental labour costs that would have been incurred in respect of any additional BOC loans written by the franchise. Naturally, costs would have been incurred in pursuing the business, not simply in the writing of the business. On that basis, he determined that a staff member would be expected to be involved in spending 10 percent of their working week contacting BOCs to pursue the opportunity. Using the salary level of $50,000 per annum, he calculated, as an alternative, an annual fixed labour cost of $5,000. According to the statement of Mr Allen, assuming a high transfer in respect of BOCs his best estimate was that they would need to employ only one additional person and would not have needed any further office space or supplies. Ms Letts' assessment does not appear to take this into account. He also stated that they may have needed to provide additional IT support.

[433] Mr Potter had calculated that the additional variable costs that should be applied per annum would be equal to the greater of $5,000 or 3.7 percent of any additional revenue. He identifies these costs to be office supplies and stationery, telephone costs and marketing costs, which would have been incurred in attempting to convert customers on the database to Binaray, selling the products to those customers and writing additional loans in respect of referrals from customers from the database that are converted to the franchise. Mr Potter determined, having reviewed the financial statements of the franchise and the total revenue earned for the period from 2010 to 2014, with the cost range between 2.6 percent to 5.5 percent with an average of 3.7 percent, he would exclude the earlier years on the basis that the franchise was not established. He therefore adopted a figure of $5,000 or 3.7 percent of any additional revenue for the additional variable costs for each year.

[434] Ms Letts calculated the variable costs on a different basis. Ms Letts assumed a rate of 4.6 percent of upfront commissions comprising 1.5 percent to take account of additional IT costs and 3.1 percent to account for motor vehicle expenses. That followed an analysis of the expenses in the financial statements provided by the claimants.[403] Mr Potter contends that Ms Letts' approach does not take account of the fact that some of those variable costs have an element of being fixed costs that would be incurred by a franchise in attempting to pursue the opportunity, even if a loan was not written. Those would include telephone, printing and stationery costs. While I accept that an element of the costs will be fixed costs, they do not appear to be significant. I do not consider that Ms Letts' approach is unreasonable in relation to the variable costs.

[435] Ms Letts has relied on the monthly commission statements for the franchisee to determine monthly loan values and has in her calculations provided for subsequent possible loan increases of 1.8 percent with a 23 month time lag.[404]

[436] Mr Potter, however, does not include an amount for a loan increase, given that the calculation of conversions relates to new loans, not to increases in loans.[405] He considered that in the absence of any evidence to suggest that a borrower in respect of a further loan would take out an increase in respect of that further loan, as opposed to the original loan, he would exclude any loan increases in respect of those further loans. Binaray submits that a proportion of clients would increase their loan over time and therefore if a BOC took out a loan with Binaray, they too at a certain point would increase the value of their borrowing, which would lead to further income for Binaray. This is based on the fact that there is evidence that for loans obtained through Binaray show that there was an increase in those loans during the life of the loan. RAMS contends that Binaray's claim is put on the basis that Binaray lost the opportunity to sell loans to BOCs other than the loan the BOC had taken out through the broker. RAMS therefore contends that the Court should not include "loan increases" as part of Binaray's claim. Paragraph 4(e) of the particulars of loss or damage provided in respect of the further amended statement of claim refers to loan increases as part of the opportunity which had been lost.[406] Paragraph 11 also calculates the loss of profits on the basis of the reports of Ms Letts. On the basis of Binaray's experience with its own customers, the possibility of an increase cannot be dismissed. However, it is unlikely that there would be an increase in relation to every loan, particularly if it is an additional loan to an existing loan. Doing the best I can, I would estimate that 10 percent of the BOCs would have increased their loans by 1.8 percent.

[437] Ms Letts in her second report was instructed that in respect of the spreadsheet of 449 BOCs that were in Binaray's territory as at September 2007, 29 of those BOCs naturally drifted to Binaray.[407] She divided 29 by 18 to get a monthly drift rate of 1.61 per month customers per month,[408] assuming that the drift occurred over the 18 month period from June 2006 to the end of 2007. Mr Potter considered that any damages to which Binaray should be entitled should be discounted for natural drift, but considered the amount assessed by Ms Letts was understated.[409] In short, this is because the 29 customers may have naturally drifted to the franchisee over a shorter period, which would therefore raise the monthly average. Ms Letts assumed the monthly rate of natural drift would persist until February 2010, but thereafter, assumed it would stop because the broker channel closed at that point. Further, Mr Potter considers that Ms Letts' approach assumed the monthly rate would remain static and did not take into account the material increase in the database of BOC loans after 2010, but assumes a flat number based on the size of the database as at July 2006.

[438] The fact that some BOCs did become customers of Binaray notwithstanding that Binaray did not have access to the BOC database, which was attributed to customers those who were dissatisfied with their broker or could not find their broker, is a matter which would need to be taken into account both in terms of the possibility and probability of attracting further BOCs who are similarly dissatisfied in assessing the damages for the loss, as those customers were identified as part of the base of BOCs who were the subject of the loss of opportunity. Binaray contends the figure of 1.61 is an appropriate figure and more likely to be overstated than understated. Mr Allen's analysis of the post-2008 database produced by Mr Choo determined that only 14 BOCs drifted to Binaray[410] post 2008. RAMS, however, states that the Excel spreadsheets provided to Ms Letts in March 2017 with ticks in the column entitled "Naturally to us", would indicate a higher number of BOCs who were the subject of natural drift than 1.61.[411] Ms Letts did not undertake any analysis in relation to the spreadsheets provided. It is evident from the instructions given to Ms Letts through the solicitors for Binaray that a number of customers were said to have naturally drifted to Binaray, notwithstanding no approach being made by Binaray. According to those instructions, the drift of BOCs that occurred was 11 customers between 21 April 2008 and 26 June 2009; at 22 June 2014, some 17 BOCs became Binaray's customers over time; between 14 April 2008 to 25 November 2009, some 28 BOCs became the customers of Binaray. From a spreadsheet showing BOCs in Binaray's territory in 2007, at least 36 of those customers became Binaray's customers over time. According to another spreadsheet, for the period between 3 March 2008 and 26 June 2009, the BOCs whose applications settled between 3 March 2008 and 26 June 2009 consisted of 97 BOCs who, without approach, became Binaray's customers over time. While there is an overlap in relation to the date of those spreadsheets there is no suggestion that there is duplication. Given there were BOCs drifting to Binaray, Binaray was in a position to analyse whether that was the case. However, Mr Choo's analysis identified 17 of the 44 loans for BOCs post-2008 as being an understatement. The figure of 1.61 per month based on the 29 customers who were said to have drifted to Binaray of the 449 BOCs that were in Binaray's territory as at 2007 increased, and the figure of 1.61 per month is understated. Binary criticises the submission by RAMS stating that the notion that the figure is understated is vague and merely the matter of an assertion. It also submits that the figure of 1.61 for the period 2008-2010 is higher than the figure produced by Mr Choo. There is no doubt that the evidence in relation to this is unsatisfactory, however, as it was Binaray who was in the position to adduce the evidence on the true "natural drift" and it did not do so, it can hardly be a point of criticism for Binaray to make of RAMS.

[441] Binaray also claimed that as a result of the loss of opportunity it lost the opportunity to repay the interest of an RFCS loan earlier and so incurred greater interest. Ms Letts was provided with instructions that should Binaray have received the additional funds, they would have been applied to pay off the RFCS loan.[415] Mr Potter stated that the use of the RFCS loan appeared to be a refinancing decision made in respect of the franchise and did not consider that it was appropriate to include such costs in an assessment of the loss claimed to have been suffered by the franchise.[416] That is supported by the evidence of Mr Allen.

[442] Mr Allen was cross-examined in relation to the RFCS loan and agreed to a suggestion that if he had any interest in paying down the loan any sooner, he would have made different profit distributions to the ones that he had in fact made.[417] RAMS contends that that is a concession on Mr Allen's part that had he, in fact, had any interest in paying down his loan, he would have done that, but he failed to. The income statements of the trust show that in the various years it made a profit and the profit was distributed rather than paying down the loan. Thus, the evidence shows there was a capacity to pay the interest down at a faster rate, but it did not happen. I am not persuaded that the evidence established that had Binaray received the additional income from the BOCs, it would have paid the interest down on the RFCS loan at a quicker rate. I am not satisfied that Binaray suffered any loss as a result of the breach by Binaray in this regard.

[443] Ms Letts makes a calculation on the basis that in the counterfactual, Binaray would have received referrals from the BOCs, presenting a further lost opportunity. In that regard, she was provided with an email from Mr Ramke of RAMS dated 1 December 2005 which referred to the fact that conversion of 100 phone calls to referrals from the existing broker customer database would lead to 12 settlements.[418] That email was about conversion of leads and made provision for referrals. It was provided by Mr Ramke to Mr Allen as "a suggested matrix for his consideration and possible inclusion". It is not evidence that referrals can account for one percent of the customer base. While the RAMS model clearly acknowledged that referrals from customers provided an additional basis upon which franchisees could expand their loan customer database, the frequency at which such referrals occurred has not been the subject of any factual evidence such as reference to clients of Binaray who referred further family or friends to Binaray. While it was the subject of anecdotal evidence by Mrs Allen and Mr Allen, there was no evidence as to the number or frequency of referrals. I am not satisfied that the evidence of Mr and Mrs Allen, nor Exhibit 57, provide any proper evidential basis upon which I can conclude that there was any real possibility, let alone a probability, that there would have been referrals from BOCs to Binaray, had Binaray successfully converted the BOCs, or determine the rate at which such referrals would have occurred.

[444] While counsel for Binaray referred me to the marketing material of RAMS[419] provided to its franchisees, which noted the value of referrals, that material does not form an evidential basis for estimating the possibility or probability of a referral rate in the present case.

[445] I do not consider that there is any evidential basis for me to determine the likelihood that the loss includes a loss of referrals.

[446] Ms Letts calculates the average loan size on the basis of the monthly commission statements for Binaray. Mr Potter assumed an average of the loan values for additional loans obtained by BOCs.[420] The average value of additional loans that were actually obtained by borrowers on the BOC database is the best proxy, in my view, for the hypothetical, where the loss claimed is a loss of opportunity to convert BOCs or to sell them an additional loan. Additional loans are likely to vary in amount from an original loan given it is a further loan. Mr Potter assumed that the average loan value of $300,669 applied in respect of any additional loan written in respect to borrowers on the database in the period of July 2006 to December 2007 and that loans written after that period were at an average of $300,669.[421]

[447] While Mr Potter adopted the 18 month time lag used by Ms Letts, I note that he considered it was likely to overstate the loss by accelerating the time of loans. Ms Letts provided no proper basis for the timing. Given that Ms Letts agreed that she had not taken into account the difference between BOCs and previous BOCs and has assumed the conversion of those BOCs who existed at the time Binaray took over the franchise whereas on Binaray's case it would take 18 months to build a relationship and convert the adoption of 18 months is unlikely. Mr Allen considered a period of 18-24 months would be appropriate. In my view, particularly given RAMS is targeting first home buyers and the self-employed it is appropriate to adopt the more conservative figure of 24 months. However, given the approach I have adopted it is not necessary to include this in calculations.

[448] Doing the best I can based on the above analysis, I consider that the alternate Potter analysis at [1.5] of Exhibit 77 using the 304 BOCs for 2006 and 316 BOCs post 2008 and using the 25 percent conversion rate is the most appropriate starting basis to assess the loss. I consider that the conversion rate that Binaray would be able to effect if the BOC pool was confined to those who took out additional loans would be no higher than 25 percent and would likely be less than that. It therefore represents the maximum profit that could be achieved by Binaray before taking account of natural drift and other contingencies such as the "do not contact" issue.

[449] By reference to [1.5] I consider that the additional loan rate figure that is the most probable would only be slightly above that which is reflected by 13.92 percent to take account of the fact that there may have been further additional loans than occurred in fact. I would therefore adopt a figure which adds 25 percent of the difference between the two additional loan rates of $38,050, which would be a total of $225,871.

[450] However, that figure would require a considerable discount to be applied as I consider that it is only a small possibility that that could have been achieved by Binaray and that it is more probable that it would have been able to convert less than that, particularly given the small number of brokers in the allocated territory who were likely to have dissatisfied customers or stopped business. A discount also needs to be applied to take account of the contingencies and natural drift. I would then apply a 60 percent discount to reach a figure of $90,348.40.

[451] I will, however, hear the parties as to the above approach prior to finally determining the question of quantum, given it was not a matter that was canvassed in submissions.

[452] RAMS pleaded that the proceedings were commenced on 29 November 2013, which is out of time. It contends that if RAMS breached the contract, the breach occurred on or shortly after the contract was entered into on 25 July 2006, the six year limitation period therefore expiring about late July 2013. It contends that the breach was a "once and for all" breach and that the obligations were not the subject of a continuing covenant. It contends although the contract does not expressly specify timeframes for RAMS to complete its obligations, the time for performing those obligations was "a reasonable time from the commencement of the agreement". Alternatively, it contends that even if the obligation was a continuing one such that a separate cause of action arises for each particular failure, any cause of action based on a breach of contract that occurred more than six years before the proceeding commenced (i.e. 28 November 2007) is statute barred.

[453] Binaray does not contest the fact that the RAMS has a defence based on the Limitations of Actions Act 1974 (Qld) for any breach prior to 29 November 2007, however it contends that the obligation to provide access to the whole of the database was a continuing one. Therefore, it contends the limitations defence is of little consequence since as at 29 November 2007 there was a database which ought to have been allocated to Binaray and Binaray was denied that opportunity from 29 November 2007 onwards. In that regard, it relies on Larking v The Great Western (Nepean) Gravel Ltd (in liq)[422] where Dixon J stated:

"...if his covenant is to maintain a state or condition of affairs, as, for instance, maintaining a building in repair, keeping the insurance of a life on foot, or affording a particular kind of lateral or vertical support to a tenement, then a further breach arises in every successive moment of time during which the state or condition is not as promised, during which, to pursue the examples, the building is out of repair, the life uninsured, or the particular support unprovided."

[454] RAMS contends that given Binaray's case is put on the basis that once a customer becomes a customer on the database, they start the marketing campaign and within 18 months there is conversion, it must necessarily follow that persons on the list up until 29 November 2007 cannot be included in Binaray's claim because of the failure to bring proceedings at an earlier time.

[455] Binaray contends that RAMS was subject to a continuing obligation to provide it with the full allocation of BOCs each time there was an additional BOC added to the database.

[456] The nature of the obligation to provide access to the BOC database is one which was a continuing obligation to allocate that BOC to Binaray after the customer took out a loan through a BOC. Thus, the whole action is not statute barred. However, I do not accept the argument of Binaray that there was an obligation to provide the whole database on an ongoing basis such that all the names who were allocated before November 2007 were still obliged to be allocated after November 2007 on the database and therefore it makes no difference that any breach before November 2007 is statute barred. On its proper construction, I consider that the reference to "allocate" in clause 17.1.7 requires an allocation at the time of entry into a franchise agreement and then allocations of additional BOCs added to the database to be provided to the Franchisee. I do not consider that the RAMS business model affects this construction. I do not consider that there was continuing obligation to allocate the whole database throughout the life of the Franchise Agreement.[423]

[457] In my view, for those BOCs who were on the database and should have been allocated before November 2007, the breach[424] occurred at the time when the BOC should have been allocated to Binaray. Thus, existing BOCs should have been allocated to Binaray within a reasonable time after the franchise commenced. Where a broker had entered into a loan agreement with a BOC after July 2006, the breach occurred within a reasonable time of the BOC's loan settling when the BOC was within its territory. Loss, of course, does not have to be incurred for the cause of action to accrue. In this regard, the case seems to be most analogous to the failure to pay instalments of interest or rent. In such a case, the claimant will succeed in respect of so much of the series of breaches or the continuing breach as occurred within the six years before the action was brought. Thus, for breaches that occurred by the failure to allocate BOCs who were placed on the database of RAMS between July 2006 and November 2007, the cause of action for breach of contract in relation to BOCs is statute barred. Given as at September 2007 there were 449 BOCs on the database that would appear to be the most accurate number available of the BOCs who should have been allocated to Binaray by November 2007, however I will hear further submissions from the parties as to that. The effect of this on the damages calculation is also a matter upon which further submissions are required by the parties.

[458] RAMS contends that Binaray has delayed unreasonably in commencing the proceeding. It originally made a complaint in relation to its conduct proceeding to trial, however, in oral submissions that was not pursued. It contends that Binaray's delay disentitles it from claiming interest over the entire period from the date when the cause of action arose. Binaray was aware of its potential claim against RAMS in the period from 25 July 2006 until 15 April 2008 and did not inform RAMS or try to resolve the dispute with RAMS until it issued the notice of dispute.[426] RAMS further contends that Binaray delayed the issuing of the proceedings from 2011 until 22 May 2014, the date upon which it served RAMS with the claim, the statement of claim, the amended statement of claim and Ms Letts' report of 29 July 2013 after the breakdown of settlement negotiations. Mr Allen stated that the breakdown in settlement negotiations would have occurred post-2010 and could not be more specific.[427] Further, RAMS contends that if the Court finds RAMS' obligations were a "continuing covenant" such that a separate cause of action arose for each particular failure to provide a BOC's information (i.e. the time at which a BOC loan was originated and its information was entered on to the RAMS system but not provided to Binaray), it would be inappropriate to apply interest at the time each relevant cause of action arose because neither Binaray's case nor Ms Letts' calculation of loss proceed on the basis that any commission or other revenue would have been earned at that time. RAMS contends the Court should, in the exercise of its discretion, not award interest until Binaray would have allegedly earned commission from writing an additional loan to a BOC.

[459] Binaray contends it has not acted unreasonably in commencing the proceedings such that it should be disentitled from interest for the whole period. Mrs Allen gave evidence that after the notice of dispute was issued, the plaintiff dealt with RAMS on a number of occasions in relation to the dispute, without success.[428] Further, Mr and Mrs Allen advised RAMS between 5 November 2012 until 18 December 2012 that they were still collating all of the information so that they could fully evaluate their position and conclude the matter as soon as possible. Both parties referred to the principles dealt with by McPherson JA (with whom McMurdo P and Thomas JA agreed) in . The Court referred to s 47(1) of the (Qld). The Court noted that:

"The section confers a discretion which it is settled, is to be exercised judicially with a view to compensating the successful plaintiff for the injury or loss sustained...The purpose or function of an award of interest under the section is restitutionary. It is not to punish the defendant but to compensate the plaintiff for being kept out of the money represented by the judgment sum in the period between the accrual of the cause of action and judgment".

[460] However, as was noted by McPherson JA, the Courts have recognised that in some circumstances, it would be "unfair to order a defendant to pay interest for the whole period between the accrual of the cause of action and the date of judgment".[433] An example given is "where the plaintiff has been guilty of unreasonable delay in prosecuting the claim".[434]

[461] In the present case, the proceedings were not served until some eight years after the plaintiff had first considered that it was entitled to be receiving the names of the BOCs. There were, however, discussions which took place between the parties in an attempt to resolve the matter. McPherson JA in Interchase Corporation Ltd (in liq) v Grosvener Hill (Qld) Pty Ltd (No 3) by reference to Moffitt P in Bennett v Jones,[435] stated "the power to award interest ought not to be used as an instrument of policy in the public interest to procure expeditious settlement or prosecution of claims, even if it might incidentally have that effect "where delay of one party causes or may cause detriment to the other...". I do not accept that interest should be excluded because the parties were in negotiation.

[462] In the present case, I consider that there has been an unreasonable delay by Binaray in issuing proceedings once it had engaged solicitors in 2011[436] until the claim was served on RAMS on 22 May 2014, even though the statement of claim had been filed on 29 November 2013. Such a delay, in my view, is an unreasonable one. Further, given interest is restitutionary and on Binaray's own case it would not have converted a BOC for 18-24 months interest should not accrue until commissions became payable. I would therefore consider that interest should be payable for the period from 30 November 2007 until 2011 and from the time the proceedings were instituted and served in May 2014. Given the actual date upon which solicitors were appointed is unknown but Mr Allen indicated a breakdown had occurred after 2010, I consider this period from January 2011 to May 2014 should be excluded. I will hear from the parties about the effect of part of the action being time barred.

[463] I am therefore satisfied that:

• (a) RAMS did have an obligation pursuant to clause 17.1.7 of the Operations Manual to allocate to Binaray customers of RAMS who were generated through RAMS accredited brokers;
• (b) RAMS did have an obligation to provide Binaray with access to or use of customer information of BOCs within the constraints of the Business Partner Charter;
• (c) RAMS was only obliged to provide information as to existing BOCs and not BOCs who had discharged their RAMS loan;
• (d) RAMS did breach their contract in not allocating the BOCs in the allocated territory to Binaray;
• (e) Binaray did suffer a loss of a commercial opportunity by reason of the breach;
• (f) Binaray is precluded from claiming damages for loss more than six years before the commencement of the proceeding; and
• (g) Binaray is entitled to interest, but not for the full period.

[464] Prior to making final orders as to quantum, the effect of the limitations issue and interest, I will hear from the parties, given the reasons above. I will also hear submissions as to costs.

[465] I order that:

• (1) The parties provide further submissions of no more than 10 pages within 21 days of today.

[1] RAMS was known as RAMS Home Loans Pty Ltd between June 2003-December 2003, RAMS Franchising Pty Ltd between December 2003-March 2008, and RAMS Financial Group Pty Ltd from March 2008.

[3] M Allen T3-63/1-11, but the particulars to paragraph 13 in the Further Amended Statement of Claim refer to requests for the list in September to October 2006.

[5] Statement of Agreement Facts, [21].

[10] The plaintiff defined the issue by adding the words after (b) "for the purpose of the plaintiff providing customer service and database marketing", which was the wording used in clause 17.1.7 of the Operations Manual.

[11] The plaintiff identified an additional issue "Does the term customer as referred to in the Franchise Agreement include customers who originally took out a RAMS loan through a mortgage broker (the initial RAMS loan) but who had discharged the initial RAMS loan?"

[12] Document 2 of the Agreed Bundle of Documents "A".

[13] Clause 14.1, tab 3 of the Agreed Bundle of Documents "A", volume 1.

[14] Clause 14.9 provides for RAMS to give reasonable notice of such changes.

[15] "About this Agreement", tab 3, volume 1, Agreed Bundle of Documents "A".

[16] Further Amended Statement of Claim, [8].

[18] Volume 1, Agreed Bundle of Documents "A", tab 3.

[19] [2014] HCA 7; (2014) 251 CLR 640.

[21] [2017] HCA 12; (2017) 261 CLR 544.

[22] [2015] HCA 37; (2015) 256 CLR 104 at [46] to [51] per French CJ, Nettle and Gordon JJ.

[23] Further Amended Statement of Claim, [8].

[25] (Volume 1, Agreed Bundle A, Tab 3) at RFG.100.203.0008.

[26] Defendant's Closing Submissions, [25].

[27] Statement of Agreed Facts, [6] and [9].

[28] Defendant's Closing Submissions, [33].

[29] Defendant's Closing Submissions, [16]; Plaintiff's Closing Submissions, [22].

[30] Defendant's Closing Submissions, [26].

[31] Or any customer who had originated through a third party.

[32] Whether it was binding is another matter.

[33] Refinancing an existing Customer loan with an Approved Product in circumstances where a Variation to the Customer's existing loan would achieve substantially the same outcome for the Customer.

[34] [2001] NZCA 348; [2002] 1 NZLR 506, particularly at [42]-[44] per Thomas J.

[37] Exhibit 7, "Key Features of the RAMS 'New Franchise Model'".

[38] Plaintiff's Closing Submissions, [13].

[39] [2001] NZCA 348; [2002] 1 NZLR 506.

[40] At [2] per Thomas J and [80] per Keith and Blanchard JJ.

[41] GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 at [224].

[42] See Leggatt J in Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EHWC 111 (QB) at [137]-[142], referred to by Lyons J in IW & CA Price Constructions Pty Ltd v Australian Building Insurance Services Pty Ltd & Ors [2017] QSC 39, which was overruled on appeal in relation to the question of goodwill only in [2017] QCA 313.

[43] Exhibit 39; Statement of Agreed Facts, [13].

[44] Clauses 17.2.1 and 17.2.2 provide the services that are to be provided and commission payable including providing that RAMS Home Loan Centres are required to provide customer service, retention and cross sale activity to customers generated by Franchise Direct.

[45] Plaintiff's Closing Submissions at [17]; Defendant's Closing Submissions at [62].

[46] Plaintiff's Closing Submissions at [20].

[47] [2008] HCA 57; (2008) 238 CLR 570 at [35].

[48] James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603 per Lord Reid.

[49] Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382 at [113] per Campbell JA.

[51] Which refers to the limitations in the Business Partner Charter.

[52] Which refers to the obligation of the franchisee to provide service to all BOCs.

[53] Defendant's Closing Submissions, [47].

[54] Plaintiff's Closing Submissions, [23].

[55] Further Amended Defence, [9(a)].

[56] [2016] FCA 43.

[57] Further Amended Statement of Claim, [9(b)-(c)].

[58] Secured Income Real Estate (Australia ) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607-608

[59] WL Marshall v The Colonial Bank of Australasia [1904] ArgusLawRp 86; (1904) 1 CLR 632 at 647 per Griffith CJ ; Australia Media Holdings Pty Ltd & Others v Telstra Corporation (1998) 43 NSWLR 104 at 123

[60] In relation to which see the discussion of the relevant authorities by A Lyons J in IW and CA Price Constructions Pty Ltyd ABN 5030103933 A Trustee for the Coastal Building Insurance Claims & Repairs Trust v Australian Building Insurance Services Pty Ltd ACN 162498599 [2017] QSC 39 at [51]- [57].

[61] Baldwin v Icon Energy Ltd [2016] 1 Qd R 397.

[62] M. Allen, T2-47/30-35; S. H. Allen, T4-30/25-45, T4-31/10-15.

[64] See for example, Ms Thammiah, T5-28/5-10.

[65] Australian Oxford Dictionary (2nd Ed); Oxford Dictionary (3rd Ed); see also the discussion in TC Newman (Qld) Pty Ltd v DHA Rural (Qld) Pty Ltd (1988) 1 Qd R 308 at 319-320, per Williams J_._

[66] See paragraphs 14 and 15 of the Further Amended Statement of Claim, with [15] not referring to the obligation being an ongoing one.

[67] Further Amended Statement of Claim, [16].

[68] Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ and 368 per Brennan J.

[69] [2016] HCA 18; (2016) 257 CLR 440 at [39].

[73] [2017] QCA 254.

[74] Defendant's Supplementary Submissions in Reply, [2]-[3].

[75] Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited (No. 2) [2016] QSC 252.

[76] Defendant's Submissions in Reply, [24].

[77] Defendant's Supplementary Submissions in Reply, [4]-[5].

[78] [2017] QCA 254 at [12].

[84] [2012] NSWCA 192 at [88].

[85] Hart Security Australia Pty Ltd v Boucousis & Ors [2016] NSWCA 307; (2016) 339 ALR 659 at 688; Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464 at [218].

[86] [2016] VSCA 187.

[90] Defendant's Closing Submissions, [83]-[95].

[92] Defendant's Closing Submissions, [87] and [88].

[93] Defendant's Closing Submissions, [97].

[94] Defendant's Closing Submissions, [170].

[95] M Allen, T2-36/32-47 to T2-37/1-8; G Melvin T5-128/21-27, although his experience relates to 2014 onwards.

[97] M Allen, T2-37/1-7; G Melvin T5-128. According to Mr Allen, RAMS provided for self-certification, whereas Mr Melvin referred to permitting accountants to sign off. The difference for present purposes is of no significance and may be due to different time periods being spoken of.

[99] M Allen, T2-30/23; G Melvin, 5-124 and 5-127.

[100] M Allen, T2-60/7-15, T2-63/38-47, T3-45/1-2 and 11-12.

[101] S Allen, T4-32/20-31, T4-33/22-50, T4-92.

[129] T2-89/10-40. The list was based on his review of RAMS documents identified in Exhibit 21.

[141] Exhibit 1, BAS returns documents 216-219.

[145] Statement of Agreed Facts, [33]-[36].

[146] Statement of Agreed facts, [37].

[147] Statement of Agreed facts, [38].

[169] Plaintiff's Closing Submissions, [77]-[83].

[170] E.g. M Allen, T3-17/1-2; T3-16/42-47; G Melvin T5-130/37-45.

[171] Defendant's Closing Submissions, [88].

[172] Eg. M Allen T3-46/6-11; S Allen T4-85/40-46; Bowen T3-89.

[173] M Allen T3-17/L1-2; Kirkpatrick T5-66/L25-32; Melvin T6-49/15-20.

[174] M Allen T3-47/14-16; Kirkpatrick T5-62/11-33; Melvin T6-3/16-23.

[175] M Allen T3-17/7-10; S Allen T4-85/46; Kirkpatrick T5-56/30-41;

[176] Kirkpatrick T5-62/35-37 and T5-63/4-8.

[177] M. Allen T3-17/1-2; R3-161/42-47.

[178] M Allen T3-17/12-14: S Allen T4-86/1-2: Kirkpatrick T5-56/30-45.

[180] M Allen T3-46/1-5; Kirkpatrick T5-83/5 and T5-84/11-15 and 20-26.

[184] S Allen T4-332/20-27; T4-33/41-47 and T4-34/1-6.

[186] Plaintiff's Closing Submissions, [66].

[187] Plaintiff's Closing Submissions, [69].

[188] M Allen, T3-17/12-14, T3-17/7-10, T3-46/1-5; S Allen T4-85/46.

[217] Plaintiff's Closing Submissions, [65].

[237] Fardon, T6-73/30 to T6-74/8; Ziino T7-65/44 to T7-66/45.

[242] Defendant's Closing Submissions [123]; C Kirkpatrick, T5-64/29-46.

[243] M Allen, T 2-81/15-18; Exhibit 15.

[250] Plaintiff's Closing Submissions, [70].

[251] Defendant's Submissions, [70].

[258] MFI-L provides extracts particularly relied upon by RAMS.

[261] See the discussion in ASC v McLeod [2000] WASCA 101; (2000) 34 ACSR 135 at [49]- [52] per Owen J (with whom the remainder of the Court agreed), referring to R v Wright [1980] VicRp 56; [1980] VR 593.

[262] See for example Kirkpatrick T5-110/32-36; Melvin T6-41/9-14.

[274] Defendant's Closing Submissions, [150].

[277] Defendant's Closing Submissions, [154].

[281] Statement of Agreed Facts, [21]-[22]

[287] Each application was assigned a unique identification number: Statement of Agreed Facts, [32].

[294] Plaintiff's Closing Submissions, [135].

[297] Exhibit 76; cf Statement of Agreed Facts, [11] and [13].

[300] Plaintiff's Closing Submissions, [138].

[301] [2003] NSWCA 74 at [12].

[304] Plaintiff's Closing Submissions, [58].

[311] Defendant's Closing Submissions, [107]-[124].

[312] Defendant's Closing Submissions, [149].

[315] Defendant's Closing Submissions, [122].

[317] See for example, evidence of S Allen, T4-6/42 to T4-62/46; T 9-15.

[320] Defendant's Closing Submissions, [122].

[321] Plaintiff's Closing Submissions, [91].

[322] Defendant's Closing Submissions, [122].

[325] Cf, [91] of the Plaintiff's Closing Submissions.

[328] But not one which would not be caught within "existing Customer information".

[329] Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2017] QCA 254.

[343] RAMS contends such a time lag is ambitious particularly given the fact that the customers which are particularly targeted by RAMS are first home buyers. Mr Potter however was prepared to adopt it for the purpose of his report, although he expressed concerns about its basis: Exhibit 81, [2.26].

[344] Which was prohibited under the Franchise Agreement.

[346] That was so whether he adopted his own analysis based on loan records created by Binaray by which he calculated the rate of additional loans to be 1.31 in respect of each Borrower: Exhibit 76, Issue 8; Binaray objected to that exercise apparently on the basis of the underlying record used. Given that Mr Choo's analysis reveals that the additional loan rate achieved by RAMS as adjusted by Mr Potter was 23 percent which was a reasonable exercise I do not need to decide the point of objection which was not clearly articulated.

[347] Exhibit 72 (save for the first sentence in paragraph 5 on the basis it was provided to Ms Letts but not admitted as truth of its contents).

[351] Plaintiff's Closing Submissions, [111].

[357] Plaintiff's Closing Submissions, [115].

[358] Plaintiff's Closing Submissions, [115].

[359] Plaintiff's Closing Submissions, [117].

[370] Defendant's Closing Submissions, [184].

[371] Plaintiff's Closing Submissions, [104(g)].

[372] Exhibit 72, which was admitted on a limited basis.

[374] Exhibit 82 at [3.14] to [3.17].

[376] Plaintiff's Closing Submissions, [118].

[378] Plaintiff's Closing Submissions, [120].

[379] Plaintiff's Closing Submissions, [121].

[387] T6-73/30-T6-74/8; T7-65/44- T66/45

[395] T5-130/6-14; T6-2/25-47- T6-3/1-10.

[399] Exhibit 80, [5.22] to [5.23].

[403] Exhibit 73, [127]; Second Joint Expert Report, Issue No. 4, Exhibit 77.

[406] See paragraph 4 of the Particulars of Loss and Damage.

[409] See in particular, Exhibit 82, [4.9].

[411] M Allen, T3-62 to T3-57/20; Letts, T8-53/4-10.

[412] T8-54 to T8-55; Exhibit 78, [4.4].

[422] [1940] HCA 37; (1940) 64 CLR 221 at 236.

[423] Cf Hammond v Minister for Works (1992) 8 WAR 505 where there was a continuing duty to act.

[424] In the case of breach of contract, the cause of action is complete upon the breach occurring.

[425] See Chitty on Contracts, 33rd Ed, (2018) at [28 - 035]; G. E. Dal Pont, 'Law of Limitation', (2016) at [5.14].

[430] [2003] 1 Qd R 26 at 59-63.

[431] See now s 58 Civil Proceedings Act 2011 (Qld).

[434] At 53, referring to Serisier Investments Pty Ltd v English [1989] 1 Qd R 678, per Thomas J.

[435] (1977) 2 NSWLR 355 at 370.