Bodycorp Repairers Pty Ltd v Maisano

TORT - inducement of breach of contract - attempt to establish case by inference

PRACTICE AND PROCEDURE - application to amend pleadings during trial - leave granted - date from which amendment to take effect - whether new and distinct cause of action - relation back effect of order.

**1 In metropolitan Melbourne there were said to be serious problems with the automotive repair industry in the 1980's and early 1990's. At that time, there were many independent operators performing repair works for damaged vehicles. It was suggested that there were highly unacceptable business practices. The practices engaged in by vehicle smash repairers were said to include coercive conduct and insurance fraud. It was also suggested numerous participants in the industry colluded to ensure anti-competitive and corrupt conduct was able to permeate and prevail. It was said that this caused serious problems for various insurers in the market.

2 The plaintiff, Bodycorp Repairers Pty Ltd ("Bodycorp"), put together a business plan ("the Business Plan") to deal with the issues it perceived existed in the market. The Business Plan involved bringing together a number of independent repairers under a franchise regime operated by Bodycorp. The Business Plan was presented. As a result, a relationship arose between Bodycorp, Bodycorp's franchisees and the 4th defendant ("AAMI"). In time, a relationship also developed between Bodycorp and the 5th defendant ("All States").

3 For a time, the business relationships appeared to be mutually beneficial. Then things changed. Ultimately, there was a falling out between Bodycorp and AAMI. Around the same time, All States ceased sending work to Bodycorp franchisees. This gave rise to a number of claims being made. Those claims include claims against AAMI, parties related to AAMI (including All States), and former franchisees of Bodycorp. In essence, Bodycorp claims others have wrongfully broken their business relationships with Bodycorp. Bodycorp also alleges AAMI has failed to pay moneys owing to Bodycorp. For the reasons that follow, Bodycorp has failed to prove any of its claims.**

**4 As referred to above, Bodycorp is the plaintiff. Bodycorp established a franchise business in the mid 1990s. This franchise had a substantial number of smash repairers as franchisees.

5 The 1st defendant, Anuniziato Enzo Maisano, ("Maisano"), was a franchisee of Bodycorp from on or about 2 February 1996. This franchise related to the Moorabbin area. From in or about December 1997, Maisano also conducted a Bodycorp shop at Malvern. During the relevant events, Maisano also went by the name of Michael Mason.[1]

6 The 2nd defendant was a former partner of Maisano. She died in or about 2010.

7 The 3rd defendant was alleged, in the alternative, to be the company that conducted the Moorabbin franchise. Maisano was a director of the 3rd defendant. The 3rd defendant was last de-registered on 27 November 2011. It took no active part in the proceeding. It was Bodycorp's position at trial that the contractual relationship for the Moorabbin franchise was between Bodycorp and Maisano. Accordingly, the absence of the 3rd defendant was of no consequence.

8 As referred to above, AAMI is the 4th defendant and All States is the 5th defendant. AAMI is a motor vehicle insurer. AAMI entered into an agreement with Bodycorp in November 1997. This agreement was ultimately formalised and reduced to writing in a document executed on 29 June 1998 ("the AAMI Agreement").

9 All States is a company established in the 1990's to provide assessing services for AAMI's shareholder companies. All States was established by reason that the shareholder companies, also being insurance companies, wanted to have an entity in place to implement an efficient and cost-effective quoting system for them. In addition to AAMI's shareholder companies, AAMI itself was also one of the shareholders of All States.

10 The 6th defendant, Barry Martin ("Martin"), is a former employee of AAMI. He is now retired. From 14 July 1997 until September 2010 he held the position of supply and development manager with AAMI. In that role, his duties included liaising with smash repairers and managing the relationship between AAMI and the repairers. Those repairers included franchisees of Bodycorp.

11 At the start of the trial of this proceeding, the 7th defendant ("Melton") and the 8th defendant ("Munro") were being pursued by Bodycorp. On 16 May 2013, consent orders were made dismissing the case against Melton and Munro (collectively "the Melton Defendants"), with no order as to costs.**

**12 By 1995, AAMI had introduced what it called its "2-quote system". This system required a quote to be obtained from 2 smash repairers before AAMI would approve the repairs. The repairers were required to prepare the quotes independently, and were not informed of the amount or other contents of the competing quote. The purpose of the 2-quote system was to prevent colluding between repairers, thereby allowing the possibility of artificially inflating prices quoted for smash repairs. Once the 2 quotes were prepared and submitted, an assessor of AAMI would compare the quotes and then select the most competitive and complete quote; ie not necessarily the cheapest. The AAMI assessors were based at 5 or 6 customer service centres throughout metropolitan Melbourne. It was through these service centres that all quotes and repairs were coordinated by AAMI.

13 In addition to the 2-quote system, AAMI also had a process in place for approving smash repairers. For this purpose, repairers were put on trial and, if after 6 months they had satisfactorily performed work provided by AAMI, they would then be placed on a panel. The repairers placed on the panel were known as "Recommended Repairers". It was the Recommended Repairers who would usually get the opportunity to quote for AAMI. Generally, like or similar opportunities were given to repairers who were on trial as to those who were Recommended Repairers.

14 It was very valuable to a repairer to be given Recommended Repairer status by AAMI. It reflected a high standard of competence and quality. Repairers who achieved this status added substantially to the goodwill of their business. Further, work from AAMI (together with work from All States) represented most of the business done by the Bodycorp franchisees from 1995 to 1998.

15 Bodycorp was incorporated in March 1995. Later in 1995, at the time Bodycorp approached AAMI, it had 2 directors, who were brothers; namely, Antonio Murdaca ("Murdaca") and Ralph Murdaca ("Ralph Murdaca"). Bodycorp was the trustee of the Bodycorp Unit Trust, 50% of which was owned by interests associated with Murdaca and 50% of which was owned by interests associated with Ralph Murdaca. In 2002, Ralph Murdaca ceased his involvement with Bodycorp. Ralph Murdaca and his related parties transferred their beneficial interest in the shares in Bodycorp and the units held in the Bodycorp Unit Trust to Murdaca and Repose Nominees Pty Ltd, respectively.[2]

16 In or about mid 1995, Bodycorp prepared the Business Plan. This document was presented to senior management at AAMI. Murdaca said the Business Plan formed the basis of the "umbrella organisation" of Bodycorp.

17 The Business Plan set out perceived problems with the smash repair industry in metropolitan Melbourne. In addition to the matters referred to in paragraph 1 above, those problems were said to include the unsatisfactory state of repair shops, the unbusinesslike manner of repair shop employees, the absence of customer comfort areas and various other matters. It was said these matters gave a negative impression of the people behind the smash repair industry, and of the repair work itself.

18 In this context, Bodycorp identified its role, as part of the Business Plan, as follows:**

In this regard the need exists for a "Bodycorp", a tightly run franchise headed by a management team with hands on experience in the smash repair industry, as well as organisational and administrative skills necessary to successfully marry operator, insurer and the insured.

...

[Ralph Murdaca and Murdaca] have owned and operated several smash repair shops extremely successfully in the past 15 years, in the recent times controlling 5 outlets and assisting in the management of 3 others.

...

The [group's] main achievement so far has been to assemble a group of 16 shops which were presentable, whose owners were able to produce a quality repair, properly equipped, reasonably honest and had not had a coloured history in their dealings with insurance companies or the police.

**19 The Business Plan recorded that Bodycorp had inspected and investigated 85 shops in metropolitan Melbourne. This exercise was done in order to identify smash repair shops of appropriate standards and to incorporate them into the Bodycorp group as franchisees.

20 The Business Plan also discussed various other advantages to the industry said to exist by reason of the Bodycorp franchise arrangements. These advantages included economies of scale in relation to the purchase of products necessary for repairs, and putting in place administrative and service systems that ensured, amongst other things, quality, service, speed, accuracy and cost control.

21 The Business Plan was a lengthy document consisting of 22 pages, plus a draft franchise agreement and related documents. It is not necessary to set out any further detail. In short, the Business Plan contemplated the Bodycorp franchise expanding beyond the existing 16 franchisees then in place, and, with that expansion, building an ongoing relationship with AAMI.

22 The Business Plan stated that it was Bodycorp's intention to forge a strategic alliance between itself and AAMI. The Business Plan suggested Bodycorp provided AAMI with, effectively, the perfect opportunity to establish a mutually beneficial relationship. It propounded that "all the potential is present to commence a formidable joint venture". As part of the proposed joint venture, Bodycorp's aim was to achieve Recommended Repairer status for all Bodycorp franchisees.

23 Murdaca said that, after discussing the Business Plan with AAMI, Bodycorp went about implementing the plan. This included a checklist that Bodycorp would use to ensure that things were done by the franchisees in accordance with Bodycorp's standards. It also included offering a 5 year warranty to AAMI.

24 Murdaca gave evidence that he gave the Business Plan to 2 senior executives of AAMI, being Robert Belleville ("Belleville") and Don Casboult ("Casboult"). However, a contemporaneous memorandum drafted by Ian Rogers ("Rogers"), then of AAMI,[3] suggested the Business Plan was provided to Belleville and Rogers. That memorandum, dated 5 July 1995, indicated AAMI's acceptance of Bodycorp's proposal. It stated:**

As a result of [the meeting with Bodycorp], [Bodycorp] received from AAMI agreement with their concept and corporate ethos. [Bodycorp] were advised to finalise the list of members of their group and submit them to me as the contact point. Once we were in receipt of this list it was agreed that we would bring the relevant staff members together to meet and discuss the non AAMI recommended repairers on the list.

...

Following that [Bodycorp] were told we would advise [Bodycorp] regarding recommended repairer status for the non-recommended members of the group.

...

The attached list of repairers shows [14] in the group. The first [6] are currently recommended repairers. We need new agreements with them to include Bodycorp in the agreement. The last [8] are non recommended repairers and it is these we need to discuss.

(Emphasis added.)

**25 On 18 July 1995, a number of employees of AAMI met to discuss the status of the Bodycorp franchisees. These discussions included whether or not each of the franchisees ought to either remain or become Recommended Repairers. As a result of this process, some of the Bodycorp franchisees, who previously were not Recommended Repairers, were placed on AAMI's panel of Recommended Repairers.

26 Also around this time, AAMI was undertaking a general review of its Recommended Repairers who were not Bodycorp franchisees. AAMI's own internal correspondence refers to a group called the "Dirty 30",[4] and the fact that some of their then Recommended Repairers were giving active support to that group.

27 From time to time, AAMI continued to consider the suitability of smash repairers to be on the AAMI panel of Recommended Repairers.

28 A memorandum to the state manager of AAMI dated 8 September 1997 recorded that there were a total of 119 Recommended Repairers in metropolitan Melbourne. Of those, 19 were Bodycorp franchisees (2 of whom were on trial). That memorandum listed the Bodycorp franchisees that had been included on the AAMI panel of Recommended Repairers since March 1995. The memorandum recorded that in September 1995, Abbotsford, Berwick, Coburg, Laverton, Melton, Mornington, Preston and Sunbury were added to the panel. The memorandum also recorded that in 1996, Heidelberg and South Melbourne were added to the panel. Finally, it was recorded that, in May 1997, Moorabbin was included.

29 The memorandum dated 8 September 1997 also listed Bodycorp franchisees that already had Recommended Repairer status before they joined Bodycorp. Those Bodycorp franchisees were Clayton, Keilor, Maribyrnong, Noble Park, North Melbourne, Reservoir and Spotswood.

30 Each Recommended Repairer was required to enter into an agreement ("the Recommended Repairer Agreement") with AAMI. These were introduced by AAMI in the early 1990s. The Recommended Repairer Agreement was in a standard form, though, from time to time, it was varied in minor ways. Each Recommended Repairer Agreement was substantially in the same form, and included the following clauses or clauses similar to the following clauses:[5]**

In support of the Recommended Repairer Agreement AAMI will agree to:

1. Ensure all customers obtain at least one quotation from the Recommended Repairer ...
2. Assess vehicles on a competitive basis which means a minimum of [2] competitive quotes will be obtained on all non-driveable and driveable vehicles.
3. Arrange for at least one quotation from a Recommended Repairer for non-driveable vehicles and, in the absence of a request by the customer to obtain his own quotation and in the absence of a quotation from the repairer to whom the car was originally towed, AAMI will obtain 2 quotations from Recommended Repairers.

1. Ensure Recommended Repairers have every opportunity to submit competitive quotations ...
2. Provide equal opportunity to all Recommended Repairers by towing all non-driveable vehicles to, where available, AAMI Customer Service Centres to enable truly competitive quotes to be written.

1. Maintain records of all repairer transactions. In particular AAMI will provide monthly details of the number of jobs quoted and won along with the total repair cost authorised and average per job. This information will be strictly confidential between AAMI and the repairer. In addition it will assist both the repairer and AAMI to improve performance.

1. Pay Recommended Repairers within 30 days of receipt of invoice.
2. Provide to each repairer an AAMI Recommended Repairer sign.

1. Not transfer, in the event of the repair business being sold, the entitlements under this Agreement and the AAMI Recommended Repairer sign.

...

Termination of this Agreement shall be made in writing by either party providing 14 days notice of termination.

This Agreement replaces any prior agreement between AAMI and the repairer.

**31 This represented a bilateral agreement between AAMI and the Recommended Repairer. Bodycorp franchisees that achieved the requisite status were required to enter into such an agreement in their own right; ie independent of Bodycorp. Thus, it is important to indentify the relationships that existed between each of Bodycorp, AAMI and its franchisees leading up to the events in November 1997.

32 Notwithstanding the overtures contained in the Business Plan, including reference to a joint venture, no contractual relationship was entered into, formal or otherwise, between Bodycorp and AAMI before November 1997.[6] It seems, from the communications within AAMI,[7] that at some point in 1995 it might have been contemplated that a tripartite arrangement was desirable. However, whatever might have been discussed (about which I have no direct evidence), it was common ground at trial that no legal relationship was ever created as a result of the 1995 discussions.

33 As between Bodycorp and its franchisees, franchise agreements were entered into. It is unnecessary to go into the details of the agreements beyond stating that they contained terms one would expect to see in many franchise agreements.[8] The only matter I refer to presently is the fact that, in the pro forma franchise agreement, restrictive covenants provided restraints upon franchisees conducting business as a smash repairer upon the expiration of the franchise agreement. All of the franchisees had this clause removed prior to entering into a franchise agreement with Bodycorp.[9] In other words, each franchise had only agreed to enter into a franchise agreement with Bodycorp on the basis that no restraint of trade was to be imposed.

34 As may be seen from paragraphs 30 and 31 above, each Bodycorp franchisee who was a Recommended Repairer had a direct contractual relationship with AAMI. Further, in relation to Bodycorp franchisees who were not Recommended Repairers, they fell into 2 categories. Some of these franchisees were placed on trial in an attempt to become a Recommended Repairer, and others were simply given work (referred to as "overflow work"), when there was a surplus of work that could not be handled by Recommended Repairers.

35 In summary, before 1997, no agreement had ever been reached formally to link each of the relationships together. As a consequence, AAMI was able to deal with the Bodycorp franchisees in such manner as it saw fit, subject to the contractual terms of any Recommended Repairer Agreement. In my view, this is of some considerable significance when considering the events in and after November 1997.**

36 The claims made by Bodycorp are set out in its further amended statement of claim ("FASOC").

**37 Two causes of action are pleaded against Maisano; namely, breach of contract and inducing breach of contract.

38 Bodycorp alleges that Maisano breached a franchise agreement entered into between Bodycorp and Maisano ("the Moorabbin Franchise Agreement"). The Moorabbin Franchise Agreement was for a fixed term of 3 years, expiring 2 February 1999. Pursuant to the Moorabbin Franchise Agreement, Maisano was required to pay Bodycorp a management fee of 8% per annum of gross payments received by Bodycorp on behalf of Maisano. There was an option to extend the Moorabbin Franchise Agreement for 3 further terms of 3 years each.

39 It was alleged that on or about 6 July 1998, Maisano breached the Moorabbin Franchise Agreement by ceasing to operate as a franchisee of Bodycorp. The loss claimed by Bodycorp was for the 8% management fee for the remainder of the term (which Bodycorp would have received if Maisano had not ceased operating as a Bodycorp franchisee). Losses were also claimed in relation to rebates Bodycorp says it would have earned.

40 Further or alternatively, it was alleged that in the period between March 1998 and July 1998, Maisano stated to each specified franchisee (collectively "the Category A Franchisees")[10] words to the effect that:**

(a) It would be in the best interests of the franchisee to terminate its franchise agreement with [Bodycorp]; and

(b) If it did so, the franchisee would continue to be recognised by AAMI as a Recommended Repairer, but would no longer have to pay an 8% management fee to [Bodycorp],

The particulars of the Statement were to the effect that the Statement was oral and made to each of the Category A Franchisees.[11]

**41 It was alleged that in making the Statement to each of the Category A Franchisees, Maisano was aware of the existence of a franchise agreement between that franchisee and Bodycorp. It was further alleged Maisano intended that the franchisee should decide to terminate its franchise agreement with Bodycorp and, in so doing, breach the agreement. It was also alleged that each Category A Franchisee was, in fact, induced to breach the relevant franchise agreement and ended it before the fixed term of that agreement had expired.

42 The loss claimed by Bodycorp included not only the loss of the management fee of 8% for the remainder of the term of each of the franchise agreements in question, together with the rebates for that period, but also for 3 further 3 year terms in relation to each franchise. This was claimed on the basis that "each of the former franchisees would probably have exercised its option to extend the term".**

**43 Precisely the same representations the subject of the Statement were alleged to be made by AAMI and Martin between February 1998 and December 1999 to different franchisees (collectively "the Category B Franchisees").[12] These representations were defined as "the AAMI Statement".[13]

44 The allegations referred to in paragraph 41 above were made, with the necessary changes as to identity, in relation to AAMI and Martin and the Category B Franchisees. Loss was claimed in a similar vein, including on the basis that it was assumed each of the Category B Franchisees would have exercised its option to extend the term of the franchise agreement for 3 further 3 year terms.

45 As against AAMI, claims were made for breach of contract. As noted above, Bodycorp alleged an agreement between it and AAMI made in or about November 1997. That agreement was said to provide that, if at any time before 29 June 2000 a Bodycorp franchisee who was a Recommended Repairer ceased to be a Bodycorp franchisee, AAMI would take various steps, the effect of which would be that the former franchisee could no longer conduct its business as a Recommended Repairer of AAMI for 6 months. This agreement of November 1997 was alleged to have been "embodied in a written document dated 29 June 1998". It was common ground between Bodycorp and AAMI that the document executed on 29 June 1998 contained the entirety of the terms of the agreement between the parties.

46 The AAMI Agreement included the following provisions:**

1. To facilitate the repair of motor vehicles AAMI appoints certain repairers as AAMI Recommended Repairers.

1. By a letter dated 10 November 1997 Bodycorp alleged that in about 1995 AAMI and Bodycorp entered an agreement that authorised or alternatively AAMI represented that Bodycorp was authorised, to appoint repairers as AAMI Recommended Repairers.
2. AAMI denies that it entered any agreement or alternatively made the representation to Bodycorp to the effect alleged.
3. The parties have entered this agreement to clarify their respective rights and interests.

1.1 AAMI must invite the AAMI Recommended Repairers listed in Schedule 1 to execute a new recommended repairer agreement in the terms of Attachment "A".[14]

...

1.3 AAMI agrees that if any of the AAMI Recommended Repairers listed in Schedule 1 cease to be a Bodycorp franchisee the (sic) ("former Bodycorp franchise") at any time within the two year period following the execution of this agreement then:

(a) AAMI will promptly give written notice terminating the AAMI Recommended Repairer Agreement with the former Bodycorp franchisee;

(b) AAMI will take reasonable steps to ensure that AAMI Recommended Repairer signs are not displayed by the former Bodycorp franchisee within 21 days of the giving of notice under clause 1.3(a);

(c) AAMI will in the ordinary course not request the former Bodycorp franchisee to prepare a quote for the repair of a damaged car for a period of six months from the giving of notice pursuant to clause 1.3(a);

(d) AAMI will not re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer for a period of six months from the giving of notice pursuant to clause 1.3(a); and

(e) AAMI may in its absolute discretion re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer six months after the giving of notice pursuant to clause 1.3(a).

...

2.4 Bodycorp acknowledges and agrees that:

(a) AAMI retains the right to terminate its Recommended Repairer Agreements on the terms of the agreements. Without limiting the generality of this acknowledgement Bodycorp agrees that AAMI may terminate the Recommended Repairer Agreement with any Bodycorp franchisee on the giving of notice in writing by AAMI;

(b) If AAMI terminates a Recommended Repairer Agreement with a Bodycorp franchisee Bodycorp has no right, title, interest or authority to appoint any other person (including a Bodycorp franchisee) to replace the repairer whose agreement has been terminated.

(c) Bodycorp has no right, title or interest in an AAMI Recommended Repairer Agreement or Recommended Repairer sign; and

(d) AAMI has the sole discretion to appoint Recommended Repairers.

2.5 In respect of AAMI's obligations in paragraph 1.3 of this agreement Bodycorp acknowledges and agrees that:

...

(b) AAMI may and in the ordinary course does and will continue to authorise non-recommended repairers perform repair work if the non-recommended repairer's quote is the most competitive and the AAMI non-recommended repairer has the apparent capacity and equipment needed to perform the repair;

...

(d) AAMI may in its absolute discretion re-appoint the former Bodycorp franchisee as an AAMI Recommended Repairer at any time after six months after the giving of a notice pursuant to clause 1.2(a) or 1.3(a).

2.6 Bodycorp hereby releases and forever discharges AAMI from all actions, suits, causes of action or claims of any type in any way related to the subject matter of the letter from Bodycorp to AAMI dated 10 November 1997.

**47 The AAMI Recommended Repairers listed in schedule 1 (for the purposes of cl 1.3) were the Bodycorp franchisees located at (listing them in the order in which they appear) Mornington, Berwick, Laverton, Coburg, Preston, Heidelberg,[15] South Melbourne, Moorabbin and Sunshine. To this list can also be added Melton, which was the subject of a separate clause; namely cl 1.2 (which, in broad terms, was similar in effect to cl 1.3). Curiously, and without any explanation as to why, the FASOC pleaded the obligations imposed on AAMI pursuant to cl 1.3 arose in relation to all Bodycorp franchisees who ceased to be a Bodycorp franchisee; ie the allegation went well beyond the Bodycorp franchisees listed in schedule 1.

48 Having pleaded the obligations set out in cl 1.3 of the AAMI Agreement, Bodycorp alleged that, after consultation with AAMI, Bodycorp terminated the Berwick franchise in or about July 1998. Further, it alleged that by reason of the termination of the Moorabbin and Melton franchises, AAMI provided notices, pursuant to the AAMI Agreement, that each of those 3 former franchisees were terminated as Recommended Repairers and were required to return their Recommended Repairer signs.

49 The FASOC then alleged that AAMI breached the AAMI Agreement in a number of ways. Bodycorp alleged AAMI either failed to give the requisite notice to the other franchisees that had terminated[16] or, in the case of Moorabbin, Melton and Berwick, revoked the notice which it had previously given terminating the Recommended Repairer status of those franchisees. A further breach alleged was the failure of AAMI to require any of the former franchisees to remove their "Recommended Repairer" signs. Finally, it was pleaded that, by continuing to recognise each of the former franchisees as Recommended Repairers and to provide work to them, AAMI further breached the AAMI Agreement.

50 It was then alleged, by reason of those breaches, AAMI had no need to appoint a Recommended Repairer to replace the former franchisees. Bodycorp claimed that, as a result, Bodycorp was unable to enter into new franchise agreements with any new franchisees in the areas serviced by the former franchisees.

51 As a consequence, Bodycorp claimed it had suffered loss and damage. In substance, this loss was said to arise from the loss of opportunity to enter into new franchise agreements.

52 A further claim against AAMI was made by Bodycorp for "work and labour done". Until day 13 of the trial, the claim was for the sum of $700,000. The claim was based upon an allegation that invoices had been remitted to AAMI but had not been paid by AAMI. Although the invoices were for work done by the franchisees of Bodycorp, Bodycorp claimed to be entitled to the moneys the subject of those invoices. It was alleged Bodycorp was an assignee of a right of each of its franchisees to be paid by AAMI for vehicle repair work done by the franchisees for or on behalf of AAMI. This claim for $700,000 was particularised very specifically. It was said that the "financial records of [Bodycorp] disclosed a deficiency of $700,000". It also said copies of those records were available for inspection.

53 There was no other basis on the pleading by which Bodycorp sought to quantify this claim. It was not until 22 May 2013 (ie more than 2 weeks after the trial had commenced) that Bodycorp put AAMI on notice that it sought to plead a different basis upon which to establish this claim.

54 After leave was granted by the court on 24 May 2013, the claim made for work and labour done was increased to $1,445,335. Further, the basis upon which it was calculated was completely different. In short, the means by which this new claim was made was substantially by reference to documents produced by AAMI as part of its business. These documents were used by Bodycorp's expert, Gregory Blashki ("Blashki"),[17] to prepare an expert report dated 3 March 2013 ("Bodycorp's Expert Report"), which was tendered at trial.

55 Bodycorp also alleged a further agreement made in or about September 1998 between Bodycorp and AAMI. It was pleaded to be partly oral and partly to be implied. It was alleged that Bodycorp would procure that the South Melbourne franchisee would cease quoting for AAMI at its North Melbourne customer service centre, and, in return, AAMI would recognise the Tottenham franchisee of Bodycorp as a Recommended Repairer and would provide quoting opportunities at North Melbourne to the Tottenham franchisee ("the South Melbourne Agreement").

56 It was alleged that Bodycorp duly procured that South Melbourne cease quoting at North Melbourne. It was further alleged that, in breach of the South Melbourne Agreement, in December 1998 AAMI ceased to recognise the Tottenham franchisee as a Recommended Repairer and also ceased to request that franchisee to prepare quotes for AAMI. Until 24 May 2013, loss was claimed in relation to the South Melbourne Agreement in the sum of $220,000. Belatedly, the claim was increased to $330,985. Reliance was placed on Bodycorp's Expert Report to justify the larger claim.

57 The FASOC also contained a claim alleging certain conduct was in breach of the Trade Practices Act 1974 (Cth). Although this claim remained the subject of the pleadings, on day 1 of the trial Bodycorp informed the court that this claim was no longer being pursued.**

**58 An agreement was alleged to have been made, in or about September 1995, between Bodycorp and All States. It was particularised as being partly in writing, partly oral and partly to be implied. According to the FASOC, it was agreed that if Bodycorp established a franchise in a particular area and Bodycorp undertook to be responsible to All States for the quality of the repair work done by that franchisee, All States would send work to that franchisee ("the All States Agreement").

59 It was alleged that, pursuant to the All States Agreement, between September 1995 and September 1998, All States provided work to the Bodycorp franchisees and Bodycorp was held responsible by All States for the work so provided. It was alleged that, in September 1998, All States ceased to provide work to Bodycorp franchisees and as a result Bodycorp suffered loss and damage in excess of $750,000. This claim was made on the basis that Bodycorp had been denied the opportunity to derive management fees from work that would have been done by Bodycorp franchisees.**

60 As the case has now been dismissed against the Melton Defendants, I shall be brief. The FASOC set out claims for breach of contract against Melton. Further, a claim was made against Munro for inducing breach of contract which replicated the claim that was made against Maisano.

61 It is convenient to deal first with the various contract claims made by Bodycorp.

**62 The issues in relation to the contract dispute between Bodycorp and Maisano are easily identified. Bodycorp and Maisano accept the existence of the Moorabbin Franchise Agreement. They accept it was in writing, was entered into on 2 February 1996 and that it was for a term of 3 years. Maisano admits that on or about 8 July 1998 (ie 2 days after Bodycorp's alleged date) he ceased operating as a franchisee. He says he did so because the Moorabbin Franchise Agreement was terminated by a letter dated 8 July 1998 sent by Maisano's solicitors to Bodycorp ("the Termination Letter"). Accordingly, the only real issue is whether Maisano was acting lawfully when he purported to terminate, and ceased to continue to act in accordance with the terms of, the Moorabbin Franchise Agreement.

63 By his defence, Maisano alleged that Bodycorp breached the Moorabbin Franchise Agreement and thereby repudiated the agreement. Accordingly, the Termination Letter was sent on 8 July 1998, accepting that repudiation and thereby bringing the Moorabbin Franchise Agreement to an end.**

**64 The breaches alleged by Maisano against Bodycorp are twofold. Both of them relate to appointments or purported appointments of new franchisees by Bodycorp within Maisano's franchise territory ("the Territory"). There was a dispute as to what the Territory encompassed. There were also issues as to the nature and extent of Bodycorp's conduct in its dealings with the new, or, at least, proposed new, franchisees.

65 It would be expected that the Moorabbin Franchise Agreement would make it clear as to what the Territory was. This is not the case. Because of the unsatisfactory state of the documentation concerning the Moorabbin Franchise Agreement, it is necessary to refer to some evidence about its execution, and the events leading up to its execution.

66 "The Territory" was a defined term in the Moorabbin Franchise Agreement. It was defined by reference to schedule 8. Schedule 8 defined the Territory "[a]s represented in the map attached". The map attached was a photocopy from page 77 of the Melways ("the Melways Map"). The Melways Map in the court book had no markings on it at all and encompassed an area from, in the north west, Brighton East, to, in the south west, Cheltenham, to, in the south east, Heatherton and to, in the north east, Oakleigh South. More particularly for the purposes of this dispute, it included Bay Road in Cheltenham, from Nepean Highway to Bluff Road ("the Bay Road Area").

67 The Moorabbin Franchise Agreement contained in the court book is unexecuted. Bodycorp was unable to produce an executed copy, and had not discovered such a document previously.[18]

68 When asked about the Territory, Murdaca was not able to give clear evidence about its precise dimensions. He was also unable to give any meaningful explanation as to why the executed document was unable to be produced, other than that Bodycorp had had a number of lawyers over the years. He also could not give an explanation as to why the original signed version of the Moorabbin Franchise Agreement had never been accounted for in any affidavit of documents filed on behalf of Bodycorp.

69 In light of the fact that an executed version of the Moorabbin Franchise Agreement was not produced, evidence was led by Maisano about the circumstances giving rise to its execution. Maisano never had an executed copy of the Moorabbin Franchise Agreement; upon its execution Bodycorp took the document into its custody. However, Maisano did have in his possession a document in precisely the same form as that produced by Bodycorp, save that the Melways Map had green highlighting specifically identifying the Territory for the purposes of schedule 8 of the Moorabbin Franchise Agreement. The green highlighting showed a smaller area than the entire map on the Melways Map. But most of the Melways Map was incorporated in the highlighted area. In particular, the Bay Road Area was well within the boundaries identified. Maisano gave evidence that this map, as highlighted, replicated the document he and Murdaca executed, being the Moorabbin Franchise Agreement.

70 Thus, on the 2 unexecuted versions of the Moorabbin Franchise Agreement put before the court, the Territory is either the whole of the Melways Map, alternatively the area within the green highlighting on the Melways Map. Either way, both incorporate the Bay Road Area. Accordingly, unless there were compelling evidence from Bodycorp as to different dimensions of the Territory, there can be no proper basis for suggesting that the Bay Road Area was not within the Territory.

71 Maisano gave evidence that immediately before signing the Moorabbin Franchise Agreement he and a representative of Bodycorp, Charles Pellegrino ("Pellegrino") went through an earlier draft Maisano had been given. Maisano said together they went through the earlier draft with the document to be executed and compared them page by page. Maisano said this was done to ensure that the details were the same as the earlier draft, which had been agreed to at an earlier meeting. Maisano also said the agreed area of the Territory was the subject of discussions at the initial meeting between Maisano and Bodycorp (T1180.04). Murdaca did not give any contradictory evidence in this regard.

72 Pellegrino was an accountant acting for Bodycorp at the time. He was not called to give evidence on behalf of Bodycorp. Indeed, no one was called on behalf of Bodycorp to corroborate Murdaca's evidence.

73 Maisano stated that, as part of the execution process, each page was signed, including the Melways Map. Maisano was also able to give evidence that an erroneous address referred to in schedule 3 had not been corrected, as previously requested by Maisano. He said this error was amended as part of the execution process. In summary, Maisano was able to give very specific evidence about this process and, in particular, that the Melways Map as produced by him from his copy was the one the subject of the executed version.[19]

74 As I have stated above, Murdaca suggested that the Bay Road Area was not within the Territory. However, his evidence in this regard was very vague. In particular, he was unable to point to any conversation or document which identified what Bodycorp said was the Territory. Indeed, Murdaca stated that at the time it was Pellegrino and one other person that were preparing the maps for the various franchises. When challenged about the size of the Territory, Murdaca put his evidence in terms of his belief as to the Territory rather than giving direct evidence. In closing submissions, counsel for Bodycorp accepted there was no evidence from Bodycorp as to what the Territory was, but submitted, based on Murdaca's evidence, I should find it did not include the Bay Road Area.

75 There are some further observations to be made on this issue. Notwithstanding the issue of the Territory was directly raised in Maisano's defence well before the trial, no allegation was made by Bodycorp on the pleadings as to what it said the Territory was.

76 Further, outlines of evidence were filed on behalf of the parties. This issue was not referred to in Bodycorp's outlines. It appears the first time Bodycorp sought to make an issue about the extent of the Territory was when Murdaca gave his evidence-in-chief on day 2 of the trial.

77 Finally on this issue, evidence was led to demonstrate the integrity of the Melways Map with highlighting, as produced by Maisano. His solicitor gave evidence that in 2000 a brief was sent to counsel which contained the unexecuted Moorabbin Franchise Agreement, including the Melways Map with highlighting. At that time it was a bound document. The solicitor said this bound document was the same document Maisano had discovered in this proceeding and had tendered in evidence. He said he removed the binding himself for the purposes of photocopying and did not rebind the document.

78 In the circumstances, the only finding properly open to the court is that the Melways Map with highlighting, being the version produced by Maisano, reflects the actual Melways Map in the Moorabbin Franchise Agreement executed by Maisano and Murdaca on behalf of Bodycorp.**

E.1.3 The importance of the terms relating to the Territory

79 It is now necessary to refer to the clauses in the Moorabbin Franchise Agreement relevant to the Territory. Those clauses are as follows:

2.2 The Franchisee acknowledges that this Franchise is not an exclusive franchise and that the Franchisor may grant other Bodycorp Franchises outside the Territory and, subject to the prior consent of the Franchisee ... inside the Territory.

...

1. In consideration of the Franchisee paying the Franchise Fee and performing all other obligations under this Agreement, the Franchisor will, as and when it deems necessary or appropriate throughout the duration of this Agreement:

...

3.15 Subject to ... the Franchisee honouring its obligations under this Agreement, not open another Business or grant another Franchise within the Territory without the prior written consent of the Franchisee.

**80 Of their nature, it would be expected that both a franchisor and a franchisee would consider terms concerned with the territory of a franchise to be essential to any agreement to enter into a franchise. In relation to a franchisor, the territory confines the area in which a franchisee may exploit the business sold by the franchisor. Equally, such clauses allow a franchisee to have some protection from competition and to establish some goodwill within a particular area. Although the terms of the particular contract need to be considered, speaking generally, it would be expected that terms of a contract which define or protect the territory of a franchisee would be understood as being essential promises, being of such importance that the parties would not have entered into the contract unless they were assured that both parties would respect the territory of the franchise.[20]

81 Clause 2.1 granted Maisano the right to operate the business within the Territory. Maisano was required to pay a franchise fee for this right. Having reviewed the whole of the Moorabbin Franchise Agreement, I am of the opinion that Bodycorp's obligation as set out in cl 3.15, and as reflected in cl 2.2, contains an essential promise, the breach of which would entitle Maisano to terminate.

82 The evidence shows that there was a direct relationship between the location of a Bodycorp franchisee and the ability of that franchisee to quote for work for AAMI. Also, for work other than for AAMI, the value and potential profitability of a Bodycorp franchise would be likely to be greatly diminished if Bodycorp were able to authorise other Bodycorp franchisees to establish businesses proximate to Maisano. The fact that written consent from Maisano was required before the Territory could be infringed also suggests the essentiality of the terms relating to the Territory.

83 The question of the essentiality is to be derived from "the intention of the parties as appearing in or from the contract".[21] However, if it be relevant, the view I have formed is fortified by discussions that occurred prior to the Moorabbin Franchise Agreement being entered into.[22] Maisano gave evidence that Murdaca told him that there was a guarantee that Maisano would get an allocated area and that no one could quote in the area. Murdaca said it would be a restricted area. Further, in cross-examination, Murdaca accepted that the Territory was important to both Bodycorp and Maisano. Murdaca accepted all franchises were governed by a territory.

84 Accordingly, the terms of the Moorabbin Franchise Agreement (and the discussions between the parties) clearly demonstrate that the parties considered the Territory to be fundamental to the relationship of franchisor and franchisee. Also it is plain that it was the intention of the parties that they act in accordance with the existence and exclusivity of the Territory (subject to the exception of prior consent as expressly provided). In the circumstances, if Bodycorp were to deliberately infringe the relevant clauses by appointing a new Bodycorp franchisee within the Territory without the permission of Maisano, it would be expected that such a breach of contract would justify Maisano terminating the Moorabbin Franchise Agreement if he was so minded.**

**85 There is no doubt on the evidence that Bodycorp investigated and then pursued the opportunity of appointing another franchisee within the Territory. This occurred in 1998 when the Moorabbin Franchise Agreement was still on foot. The issue is whether the conduct engaged in by Bodycorp actually gave rise to a new franchise or new franchises within the Territory, and thereby breached the Moorabbin Franchise Agreement. There is also an ancillary issue as to what effect, if any, the conduct may have had on Maisano's business.

86 Maisano alleges that on 2 separate occasions Bodycorp sought to appoint a franchisee within the Territory. He alleges that in relation to 1 of these, namely Body Line Panel Works Pty Ltd ("Body Line"), he became aware of the appointment in early July 1998. The evidence Maisano gave suggested he was first aware of this issue in April 1998. In relation to the other franchisee, Cheltenham Accident Repair Centre Pty Ltd ("Cheltenham Accident Repair"), he alleges that he learned of this after he had already terminated the Moorabbin Franchise Agreement. However, he relies upon it as justifying his conduct in terminating the Moorabbin Franchise Agreement.[23]

87 In relation to Body Line, Murdaca was directly involved in seeking to have Body Line become a new franchisee. Twice he attended the proposed premises at 321 Bay Road, which was within the Bay Road Area. Murdaca did so to assess the suitability of the premises and the business, with the intention of Body Line becoming a franchisee. He even took representatives of All States, including Garry Austin (the national operations manager[24]), to these premises so they could inspect them.

88 Also Murdaca executed a franchise agreement on behalf of Bodycorp in early 1998; it is undated. The franchise agreement has a common seal of Body Line affixed to it. It also has a signature for that company. Murdaca said that after this document was executed he soon found out it was "useless". He said this was because the person who signed on behalf of Body Line was not a director.

89 There is also another franchise agreement signed by Body Line. This agreement is dated 25 March 1998, and was executed by Anke Kaufer, who was a director of Body Line at the time. This agreement was also executed by Rogers on behalf of Bodycorp. Rogers was employed by Bodycorp at the time. Murdaca gave evidence that, as the document did not contain his signature, Bodycorp did not enter into any such agreement. Nevertheless, Murdaca did concede that the intention of Bodycorp was to enter into such an agreement.

90 There are at least 2 difficulties for Bodycorp arising out of these events concerning Body Line. First, there is no specific evidence as to when Bodycorp learned of the apparent absence of authority of the person who signed on behalf of Body Line. Given Murdaca was giving evidence in mid 2013 about events that occurred back in 1998, there is a considerable margin for error as to how soon it was that this position became apparent. Equally, in relation to the document executed by Rogers on behalf of Bodycorp, it is unclear as to when Bodycorp decided not to act in accordance with that signed document. Other evidence would suggest that whichever signed agreement was acted upon by Bodycorp, the intention of Bodycorp to treat neither of these documents as binding did not occur until after 8 July 1998.[25]

91 Secondly, at the time Murdaca, on behalf of Bodycorp, executed the franchise agreement with Body Line, he believed he was executing a legally binding agreement. He gave specific evidence that that was his view. He also met with the director of Body Line personally. Accordingly, regardless of the legal effect of the document, there can be no doubt as to what the intention of Bodycorp was, namely to appoint another franchisee within the Territory (as that term was defined in the Moorabbin Franchise Agreement). The same observation may be made in relation to the document signed by Rogers. Bodycorp's intention, objectively viewed with the conduct it engaged in, was inconsistent with its obligations under the Moorabbin Franchise Agreement.

92 I now turn to the other proposed franchisee. The knowledge of Maisano in relation to Bodycorp establishing another alternate franchisee within the Territory arose from a document filed in this proceeding by Bodycorp.

93 In 2007, Bodycorp sought leave to amend its case by a further amended statement of claim. This proposed pleading attempted to introduce further allegations concerning the conduct of the defendants. Leave to make those amendments was refused both at first instance and on appeal.

94 It is not necessary to go into the detail of much of the further amended statement of claim as proposed in 2007. It is sufficient for present purposes to note that the amendments included allegations that as "at February [1998], and at all relevant times thereafter" there were franchise agreements in place between Bodycorp and various franchisees, including "Cheltenham Accident Repair Centre Pty Ltd trading as Bodycorp Cheltenham". The allegations were that the goodwill of Bodycorp had been developed by developing franchises, including "Bodycorp Cheltenham". Finally, it was suggested that various persons were induced to terminate their franchise agreement, including the franchise agreement in relation to Cheltenham. It was said that this occurred in April/May 1998.

95 A company search of Cheltenham Accident Repair shows it was registered on 16 June 1998, ie 1 or 2 months after the alleged inducement. The search also showed that from 1 July 1998 (until 8 November 2009) one of its principal places of business was 321 Bay Road, Cheltenham.

96 Murdaca said that he gave instructions in relation to the further amended statement of claim advanced in 2007. He gave evidence that there were other influences at the time. There was a funder involved and he was also given advice on the various issues. However, his evidence was clear that, having been given advice, he gave instructions as to the content of the proposed pleading in 2007. It follows that in 2007 Bodycorp gave clear and unequivocal instructions that a Bodycorp franchisee was established by Bodycorp in the Territory in 1998.

97 There is another fact relevant to determining Bodycorp's intention in 1998. The relationship between Murdaca and Maisano became problematic in early 1998. Murdaca conceded that by February 1998 their relationship had become "strained". The breakdown in the relationship arose largely out of events concerning another shop at Malvern. Those events give rise to a dispute over moneys paid by Maisano. It is unnecessary to go into that matter here. However, the difficulty in the relationship makes it all the more likely that Murdaca was looking for an alternative Bodycorp franchisee to conduct work in the Territory without the consent or involvement of Maisano.

98 Therefore, although the facts are not clear as to precisely when the events occurred, there are 2 separate bases upon which it can readily be established by Maisano that Bodycorp intended to establish a new franchise within the Bay Road Area at 321 Bay Road, Cheltenham. It also seems that work was being referred to this new franchise. I draw this conclusion not so much from the representations made by All States to Maisano, but from the fact that when confronted by Maisano with the suggestion of the existence of an alternate franchisee, Murdaca did not deny its existence.[26]

99 As to who the new franchisee was, I cannot be certain. The evidence is incomplete. Also what was pleaded in the proposed further amended statement of claim contradicts some of the objective evidence. However, it is not necessary for me to determine which of the 2 possible franchisees ultimately became the franchisee. I am satisfied on the evidence that at least 1 of them was a franchisee within the Territory.**

E.1.5 Was Bodycorp in breach as at 8 July 1998?

**100 The only remaining issue is whether the breach or breaches by Bodycorp were continuing as at 8 July 1998, when Maisano purported to terminate the Moorabbin Franchise Agreement. Given the very extensive lapse of time between these events and the trial, there is considerable uncertainty about precisely when these events occurred. However, there are some matters which, in my view, clearly indicate that it is highly likely the breach was continuing at the time the Termination Letter was sent by Maisano.

101 First, before 8 July 1998, Murdaca discussed this issue with Maisano and Murdaca never denied the existence of a new franchisee. Maisano learned of another franchisee in the Territory in April 1998. It was because of this, he said he was upset with Bodycorp from April until July 1998. He confronted Murdaca in April, only to be told by Murdaca that the franchisee had been signed up because All States had excessive workload for the area.[27]

102 As a result of this information, Maisano contacted All States. A person from All States, by the name of Jillian, informed Maisano that she had been told by Bodycorp to split work between Maisano and the new franchisee in the area. Maisano said he then spoke again to Murdaca about the issue and discussed it with him at length. At no time was there any suggestion by Murdaca that there was not a new franchise on foot within the Territory.

103 During one of these discussions about the new franchisee, Maisano said it was the last straw and that he was going to get advice about terminating the agreement. Again, there was no suggestion that Murdaca comforted Maisano by stating that there was no alternate franchisee. The last of these conversations was in mid June 1998, when Maisano said to Murdaca that he "was going". It was accepted in closing submissions that Bodycorp did not dispute this conversation occurred in mid June 1998. When I inquired of counsel for Bodycorp why Murdaca did not say in June 1998 that the new franchise was not going ahead if that was Bodycorp's actual position, he said he could not answer that. The obvious answer is that as at mid June 1998 when the issue was last discussed, Bodycorp did intend to have (and probably already had) another franchisee in the Bay Road Area.

104 In summary, there were a number of occasions where Murdaca had the opportunity, prior to the Termination Letter being sent, to indicate to Maisano that there was no alternate franchisee. Notwithstanding that the very subject matter of the discussion was an alternate franchisee taking work away from Maisano, Murdaca said no such thing.

105 Secondly, after the Termination Letter was sent on 8 July 1998, there was a discussion between Maisano and Murdaca. Again, during that discussion Murdaca made no suggestion that there was no alternate franchisee. Murdaca said in this discussion that he wanted to meet with Maisano to discuss matters.

106 The fact that a conversation between Maisano and Murdaca took place is recorded in a letter dated 13 July 1998. The letter from Maisano's solicitors to Bodycorp referred to alleged threats said to have been made by Murdaca in relation to Maisano's business. The short point is that it does not record any suggestion that Murdaca had said that there was no alternate franchise in the Territory at the time.

107 Thirdly, and tellingly, in response to a suggestion that the Termination Letter indicated Maisano's absence of consent to a new franchisee, Murdaca gave evidence under cross-examination that the franchise was not in the Territory and Bodycorp did not need his consent.

108 On 3 August 1998, solicitors for Bodycorp, somewhat belatedly, responded to the letters from Maisano of 8 and 13 July 1998. They asserted that the factual contention contained in the 8 July 1998 letter concerning the granting of an alternate franchise in the Territory was incorrect. Maisano gave evidence that this was the first time it had been asserted by Bodycorp that there was no alternate franchisee. Based on the evidence before the court, there is no reason to doubt Maisano's evidence. Indeed, Murdaca never at any time suggested that, prior to 3 August 1998, he disabused Maisano, in their discussions leading up to, or immediately after, the Termination Letter, of Maisano's belief of an alternate franchisee in the Territory.

109 It may well be that Bodycorp desisted in having an alternate franchisee after 8 July 1998. It also may be that in 1999 an alternate franchisee did operate in that area (as was suggested by Maisano). In my view, none of this evidence is helpful in determining the issues at hand. The simple question for me was whether or not, as at 8 July 1998, when Maisano purported to terminate the Moorabbin Franchise Agreement, there was a continuing breach of cll 2.2 and 3.15 of the Moorabbin Franchise Agreement. For the reasons set out above, in my view there was. Alternatively, if I am wrong about whether an agreement was actually entered into, there can be no doubt that Bodycorp unequivocally intended to enter into a further franchise agreement in the Territory, and that this intention continued until some time after 8 July 1998.[28]**

110 The final question to determine is whether Bodycorp's conduct entitled Maisano to terminate the Moorabbin Franchise Agreement. That question is determined by asking:

(1) Whether the conduct of Bodycorp is such as to convey to a reasonable person, in the situation of Maisano, renunciation either of the Moorabbin Franchise Agreement as a whole or of a fundamental obligation under it. Renunciation in this context means conduct which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations.[29]

(2) Does the breach of the Moorabbin Franchise Agreement justify termination by Maisano.[30]

In relation to the latter of these 2 questions, even if the breach is not the breach of an essential term, the impugned conduct may manifest an unwillingness or inability to perform in circumstances that are such that Maisano is entitled to conclude that the Moorabbin Franchise Agreement will not be performed substantially according to its requirements.[31] In relation to the former question, the High Court has observed that actions may speak louder than words.[32] It seems this observation might be applicable to both questions. As the High Court noted, there is an overlapping in relation to the 2 questions posed.

**111 The conduct of Bodycorp up until 8 July 1998 unequivocally conveyed to Maisano that it did not intend to perform the Moorabbin Franchise Agreement in accordance with its terms. In particular, from April 1998 through to 8 July 1998, Bodycorp indicated on a number of occasions that it had appointed a new franchisee. Murdaca may have believed that it was not within the Territory, but I have found that he was wrong about this. In those circumstances, Maisano was entitled to conclude that Bodycorp renunciated the Moorabbin Franchise Agreement in relation to a fundamental obligation, namely the exclusivity of the Territory for the purposes of Maisano's business. That conduct alone entitled Maisano to terminate the Moorabbin Franchise Agreement.

112 If I am wrong about the classification of cll 2.2 and 3.15 as essential terms of the Moorabbin Franchise Agreement, in any event I find that the conduct of Bodycorp justified termination by Maisano by reason of the deliberate and continuing breach of the Moorabbin Franchise Agreement. The ongoing insistence by Bodycorp that it could maintain another franchisee within the Territory was sufficiently serious to entitle Maisano to terminate, even if cll 2.2 and 3.15 are properly classified as non-essential or intermediate terms.[33]

113 In circumstances where Bodycorp was confronted with the breach which Maisano reasonably claimed adversely affected his business, and Bodycorp decided to continue with its wrongful conduct, the breach must be viewed as serious. This is particularly so where the evidence suggests that the new franchisee had the direct effect of taking business that otherwise would have gone to Maisano. Even without that evidence, the inference open to be drawn is that a new franchisee located in the Territory would take business opportunities away from Maisano. Given there is only a finite number of quoting opportunities throughout metropolitan Melbourne that would have been available to Maisano, an additional franchisee in the same area, who was able to provide competitive quotes for AAMI's business, must necessarily affect Maisano's business adversely.

114 Further, even if, contrary to some of the evidence, it could be argued that Bodycorp failed to enter into a binding agreement with a new franchisee, the evidence shows it acted as if a new franchise agreement was in place. Bodycorp's continuing and unequivocal intention to seek to enter into a new franchise agreement and to allow business to occur as if a new agreement were on foot amounted to breach of the Moorabbin Franchise Agreement. Such conduct, of itself, would justify Maisano terminating the Moorabbin Franchise Agreement.[34]

115 The onus is on Maisano to establish that the conduct of Bodycorp definitely intimated that Bodycorp no longer regarded itself as bound, or was only willing to act inconsistently with its obligations.[35] Consistent with the onus being on the party acting on a repudiation, courts are slow to infer repudiation.[36] However, the onus has been discharged. The facts indicate that Bodycorp was only willing to perform the Moorabbin Franchise Agreement in a manner substantially inconsistent with its obligations and not in any other way.[37] That conduct entitled Maisano to terminate whichever way the relevant clauses of the Moorabbin Franchise Agreement are characterised.

116 In summary on this issue, Maisano was entitled to terminate the Moorabbin Franchise Agreement. The claim by Bodycorp for Maisano failing to perform in accordance with the Moorabbin Franchise Agreement after 6 or 8 July 1998 must fail.[38]**

117 As may be seen from section D.2 above,[39] there are 2 separate contractual claims against AAMI. I will deal with these in the order in which they are pleaded.

118 The relevant clauses of the AAMI Agreement have been set out in paragraphs 46 to 47 above.

**119 As noted in paragraph 47, there was a preliminary point to address in relation to the ambit of the claims made under the AAMI Agreement by Bodycorp. On its face, the AAMI Agreement was confined to the Bodycorp franchisees expressly referred to in it. There was simply no basis to seek to expand its operation beyond those Bodycorp franchisees. This was effectively acknowledged by Murdaca. He said the "agreement took forever" to get signed up and by the time the parties signed "half the business was gone by then". Accordingly, I proceed to address the issues raised on this confined basis.

120 Although AAMI appeared to dispute the issue, there is no doubt that the agreement was originally struck in November 1997. This is acknowledged in correspondence coming from AAMI.[40] However, nothing turns on the point of whether the agreement was entered into in November 1997 or on 29 June 1998. This is because it is pleaded that, whenever the agreement was struck, its terms were embodied in the written document executed on 29 June 1998, being the AAMI Agreement, and the breaches are alleged to have occurred after this date.

121 As noted in footnote 15 above, there is some issue about whether or not Heidelberg was a franchisee of Bodycorp. There is conflicting evidence in this regard. It is clear that Bodycorp referred to Heidelberg as a franchisee in some of its correspondence. However, it is also clear that Bodycorp put in place a licence arrangement in relation to that shop.

122 When confronted with the conflicting evidence, Murdaca was steadfast in his evidence that the relationship between Bodycorp and whoever was running Bodycorp Heidelberg was that of franchisor and franchisee.

123 Murdaca said a lease, a licence and a franchise were granted to Century Capital Pty Ltd ("Century Capital"), who then effectively on-licensed the operation on 3 separate occasions; first to the Lantieris of Bodycorp Airport West; secondly to Alex and Charlie Fasoulis, and thirdly to Overall Panels, the proprietor of which was Raymond Chaiban ("Chaiban") of Bodycorp Coburg. Murdaca also said that while Bodycorp itself had signed a Recommended Repairer Agreement with AAMI in respect of Heidelberg, Bodycorp never operated the Heidelberg business.

124 When challenged, Murdaca conceded the franchise agreement with Century Capital related to Malvern. Bodycorp was unable to produce a franchise agreement for Century Capital that was for the Heidelberg business. Murdaca also accepted that in correspondence with AAMI, Bodycorp asserted it owned the Heidelberg business, and that it had either leased the premises or licensed the business to Alex and Charlie Fasoulis and later to Chaiban.

125 When the correspondence referred to was put to Murdaca, he maintained it was Century Capital who had granted the respective leases or licenses, in line with the evidence referred to above.

126 Murdaca also said there was definitely a signed franchise agreement in relation to Heidelberg. None was produced. Murdaca said he would find it and make enquiries. If he did such things, they apparently came to nought. However, it seems there may have been a franchise agreement executed in February 1996. AAMI's records in 1997 recorded that this was the position.[41]

127 In addition to Murdaca, Mimma Lantieri ("Lantieri") gave evidence on this topic. She said they leased the shop from Bodycorp, and made lease payments accordingly. She said the Lantieris, through their company, L&M Panels Pty Ltd ("L&M Panels"), were a franchisee at Heidelberg. However, she accepted there was no written franchise agreement between L&M Panels (or the Lantieris) and Bodycorp.

128 The state of the evidence makes it very difficult for the court to reach a conclusion with any degree of certainty. Given L&M Panels had a written franchise agreement in relation to Airport West, it is possible that it was agreed that that document would apply, with any necessary amendments, in relation to Heidelberg without a further document being required. However, there was no evidence to this effect.

129 In any event, I am willing to proceed on the basis that L&M Panels was located at Heidelberg and was either a franchisee, or in a contractual relationship with Bodycorp similar to a franchise agreement which could be the subject of a breach if the proprietors of the business were wrongfully induced to end their relationship with Bodycorp. Consistent with this finding, it seems that the contemporaneous documents demonstrate that Heidelberg was being treated as a franchisee.

130 There is no real dispute that each of the Bodycorp franchisees referred to in schedule 1 of the AAMI Agreement ceased to be Bodycorp franchisees within the 2 year period referred to in cl 1.3 of the AAMI Agreement. However, AAMI did not accept this was the position. AAMI submitted, with the exceptions of Moorabbin and Melton, Bodycorp had failed to prove each of the relevant franchisees left in the 2 year period because the evidence was not specific as to the dates of departure.

131 Although there is not direct evidence on the point, the only proper inference open is that each of the relevant franchisees listed in schedule 1 of the AAMI Agreement ceased to be franchisees during the relevant 2 year period. This must follow from the fact that each of them had been franchisees for more than a year. The franchise agreements were for a 3 year term.[42] The only basis which might make it possible for any of them not to have ceased lawfully (or otherwise) in the 2 year period would be if they renewed their franchise agreements in the 12 months leading up to 29 June 1998. There is nothing in the evidence to suggest this occurred.[43]

132 As noted above,[44] the allegations do not include all franchisees listed in schedule 1; they are confined to franchisees that meet the description of Category A Franchisees, Category B Franchisees and are listed in schedule 1. It follows the allegations are limited to Berwick, Heidelberg, Moorabbin and Mornington. To this list, Melton must be added.[45]

133 There was no dispute that, in relation to the relevant franchisees, AAMI either failed to give written notice in accordance with cl 1.3(a) or, with respect to Moorabbin and Melton, withdrew notices previously given under that clause. The evidence in relation to Berwick is less clear. It lost its Recommended Repairer status, but this was said to be because of quality issues, rather than its relationship issues with Bodycorp. In any event, it appears its status was reinstated after it ceased to be a Bodycorp franchisee, but within the relevant 6 month period. It is also common ground that AAMI did not take steps to ensure that the AAMI Recommended Repairer signs were not displayed by those franchisees that ceased to be Bodycorp franchisees. Finally, AAMI's key witness, Martin, expressly acknowledged that none of these repairers lost its Recommended Repairers status after the relationship with Bodycorp ceased.[46]

134 Accordingly, there can be no doubt AAMI breached the AAMI Agreement. AAMI accepted this position, at least in relation to Moorabbin and Melton.**

E.2.1.2 Were the restraints of trade unreasonable?

**135 The key issue between Bodycorp and AAMI is whether or not the obligations imposed on AAMI pursuant to cll 1.2 and 1.3 of the AAMI Agreement are enforceable or whether they are unreasonable restraints of trade. Of course, the restraints of trade are imposed directly upon AAMI, rather than the Bodycorp franchisees. However, in considering whether or not the restraints are reasonable, the court should also consider the effect the restraints have upon the businesses of the franchisees. It was common ground between all the parties that to be a Recommended Repairer was extremely valuable to the Bodycorp franchisees.[47]

136 By imposing the restraints in cll 1.2 and 1.3, not only did Bodycorp seek to restrict the conduct of AAMI; Bodycorp also sought to shut down a substantial part of the business of its former franchisees while it attempted, or created the opportunity, to establish its own new franchisee in the relevant area. Indeed, Bodycorp expressly acknowledged this was the purpose of the restraints. Bodycorp submitted the benefit to be derived by Bodycorp was the ability to protect the integrity of its franchise network and having the opportunity to procure a Recommended Repairer for a new franchisee in the region served by the former franchisee. This was submitted to be a legitimate business expectation of Bodycorp.

137 There were a number of contemporaneous statements made by Bodycorp as to why they sought to enforce the restraints against AAMI. For example, in a letter dated 12 June 1998, Bodycorp's solicitors stated the restraints were "to protect our client's franchise business from any current or future Bodycorp franchisees leaving Bodycorp". AAMI submitted this was the very vice the court should find as being unreasonable. Also, both Murdaca and Ralph Murdaca gave evidence to the effect that Bodycorp wanted to be in a position where it could tell its franchisees that if they left Bodycorp they would lose their AAMI Recommended Repairer sign.

138 There is a further, and critical, fact that needs to be addressed. As set out in paragraph 33 above, the pro forma franchise agreement proffered by Bodycorp to its franchisees contained a restraint of trade in it. However, none of the executed versions of the franchise agreements between Bodycorp and its franchisees contained such a restraint. Thus, it is plain that, at the time each of the franchisees entered into the Bodycorp franchise agreements, they expressly rejected that agreeing to become a Bodycorp franchisee included the imposition of a restraint of trade if that franchise agreement ceased.

139 In this context, cll 1.2 and 1.3 of the AAMI Agreement must be seen as an attempt by Bodycorp, having failed to impose the restraint itself, to have a third party impose a restraint upon its own franchisees in the event that they ceased to be Bodycorp franchisees. In my view, this factual background at the time the AAMI Agreement was entered into[48] makes it a difficult task for Bodycorp to establish that the restraints the subject of the AAMI Agreement were reasonable.

140 A restraint of trade may be described as a contract in which one party agrees with any other party to restrict its liberty in the future to carry on trade with other persons not parties to the contract in such a manner as it chooses.[49] Bodycorp accepts cll 1.2 and 1.3 impose restraints of trade. Bodycorp also accepts that it has the onus of establishing that the restraint of trade sought to be imposed was reasonable.[50] To be enforceable, the restraint must afford no more than adequate protection to the interests of Bodycorp.[51]

141 When a court applies the doctrine of restraint of trade, the relevant matters are not to be considered on legal niceties or theoretical possibilities. They are to be determined by reference to the practical working of the restraint.[52] This includes the effect the restraint may have upon persons who are not parties to the relevant contract.[53]

142 A restraint of trade is contrary to public policy. The general position is that depriving a trader of the liberty to trade is contrary to the public interest.[54] It is void unless it "may be justified by the special circumstances of a particular case".[55] In order to do this, the covenantee (ie Bodycorp) must establish the restriction is reasonable by reference to both the interests of the parties and by reference to the interest of the public.[56] Reasonableness is a question of law.[57]

143 There are a number of reasons why, in my view, the restraint of trade sought to be imposed is unreasonable.

144 First, it seeks to severely harm[58] any Bodycorp franchisee who ceased to be a franchisee of Bodycorp, even if this were done lawfully at the end of a franchise agreement. In this regard, counsel for Bodycorp submitted that the use of the word "cease" in cl 1.3 of the AAMI Agreement should not be read down, but should be given its natural and ordinary meaning. He submitted that, even if a Bodycorp franchisee ceased to be a franchisee lawfully (eg the term of the franchise agreement came to an end), it would be the subject of the restraint. This construction of the clause was the only construction contended for by Bodycorp.

145 In circumstances where such a franchisee has received nothing in return for the restraint being imposed,[59] this would clearly be unreasonable in relation to it. This position is fortified by the fact that each Bodycorp franchisee successfully negotiated with Bodycorp not to be the subject of a restraint.

146 Secondly, Bodycorp sought to create a restraint of trade at a time when its franchisees were already starting to leave Bodycorp. Complaints were made to Bodycorp by some of its franchisees from 1997 onwards. In particular, a number of franchisees were unhappy about paying a fee of 8% of their turnover to Bodycorp. Indeed, in closing submissions counsel for Bodycorp submitted that the catalyst for the AAMI Agreement, and the restraints of trade agreed upon, was the fact that the Abbotsford franchisee wanted to leave the Bodycorp group. Therefore, Bodycorp was seeking to interfere with the freedom of trade enjoyed by the Bodycorp franchisees at the very point in time when that freedom was either in the process of being exercised, or its exercise was imminent (ie at the expiry of the respective franchise agreements).

147 Thirdly, the restraint prevents the Bodycorp franchisee from obtaining Recommended Repairer status in circumstances where it would be capable of obtaining that status independently of Bodycorp, either before or after the franchise agreement. Although some franchisees obtained such status while being a franchisee, and most likely with the assistance of Bodycorp, it would be unreasonable then to necessarily tie the ongoing maintenance of that status to remaining a franchisee of Bodycorp.

148 Nothing in the individual franchise agreements gives rise to this position. And yet counsel for Bodycorp boldly submitted that the court ought to uphold that the only way a franchisee would have been able to keep its Recommended Repairer sign would be to renew the franchise agreement with Bodycorp. He submitted that was a reasonable position because the franchisees in question had obtained their Recommended Repairer status after becoming franchisees. In my view, this circumstance does not make it reasonable for Bodycorp to maintain that, unless a repairer continues to be a franchisee, Bodycorp is entitled to deprive a repairer of the substantial part of its business.[60] Such a position places Bodycorp in an extraordinarily strong bargaining position. It was not the basis upon which the Recommended Repair status was obtained.

149 Fourthly, the restraint goes well beyond what was reasonable for the protection of Bodycorp's interests in seeking to have a franchisee with Recommended Repairer status in a particular area. There appears to be no good reason why Bodycorp could not seek to establish a competing business in the area which, if of a satisfactory standard and satisfactory to AAMI, could not obtain Recommended Repairer status in due course (whether at the expense of the former franchisee or otherwise). The evidence shows that AAMI reviewed its Recommended Repairers from time to time. The fact that the restraint made it easier for Bodycorp to achieve this desired outcome does not make it reasonable.

150 Fifthly, it was highly likely that Bodycorp was seeking to achieve an outcome by the restraint of trade which was futile or had minimal prospects of success. As at 29 June 1998 the relationship between Bodycorp and AAMI was less than harmonious. For Bodycorp to achieve its desired outcome, it required AAMI give Recommended Repairer status to a new franchisee in the relevant area within the 6 month period after cessation. Whether this would occur was entirely within the sole discretion of AAMI.[61] Given the state of the relationship, it was improbable that AAMI would ever agree to such an arrangement. This position is compounded by the fact that before the AAMI Agreement was entered into, AAMI stated in substance it would not be appointing any new Recommended Repairers for the foreseeable future.[62] If it be relevant, this position was maintained by AAMI throughout 1998 and 1999.

151 Both individually and collectively, the above factors demonstrate the restraint of trade was unreasonable at the time it was entered into.

152 For completeness, AAMI submitted it received no advantage in agreeing to the restraints of trade. AAMI submitted that all it obtained were the acknowledgements in cll 2.4 and 2.5 of the AAMI Agreement and they were merely restatements of the factual position as otherwise prevailed. As the issues the subject of the trial have not included such matters, I am in no position to state whether or not those clauses accurately state the true position. In any event, an acknowledgement of the kind given is adequate consideration, even if it reflected the true position, as it precluded Bodycorp from taking proceedings it otherwise might have taken in relation to those matters.[63]

153 Indeed, it is likely that the only reason AAMI was willing to give the restraints of trade that it did was because it saw that there was some risk in relation to allegations that Bodycorp might have otherwise made.[64]

154 In circumstances where AAMI led no evidence as to any adverse effect on its business by reason of the provisions of cl 1.3 of the AAMI Agreement, I am not in a position to find that the effect of those clauses on AAMI's business is another reason for finding that they are unreasonable. Indeed, the evidence shows that AAMI had a large number of Recommended Repairers throughout metropolitan Melbourne.[65] It is highly likely that the loss of up to 5 Recommended Repairers for a period of 6 months[66] would have very little impact on AAMI's ability to run its business.

155 Even though the restraints of trade would have a minimal impact on AAMI's business, this does not overcome the fact that the restraints were for an illegitimate purpose. That purpose compels the court to find that the restraints of trade are unenforceable.

156 Submissions were made by Bodycorp in relation to the superior bargaining power of AAMI. Those submissions were misconceived. If any unequal bargaining power existed,[67] the circumstances in which unequal bargaining power might be considered relevant to the issue of reasonableness is when the covenantee has superior bargaining power; not the covenantor. This circumstance would weigh against the restraint being upheld as reasonable.[68] However, it does not follow that if the covenantor has the stronger bargaining power, that results in a restraint of trade that is plainly unreasonable being treated otherwise.**

**157 The South Melbourne Agreement is alleged to have arisen out of the dissatisfaction of the South Melbourne franchisee with its success rate at the North Melbourne customer service centre of AAMI. The South Melbourne franchisee considered an inappropriate number of its quotes were being rejected by that centre.

158 Some time in 1998, Ralph Murdaca sought to address this issue on behalf of Bodycorp South Melbourne. Ralph Murdaca said he had a discussion with Linda Sparnenn ("Sparnenn"), the manager of the North Melbourne service centre. According to Ralph Murdaca, Sparnenn approached him and said she understood the Tottenham Bodycorp franchisee was seeking to get into the North Melbourne centre. Sparnenn said that there were too many repairers for the North Melbourne centre, but if South Melbourne was willing to start quoting in Moorabbin instead of North Melbourne, then "we will let Tottenham in".

159 As a result of this discussion, Ralph Murdaca said he then made inquiries of the South Melbourne franchisee. In accordance with what was discussed from that time on, the South Melbourne franchisee quoted at the Moorabbin customer service centre and ceased to quote at North Melbourne.

160 As is set out above,[69] it is said by Bodycorp that in December 1998 AAMI ceased to recognise the Tottenham franchisee as a Recommended Repairer. This allegation cannot be maintained in circumstances where the Tottenham franchisee was never a Recommended Repairer. No Recommended Repairer agreement was produced in relation to this franchisee.

161 Further, correspondence from Bodycorp itself acknowledged this lack of status. In a letter dated 8 November 1999, Bodycorp stated that as a result of the South Melbourne Agreement, Bodycorp Tottenham took on the status of a Recommended Repairer "on trial". It further alleged that after receiving some quoting opportunities, Bodycorp Tottenham ceased receiving further quoting opportunities.[70] There was no suggestion by Bodycorp in this letter that Bodycorp Tottenham ever actually became a Recommended Repairer. The letter also acknowledged that, prior to this time, Bodycorp Tottenham had no status as a Recommended Repairer "other than it was used for overflow work at Christmas". Accordingly, insofar as the breach makes an allegation as to Recommended Repairer status, it fails at the threshold.

162 There are further problems with this claim. First, as noted in paragraphs 30 and 35 above, even if Tottenham had become a Recommended Repairer it had no right to remain a Recommended Repairer. According to the terms of the Recommended Repairer Agreement, AAMI could at any time terminate the Recommended Repairer status by giving 14 days' notice. It must also follow that Bodycorp could not insist upon AAMI keeping any Bodycorp franchisee as a Recommended Repairer beyond the term expressly stated in the Recommended Repairer Agreement.

163 Secondly, by the AAMI Agreement itself, Bodycorp expressly acknowledged and agreed that AAMI could decide who and when a repairer was to be a Recommended Repairer.[71] There was no suggestion that the South Melbourne Agreement varied the AAMI Agreement.

164 Thirdly, a further fact which undermines any claim for loss for any breach of the South Melbourne Agreement is the fact that the claim is premised on the basis that South Melbourne was not getting enough work from the North Melbourne customer service centre. Essentially, the arrangement was put in place to assist the South Melbourne franchisee with getting further work by quoting at the Moorabbin customer service centre. In those circumstances, it cannot be readily apparent, without some form of reconciliation, that the failure to make the Tottenham franchisee a Recommended Repairer at the North Melbourne service centre would actually result in any loss of business to Bodycorp.[72]

165 For the reasons set out above, on the evidence of Bodycorp alone, the allegations concerning the South Melbourne Agreement are simply not made out.

166 AAMI also led evidence in relation to the South Melbourne Agreement. Although Sparnenn was not called, Peter Camilleri ("Camilleri") was called on behalf of AAMI. He was the other person with whom it was alleged Ralph Murdaca discussed the South Melbourne Agreement.

167 In 1998, Camilleri was an assessing supervisor of AAMI at the North Melbourne customer service centre. He said it was not part of his role to make any kind of agreement with any repairer. In particular, he said it was not part of his role to evaluate repairers or to make any decisions about whether or not they took on the status of a Recommended Repairer.

168 In response to the suggestion that both Sparnenn and Camilleri attended a meeting with Ralph Murdaca at which the South Melbourne Agreement was reached, Camilleri said he recalled no such conversation. Under cross-examination, he could not expressly deny the conversation took place, but he said he had no recollection of it. Given the lapse of some 15 years, I do not think there is any significance in this particular piece of evidence. Bodycorp accepted in its closing submissions that Camilleri was a credible witness.

169 Finally, in reliance upon the decision of Jones v Dunkel,[73] I was asked to draw adverse inferences in relation to the absence of a large number of witnesses Bodycorp suggested AAMI should have called. However, I was not asked by Bodycorp to draw any adverse inference based upon the fact that Sparnenn was not called to give evidence on behalf of AAMI. Accordingly, I must assume it was a conscious decision on the part of Bodycorp not to make any point in relation to the absence of this witness.

170 In conclusion, the evidence does not make out the case as pleaded. For completeness, I note that even if the evidence did substantiate the allegations in the FASOC, a promise to send work in the future to a particular franchisee for an unspecified period of time is extremely vague. I seriously question whether a discussion to that effect in a relatively informal meeting as described by Ralph Murdaca, with officers of AAMI at the management level of a service centre, would have been likely to have been intended to give rise to a binding contractual arrangement. In any event, based on the evidence, there was clearly no basis to infer an intention to create legal relations and enter into a legally binding contract.**

**171 Central to the case put by Bodycorp against All States is a letter dated 25 September 1995 from All States to Bodycorp. The letter was signed by Austin. Austin had previously worked with AAMI for many years. From 1995, he was employed by All States as the national operations manager. He was responsible for the day-to-day operation of All States on a national basis. In this capacity, Austin reported to the then CEO of AAMI.

172 Relevantly, the letter dated 25 September 1995 read as follows:**

Our updated Repairer listing will shortly be finalised and you will be pleased to note we have included all the [Bodycorp] group of repairers.

This will be distributed to our Shareholder Companies and would (sic) appreciate if you could arrange with your repairers to ensure they all receive a high level of service and competitive costing.

The letter then listed the "Shareholder Companies" of All States and concluded by suggesting Murdaca give Austin a call if Murdaca had any queries.

**173 As noted above,[74] the All States Agreement was also alleged to be oral. Conversations were alleged to have been had between Austin and Murdaca in September 1997. There were, in fact, discussions between Murdaca and Austin.[75]

174 The evidence given by Murdaca of his conversations with Austin as to the alleged All States Agreement was scant. It amounted to no more than saying that All States wanted to use the Bodycorp franchisees and that they liked the Bodycorp system. Murdaca also gave evidence of his role in relation to controlling quality, organising quotes, and so on. However, he simply gave no evidence of an oral discussion to the effect pleaded.

175 Austin gave evidence that there was never a conversation between him and Murdaca to the effect alleged. He gave unchallenged evidence that there were no formal agreements of any kind with any Recommended Repairers, including Bodycorp. Also, unlike AAMI, it did not have a system involving the provision of official signs.

176 Austin said he did not recall having any conversation with Murdaca in or about September 1995 by which he undertook to send work to Bodycorp repairers. By way of what appeared to be speculation, he said the only agreement that could have been discussed was that Bodycorp would have been given the opportunity to provide a quote if there was a customer that needed a repair and the customer was close to one of the Bodycorp shops.

177 He also stated he had no authority to enter into any agreements on behalf of All States. He was not challenged in this regard.

178 With respect to the conduct alleged to give rise to the All States Agreement, it amounted to no more than the fact that All States provided work to Bodycorp franchisees from time to time after September 1995 and that Bodycorp "was held responsible" for the conduct and quality of the repair work. This really is no more than an allegation that Bodycorp franchisees performed work from time to time as requested by All States, and that Bodycorp supervised the work.

179 When one considers the 3 bases upon which the All States Agreement is alleged to have been made (ie written, oral and implied), neither individually nor collectively do they constitute any binding agreement which required All States to continue to provide its work to Bodycorp and its franchisees.

180 The letter dated 25 September 1995 says no more than the Bodycorp franchisees would be included on a listing held by All States of repairers All States was willing to use. This was described by Austin as a "Recommended Repairer book". Clearly, being placed in this book does not amount to a binding agreement to necessarily use the Bodycorp repairers for the foreseeable future.

181 The oral evidence and other evidence relied upon puts the case no higher than the letter dated 25 September 1995.

182 It is also relevant to note that the whole purpose of establishing All States was to adopt and implement the 2-quote system that had been previously established by AAMI. Such a system means that no repairer could ever be certain of receiving any work, unless it was the repairer providing the most satisfactory quote. Given this was a fundamental plank of how the business of All States was run, it seems contrary to such a system to promise that Bodycorp would be necessarily receiving work. In short, I find that no such assurance was ever given.

183 Austin gave evidence that he did not recall All States ever making a decision not to refer work to Bodycorp franchisees. Certainly, there was no evidence to the effect that such an agreement was ever made. In any event, in light of the findings I have made above, if there were such a decision, it would not have been in breach of any contract with Bodycorp to make that decision.

184 Accordingly, Bodycorp is not entitled to recover any alleged loss by reason of All States ceasing to send work to Bodycorp from some time in late 1998.**

**185 Before proceeding further, it is desirable to set out the relevant principles and the elements of the cause of action.

186 In James v The Commonwealth[76] Dixon J referred to a passage from Salmond,[77] with approval. In part, the following was referred to:[78]**

There must be an inducement in the strict sense - that is to say, the intentional creation of some inducing cause or reason for the breach of contract; ... To induce a breach of contract means to create a reason for breaking it; to advise a breach of contract is to point out the reasons which already exist. The former is certainly actionable; the latter has never been held to be so, and is probably innocent.

(Original emphasis).

187 Having referred to Salmond, Dixon J continued:[79]

All the acts of which the plaintiff complains as amounting to an interference with his business must be considered in combination for the purpose of determining whether they amount to a wrongful procurement of a breach or breaches of the obligation ...

(Emphasis added).

**188 In addition to the requirement of there being an inducement, a defendant must have so induced or procured the breach knowing it will be a breach of contract.[80] If, for example, a defendant reasonably believed that a contract had been rescinded then, even if that is incorrect, the defendant has not committed the tort.[81]

189 The High Court authorities quoted above have been referred to repeatedly in many cases since. There is no need to go through the history of those cases. Some of these authorities were reviewed by Lindgren J as a member of the Full Court of the Federal Court in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd.[82] Having referred to the authorities, Lindgren J stated as follows:[83]**

In my opinion, the authorities establish conclusively that the gravamen of the tort is intention. Although the requirement of knowledge of the contract is sometimes discussed as if it was a separate ingredient of the tort, it is in fact an aspect of intention. The requirement that the alleged tortfeasor have "sufficient knowledge of the contract" is a requirement he have sufficient knowledge to ground an intention to interfere with contractual rights.

His Honour continued by stating that the intention and the necessary supporting knowledge of the contract refers to the actual or subjective state of mind of the alleged tortfeasor. As to the level of knowledge required, it must be sufficient to ground the necessary intention, although the precise term breached need not be known.[84]

190 Finally on the issue of intention, the tort will not be established if the defendant only had a subjective wish that a contract be breached. As was observed by 4 members of the High Court:[85]

[T]he tort of inducing or procuring a breach of contract is not established by demonstrating only that the alleged tortfeasor hoped or wished that the contract would or might be breached. To establish an inducing or procuring of breach, something more must be shown than that the alleged tortfeasor harboured an uncommunicated subjective desire that the contract would or might be breached.

**191 Damage is the gist of the cause of action; unless damage can be proved, an element of the cause of action is missing.[86] However, damages are "at large". It is enough to show that the act done was likely to damage the plaintiff; proof of specific damage is not required.[87]

192 In summary, for Bodycorp to be successful it must establish that:**

(1) Legally binding contracts were on foot with each franchisee.

(2) Those contracts were interfered with by the defendant(s), by inducing the franchisees to breach the contracts.

(3) The inducement was knowing and intentional, in circumstances where the defendant(s) had sufficient knowledge of the contract(s) to know they were inducing a breach.

**193 The relevant allegations against Maisano are summarised in paragraphs 40 to 42 above.

194 Given Maisano was a franchisee of Bodycorp, it can be taken that he was aware of the standard terms of the contract that existed between Bodycorp and each of the Category A Franchisees. However, importantly, it is not alleged that he knew when any of the relevant franchise agreements were entered into. It must follow, given that the contracts had a 3 year term, that it is not alleged that he knew when each of the franchise agreements came to an end. As noted in section E.2.1 above,[88] in 1998 a number of the Bodycorp franchise agreements were due to come to an end simply by reason of the 3 year term being completed.

195 Maisano emphatically denied that he attempted to induce any Bodycorp franchisee to breach its contract with Bodycorp. There is no contemporaneous evidence to suggest that he made such attempts. The only evidence I have to consider is the oral evidence of Maisano and 1 former Bodycorp franchisee.

196 As noted above,[89] there were only 4 Category A Franchisees; namely, Clayton, Geelong, Caulfield and Nunawading. Critically, with the exception of Clayton, either the relevant franchise agreements were not in evidence or they were undated. Accordingly, the court has no way of knowing when it was that the 3 year term for each of these franchisees expired.

197 More specifically, in relation to Caulfield, Murdaca said he "believed" he had executed a franchise agreement. Not only was none produced, but no approximate date of the agreement was given. In relation to Bodycorp Nunawading, Murdaca said he remembered executing an agreement. However, this agreement was not produced and again no approximate date of the agreement was given. As for Geelong, although an executed document was produced, there was no attempt to provide a date as to when it was signed. Given the document was undated, the court is not in a position to know when it was actually entered into (and, therefore, when it lawfully came to an end).

198 It follows that in relation to 3 of the 4 Category A Franchisees, the claim of Bodycorp must fail at the threshold. There is no evidence to establish that at the time the Statement was alleged to have been made that there was any agreement on foot which could be breached. Alternatively, there is nothing to gainsay the real possibility that each of the agreements were due to come to an end in the very near future, so that any making of the Statement would be entirely consistent with these Category A Franchisees acting lawfully in ceasing to be a Bodycorp franchisee.

199 That leaves Bodycorp Clayton. In relation to Clayton, the franchise agreement was dated 24 July 1996. Therefore, the agreement came to an end automatically on 24 July 1999, unless the option to renew was exercised. There is no suggestion Bodycorp Clayton had an intention of exercising its option to renew.

200 The evidence of Martin was that the proprietors of what was previously Bodycorp Clayton are still in business. They also remain Recommended Repairers of AAMI. Clearly, it would not be in the commercial interests of those proprietors to give evidence that they were induced by Maisano to breach their contract with Bodycorp.[90]

201 There was no direct evidence before the court of Maisano making any representations to the proprietors of Bodycorp Clayton. As I have already noted, Maisano emphatically denied making any relevant representation. The only witness relevant to this allegation was a former Bodycorp franchisee for Bodycorp Tottenham, Rocco Crea ("Crea"). Crea became a franchisee of Bodycorp in late 1996.

202 Crea said that he had been very unsuccessful in the years prior to becoming a Bodycorp franchisee and he joined Bodycorp to improve his business. The effect of Crea's evidence was that each of Maisano, Munro and Martin questioned why Crea should remain a Bodycorp franchisee.

203 In relation to Maisano, Crea said that a number of representations were made. The time at which these representations were alleged to have been made was left entirely unclear. He said that Maisano asked him in substance why he wanted to pay 8% of his turnover to Bodycorp. He also stated that Maisano said that Crea should try and contact Martin "in the sense that ... maybe you can go out on your own". Finally, he said Maisano said "basically that I should break away and be my own personal panel shop".

204 This evidence was led not as direct evidence of the allegations made in the FASOC, but rather for the court to draw an inference that if such representations were made to Crea they were also likely to be made to the proprietors of Bodycorp Clayton.

205 Before dealing with the specific evidence given, a number of general observations need to be made about the evidence of Crea. His evidence on the whole was very vague. Given the lapse of time this is perhaps understandable, but it is clear that he was willing to make broad assertions and assert conclusions, rather than give direct answers to questions put. I also formed the distinct impression that he was willing to tailor his evidence to make it as favourable as possible for Bodycorp. On a number of occasions he gave answers that were non-responsive, but highly favourable to Bodycorp.[91] Further, Crea had the definite impression that AAMI wrongfully had been out to undermine and dismantle Bodycorp's business.[92]

206 There is another matter concerning Crea's credibility that I need to address. As may be seen from the title of this proceeding, Maisano anglicised his name in some of his dealings. He swore that as a Bodycorp franchisee, he only ever went by the name of Michael Mason. The contemporaneous documents bear this out. He also said he was only ever referred to as Michael Mason at Bodycorp meetings with other franchisees. He was not challenged in this evidence. Further, Maisano gave evidence that he did not know Crea, and that he did not recall ever speaking to him.

207 In Crea's evidence, Maisano was referred to as "Michael Maisano" or "Mr Maisano"; not "Michael Mason". This fact was not picked up by Crea, and left some doubt as to the veracity of the evidence of Crea. Martin also said Maisano was known at the relevant times as Michael Mason. But, the issue was not put directly to Crea in cross-examination. Accordingly, there is very little, if anything, that can ultimately be made on this point.

208 In any event, there is nothing in the evidence to suggest that, even if Crea's evidence is accepted, Maisano was inviting him to breach his contract. Phrases such as "go out on your own" and "break away" do not, of themselves, connote an inducement to breach a contract that is on foot. On the contrary, given that Crea did not recall more than 1 conversation on this topic, and that he was uncertain as to when it occurred (other than it was "from 1998 onwards"), such a conversation is entirely consistent with Maisano suggesting arrangements might be made with AAMI at the expiration of the franchise arrangement with Bodycorp.

209 In other words, the alleged discussion clearly left open an intention that Maisano was inviting Crea to terminate the contract in accordance with its terms or to simply allow it to run its full term.[93]

210 Further, I do not find the evidence of Crea as being probative of establishing an inference that the conduct alleged against Maisano in relation to Bodycorp Clayton actually occurred. On the contrary, only 1 conversation in the limited terms referred to does not suggest in any way that Maisano had an intention, or engaged in a pattern or course of conduct, to induce Bodycorp franchisees to leave the Bodycorp group.

211 Moreover, what was alleged to have been said by Maisano to Crea is fundamentally different to what was said to comprise the Statement. There was no representation made to Crea to the effect that "it would be in his best interests ... to terminate". Also, there is nothing to suggest that Maisano gave an assurance to Crea that if he left Bodycorp he could be certain that he "would continue to be recognised by AAMI". Accordingly, in relation to the case against Maisano concerning all of the Category A Franchisees, the pleaded case cannot be established by inference even on a prima facie basis.

212 Finally, I note that there is no contemporaneous documentation available to corroborate the allegations made against Maisano. One would have expected that if Crea was seriously the subject of inducement to leave the Bodycorp group, he would have conveyed such matters to Murdaca. It is clear from his evidence that he had a good relationship with Murdaca.

213 In turn, if Murdaca had learned of such allegations in 1998 or 1999, one would have expected such matters to be raised by Bodycorp's solicitors. At the time, Bodycorp's solicitors frequently wrote to AAMI's solicitors making complaints about various things. There was no reason to suspect they would have acted any differently if the alleged activities had been engaged in and become known to Bodycorp.

214 For the reasons stated above, the claim against Maisano for inducing breach of contract must fail.**

**215 Before turning to the specifics in relation to the evidence led against AAMI with respect to this claim, it is necessary for me to revisit the ruling I made on 17 May 2013.[94] In the closing submissions of AAMI (and also the submissions of Maisano), AAMI sought to revisit the ruling on the basis that the relevant evidence did not suggest that the Category A Franchisees and/or Category B Franchisees remained Recommended Repairers of AAMI. This position was submitted as being of some significance because of the reasons given for the ruling.

216 In paragraph 24 of the ruling on 17 May 2013, I made 2 observations based on uncontested evidence:**

(1) It would not be in the commercial interests of any current Recommended Repairer to voluntarily give evidence in a court case for a party whose interests were inimical to those of AAMI.

(2) In the particular circumstances of this case, the relevant franchisees would have no interest in giving evidence for Bodycorp given that Bodycorp's case is that these franchisees wrongfully breached their respective franchise agreements.

**217 In relation to the first observation, I made no finding as to which, or how many, Category A Franchisees or Category B Franchisees were currently Recommended Repairers of AAMI. At the time I gave the ruling, there was no clear evidence on this point.[95] As to the second observation, that position remains the case whether or not the relevant former franchisees remain a Recommended Repairer of AAMI. Of course, the fact that they were not called does not suggest in any way that those former franchisees did, in fact, breach their respective franchise agreements.[96]

218 Therefore, to the extent that it was submitted in closing that my ruling was based upon an assumption that each of the Category A Franchisees and Category B Franchisees remained a Recommended Repairer, those submissions have misunderstood what I have said in paragraph 24 of the ruling.

219 Before leaving my ruling on 17 May 2013, I refer to paragraph 50 of the ruling. In that paragraph, I found that the evidence of Luciano Lantieri did not satisfy the requirements of s 98 of the Evidence Act 2008 (Vic) ("the Evidence Act"). However, I declined to exclude the evidence on the basis that, now that the evidence was before the court, the defendants might wish to keep the evidence in, in light of my ruling in relation to the other proposed witnesses. I invited counsel to address me on this point. In closing submissions, counsel for Maisano and AAMI said that they wanted the evidence excluded. In those circumstances, that evidence has not been admitted.

220 I now turn to the evidence of former Bodycorp franchisees relevant to the issue of whether AAMI or Martin induced a breach of contract.**

**221 The first witness called was Lantieri. She is the wife of Luciano Lantieri. She was a credible and forthright witness. She is now retired, but from 1978 to 2010 she, together with her husband, were the proprietors of L&M Panels. Lantieri said L&M Panels was a franchisee of Bodycorp between 1996 and 2000.

222 L&M Panels operated 2 smash repair shops, 1 in Heidelberg and the other in Airport West. Lantieri gave evidence that both Heidelberg and Airport West were conducted as franchisees of Bodycorp.[97] She said that the Heidelberg shop was also leased from Bodycorp from 1997 for a period of about 18 months. She said the Heidelberg shop had a Recommended Repairer sign from AAMI. In contrast, Airport West was not a Recommended Repairer, though she said she understood it was on trial.

223 Lantieri described her relationship with AAMI as very good. She said the Heidelberg shop did a lot of work for AAMI and occasionally would send work to the Airport West shop because they were very busy. She said AAMI was happy with this arrangement.

224 Lantieri said in September 1998 she received a visit from Martin at the Airport West premises. By this stage L&M Panels were no longer running the Heidelberg shop. However, she said Airport West was still quoting through the Preston customer service centre of AAMI and were doing quite a lot of work through that service centre. On this occasion, she said that Martin stated that because L&M Panels was in the North Melbourne area, technically it was not allowed to quote at Preston. But Martin also said he was quite happy for the situation to continue because he was happy with their workmanship.

225 The very next day, Lantieri said she was approached by Darren Perryman ("Perryman") of AAMI. She said the discussion took place at the Preston customer service centre. On that occasion she said that Perryman stated in substance that he was happy with the workmanship of L&M Panels, but that he had been told by his superiors that L&M Panels was not allowed to quote at Preston any more because they were not in the Preston area.

226 On 28 October 1998, Lantieri wrote a letter to the state manager of AAMI complaining about these events, and in particular AAMI's change of attitude. In the letter she stated: "I have no doubt that this is a direct result of Barry Martin's visit". She suggested the conduct of Martin had severely affected their livelihood. She also made allegations of dishonesty against Martin.

227 Subsequent to Martin's visit referred to above, Lantieri said Martin visited the Airport West shop 4 to 5 times in which Martin made statements to the following effect:**

Are you happy with the 8%?

Do you need to pay the 8% to Bodycorp?

You don't really need to be in Bodycorp.

She said Martin also discussed the possibility of expanding and getting more work from AAMI.

228 In relation to the 4 or 5 conversations referred to, Lantieri said they were after 1998 through to probably the early 2000s.

**229 Nick Ciancio ("Ciancio") was the next former Bodycorp franchisee called. He joined Bodycorp in 1998 as Glenroy Bodyworks. He attained Recommended Repairer status with AAMI in 1998, after he joined Bodycorp.

230 Ciancio said he attended 1 meeting at the offices of AAMI in 1998. He said after that meeting Martin visited his shop. Ciancio said that Martin told him he would be visiting his shop on a monthly basis to go through the statistics of the business and any concerns Martin might have. He also said Martin asked him why he had joined the Bodycorp group.

231 During the first discussion at the Glenroy shop, Martin said to Ciancio that "a lot of the guys who had bought franchises at the time were leaving the group". Ciancio said in response that, because he was part of the "group B repairers",[98] he would lose his sign if he left Bodycorp. Ciancio said Martin responded by saying that he would not lose his sign if he decided to leave Bodycorp and that he would save an 8% fee being paid by Bodycorp Glenroy to Bodycorp at the time.

232 The discussion ended on the basis that Ciancio said he was happy with the agreement he had with Bodycorp. He said Martin did not pursue the matter further.

233 During cross-examination it was suggested that in 1998 Ciancio was not a Recommended Repairer. There is certainly some reason to doubt whether he was a Recommended Repairer as at 29 June 1998. He was not one of the Bodycorp franchisees listed in schedule 1 to the AAMI Agreement. Also, no written document was produced to establish he was a Recommended Repairer in 1998.[99] However, it is perfectly plausible that he became a Recommended Repairer after 29 June 1998; ie in the second half of that year. In circumstances where I found Ciancio to be otherwise a credible witness, I have no reason to doubt his evidence that he was a Recommended Repairer at some time in the second half of 1998.

234 It was suggested in cross-examination that Ciancio fabricated some of his evidence. By reason of that cross-examination, an affidavit[100] of a prior consistent statement made by Ciancio was admitted pursuant to s 108(3)(b) of the Evidence Act. That evidence corroborated Ciancio's evidence of what Martin said to Cianco concerning Ciancio's ongoing involvement with Bodycorp.

235 I accept Ciancio's evidence as to what Martin said to him in 1998.

236 AAMI criticised Ciancio's evidence. I acknowledge Ciancio may have been confused about whether or not he received a letter in 1998 from AAMI telling him that he was a "group 2 franchisee". However, I do not think this confusion, given the very lengthy lapse of time, is a matter which affects his credibility.**

**237 Crea also gave evidence in relation to representations he said were made to him by Martin.[101] Crea said that Martin spoke to him in 1998 and said "more or less" that Crea should break away from the Bodycorp group and that if he did he would be looked after by AAMI. It was not suggested this was ever said more than once.

238 When it was put to Crea in cross-examination that Martin had never met Crea, Crea responded: "Of course [Martin is] going to say that". In re-examination, Crea was taken to a file note of Martin's dated 2 December 1999. This note, which was an internal communication within AAMI, recorded that the Tottenham shop had never been visited by Martin or Maureen Joseph (who was AAMI's repairer liaison manager) ("Joseph"). Crea said this note was a lie, and that both of them had visited his shop. Somewhat curiously though, Crea gave no evidence of the actual circumstances of any visits by Martin, or how often they occurred.**

**239 The next former franchisee called was Carlo Corso ("Corso"). Corso gave evidence that Martin used to visit his repair shop at Highpoint quite often. Although he could not say precisely when it occurred, he was clear it was before July 1998 (July 1998 being a time at which he met with representatives of AAMI). Corso said it was approximately a month before that time. Corso said that Martin stated in substance that his costings and job ratio were pretty low due to him being with Bodycorp. He said that Martin basically stated that if he were to leave Bodycorp his "stats would go up".

240 Corso said after this discussion there was a change in the manner in which assessors treated him. He said he was not getting the opportunities he previously experienced, and that his success ratio was getting lower and lower.

241 Under cross-examination, Corso accepted that in 2006 he was removed as a Recommended Repairer from the AAMI panel. He said AAMI had made allegations about him fabricating claims by staging car smashes. Corso said the matter went to court and that all charges were dropped and that AAMI paid him out for that recently. Corso stated that this was not the reason why he was unhappy with AAMI. Corso said he had been unhappy with AAMI since Martin came and saw him in 1998.

242 AAMI submitted the evidence of Corso should be treated with care. This was in part because he was a long time friend and associate of Murdaca. Corso candidly admitted his friendship with Murdaca when it was put to him in cross-examination. I do not see this fact as a reason, per se, for affecting the credibility of his evidence.**

**243 The final former Bodycorp franchisee called was Roy Mellor ("Mellor"). He and his business partner, James Piazza ("Piazza"), conducted a Bodycorp franchise at Preston from late 1996.

244 In early 1997, Mellor and Piazza received accreditation as Recommended Repairers of AAMI. They did this with the assistance of Bodycorp.

245 Mellor said he had many conversations with Martin. He said these often involved quoting results recorded in report sheets from AAMI.

246 Mellor said that one day Martin came around to the Preston shop. During the course of the discussion, the issue of Bodycorp franchisees leaving the Bodycorp franchise and retaining the AAMI Recommended Repairer status was discussed. Mellor said he asked Martin what would happen if he ever left Bodycorp, or if Bodycorp went bankrupt or if it just ceased business. In substance, he asked in any of those circumstances would Mellor's business retain its AAMI Recommended Repairer status. Martin responded that the status would be maintained.

247 Mellor could not date this conversation, save to say that it was about 13 or 14 years ago. Under cross-examination, he accepted it could have been 15 years ago.

248 Mellor ceased to be a Bodycorp franchisee in 2001. Mellor ceased to be a Recommended Repairer in 2009.

249 Mellor accepted that, by August 1998, he understood that there was no nexus between remaining a Bodycorp franchisee and keeping or losing the AAMI Recommended Repairer sign.

250 Senior counsel on behalf of AAMI submitted in closing that, effectively, I should revisit the ruling I made under s 98 of the Evidence Act. He submitted that in light of the evidence as a whole I should rule under s 55 of the Evidence Act that the evidence of the former Bodycorp franchisees referred to above was irrelevant

251 I do not accept this submission. Although I readily accept that none of the evidence of any former Bodycorp franchisee of what was said to them equates to what is pleaded as the Statement or the AAMI Statement, the evidence, if accepted, clearly demonstrates that Martin conveyed to the former Bodycorp franchisees in substance that Martin (and therefore AAMI) would prefer it if those franchisees were not associated with Bodycorp. In my view, such evidence of Martin's state of mind and disposition is directly relevant, and significantly probative, in relation to the issue of whether or not Martin made the AAMI Statement.[102]**

**252 In relation to each and every statement made by the former Bodycorp franchisees, Martin flatly denied the statements were made. He directly denied saying anything on the issue at all. Accordingly, in order to accept Martin's evidence, it is necessary for me to find that each of the former Bodycorp franchisees fabricated their evidence.

253 With the exception of Crea, I found each of the former Bodycorp franchisees to be credible witnesses. I accept they were telling the truth. Further, there were other aspects of Martin's evidence which suggest that, in 1998 and 1999, he was not favourably disposed towards Bodycorp. That evidence also suggests Martin was also willing to pursue his desired outcome, even if that involved AAMI breaching lawfully binding contracts. I will elaborate.

254 Martin returned to the repair area of AAMI's business on 14 July 1997. He resumed the position of supply and development manager. This was the exact same role he had performed up to 1992. In the second half of 1997 to 1999 Martin was engaged in an ongoing review of the repair area in order to seek to introduce efficiencies and balance.

255 On 8 September 1997, Martin prepared a 6½ page memorandum entitled "Recommended Repairer - Body Group Comparisons".[103] The memorandum was addressed to the state manager and contained comparative data Martin had compiled in relation to 3 groups who perform work for AAMI; namely, Bodycorp, Woods and Armstrongs. It recorded that Bodycorp represented 16% of the metropolitan panel, Woods 11% and Armstrongs 8%.

256 In addition to comparative figures, the memorandum dated 8 September 1997 also contained a number of statements expressing his reservations or concerns about Bodycorp. They included the following:**

There is some risk our business relationship with Bodycorp and Woods could encounter some problems.

― There are serious rumblings amongst repairers within the Bodycorp Group.

― The Woods connection with RACV could eventually make it difficult for us to continue to deal with them.

Three repairers have contacted me voicing their desire to leave Bodycorp (Noble Park, Melton and Abbotsford). We may have a dilemma if a shop leaves Bodycorp and wishes to retain the sign. It would need a new application and be considered on its merits.

...

In my view we must carefully consider any future inclusions of Bodycorp shops. Their large representation, particularly in North Melbourne, could eventually lessen competitive quoting and reduce our flexibility. We cannot have them quoting against themselves or ultimately controlling costs.

Furthermore, the number of Bodycorp shops already far exceeds the recommended percentage quota of our panel.

257 Martin also raised some queries in relation to a number of the Bodycorp franchisees. However, he concluded by saying that the relationship demonstrated that AAMI could achieve desired outcomes if AAMI honoured its side of the deal and totally supported repairers. He did, however, say it would be unwise to put all AAMI's "eggs in one basket". Martin concluded by saying:

The purpose of these notes is to ensure there is a mutual understanding within AAMI of our position with the groups and to agree on future directions.

I would appreciate the opportunity to discuss these issues, and any others, at your convenience.

**258 In November 1997, an issue arose as to whom the Recommended Repairer status had been awarded. This issue was the genesis of the AAMI Agreement. To understand how things evolved, it is necessary to refer to some correspondence.

259 In a letter dated 10 November 1997, Rogers, on behalf of Bodycorp, wrote to AAMI asserting the Recommended Repairer status had been awarded to Bodycorp itself, and not to the individual franchisees. On 14 November 1997, AAMI responded to Rogers. Not only did AAMI deny that Bodycorp had been given Recommended Repairer signs to be passed on to franchisees, but also went on to state that AAMI had never authorised Bodycorp to appoint Recommended Repairers. I was informed by Bodycorp's counsel that this latter point was not an issue at any time.

260 Also on 14 November 1997, a letter was sent to Rogers in relation to Bodycorp Malvern. The letter referred to earlier notification that Bodycorp had become the owner of what was formerly known as Malvern Bodyworks. However, the letter continued that AAMI would not be adding any repairers to the existing Recommended Repairer panel until further notice. AAMI's copy of this letter had a handwritten note on it to the effect that the letter was placed on Martin's files.

261 It was in this context that Martin wrote a memorandum dated 12 November 1997 entitled "Bodycorp Shop Details". In that memorandum, Martin set out details in relation to each of the then Bodycorp franchisees (which included Heidelberg with a note "Agreement signed Feb' '96").

262 At the end of the memorandum Martin referred to 6 Bodycorp shops that AAMI authorised "a considerable amount of work to". Having referred to these shops, Martin stated:**

None of these 6 shops are "officially" on our panel however, by our actions it would be difficult to prove otherwise.

This comment appears to acknowledge that a course of conduct on the part of AAMI was sufficient to give repairers some recognition and status in relation to AAMI's panel of repairers. Martin said this related to the amount of work AAMI was putting through those repair shops.

**263 On 18 March 1998, Martin wrote a memorandum to the state manager entitled "Melton Body Works". That memorandum referred to the fact that Munro had terminated his agreement with Bodycorp.

264 Martin stated that AAMI's "unofficial position" was that the AAMI sign at Melton had to come down. Martin said he described the position in this manner because, as at March 1998, no written agreement had been entered into with Bodycorp. Martin said this comment reflected his views about what was occurring, but that he did not state this to anyone outside AAMI.

265 In the memorandum, Martin continued on by noting that Bodycorp was not responsible for Melton Body Works obtaining Recommended Repairer status. He also suggested that Bodycorp had managed to sign up Melton Body Works shortly before Melton Body Works was to obtain Recommended Repairer status in any event. The memorandum continued:**

Bodycorp have received in excess of $150,000 commission over the past 3 years and I am convinced this has been achieved by them approaching a vulnerable[104] shop at the time.

It is fully understood that we must carefully consider our actions to avoid being responsible for any spillage of shops from Bodycorp and any subsequent ramifications. When deciding which signs stay and which ones come down there are various situations ...

My concerns are that we are continually in the middle of a less than satisfactory business relationship with Bodycorp and by making any formal agreement on the future of their shops may not be in the best interests of AAMI. It seems we are always in a dilemma about what action to take and as there has not been any noticeable improvement in the relationship, despite all our efforts, we should rethink our position.

Without any formal agreement at this time between AAMI and Bodycorp I strongly recommend we retain our accreditation with Melton Body Works and that we do not trial the newly acquired Bodycorp shop in Melton as requested in their letter dated 16 March 1998. Furthermore, any future departures from Bodycorp should be treated on their merits notwithstanding some obvious difficulties which may arise.

(Emphasis added.)

**266 The above memorandum discloses that as at March 1998 Martin was not very impressed with Bodycorp's business practices and was less than keen for a formal agreement to be entered into with AAMI (which was then the subject of negotiation and ultimately became the AMMI Agreement). Further, he was not minded to remove Recommended Repairer status from any franchisee leaving Bodycorp, notwithstanding any arrangement that might have been in place to the contrary. Indeed, he recommended Melton Body Works keep its sign, which would mean that Bodycorp had no prospect of obtaining Recommended Repairer status for a new franchisee in the Melton area.

267 Martin gave evidence that in March 1998 he was not entirely convinced that AAMI should have a formal agreement with Bodycorp. He said at the time he could not see how it would be enforceable. Martin also said it was a restrictive policy that effectively imposed a penalty on a repairer for leaving Bodycorp. He described it as double-jeopardy.

268 When this evidence is considered together with the contents of the memorandum, it is abundantly clear that Martin opposed AAMI entering into the agreement with Bodycorp that was then contemplated.

269 On 12 May 1998, Martin prepared a file note of a meeting that was held between representatives of AAMI, Murdaca and Rogers. It is not necessary to go into the detail. However, the note concludes with the following:**

Clearly there is a great deal to be gained from both sides if it is at all possible to get rid of the issues which cloud the relationship.

**270 Approximately 2 weeks before the AAMI Agreement was entered into, Martin drafted a memorandum expressing his views on the proposed agreement. The memorandum, to Philip Oswald, a senior executive of AAMI ("Oswald"), covered a number of aspects of the proposed agreement. The observations made were very negative. Plainly, as at mid June 1998, Martin was still resisting the prospect of AAMI and Bodycorp entering into a formal agreement.

271 After the AAMI Agreement had been entered into on 29 June 1998, Martin prepared a file note in relation to Bodycorp Moorabbin. It was dated 14 July 1998. It is clear from the contents of that document that at the time Martin was intending that AAMI honour the 6 month period in the restraint of trade contained in the AAMI Agreement in the event that a Recommended Repairer ceased to be a Bodycorp franchisee.

272 Also on 20 July 1998, Martin wrote a memorandum relating to Bodycorp Melton and Bodycorp Moorabbin. It noted that they would cease to become Recommended Repairers from 31 July 1998. Consistent with the AAMI Agreement, he stated that they should not be invited to write any quotes after that time.

273 Bodycorp made submissions based on the fact that the memorandum dated 20 July 1998 had a handwritten note on it addressed to Martin. Bodycorp contended this note demonstrated Martin was willing to ignore directions from his superiors.

274 The note was penned by Casboult. Casboult stated it had been agreed to give quoting opportunities in the Melton area to Fixwell, which he said was the new Bodycorp Melton. Martin was directed to put Fixwell on the "preferred list".

275 Martin never did this. He also gave no instruction to give quoting opportunities to Fixwell. Martin said he conveyed Casboult's direction to no one. He said he did not know why, but he speculated that it was because the incumbent, Melton Body Works, at Melton successfully appealed AAMI's decision.

276 The reversal of the decision in relation to Melton Body Works did not occur until 29 July 1998, some 9 days after the date of Martin's memorandum. However, it is unclear when Martin received the direction from Casboult. It is quite possible that Casboult took a few days or even a week to get back to Martin. Accordingly, the evidence does not establish Martin ignored Casboult's direction.

277 On 22 July 1998, Martin made a file note of a discussion with Munro. That recorded that Munro said he was intending to push his case for reinstatement of his Melton shop with AAMI and to recoup franchise fees from Bodycorp. The note also referred to Bodycorp Geelong. Munro informed Martin that Bodycorp was putting a lot of pressure on Bodycorp Geelong to sign a new franchise agreement. Martin noted that his response was that whether Bodycorp Geelong signed with Bodycorp was entirely a matter for it and not a concern of AAMI's.

278 It is clear that by July 1998 the relationship between Bodycorp and AAMI was less than satisfactory. In late July 1998, solicitors for Bodycorp threatened to commence court proceedings against AAMI. There were also allegations made by Bodycorp which gave rise to an inquiry being conducted by AAMI. (It is not necessary to descend to the details of these matters, save to observe that matters were in the hands of lawyers for both parties.)

279 Numerous letters passed between the respective solicitors. One of them was a letter dated 13 August 1998 from AAMI's solicitors to Bodycorp's solicitors. After addressing various matters, the letter stated that the conduct of Bodycorp was not conducive to a sensible and commercial resolution of the issues confronting AAMI and Bodycorp. The letter expressed some bewilderment as to why Bodycorp had engaged in such conduct "particularly in such a difficult and sensitive time". The letter continued:**

By reason of the matters we have outlined and in view of Bodycorp's change in attitude to AAMI's open and honest attempt to resolve the present situation in a manner that is fair to all parties, we are now instructed to request that [Murdaca] and Ralph Murdaca and [Rogers] refrain from contacting any AAMI officer or employee until further notice. All further communication should be made through you and addressed to us. Individual franchisees should continue to conduct their business with AAMI staff in the usual business manner.

In light of the above circumstances we are instructed to accept service of proceedings on behalf of AAMI.

(Original emphasis.)

**280 As is apparent, at this point in time there was a fundamental shift in the manner in which the parties dealt with each other. Effectively, Bodycorp was put to 1 side in relation to dealings between Bodycorp franchisees and AAMI. Further, and most importantly, the matters between the 2 parties were now entrenched in the hands of the lawyers.

281 On 25 August 1998, solicitors for Bodycorp Melton sent a proposed statement of claim against AAMI and Bodycorp to the solicitors for AAMI "[a]s requested". The allegations drafted were in relation to the Recommended Repairer status at Melton. In substance, it complained that Bodycorp and AAMI had agreed that, as a result of Melton ceasing to be a Bodycorp franchisee, AAMI had ceased to recognise Melton as a Recommended Repairer from 17 July 1998. It was said that this was a result of a conspiracy between AAMI and Bodycorp.

282 On 26 August 1998, Martin had a discussion with Stephen Morrish ("Morrish"). Morrish was the proprietor of Bodycorp Berwick.

283 A file note of that discussion records that Morrish advised Martin that Munro and Maisano had met with senior representatives of AAMI the previous week. Morrish stated that he had been told that, as a result of that meeting, AAMI was encouraging Bodycorp franchisees to sue AAMI as this might help AAMI to get out of the agreement AAMI had signed with Bodycorp on 29 June 1998 (ie the AAMI Agreement). He also told Martin that AAMI had asked for signed affidavits to be provided by the Bodycorp franchisees.

284 Also during this discussion, Morrish stated to Martin that Morrish was confident Bodycorp Berwick would retain its Recommended Repairer sign. There were various other matters the subject of the conversation that were recorded in the file note.

285 At the end of the file note, Martin made the following observation:**

I do not understand why we do not sever all ties. Bodycorp may have an action against us for lost franchise fees ($6-700K) but they would have to prove we undid their franchise agreement. Our weakness is the [AAMI Agreement] wherein we agreed to deal with shops in a certain manner.

**286 It is clear from this file note that Martin had changed his views from those expressed in the previous month. It is apparent Martin was quite willing to contemplate completely disassociating AAMI from Bodycorp, and its franchisees, and for AAMI to wear the risk of a damages claim in the sum of $600,000-$700,000. When it was suggested to Martin that his comments amounted to a battle plan, Martin did not quibble with the characterisation. Martin's response was that if that was what he was doing, senior management took no notice of him. However, Martin said he expected the file note was brought to the attention of his superiors.

287 On 31 August 1998, Martin made another file note of a further discussion with Morrish. The note records that Morrish was very upset with AAMI in relation to the loss of the Recommended Repairer sign. It recorded that Morrish intended to take further action.

288 Some time between July 1998 and November 1998, the official position of AAMI changed in relation to whether or not it intended to comply with the AAMI Agreement. No direct evidence was led by AAMI as to when this occurred.

289 On 12 November 1998, a "pro forma" letter was sent to a number of Bodycorp franchisees. AAMI stated in each of those letters that, if a Bodycorp franchisee were to leave Bodycorp, it would not affect their status as a Recommended Repairer of AAMI. The letter stated "[t]o avoid confusion" the position adopted by AAMI extended to those franchisees who became Recommended Repairers after becoming Bodycorp franchisees (ie including those franchisees listed in schedule 1 to the AAMI Agreement).

290 It was explained in the letter dated 12 November 1998 that AAMI had no desire to become involved in the franchisor/franchisee relationship concerning Bodycorp. The letter stated that whether a repairer remained with Bodycorp was a matter for the repairer. Further, it stated that whether a repairer was a Bodycorp franchisee did not impact on the repairer's relationship with AAMI.

291 In closing submissions, senior counsel for AAMI suggested that what was contained in this letter as to AAMI's position was "probably incorrect". He suggested that this was inconsistent with the agreement. He correctly observed that the matter was not explored in evidence. However, given that there is no further evidence on the matter, I am driven to conclude that what was said in the letter of 12 November 1998 was intentional. Moreover, the position as stated in the letter dated 12 November 1998 is entirely consistent with the position AAMI now maintains as to the unenforceability of the restraints of trade contained in the AAMI Agreement.

292 In short, I see no reason to infer that a mistake was made when this letter was drafted. This is particularly so given that Martin said he believed the letter was prepared by AAMI's solicitor, Ken Adams ("Adams").

293 The final piece of correspondence relevant to the state of mind and disposition of Martin is a file note prepared on 25 June 1999. Although this is some considerable period of time after the other documents I have referred to above, it still has some relevance to Martin's position and his attitude towards Bodycorp. That file note records that the customer service centres of AAMI were being instructed not to use any Bodycorp shops and to "wind back Malvern". Martin records that he will continue to "push for the same attitude with Tottenham".

294 In my view, the documents referred to above evince an intention of Martin over an extended period of time to weaken the relationship between Bodycorp and AAMI. Although there is a short period of time after the AAMI Agreement was entered into where Martin appears to strictly adhere to its terms, otherwise it is clear that he was content, perhaps even keen, for Bodycorp franchisees to disassociate themselves with Bodycorp. Although the official line adopted by AAMI in its letters and letters from its solicitors was, up until November 1998, more consistent with the terms of the AAMI Agreement, it is clear Martin was not entirely supportive of that position.

295 There is no doubt that Martin considered there were serious difficulties in the relationship between Bodycorp and AAMI. These were issues with which he had to deal. It is likely that Martin thought it would be far easier for him to deal with Bodycorp franchisees individually rather than having to deal with Bodycorp management, with whom he could not improve the relationship "despite all [AAMI's] efforts".[105]

296 Martin gave evidence that his superiors read him "the riot act" in relation to the position of Bodycorp. He said he was advised to be absolutely careful as to what he said to Bodycorp franchisees. Martin said he was directed not to talk about these issues. He said he did not dare talk to anyone outside AAMI as the issues were so sensitive that he would have expected to be sacked if he ignored the direction. There was no document produced to substantiate this direction. Martin said this occurred in 1998 or thereabouts, but was probably not put in writing. He said each of Belleville, Casboult and Michael Kay ("Kay") gave the direction.

297 I expect that such a direction was given at some stage. However, I have no clear evidence as to when it occurred or for how long it remained operative. What is clear is that sometime between July 1998 and November 1998 the official position of AAMI changed, so that franchisees were being told if they left Bodycorp they could still maintain their Recommended Repairer status. The file note of Martin dated 26 August 1998[106] suggests AAMI was shifting in its position as early as August 1998. Such a change in position is entirely consistent with Martin then, again, pursuing his intentions of weakening and diminishing the relationship between Bodycorp and AAMI.

298 Accordingly, I find that it is highly unlikely that Martin made any representations to franchisees concerning their relationship with Bodycorp during a period from approximately July to August 1998. However, outside that limited time frame (ie both before and after), Martin was meeting with franchisees on a regular basis,[107] and it is highly likely the issue of the relationship with Bodycorp was discussed.[108] In the circumstances viewed as a whole, I accept Martin made the representations as stated in the evidence of the former franchisees, except Crea.[109]**

**299 On the basis that the representations were made by Martin to each of the former Bodycorp franchisees other than Crea, the next issue is whether or not those representations establish a case that AAMI or Martin have to answer. It is abundantly clear there is no case to answer.

300 Similar to the reasoning above in relation to Maisano, the representations the subject of the evidence do not equate, or even come close, to the substance of the AAMI Statement pleaded in the FASOC. The representations certainly question, to differing extents, whether it was in the interests of the franchisees to remain with Bodycorp. Some representations were coupled with the possibility of more work from AAMI once a franchisee left Bodycorp. However, it is a quantum leap to equate such representations with an intention on the part of AAMI or Martin to induce the franchisees to unlawfully breach a binding agreement with Bodycorp.

301 In closing submissions, I put to counsel for Bodycorp that there was nothing in the evidence of any of the Bodycorp franchisees to suggest that Martin said that they should terminate their franchise agreement with Bodycorp. That was accepted by counsel. However, it was submitted that it was implicit in the representations that were made that the franchisees would be better off if they were not Bodycorp franchisees. It was also said that it was implicit that Martin was suggesting they ought to terminate a lawfully binding agreement. It was said that this was because of the immense power that Martin had.

302 In my view, these submissions must be rejected. Consistent with my reasons in relation to Maisano,[110] the evidence of the representations made by Martin are entirely consistent with Martin seeking to convey that the Bodycorp franchisees could continue to be Recommended Repairers once they had lawfully ceased to be franchisees of Bodycorp. This is particularly so in the context where many of the franchisees had agreements that were due to expire in the near future.

303 As discussed in paragraphs 185 to 192 above, a plaintiff needs to establish an informed and clear intention that a defendant intended the inducement of a breach of contract. The evidence of the former Bodycorp franchisees does not remotely reflect conduct demonstrating such an intention on the part of Martin. The evidence does suggest that Martin would have been more than happy for the Bodycorp franchisees to leave Bodycorp. The evidence also suggests Martin was more than willing to point out that the franchisees would be better off if they were not with Bodycorp. But conveying such matters to the franchisees is clearly insufficient to establish a cause of action.

304 There is one further fact I should refer to before leaving this topic. I refer to paragraph 146 above. Evidence led by both Bodycorp and AAMI demonstrated that from July 1997 there were a significant number of Bodycorp franchisees who were discontent with paying Bodycorp for moneys due under the respective franchise agreements. Speaking generally, I expect no inducement was required for some of the franchisees to leave the Bodycorp group if they were of the view that upon departing they would be able to maintain a profitable business.**

**305 This claim has very little, if any, substance. As noted above,[111] until the amendment was made during the course of the trial, the particulars disclosed that the claim was sought to be made out based on the records of Bodycorp. Although those particulars remained in the pleading, that basis for making the claim was largely abandoned in closing submissions. The case is now sought to be made out on documents produced by AAMI during the course of its business.

306 The documents relied upon by Bodycorp were quoting analyses issued by AAMI on a monthly basis. The information contained in the quoting analyses was prepared by AAMI pursuant to cl 8 of the Recommended Repairer Agreement, which required AAMI to "provide monthly details of the number of jobs quoted and won along with the total repair cost authorised and average per job".

307 In addition to providing each Recommended Repairer who was a Bodycorp franchisee with this information, AAMI provided a monthly report to Bodycorp itself. This provided details in relation to all of the Bodycorp franchisees who were Recommended Repairers. The quoting analyses sent to Bodycorp purported to provide "details of the opportunities your individual panel shops quoted on for the month", and then tabled data for the particular month in question. Each quoting analysis had 4 columns headed "jobs quoted", "authorised", "success rate %" and "repair cost $".

308 The "jobs quoted" column listed the number of jobs for which a quote had been given. The "authorised" column listed the number of the quoted jobs that were authorised by AAMI. The "success rate %" column listed, as a percentage, what the number in the 2nd column represented as a proportion of the 1st column. Accordingly, none of these columns identified the sums involved. This was done in the 4th column "repair cost $". Further, the percentage figure given in the 3rd column did not relate to work done, but only the success rate in relation to being a successful bidder.

309 It follows that, on the face of the document, it is concerned with the quoting performance of the repairers. There is nothing to indicate that the premise of the 4th column was understood differently to the 3 columns that preceded it.

310 In making this claim, Bodycorp made the assumption that each and every item referred to in the "repair cost $" column ultimately became the subject of work performed by a Bodycorp franchisee, and therefore the subject of an invoice issued to AAMI. The evidence demonstrated that this assumption was not correct.

311 Both Murdaca and a former employee of AAMI gave evidence as to what the "repair cost $" amounts represented. Murdaca asserted, in substance, that the work referred to was invariably done. He said "these vehicles would have been repaired" when taken to an example of the quoting analyses. Murdaca stated that if the work was not done it would not show on the statistics reported. This was because the reports came 4 to 6 weeks, sometimes 6 to 8 weeks, after the successful quote. Murdaca said that a normal turnaround time for a vehicle was 7 days. He contended that the amount probably understated the amount of work done. He said this was because some additional repair costs were sometimes identified after quoting.

312 Michael Andrus ("Andrus"), who previously worked for AAMI, also gave evidence on this matter. Andrus worked for AAMI for just over 40 years. He is now retired, having been "packaged off" in 2010. When he first met Murdaca, in around 1989, Andrus was managing the North Melbourne customer service centre. Andrus said that he managed various customer service centres over years and got to know all the panel beating shops, including all the Bodycorp franchisees.

313 Martin was more senior in AAMI's management than Andrus. Before Martin returned to the role of supply and development manager in 1997, it was filled by Perryman and Joseph. Leading up to 1992, and immediately before Perryman and Joseph, Martin had the responsibility for the repairer management in Melbourne. In short, at no time did Andrus have overall responsibility for the repairers.

314 Andrus gave evidence which corroborated the evidence of Murdaca. Andrus said the "repair cost $" column recorded actual work done by the franchisees. He said that if an insured did not proceed with a claim that had been the subject of a successful quote by a franchisee, then that matter was not recorded in this column, although it was recorded in the other columns. But he contradicted Murdaca's evidence in relation to the additional work (referred to as "supplementary"). Andrus said supplementary was included in the "repair costs $" column. However, it was clear from his evidence that, although he discussed the quoting analyses with Bodycorp franchisees from time to time, from 1995 onwards he had never prepared or authored such a document.

315 Andrus said the quoting analyses were prepared from computer reports, the data having been supplied by the customer service centres. He said the customer service centres were responsible for getting the quotes and authorising the quotes. Andrus stated that the repair costs would also be information provided by the customer service centres. However, he acknowledged that the customer service centres did not deal with invoices. The invoices were dealt with by the claims department, which was at a central office in St Kilda Road, Melbourne.

316 Andrus also gave evidence that he had never compared the figures in the "repair cost $" column with the costs of actual repairs. He said they "should be one and the same". However, when tested under cross-examination, Andrus accepted that the quoting analyses stated no more than how many jobs were quoted, how many jobs were authorised, the percentage of the authorised jobs in respect of the jobs quoted and the amount quoted. He also accepted there would be circumstances in which a customer would not go ahead with the repair.

317 Finally, Andrus said that in the last 12 to 13 years of his work at AAMI he was looking after country Victoria because of a special operation he had had. Accordingly, it appears that in the critical period, he was not performing the role of dealing with metropolitan Melbourne.

318 Looking at the evidence of Andrus as a whole, I cannot be satisfied that the assertions he made about the amounts that "should" be the same were in fact the same. Further, it is clear from the role played by Andrus that there were persons in the management of AAMI who would have been far more familiar with the subject matter of what actual amount of work was performed compared to the "repair cost $" amount.

319 Martin, on behalf of AAMI, gave evidence as to what the amounts in the quoting analyses represented. He was the author of many of the documents. He stated that amounts in the column "repair cost $" had nothing to do with payments actually made to franchisees.

320 Martin said the figures did not reflect the actual cost because many cars successfully quoted on did not actually get repaired. He said there were "many, many" reasons for this. They included persons not wishing to incur an excess or affect their "no claim bonus", and therefore choosing not to lodge a claim; people waiting many, many months before doing the work (and therefore not referable to the month of the analysis); or a car getting damaged whilst waiting to be repaired. He also said that sometimes the car was appraised for repair, but when the work was to be done extra damage would be found so that the car would be rendered a total loss.

321 Although Martin did not refer to any other examples, it does appear there were valid reasons why "repair cost $" would not always equate with actual work done. Significantly, Martin was not challenged directly in relation to his evidence on this point. On the contrary, in closing submissions counsel for Bodycorp accepted that events of the kind referred to by Martin did occur.

322 Martin said that AAMI did not revisit the quoting analysis at some later time to adjust the figures for work that was not actually done. He said this was difficult to ascertain, as often moneys were not paid directly to the repairers. He said AAMI's records did not include an analysis of the type sought by Bodycorp.

323 The evidence of Martin concerning subsequent events was corroborated by Maisano. Maisano did a considerable amount of work for AAMI as a Bodycorp franchisee. At one point he was rewarded by Bodycorp for his success as a Bodycorp franchisee. He gave evidence that there were occasions where he was the successful party in relation to the quote but would not get the chance to do the repair. He also gave other instances of why, in his experience, successful quotes did not equate to work completed. He said in some circumstances the customers decided to sell the car or to hand it down to their children. Maisano was not challenged on this evidence.

324 It was submitted by Bodycorp that the nexus between this evidence and the figures in the quoting analyses was not made, and therefore nothing could be made of Bodycorp's failure to make any challenge. It is correct that the reference to the quoting analyses was not made in Maisano's evidence. Be that as it may, the evidence did appear to be dealing with the subject matter in question. Maisano did speak in terms of AAMI having to cancel previous authorities in light of the customers not pursuing the repair work. In any event, nothing turns on this in light of the concession by Bodycorp that events as identified did occur. The single issue is whether such events were reflected in the quoting analyses.

325 Martin also gave unchallenged evidence about when a repairer's invoice was first recorded in AAMI's systems. It was not recorded when first received, but when payment was created by AAMI. This could be weeks after the invoice was received. This fact makes it highly unlikely that figures published immediately after the month in question (ie when the quotes were given and considered) would, or even could, incorporate actual invoice amounts.

326 In addition, Martin said that sometimes AAMI would never get an invoice from a repairer, because, for instance, a repairer would have an agreement with a factoring company. He said in those circumstances, the invoice would be received by AAMI from the factoring company. Martin said if a report was then produced by AAMI of payments made at the time, the systems would not show the amount that was originally invoiced by the repairer. This evidence was also not challenged.

327 By reason of the subject matter of cl 8 of the Recommended Repairer Agreement, together with the evidence given by Martin and Maisano, I cannot be satisfied that the "repair cost $" amounts referred to in the quoting analyses represent repair costs of work actually done. On the contrary, the evidence strongly suggests these figures only represent repair costs of work quoted on.[112] Indeed, counsel for Bodycorp properly acknowledged in closing submissions that there was simply no evidence before the court that AAMI adjusted the relevant figures after such events occurred.

328 Moreover, the evidence of Murdaca and Andrus was entirely speculative in its nature. They were not responsible for the reports. They gave no evidence to suggest they ever reconciled the relevant figures at the time. Neither of them had direct involvement in the work actually performed by the Bodycorp franchisees. Their evidence really amounted to no more than assertions as to what they believed the figures represented.

329 Significantly, these assertions were being made approximately 15 years after the relevant events, when the proceeding had been on foot for approximately 11 years. For nearly the entirety of that 11 years Bodycorp did not intend to prove its case in reliance upon the quoting analyses. The combination of these matters makes the evidence of Murdaca and Andrus on this topic of negligible probative value.

330 In closing submissions, counsel for Bodycorp accepted that the court would need evidence beyond the quoting analyses themselves before it could be satisfied that the submissions of Bodycorp as to the meaning of the "repair cost $" amounts represented that for which Bodycorp contended. I was not taken to any document relating to the preparation of the quoting analyses which could so satisfy me.[113]

331 There are further matters that seriously undermine the probative value of the evidence led by Bodycorp in relation to this claim.

332 Both Blashki (Bodycorp's accounting expert) and AAMI's accounting expert, Geoffrey Sincock ("Sincock"),[114] gave evidence that the usual way such a claim would be made would be on the basis of comparing invoices issued with the payments made. Blashki stated you would also need the bank statements to prove the accuracy of such source documents. The fact that Bodycorp has failed to produce any reconciliation between payments and invoices issued is a glaring deficiency in Bodycorp's case. Although loss might be proved by other means, it is telling that there has been no attempt to try and verify the claim made, or even part of the claim, by such a process.

333 The deficiency is all the more glaring by reason of some of the documentation that was provided to Blashki. Blashki was actually supplied with a large number of invoices, cheque remittances and payment advices under cover of Bodycorp's letter of instructions to Pitcher Partners dated 21 November 2012. However, Blashki did not (and presumably was not expressly instructed to) look at any of these documents.

334 Blashki said he did not look at them for 2 reasons; first, the task would have been enormous and, secondly, even if he had done it, Blashki was not "in a position to prove whether they were complete, therefore reliable". In short, it is clear Blashki was not confident in the reliability of the materials with which he had been supplied.[115] Murdaca was also unsure whether all the relevant invoices had been produced by Bodycorp.

335 As noted in Bodycorp's Expert Report by Blashki, "many key records that would normally be relied upon" were not made available to Blashki. They were also not made available to Sincock. No explanation was provided as to why such documentation, including "general ledgers, cash books, revenue reports, expense details, and debtors and creditors ledgers" had not been provided by Bodycorp.[116]

336 Because of the state of the documentation provided to Blashki, he said in performing his task he had to do estimations where there were missing records. He said he had to extrapolate from the limited information that he had. The gaps in the information were not only from Bodycorp's records, but also in relation to missing quoting analyses from AAMI. Blashki also accepted that matters of significance in Bodycorp's Expert Report were only capable of understanding on the basis of assumptions he was given. One of the assumptions made, that permeated the whole of Bodycorp's Expert Report, was that the figures in the AAMI quoting analyses represented the income of each repairer. As I have found, this assumption was incorrect.

337 Bodycorp bears the burden of proof not only in relation to establishing it suffered the loss claimed by reason of non-payment, but also in relation to the amount of loss it says it has sustained. It must do this on the balance of probabilities with as much precision as the subject matter reasonably permits.[117]

338 If Bodycorp had put the proper business records before the court, it would have been a relatively straightforward exercise to establish whether or not Bodycorp had been paid for all of the invoices rendered. It has failed to do this. Rather, Bodycorp has invited the court to speculate and draw conclusions based on documents which were not prepared for the relevant purpose. In those circumstances, it is my view that it has not satisfied the onus it bears in relation to establishing the loss claimed.

339 There was 1 type of Bodycorp record relating to claims actually made. This document type was entitled "claim reconciliation sheet" (or similar words, depending on the year) and provided information for a particular financial year. The status of such documents was entirely unclear. No one from Bodycorp gave any evidence in relation to them.

340 When Blashki was asked what the document was, he was unsure and struggled to remember what his instructions were on the topic. The documents were admitted into evidence as they were tendered by agreement as part of a bundle of documents put before the experts.

341 There are a further matters relevant to the probative value of the quoting analyses as a measure of the loss claimed.

342 Bodycorp called 6 witnesses who were former Bodycorp franchisees or officers of former Bodycorp franchisees. None of these witnesses gave evidence with respect to the relationship between the figures contained in the quoting analyses provided by AAMI and the actual amount of work performed. It would be expected that each one of them would be in an ideal position to corroborate Murdaca's evidence if it were accurate. But none of them did so. This lack of evidence was even more telling given that some of the former Bodycorp franchisees expressly referred to the quoting analyses in their evidence.[118]

343 Further, there was an unreality about the basis of the claim given its amount. The amount claimed represented 8% of the invoices alleged to be missing or unpaid. This means that, for the claim to be valid, the invoices themselves would need to total many millions of dollars.[119] It seems highly unlikely Bodycorp would have allowed such significant amounts to go unpaid without being able to substantiate its claim at a time proximate to the times in question.

344 Finally, on this topic, I refer to the observations in Bodycorp's closing submissions about the absence of any cross-examination of Murdaca in relation to the accounts of Bodycorp. Ralph Murdaca was cross-examined on these accounts, but not Murdaca. Bodycorp submitted that the uncontroverted evidence of Ralph Murdaca was that Murdaca was primarily responsible for the accounts.

345 There are a number of responses to this. First, ultimately the accounts were not relied upon to establish the loss claimed. Secondly, the evidence that Murdaca was primarily responsible for the accounts was only given by Ralph Murdaca after Murdaca had completed his evidence. Thirdly, the outline of evidence filed on behalf of Ralph Murdaca expressly dealt with this topic.[120] In those circumstances, AAMI cannot be criticised for directing its cross-examination to Ralph Murdaca, rather than Murdaca.

346 In concluding, I observe that Blashki said the quoting analyses were not documents that would normally form part of the accounting records of a company. He did not know whether they reflected the accounting records of AAMI.

347 Blashki properly acknowledged that if the quoting analyses did not record the income of the Bodycorp franchisees in question, then all calculations he made on that assumption would be unreliable. Blashki also said if this assumption concerning income was incorrect then the methodology he adopted would be incorrect. Accordingly, this claim cannot be substantiated.**

**348 Bodycorp invited the court to draw inferences based on the submission that AAMI failed to call a number of potential witnesses. In so doing, they relied upon the rule in Jones v Dunkel.[121]

349 Recently, the Court of Appeal[122] concisely stated when the relevant inference may be drawn, namely:[123]**

... where, as a consequence of the issues raised during the course of the evidence, an unexplained failure to call witnesses may lead to an inference that the uncalled evidence would not have assisted the party's case. The rule permits the trier of fact to take that into account in deciding whether to accept a particular piece of evidence which has been put in issue.

(Citation omitted.)

**350 The first submission on this issue was that each of Belleville, Casboult and Oswald (all AAMI executives) and Adams (AAMI's solicitor) should have been called in relation to the AAMI Agreement and the relevant evidence from November 1997 to June 1998.

351 There is no substance to this submission. There was no issue between the parties that the written document comprising the AAMI Agreement reflected the agreement between the parties. Nothing further needed to be before the court (and perhaps may not have been admissible before the court in any event[124]).

352 Secondly, without dealing with matters individually, it was submitted that these AAMI executives and others, together with Adams, ought to have given evidence in relation to a number of other events. These events were referred to by way of contemporaneous documentation, including file notes, memoranda and notices. I can see no reason to draw any inference from the absence of these witnesses in relation to such matters. The contemporaneous documents were in evidence. In large part they spoke for themselves. Further, it is not incumbent upon a defendant to call witnesses to fill gaps that may exist in a plaintiff's case.

353 Thirdly, it was submitted by Bodycorp that Helen Thompson and Sam Sorrenti ought to have been called. These officers of AAMI had been involved in investigations and audit work in relation to allegations by Bodycorp that AAMI had failed to pay moneys owing. Again, I can see no need to draw any inference by reason of their absence. It is a matter for a plaintiff to prove its case on loss. If it is unable to even establish a prima facie case, there is no obligation on a defendant to call evidence to purport to meet a case that has not been made out.

354 Fourthly, it was further submitted that Joseph and Perryman should have been called to give evidence regarding AAMI's dealings with Bodycorp and its franchisees from the period between 1995 and 14 July 1997. It was said these witnesses were relevant to the "change in the philosophy" that Martin brought to the relationship with Bodycorp.

355 The dealings relevant to the issues in this case were those from well after July 1997. In my view, the fact that there might have been a different type of relationship when Perryman and Joseph were in charge does not address the issue of what in fact the relationship was at the relevant times. In short, evidence of the matters referred to would have been marginally relevant, at best.

356 Fifthly, it was submitted that a previous state manager for AAMI, Anthony Durakovic ("Durakovic") ought to have been called by AAMI to give evidence concerning his dealings with Lantieri and the direction made to Martin to reply to her letter of 28 October 1998. Both pieces of correspondence were in evidence. The documents speak for themselves. It is difficult to contemplate what the then state manager of AAMI might have said by way of oral evidence that would be relevant to the issues at trial. The submissions of Bodycorp did not descend to such detail. I can see no proper reason to draw any inference.

357 Sixthly, a submission was made in relation to Durakovic and Kay, another AAMI executive. It was submitted they should have given evidence concerning an instruction in June 1999 not to use any new Bodycorp franchisee and to wind back Bodycorp Malvern. This instruction was referred to in a memorandum of Martin.[125] Again, I do not follow what might have been added by these witnesses. The fact that an instruction was made was already in evidence. In any event, I was left to speculate as to what the significance of their absence was as no detail was given as to why these witnesses should have been called.

358 In summary, I cannot see any substance in relation to any of the submissions of Bodycorp in relation to the absence of witnesses. Indeed, in a case of this size and in relation to events so long ago, it is highly likely that an approach by a party to call every possible relevant witness would be contrary to the obligations imposed by reason of the overarching purpose in civil litigation to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[126]**

**359 AAMI submitted inferences ought to be drawn from the fact that none of the Category B Franchisees were called.

360 For reasons already explained,[127] these witnesses could not properly be considered as witnesses who would expect to be called as part of the case of Bodycorp. Put bluntly, they could not sensibly be considered to be "in Bodycorp's camp". Accordingly, there is no issue of an unexplained failure to call such witnesses.**

I. Basis upon which leave was granted on 24 May 2013 to amend the statement of claim

**361 As previously observed, leave was granted to Bodycorp to amend its statement of claim on 24 May 2013. As the application was heard and determined during the course of trial, I reserved for later argument the question of whether or not the order granting leave ought to be effective from that date rather than the date upon which the proceeding commenced. I now turn to consider that question.

362 AAMI relies upon the decision of the Court of Appeal in Agtrack (NT) Pty Ltd v Hatfield[128] in seeking to have the order made on 24 May 2013 only come into effect from that day. Relevantly, the order granting leave permitted the introduction of paragraphs 42A to 42C to the statement of claim, together with an increase in the amount claimed from $700,000 to $1,445,335.

363 Paragraph 42A did no more than refer back to an existing allegation, namely paragraph 41(b), and alleged that those matters gave rise to an indebtedness.

364 Similarly, paragraph 42B did no more than refer back to paragraph 41(c) of the existing pleading, and alleged by reason of that allegation AAMI was indebted to Bodycorp.

365 In substance, the new allegation was contained in paragraph 42C which stated that AAMI wrongfully made payments to Bodycorp franchisees rather than to Bodycorp directly.

366 In my view, the amendments as allowed do no more than amend a cause of action that is already pleaded. The existing cause of action complained that moneys owing to Bodycorp by AAMI for work done by Bodycorp's franchisees had not been paid to Bodycorp by AAMI. That remains the cause of action. In substance, the new paragraph 42C is an attempt to preclude AAMI from stating that the moneys had been paid, albeit to Bodycorp franchisees, and that these payments therefore discharged the debts that were said to be owing to Bodycorp. In short, in no way can the amendments be characterised as introducing "a new and distinct cause of action".[129]

367 The substance of the submissions made by AAMI was that the allegations now seek to introduce additional facts and a different means by which to prove the claim. I agree with those observations. However, a variation in the means by which the same cause of action might be proved does not attract an exception to the "relation-back" effect of the amendments.[130]

368 In AAMI's defence to the new allegations, AAMI alleges that Bodycorp represented to it in September 2000 that it would not seek to recover any moneys paid by AAMI directly to Bodycorp franchisees ("the Non-Recovery Representation"). AAMI pleaded that it relied on the Non-Recovery Representation to its detriment by not keeping and retaining full and complete records concerning direct payments to Bodycorp franchisees. It is further pleaded that as a result of the Non-Recovery Representation and the resulting detriment, Bodycorp is estopped from advancing the claims in paragraphs 40 to 43 of the FASOC. Given my findings in section G above,[131] it is not necessary to consider this matter in full. I will address this defence briefly.

369 The genesis of this defence is a letter dated 12 September 2000 sent by Bodycorp to AAMI. That letter referred to some issues Bodycorp had outstanding in relation to its tax returns and accounting records. According to the letter, a sum of $170,503.27 had been identified as claims for which Bodycorp had not received any payment from AAMI.

370 The letter stated that Bodycorp was seeking to ascertain whether any of its repairers or other persons have received payment from AAMI for the claims. Bodycorp said that any information provided by AAMI would be then remitted to the Australian Tax Office so that Bodycorp's accounts could accurately reflect its income and profitability.

371 The letter sought a response from AAMI within 2 weeks. It acknowledged that obtaining the information would cost AAMI money. It agreed to allow that cost to be passed on to Bodycorp. It then stated:**

If it transpires that AAMI has paid repairers directly on some or all of the listed claims, Bodycorp is not seeking any recourse against AAMI over this.

**372 Martin gave evidence to the effect that, given the staleness of this proceeding, AAMI no longer had records available to it in relation to questions raised by Bodycorp about AAMI's accounting systems. Given that the relevant events are approximately 14 to 18 years ago, this is hardly surprising. He also gave uncontested evidence that the computer systems of AAMI had changed since the time when the relevant payments were made.

373 In the circumstances, where the allegation is being made in 2013 for the first time, AAMI has been effectively precluded from having the ability to defend allegations (such as they are) about non-payment to Bodycorp on the basis that they were paid to Bodycorp franchisees rather than Bodycorp.

374 It is my view that each of the elements of an estoppel[132] is made out. Accordingly, to the extent the claim for non-payment for work and labour done relies upon non-payment because of payment to Bodycorp franchisees, Bodycorp is estopped from making it.**

**375 In light of the findings I have made, it is strictly unnecessary for me to deal with a number of additional matters raised by the parties. In case the proceeding were to go further, I make the following brief observations.

376 Insofar as any claim made by Bodycorp for loss and damage relies upon a lost opportunity, because Bodycorp alleges it lost the opportunity to receive franchise fees for further terms of a franchise agreement, I assess that opportunity as having a value that is negligible or nil. In relation to each of the franchisees that left Bodycorp, there appears to be no basis to suggest there was any prospect of them remaining with Bodycorp at the end of the expiry of the original term.[133] It is clear that each franchisee was free to leave the Bodycorp group upon the original term lapsing.

377 The 1 qualification to what has been said in the previous paragraph is that, in relation to the Category A Franchisees and Category B Franchisees who also are referred to in schedule 1 of the AAMI Agreement (namely Berwick, Heidelberg, Moorabbin and Mornington, together with Melton),[134] there might be an argument that, if the restraints of trade were enforceable (contrary to my findings), there was more than a negligible opportunity that Bodycorp might persuade those franchisees to renew their franchise agreements. However, no factual evidence was led in this regard. In the circumstances, I would still find the lost opportunity to be negligible or nil.

378 In addition, to the extent that Bodycorp's claim for loss is on the assumption that, if the existing franchisee did not renew, a new franchisee would take its place in the area, that assumption has no basis in fact. It was not alleged that a new franchisee of Bodycorp would be entitled to Recommended Repairer status. The absence of such an allegation is, no doubt, because appointment to Recommended Repairer status was entirely in the hands of AAMI.

379 Given the entirely unsatisfactory state of the relationship between Bodycorp and AAMI from approximately mid 1998 onwards, there was no prospect whatsoever of a new franchisee obtaining Recommended Repairer status. Further, there was no evidence that Bodycorp could attract a new and viable franchisee when it had no prospect of obtaining Recommended Repairer status.[135] In my view, this is an additional impediment to Bodycorp successfully claiming loss in the event that it made out the relevant causes of action.

380 Further, to the extent that any claim made by Bodycorp seeks to rely upon the quoting analyses, for the reasons I have already stated, that part of the case is fundamentally flawed. No loss or damage could be properly established based upon the quoting analyses.

381 Finally, in relation to the claim against Maisano for inducing breach of contract, there was no evidence to establish any loss was caused by Maisano, even if the cause of action had been established. Blashki acknowledged in his analysis of the alleged loss he did not differentiate between Maisano and Munro in terms of what loss they may have caused separately. The case against Munro was dismissed and Munro was not called as a witness. In those circumstances, there was no proper basis to establish what loss Maisano alone might have caused if he engaged in the conduct alleged.**

**382 Another issue I have not determined arises out of the allegation in paragraph 41(a) of the FASOC to the effect that Bodycorp was the assignee of the right of each of the franchisees to be paid by AAMI for vehicle repair work done by each franchisee for or on behalf of AAMI.

383 No actual assignments have been the subject of any evidence by Bodycorp. All that has been put before the court are various directions made by the respective franchisees authorising AAMI to make payments for work done by that franchisee to Bodycorp instead of the franchisee.

384 Given the evidence is not controversial, it is not necessary for me to make any findings of fact in this regard. Accordingly, I will refrain from making any decision in relation to the legal issues that arise as these are not necessary in light of my previous findings.**

J.3 Failure to mitigate any loss suffered by reason of any inducement

385 It was contended that if, contrary to the primary submissions of the relevant defendants, there was an inducement of breach of various franchise agreements, then Bodycorp failed to mitigate any loss suffered. This was put on the basis that Bodycorp failed to sue any of the Category A Franchisees or the Category B Franchisees for breach of contract. In light of my earlier findings it is unnecessary to decide this point. But I do note there was no explanation at all from Bodycorp why it has not sought to recover from any of these franchisees in circumstances where it maintains that each of them breached the relevant franchise agreements.

J.4 Further submissions relating to Martin's credit

**386 By reason that I have not accepted the denials of Martin in relation to the conversations that a number of former Bodycorp franchisees alleged occurred,[136] I have not been required to consider further submissions made in relation to Martin's credit. Speaking very broadly, the submissions were to the effect that in 1992 Martin was involved in a rationalisation process which reduced the number of Recommended Repairers for AAMI. As part of this process, Martin chose to remove 69 Recommended Repairers from the AAMI panel. Of these 69 repairers, 2 shops were owned by Murdaca and persons related to him; namely, Knighton Smash Repairs and Swedish Body Works.

387 In 1992, Murdaca did not accept this decision. He complained to AAMI. As a result of Murdaca's protests, the decision of Martin was overridden and the Recommended Repairer status of both Knighton Smash Repairs and Swedish Body Works was reinstated.

388 It was submitted by Bodycorp that, because of this history, Martin harboured an animosity towards Bodycorp, as well as being disposed to favour another group of repairers. It was suggested by reason of this animosity and disposition, in 1997, when he returned to the relevant role, he went about trying to undermine Bodycorp's business.

389 In my view, the evidence does not establish an underlying animosity or adverse disposition of Martin towards Bodycorp when he resumed his position in 1997. Martin denied that he singled out Murdaca's shops in any way as part of the rationalisation process in 1992. I accept this evidence.

390 In short, I find that Martin's attitude towards Bodycorp in 1998 and 1999 was more likely to be a reflection of the events that occurred from the second half of 1997 onwards, rather than some prior event. Accordingly, I placed no weight on the events in 1992 in making the determinations that I did.**

**391 For the reasons stated, the claims of Bodycorp against each of Maisano, AAMI, All States and Martin must be dismissed. Presently, I am not aware of any circumstance that would make the usual order as to costs inappropriate. I will give the parties 14 days from today to make an application in relation to the costs order. Liberty to apply is granted for that purpose, and in the meantime I will stay the operation of the costs order.

1. The plaintiff's claims against each of the 1st defendant, the 4th defendant, the 5th defendant and the 6th defendant are dismissed.
2. The plaintiff pay the costs of each of the 1st defendant, the 4th defendant, the 5th defendant and the 6th defendant, including any reserved costs.

4. Liberty to apply within 14 days in relation to order 2.

Bodycorp shops with no evidence of a franchise agreement before the court[137]

Cheltenham (in relation to Cheltenham Accident Repair Centre)

[1] Maisano also used the name Michael Maisano, but not in the context of his dealings as a Bodycorp franchisee.

[2] Repose Nominees Pty Ltd at all material times was the trustee of the Murdaca Family Trust. For further detail in relation to these arrangements, see: Bodycorp Repairers Pty Ltd v Maisano (No 7) [2013] VSC 345, [46]-[55].

[3] Rogers subsequently became an employee of Bodycorp.

[4] This description was given to a group of smash repair industry participants who were opposed to AMMI's 2-quote system for repair work. It was said that these participants actively attempted to undermine the 2-quote system.

[5] Different versions of the Recommended Repairer Agreements were included in the court book: eg CB 1094, 1107, 1133, 4631. The differences between the different versions are not material to the issues in this proceeding.

[6] Any contention previously made by Bodycorp of any agreement between the parties was not advanced at trial or in any statement of claim in this proceeding: compare recital D to the AAMI Agreement (see par 46 below) in which allegations by Bodycorp to this effect are recorded. See also the release in cl 2.6 of the AAMI Agreement.

[7] See, for example, the memorandum dated 5 July 1995 at par 24 above.

[8] I will refer in more detail to the relevant terms of the franchise agreement between Bodycorp and Maisano below.

[9] This matter becomes relevant when considering the AAMI Agreement: see pars 135-156 below.

[10] The Category A Franchisees were defined in the FASOC to be:

(1) Smash and Scratch Panels Pty Ltd, trading as "Bodycorp Geelong".

(2) JJ Marvic Pty Ltd, trading as "Bodycorp Clayton".

(3) Lawpress Pty Ltd, trading as "Bodycorp Caulfield".

(4) Caledonian Accident Repair Centre Pty Ltd, trading as "Bodycorp Nunawading".

[11] Further particulars of these allegations are set out in Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [4]-[5].

[12] The Category B Franchisees were defined to mean:

(1) Sunbury Panels Pty Ltd, trading as "Bodycorp Sunbury".

(2) RP Panels Pty Ltd, trading as "Bodycorp Spotswood".

(3) Mr Raymond Chaiban, trading as "Bodycorp Heidelberg".

(4) Quicfix Pty Ltd, trading as "Bodycorp Mornington".

(6) Melton Bodyworks Pty Ltd, trading as "Bodycorp Melton".

[13] See also Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [9]-[14].

[14] Attachment "A" contained the Recommended Repairer Agreement with additional clauses requiring the repairer to notify AAMI if there were, in substance, a material change to its business. It also provided that the repairer would cease to be a Recommended Repairer if it ceased to be a Bodycorp franchisee. There is no evidence to suggest any such agreement was ever entered into.

[15] There was an issue in the proceeding as to whether Heidelberg was in fact a franchisee.

[16] These franchisees are confined to the Category A Franchisees, the Category B Franchisees and Berwick: FASOC par 33.

[17] Blashki is a chartered accountant and an executive director of Pitcher Partners.

[18] That is, it was not discovered as either a document in Bodycorp's possession or as a document which had previously been in its possession.

[19] Bodycorp attacked Maisano's credit. Bodycorp made the submission that at least on 2 occasions Maisano gave false evidence such that s 128 of the Evidence Act needed to be raised. This misrepresents the position; s 128 was raised because of the seriousness of what was being put to Maisano in cross-examination. Maisano was willing to respond to those allegations without seeking a certificate under s 128. There was nothing said by Maisano which established that what he had previously said on oath was false or materially inaccurate.

[20] See Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 137 [47], quoting Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641.2-642.10.

[21] Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR(NSW) 632, 641.7.

[22] Cf Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 138 [48].

[23] As to which, see: Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359, 370.9-371.3 (Rich J), 373.8 (Starke J), 377.7-378.4 (Dixon J); RW Jaksch & Associates Pty Ltd v Hawks [2005] VSCA 307, [61] (Hollingworth AJA, Ormiston and Eames JJA agreeing).

[25] See pars 101-108 below.

[26] See pars 101-108 below.

[27] As noted in par 86 above, this does not coincide with the pleaded case. The case pleaded was that Maisano became aware of the offending conduct in early July 1998. Leave to amend this pleading to allege an earlier date was refused: Bodycorp Repairers Pty Ltd v Maisano (No 5) [2013] VSC 264; the then proposed amendment is set out in the judgment at [8]. However, the evidence referred to above ultimately was before the court in any event, as a result of the cross-examination of Maisano by Bodycorp's counsel.

[28] As to which, see par 114 below.

[29] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 135 [44].

[33] See Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549, 562.2 (Mason ACJ, Wilson, Brennan and Dawson JJ); referred to with approval in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, 139 [51] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[34] Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd [2009] VSCA 161; (2009) 24 VR 349, 364-365 [83] (Maxwell P, Weinberg JA and Kyrou AJA).

[35] Larratt v Bankers and Traders Insurance Co Ltd [1941] NSWStRp 34; (1941) 41 SR (NSW) 215, 223.10 (Jordan CJ).

[36] For example, Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, 32.9 (Mason J); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 643.9 (Brennan J); Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319, 334 [64] (Williams AJA, with whom Ormiston and Batt JJA agreed).

[37] Cf Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 647.9 (Brennan J).

[38] See par 39 above in relation to the allegation referring to 6 July 1998. Bodycorp made no distinction between these 2 dates for the purposes of its submissions.

[39] See pars 43-51, 55 and 56 above.

[40] By letter dated 3 April 1998, solicitors for AAMI stated that an agreement "was made in November 1997".

[41] See par 261 below.

[42] All franchise agreements with Bodycorp were for a period of 3 years.

[43] A schedule of the franchise agreements that were before the court, together with the status of such agreements is attached as Schedule A.

[44] See fn 16 above.

[45] This is because Melton was covered by cl 1.2 of the AAMI Agreement.

[46] Martin stated that 2 of the repairers lost their status "for a short while" but were then reinstated. It is likely, then, that all remained Recommended Repairers for all, or substantially all, of the 6 months after leaving Bodycorp.

[47] See par 14 above.

[48] The relevant time for consideration of whether or not a restraint of trade is reasonable as at the time the contract was entered: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 318.4 (Gibbs J) and the cases there cited.

[49] Petrofina (Gt. Britain) Ltd v Martin [1966] Ch 146, 180D (Diplock LJ).

[50] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 308.3 (Walsh J), 317.8 (Gibbs J); Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1967] UKHL 1; [1968] AC 269, 319D-E.

[51] See, for example, Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 306.2 (Walsh J), 315.10 (Gibbs J).

[52] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 314.4 (Gibbs J) and the cases there cited.

1. [53] See, for example, Buckley v Tutty [1971] HCA 71; (1971) 125 CLR 353, 375.8, 381.3-382.2; Barnard v Australian Soccer Federation (1988) 81 ALR 51, 56.8.

[54] Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126, 142 [35] (Gleeson CJ, Gummow, Kirby and Hayne JJ).

[55] Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535, 565.4.

[57] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 317.10 (Gibbs J), and the cases there cited.

[58] One former Bodycorp franchisee described his Recommended Repairer status as his livelihood and as being very significant: T1016.12-.24. He also said it gave him a very strong reason to stay as a franchisee: T1016.27. Another former franchisee said the status could be very important and to cease to be a Recommended Repairer could seriously affect a business and a person's livelihood: T1094.17-.21.

[59] In closing submissions, counsel for Bodycorp accepted the franchisees received no benefit in return for the restraints of trade being imposed.

[60] For completeness, I note that Bodycorp submitted the restraints of trade should be imposed even if the franchisee had a sign before becoming a franchisee.

[62] Letter from AAMI to Rogers at Bodycorp dated 14 November 1997.

[63] See recital D to the AAMI Agreement in par 46 above.

[64] Cf Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 316.4 (Gibbs J).

[65] See par 28 above.

[66] At the time the AAMI Agreement was entered into, there was no apparent reason to suppose that each of the relevant franchisees would cease being Bodycorp franchisees at the same time.

[67] Both Bodycorp and AAMI had substantial law firms acting for them throughout the course of the negotiations.

[68] Cf, for example, Mason v Provident Clothing and Supply Company Ltd [1913] AC 724, 738.2.

[69] At par 56 above.

[70] It appears from the number of quotes offered to Tottenham in the first half of 1999 that Tottenham was clearly placed on trial. So much was acknowledged by Camilleri.

[71] See par 46 above, cll 2.4, 2.5(b) and (d).

[72] Blashki was given no instructions by Bodycorp about the fact that the South Melbourne franchisee continued to get business from AAMI through the Moorabbin customer service centre: T1727.06-.17. Accordingly, there is nothing before the court to be able to ascertain what additional business was gained by South Melbourne (and therefore Bodycorp) by reason of this arrangement.

[73] [1959] HCA 8; (1959) 101 CLR 298, 308.5, 312.6, 320.8-321.2.

[74] At par 58 above.

[75] Bodycorp referred to the fact that the Victorian operations manager, Jillian Sullivan, was not called on behalf of All States. The evidence of Ralph Murdaca suggested she was at some of the relevant meetings. Given the particulars made no reference to anyone other than Austin being present on behalf of All States, nothing turns on her absence.

[76] [1939] HCA 9; (1939) 62 CLR 339.

[78] At 371.4. See also Communication, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Corke Instrument Engineering Australia Pty Ltd [2005] FCA 799; (2005) 223 ALR 480, 485 [19].

[80] Short v The City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148, 160.3.

[82] [1995] FCA 1368; (1995) 58 FCR 26 (with whom Lockhart and Tamberlin JJ agreed).

[85] Sanders v Snell (1998) 196 CLR 329, 339 [22] (Gleeson CJ, Gaudron, Kirby and Hayne JJ).

[86] See, for example, Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (No 2) [1991] VicRp 98; [1991] 2 VR 636, 645.2 (Brooking J); Goldsoll v Goldman [1914] 2 Ch 603, 615.5 (referred to with apparent approval in Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388, 412 [76] (Gummow J)).

[87] See, for example, Exchange Telegraph Co Ltd v Gregory & Co [1896] 1 QB 147, 153.7, 155.10-156.2, 158.1; Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (No 2) [1991] VicRp 98; [1991] 2 VR 636, 645.2 (Brooking J).

[88] At pars 130-131 above.

[89] See fn 10 above.

[90] See my comments to this effect in Bodycorp Repairers v Maisano (No 6) [2013] VSC 265, [24].

[91] See, for example, T1043.14-.17, 1043.25-.26, 1049.23-.24, 1050.02-.11, 1053.26.

[93] Cf Sanders v Snell (1998) 196 CLR 329, 339-340 [24]-[26].

[94] Bodycorp Repairers v Maisano (No 6) [2013] VSC 265.

[95] This only became clear when Martin gave his evidence, which commenced on 22 May 2013.

[97] See pars 127-129 above.

[98] This was language used at the time to describe those repairers who were franchisees of Bodycorp and obtained their AAMI Recommended Repairer sign after they had become Bodycorp franchisees.

[99] Ciancio was not a party to the proceeding and therefore had no obligation to produce documents. Further, there was nothing put before me to suggest that AAMI had taken it upon itself to discover every single Recommended Repairer agreement with all Bodycorp franchisees, including those who were not the subject of any allegations in the proceeding.

[100] The affidavit had been filed in another proceeding. The court was not informed as to the issues in that proceeding.

[101] He also gave evidence in relation to alleged representations made by Munro. In light of my findings, and the fact that Bodycorp settled with the Melton Defendants, it is not necessary to consider the evidence with respect to Munro.

[102] Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [32]-[33].

[103] This is the same memorandum referred to in pars 28-29 above.

[104] Martin explained that the word "vulnerable" was used in this context to identify a shop that had built up a high or substantial level of work with AAMI, so as to be on the verge of being put on AAMI's panel, only to be approached by Bodycorp before getting Recommended Repairer status. He suggested this was more than coincidental.

[107] Martin said he met with Bodycorp franchisees who were Recommended Repairers 4 to 6 times a year.

[109] A submission of AAMI was that the court should rely upon the absence of any note or memorandum of any of the alleged discussions as being probative in determining whether or not these discussions took place. I do not find the absence of such documents probative. Although Martin was clearly in the practice of taking notes of some conversations, it is plain there were many discussions of which he took no notes. This is particularly so in relation to his meetings with franchisees at their shops: see fn 107 above.

[111] See pars 52 to 54 above.

[112] The conclusions I have reached as to what these figures represent reflect Blashki's evidence of what he understood them to mean: T1691.24-1692.07. Blashki simply made the assumption, as instructed, that everything in the "repair costs $" column was paid: T1697.28-.30.

[113] I was taken to one document authored by Martin in which he referred to the figures in the "repair cost $" column as "income". However, this was an internal document of AAMI prepared in September 1997 and was concerned with comparing different groups who did repair work for AAMI. Martin said it was an error to refer to those figures as "income", and that they should have been referred to as "authorised amounts". I accept this evidence. All credible evidence on this topic shows Martin did make an error on this occasion.

[114] Fellow of the Australian Institute of Chartered Accountants and partner of Deloitte Touche Tomatsu.

[115] See further, Blashki's comments at T1699.15-1700.17.

[116] The quoted items are from Bodycorp's Expert Report, par 1.4.1.

[117] Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, 266 [37]. We are not here concerned with hypothetical facts in relation to the loss claimed, to which different considerations may apply in relation to the assessment of an amount (as opposed to causation and the existence of the loss): Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 355.5 (Mason CJ, Dawson, Toohey and Gaudron JJ), 367.5 (Brennan J). Accordingly, Bodycorp's reliance on Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 57 ALR 167, 182.8-183.8 and Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1979) 146 CLR 249, 284.5 is misplaced.

[118] See T996.16-.23, 1097.25-1098.01, 1112.19-.26.

[119] The figure put forward by AAMI was approximately $14 million. This amount was not challenged by Bodycorp.

[120] Outline of evidence of Ralph Murdaca dated 3 April 2013, [16].

[121] [1959] HCA 8; (1959) 101 CLR 298, 308.5, 312.6, 320.8-321.2.

[122] Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212 (Redlich and Priest JJA and Macaulay AJA).

[123] At [30]. See also Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361, 384-385 [63]-[64].

[124] Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 352.2-353.3.

[126] Civil Procedure Act 2010 (Vic), ss 7, 10, 11, 16, 19, 23, 24, 25.

[127] Bodycorp Repairers Pty Ltd v Maisano (No 6) [2013] VSC 265, [24]. See also pars 215-218 above.

[128] [2003] VSCA 6; (2003) 7 VR 63.

[129] See Agtrack (NT) Pty Ltd v Hatfield [2003] VSCA 6; (2003) 7 VR 63, 88 [43] (Ormiston JA, with whom Chernov JA and O'Bryan AJA agreed). See also at 85-86 [39]-[40], 87-88 [42], 89 [44].

[132] Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 428.8-429.4 (Brennan J).

[133] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 355.2 (Mason CJ, Dawson, Toohey and Gaudron JJ), 364.1 (Brennan J).

[134] See paragraph 132 above.

[137] There were further franchise agreements in the court book in relation to some of these franchises that were not tendered by any party.