Cash Bazaar Pty Ltd v RAA Consults Pty Ltd

De L v. Director-General, NSW Department of Community Services [No 2] (1997) 190 C.L.R. 207 Director of Consumer Affairs Victoria v. Gibson [2017] FCA 240 Fubilan Catering Services Limited v. Compass Group (Australia) Pty Ltd [2007] FCA 1205 Given v. Pryor (1979) 24 A.L.R. 442 Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 F.C.R. 82 Henville v. Walker (2001) 206 C.L.R. 459 Jones v. Dunkel (1959) 101 C.L.R. 298 Keynes v. Rural Directions Pty Ltd (No 4) [2011] FCA 304 McGrath v. Australian Naturalcare Products Pty Ltd (2008) 165 F.C.R. 230 Miba Pty Ltd v. Nescor Industries Group Pty Ltd (1996) 141 A.L.R. 525 North East Equity Pty Ltd v. Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 A.L.R. 217 Pappas v. Soulac Pty Ltd (1983) 50 A.L.R. 231 Plunkett v. Bull (1915) 19 C.L.R. 544 Prior v. Mole (2017) 261 C.L.R. 265 Rakic v. Johns Lyng Insurance Building Solutions (Vic) Pty Ltd (Trustee) [2016] FCA 430; (2016) 259 I.R. 47 Ransley v. Medical Benefits Fund of Australia Ltd (1980) A.T.P.R. 40-160 R.T. & Y.E. Falls Investments Pty Ltd v. The State of New South Wales [2001] NSWSC 1027 Samsung Electronics Australia Pty Limited v. LG Electronics Australia Pty Limited [2015] FCA 227; (2015) 113 I.P.R. 11 Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332 Seymour Whyte Constructions Pty Ltd v. Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317 Sykes v. Reserve Bank of Australia (1998) 88 F.C.R. 511 The Republic of Nauru v. WET040 [No 2] [2018] HCA 60; (2018) 93 A.L.J.R. 102 Unilever Australia Ltd v. Beiersdorf Australia Ltd [2018] FCA 2076

Date of hearing: 9-13 December 2019

Date of last submissions: 23 December 2019

Registry: Victoria

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Category: Catchwords

Number of paragraphs: 301

Counsel for the Applicants: Ms. C. H. Sparke, Q.C.

Solicitor for the Applicants: Regal Lawyers and Advisors

Counsel for the First, Second, Fourth and Sixth Respondents: The First, Second, Fourth and Sixth respondents did not appear

Counsel for the Third Respondent: The Third Respondent appeared in person

Counsel for the Seventh and Eighth Respondents: Mr. M. K. Callanan

Solicitor for the Seventh and Eighth Respondents: Moore Lawyers

BETWEEN: CASH BAZAAR PTY LTD (ACN 608 807 647) First Applicant

AND: RAA CONSULTS PTY LTD (ACN 159 658 107) First Respondent

EXPRESS BUSINESS GROUP MMF VICTORIA PTY LTD (ACN 611 400 152) Second Respondent

REECE ARCON (and others named in the Schedule) Third Respondent

JUDGE: STEWARD J. DATE OF ORDER: 15 MAY 2020

1. The proceeding be dismissed as against the first, second, third, fourth, seventh and eighth respondents.
2. The applicants pay the seventh and eighth respondents' costs of this proceeding.
3. There be leave for the parties to file within 21 days hereof submissions addressing whether the interlocutory judgment entered against the sixth respondent on 19 March 2019 should be set aside given the reasons of this judgment. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS APPLICABLE LEGISLATION [4] OVERVIEW OF THE APPLICANTS' CASE [9] Express Australia's business [10] Tiers of franchise arrangements [11] The agreements and alleged representations [16] The 10 RMF agreements (and the side agreement), the Guaranteed Income Representation and the Capital Gain Representation [17] The Shareholders Agreement, the Minimum Payments Representations and the Individual Respondent Minimum Payments Representations [22] The guaranteed income [26] THE KEY WITNESSES [29] Mr. Patel [32] Mr. Arcon [36] Ms. Mansfield [37] Scutts Junior [49] THE FACTS - CHRONOLOGY OF EVENTS [50] Mr. Patel's dealings with Mr. Roberts [50] The Regional Master Franchise Opportunity Booklet [58] Advice obtained by Mr. Patel in relation to a draft version of the RMF agreements [68] The meeting in Loganholme and the alleged representations as to capital growth and guaranteed income [77] The conflicting evidence [77] Findings in respect of the alleged representations regarding the capital value of the RMF agreements [81] Findings in respect of the alleged representations regarding guaranteed income [83] The alleged representations made by Ms. Mansfield respecting the RMF agreements [89] The contents and legal efficacy of the 10 RMF agreements [103] The side agreement [126] The purchase of shares in Express Victoria [134] The meeting in Loganholme and the Shareholder Proposal Booklet [136] The meeting at the Langham Hotel [156] The QPO meeting [165] The terms of the Shareholders Agreement [172] The ceasing of the payments under the side agreement and the Shareholders Agreement [180] DISCRETE FACTUAL ISSUES [184] Express Australia's alleged "practice" [184] Express Australia's performance [194] The alleged "sit back and do nothing" concept [199] DISPOSITION [202] Relevant legal principles [202] General observation [203] Summary of principal observations and conclusions [206] The claims against Express Australia and Express Victoria [207] The claims against Mr. Arcon [216] The pleaded particulars of Mr. Arcon's conduct [219] Disposition - the Guaranteed Income Representation [224] Was the Guaranteed Income Representation made by Mr. Arcon? [224] Were the representations made by Mr. Arcon as to a future matter? [230] Assuming the Guaranteed Income Representation was made at the 2015 Loganholme meeting (contrary to my findings), did Mr. Arcon (or Scutts Senior) have reasonable grounds for making that representation? [233] Disposition - the Capital Gain Representation [247] Disposition - the Minimum Payments Representations [254] Were the Minimum Payments Representations made? [254] Assuming the Minimum Payments Representations (as defined) were made (contrary to my findings), did Mr. Patel rely on them? [263] Discrepancy between the Minimum Payments Representations (as defined) and the pleaded particulars of Mr. Arcon's conduct [269] Disposition - the Individual Respondent Minimum Payments Representations [273] The claims against Ms. Mansfield [275] The claims against Scutts Junior [283] The claims against Scutts Senior [287] The case against Mr. Roberts [292] Accessorial Liability [297] CONCLUSION [301]

STEWARD J.: 1 In early 2016, the second applicant ("Mr. Patel"), and his company, the first applicant ("Cash Bazaar"), became involved in certain franchise arrangements with the first and second respondents (two companies called in this judgment "Express Australia" and "Express Victoria" respectively). In simple terms, Mr. Patel and Cash Bazaar contend that in exchange for the payment by them of two sums ($372,000 and $300,000) these arrangements obliged Express Australia and Express Victoria to pay to them certain guaranteed payments for a period of years. Some of those amounts were paid. But in 2017 the payments stopped. Mr. Patel and Cash Bazaar contend that they have consequently suffered losses. They sought damages for breach of contract, and for misleading or deceptive conduct. In that respect, they have also sued the following former officers and employees of Express Australia and Express Victoria: (a) Mr. Reece Arcon ("Mr. Arcon") who was a director of Express Australia and Express Victoria. He is the third named respondent. At the time of the trial, Mr. Arcon told the Court that he remained a bankrupt (this was not disputed); (b) Mr. Rhys Scutts in his capacity as executor of the deceased estate of Mr. Peter Scutts ("the Estate"). Mr. Peter Scutts ("Scutts Senior") was a director of Express Australia. He passed away following the commencement of this proceeding. The Court was told that the Estate is insolvent (this was not disputed). The executor is the fourth respondent; (c) Mr. Rod Wakefield ("Mr. Wakefield") who was an officer of Express Australia. He was originally named as the fifth respondent but proceedings against him ceased upon a settlement being reached between him and the applicants. He was not called by any party to give evidence; (d) Mr. Lloyd Roberts ("Mr. Roberts") who was an officer of Express Australia. He is the sixth named respondent. On 19 March 2019, default judgment was entered against him with damages to be assessed: Cash Bazaar Pty Ltd v. RAA Consults Pty Ltd [2019] FCA 450. He did not appear at the trial and was not called by any party to give evidence; (e) Ms. Jai Mansfield ("Ms. Mansfield") who was an employee of Express Australia. She is the seventh named respondent; and (f) Mr. Ross Scutts ("Scutts Junior") who was a contractor of Express Australia. He described his role as that of a sales person with the title of "Franchise Development Manager". He is the son of Scutts Senior and is the eighth named respondent. 2 At trial: (a) Mr. Patel and Cash Bazaar were represented by Ms. Sparke, Q.C.; (b) the Court was told that Express Australia was insolvent and in liquidation and that Express Victoria had earlier been deregistered. Express Australia was unrepresented. Save that Ms. Sparke, Q.C. wished to press for the making of declarations that these companies had engaged in misleading or deceptive conduct, the applicants did not press their claims in contract against these companies (the claims had no utility) and agreed that the proceeding against Express Australia should otherwise be dismissed without adjudication on the merits. I note, however, that no application for leave to proceed against Express Australia pursuant to the Corporations Act 2001 (Cth.) was ever made by the applicants; (c) Mr. Arcon represented himself; (d) the Estate was unrepresented; and (e) Ms. Mansfield and Scutts Junior were represented by Mr. Callanan of Counsel. 3 In substance, the contest before me was whether Mr. Arcon, Ms. Mansfield and Scutts Junior had engaged in misleading or deceptive conduct, both as principals and as individuals knowingly concerned in the alleged misleading or deceptive conduct of Express Australia and Express Victoria, in contravention of s. 18 of the Australian Consumer Law ("A.C.L.") as set out in Sch. 2 to the Competition and Consumer Act 2010 (Cth.). That contest turned upon the content of certain alleged representations made by these individuals, and a number of other officers of Express Australia. The alleged representations were, save in two cases, said to have taken place in meetings and telephone conversations with Mr. Patel (the sole director and sole shareholder of Cash Bazaar). Significantly, the applicants contend that the alleged representations were with respect to future matters within the meaning of s. 4 of the A.C.L., and the respondents did not have reasonable grounds for making such representations. Each respondent denied that all of the alleged representations were ever made (although, some were admitted in whole or in part). In a trial which involved only some contemporaneous documentary evidence, much of the applicants' case turned upon Mr. Patel's recollection of events. He called no witnesses to corroborate his version of what had taken place. For the reasons which follow, I would dismiss the applicants' case with costs.

APPLICABLE LEGISLATION 4 Section 18 of the A.C.L. provides: Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). 5 "Conduct" is relevantly defined in s. 2(2)(a) of the A.C.L. in these terms: a reference to engaging in conduct is a reference to doing or refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; ... 6 Section 4 of the A.C.L. is concerned with representations with respect to future matters. It provides: Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation. 7 Section 236 of the A.C.L. provides: Actions for damages (1) If: (a) a person (the claimant ) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. ... 8 The term "involved" is defined by s. 2(1) of the A.C.L. as follows: involved: a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention.

OVERVIEW OF THE APPLICANTS' CASE 9 It is useful to commence with a description of the franchising system that lies at the heart of this case and a summary of the applicants' essential claims against the respondents.

Express Australia's business 10 Express Australia had been in the business of selling, directly and indirectly, franchises across Australia in the homes services industry. That industry included services such as property maintenance, dog washing, lawn mowing, home and office cleaning and removals and freight. A related company, called Express Business Group Pty Ltd ("Express Business"), had developed certain intellectual property including, it would seem, certain branding and get up, designed to facilitate the sale of home services by individual franchisees. That related company apparently held the exclusive rights to that intellectual property relevantly throughout Australia. In my view, the various rights were never adequately identified and their commercial value and utility (if any) remain unclear. In these reasons I will call this collection of intellectual property rights the "Express Intellectual Property". It was not disputed that Express Business had granted a licence in some way to Express Australia to "use and sub-license and/or franchise" the Express Intellectual Property in Australia.

Tiers of franchise arrangements 11 For the purpose of selling franchises, a "tiered franchising system" was adopted. Rights to use the Express Intellectual Property were granted in a cascading fashion from the top tier to the lower tiers. Geographical boundaries and areas created by reference to population numbers played a significant role in the franchising system. In that respect, the territory of the Commonwealth of Australia was divided into areas within which a franchisee would have the exclusive right to use the Express Intellectual Property to sell one of the defined home services. Using a concept, said to have been derived from the United States of America, Express Australia granted the right to use its intellectual property rights to intermediate franchisors. These had exclusive rights to sell franchises within a larger defined area for a specified service. Such a franchisor was called a Regional Master Franchise ("RMF") franchisor. It had the right to sell up to a specified number of franchises for a specific home service with the Express Intellectual Property within its territory and, together with Express Australia, to be paid franchise fees. The RMF franchisor did not itself carry on the specified service; this was the responsibility of the underlying franchisees. 12 Another type of franchise created by Express Australia covered the territory of each state for a particular home service. It was called a State Master Franchise ("SMF") and it conferred on that franchisor the rights to apply the Express Intellectual Property for the specified service within a state. Whilst it was not entirely clear, it would appear that SMF agreements conferred on the SMF franchisor the ability to sell RMFs within a single state. 13 Yet another type of franchise was created as part of a restructure. It was called a Multi Master Franchise ("MMF") and covered all services for the territory of an entire state. It conferred on that franchisor "the rights to all existing franchised and company run units" within a state. I infer that it conveyed an ability to sell SMFs in respect of identified home services. Relevantly, Express Victoria was the MMF franchisor for the state of Victoria. 14 By the creation of MMFs, SMFs, RMFs and individual franchises, the rights to the Express Intellectual Property for specific services were divided up into layers of decreasing size, with each intermediate franchisor (and Express Australia) taking its cut of the fees payable by the underlying primary franchisees who carried out the relevant home services. 15 An element of Express Australia's business model was to offer to pay a prospective RMF franchisor a guaranteed stream of income for a defined period. The first year of payments would be funded from part of the purchase price payable by that RMF franchisor for the right to use the Express Intellectual Property for a specified home service in a given territory. The guaranteed income gave the prospective RMF franchisor some comfort that purchasing such rights would be commercially attractive. The RMF franchisor was otherwise exposed to the risk that it would be unable to sell franchises, or that the business of individual franchisees within the RMF territory would fail or be less successful than expected. In each case, the RMF franchisor would not be paid franchise fees or be paid fewer fees.

The agreements and alleged representations 16 The essence of the applicants' case is that in reliance on misleading or deceptive representations made by the respondents to Mr. Patel, Cash Bazaar (a company incorporated by Mr. Patel initially to own his rights against Express Australia) or Mr. Patel on behalf of Cash Bazaar: (a) paid $372,000 to Express Australia for 10 RMFs and consequently executed 10 RMF agreements; and (b) paid $300,000 for shares in Express Victoria and consequently executed a Shareholders Agreement. For now, it suffices to provide an overview of the genesis of these agreements and, in broad terms, the alleged misleading or deceptive representations said to have been made with respect to future matters.

The 10 RMF agreements (and the side agreement), the Guaranteed Income Representation and the Capital Gain Representation 17 At the end of 2015 and in early 2016, Mr. Patel negotiated with Mr. Roberts, Scutts Senior and Mr. Arcon (and he also contends, with Ms. Mansfield) to purchase 10 RMF agreements in respect of five home services spread across a defined territory in Victoria from various SMF franchisors. He also negotiated the entry into of a side agreement (the "side agreement") with Express Australia whereby, on the terms and conditions set out below, Express Australia purportedly agreed to pay Cash Bazaar $2,700 per week for five years. Ten RMF agreements were purportedly entered into by Cash Bazaar on or around 4 February 2016. In respect of each RMF agreement, Cash Bazaar had to pay an "Initial Service Fee" of $37,200 ($372,000 in aggregate). These sums were not paid to each SMF franchisor but to Express Australia. The side agreement was also purportedly entered into on the same day. As it happens, for the reasons set out below, Counsel for both the applicants and Ms. Mansfield and Scutts Junior conceded in closing submissions that all of these agreements were a nullity. That legal reality was only discovered at the trial before me. 18 Mr. Patel essentially claims that he was induced to have Cash Bazaar enter into these purported contracts in reliance on the following representations as pleaded in the applicants' further amended statement of claim: (a) that by investing funds in the purchase of 10 RMFs pursuant to the side agreement, Mr. Patel would receive a guaranteed income of $2,700 per week for five years (this was called the "Guaranteed Income Representation") (emphasis added); and (b) that because the price of the RMFs was increasing each year, Cash Bazaar would be able to sell the RMFs at a future date and Mr. Patel would make a capital gain on his funds invested in the RMFs pursuant to the side agreement (called the "Capital Gain Representation"). Each of these representations was said to have been made repeatedly on different occasions by the relevant respondents. I shall expand upon this later in my reasons. 19 It was my impression that the case in respect of the Guaranteed Income Representation was pleaded in one way and, in one respect, argued in another way. Before me, the applicants argued that the Guaranteed Income Representation was simply that Mr. Patel would receive a guaranteed income of $2,700 per week for five years by investing funds in the RMFs. Critically, the side agreement did not figure in this revised representation. This discrepancy in how the case was put at trial was not met with any objections. I shall therefore, in the absence of an indication to the contrary, treat the Guaranteed Income Representation as being in the form as argued before me by the applicants. (I otherwise hold the applicants to their case as pleaded with respect to the other alleged representations.) 20 The applicants pleaded that the Guaranteed Income Representation and the Capital Gain Representation were representations as to future matters which were misleading or deceptive. They pleaded that the respondents had no reasonable grounds to make those representations. This was because: (a) in the case of the Guaranteed Income Representation, Express Australia did not have sufficient funds to make all the guaranteed payments (which, it was said, could be inferred from Express Australia ceasing to pay the guaranteed income from 2 April 2017 onwards); and (b) in the case of the Capital Gain Representation, the price of the RMFs has not continued to increase each year and Cash Bazaar cannot now sell the 10 RMFs to make a capital gain. 21 The applicants also pleaded at [17] of the further amended statement of claim that the conduct of Express Australia alleged in respect of the Guaranteed Income Representation, in all the circumstances, represented to Mr. Patel that if he invested funds in the RMFs with Express Australia, pursuant to the side agreement, Cash Bazaar and/or Mr. Patel would receive $2,700 per week for 5 years as a "passive investor". As will become apparent, the issue of passivity constituted a central plank in the applicants' case. Yet, curiously, it was not included as part of the Guaranteed Income Representation (as defined).

The Shareholders Agreement, the Minimum Payments Representations and the Individual Respondent Minimum Payments Representations 22 In early 2016, following a meeting at the Langham Hotel in Melbourne, and a further meeting at the "QPO" café in Kew, Cash Bazaar paid $300,000 to acquire 650 shares in Express Victoria. In that respect, Cash Bazaar entered into a "Shareholders Agreement" with Express Victoria (the "Shareholders Agreement"). Pursuant to this agreement: (a) Express Victoria agreed to pay Cash Bazaar $5,000 per month for four years; and (b) after four years, Cash Bazaar could offer to have its shares bought back by Express Victoria. 23 Mr. Patel essentially claims that he was induced to purchase shares in Express Victoria and to sign the Shareholders Agreement (on Cash Bazaar's behalf) in reliance on the following representations as pleaded in the further amended statement of claim: (a) that if Cash Bazaar and/or Mr. Patel purchased shares in the proposed business (i.e. Express Victoria): (i) the investment would come with a guaranteed minimum income for four years "such that a 3% shareholding would generate a minimum income of $2,500.00 per month, being a minimum 15% per annum return"; (ii) a "3% shareholding investment of $189,950.00 would return a minimum of $692,073.00, namely 364% after a period of 2 years"; (iii) "any investment less or more than 3% would generate a proportionate decrease or increase in the minimum income paid and the return to be expected"; (iv) Express Australia "would pay the guaranteed minimum income payments of the proposed MMF business" (being $5,000 per month for four years); and (v) Cash Bazaar could have a "passive role", collectively called the "Minimum Payments Representations". The Minimum Payments Representations were said to be in writing and contained in a shareholder proposal booklet, the Shareholders Agreement and a financial projection document (described in greater detail below). 24 The applicants also pleaded that Mr. Arcon, Scutts Senior, Ms. Mansfield and Scutts Junior separately and personally represented to Mr. Patel that if he invested funds in the "MMF business proposal" and purchased shares in Express Victoria, he would receive the minimum payment of $5,000 per month for four years (collectively called the "Individual Respondent Minimum Payments Representations"). 25 The applicants pleaded that the Minimum Payments Representations and the Individual Respondent Minimum Payments Representations were representations as to future matters which were misleading or deceptive. As best as can be discerned, they pleaded that the respondents had no reasonable grounds to make those representations because: (a) Express Victoria "was not registered until on or about 18 March 2016 and the MMF business proposal was not an established business proposal" at the time the representations were made; or (b) alternatively, amongst other things, Express Victoria did not have sufficient funds to make the guaranteed minimum income payments for four years; from about January 2017, Express Victoria stopped making the payments; and Cash Bazaar has not received "a return of 364% per each 3% shareholding" in Express Victoria.

The guaranteed income 26 For convenience, and consistently with the nomenclature adopted by the parties, I will call the purported promises to pay $2,700 per week and $5,000 per month as promises to pay guaranteed income (guaranteed in the sense that payment was not dependent upon the receipt of income from underlying franchisees). 27 It is not in dispute that both Express Australia and Express Victoria have failed to pay Cash Bazaar all of the guaranteed amounts, although, in the case of Express Australia, and as it happens, it was in fact never liable to make such payments. It was not otherwise seriously disputed before me that Express Victoria had breached its obligations under the Shareholders Agreement. The reason for the failure to make the payments would appear to be that each entity ran out of money. Moreover, Cash Bazaar received no fees from any franchisee operating in any of the territories covered by its 10 RMFs. That is because there never were any franchisees. Mr. Patel thought that the selling of franchises was the sole responsibility of Express Australia. In contrast, Mr. Arcon thought that the selling of franchises was the responsibility of Cash Bazaar as the RMF franchisor. 28 It would also appear to have been accepted that many other individuals and companies involved in the Express parties' franchising arrangements have ended up in the same position as Mr. Patel and Cash Bazaar. I infer that this circumstance has been very distressing to them all. Understandably, these individuals and entities want what they believe is owing to them. I infer that there has been much anger and regret amongst Express franchisors and franchisees. But these feelings do not mean that each is necessarily entitled to a legal remedy or to the same legal remedy. These reasons show why that is so in the case of Mr. Patel and Cash Bazaar.

THE KEY WITNESSES 29 Mr. Patel, Mr. Arcon, Ms. Mansfield and Scutts Junior (the "Key Witnesses") were all cross-examined over several days. Two other witnesses were called by the applicants to give evidence: a Mr. Ateev Dang ("Mr. Dang"), another person who had entered into agreements with Express Australia and Express Victoria; and a Mr. Kevin Strutton ("Mr. Strutton"), another holder of RMFs and SMFs in Victoria. 30 Given the heavy reliance upon oral testimony by all parties, it is appropriate to commence my consideration of the facts with an explanation of my impression of each of the Key Witnesses. Having said that, where possible I have placed much greater reliance upon the content of the available contemporaneous documents. I have found them to be a far sounder source of reliable evidence in a case where the Key Witnesses have strikingly different memories of what was said in meetings and telephone conversations. That is especially so in the case of the oral testimony of Messrs. Patel and Arcon. Where appropriate I have drawn inferences from the contemporaneous documents where such inferences accord "with the probabilities of ordinary human experience": The Republic of Nauru v. WET040 [No 2] [2018] HCA 60; (2018) 93 A.L.J.R. 102 at [35]. 31 The same approach was adopted by Kenny J. in another consumer law case concerning franchises. In Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332, what Kenny J. said at [53] is apposite: In summary, wherever possible, I have sought to resolve conflicts in these witnesses' accounts by reference to documentary material or the inherent probabilities of the case. Where this has been impossible, it has been necessary to resort to concepts of onus of proof: it was for the applicants to satisfy the court on the balance of probabilities that their version of the events and discussions should be accepted.

Mr. Patel 32 Mr. Patel had previously been employed by IBM in a sales capacity. He was made redundant in 2014. He currently runs an "IT managed services company". It was an important part of his case theory to emphasise his lack of experience in franchising and to contend that his bargaining power was relatively low when compared to Mr. Arcon, Scutts Senior and Mr. Roberts. This led him, he claimed, to rely more heavily on what they had said to him. He denied repeatedly that he was a "sophisticated business person" or "investor", or had ever described himself in this way to Express Australia. Mr. Arcon, however, said that this is precisely how Mr. Patel introduced himself to Express Australia. 33 In cross-examination it was revealed that Mr. Patel's business knowledge and experience was considerable. He holds two M.B.As, one in Marketing and another in Corporate Finance. This should have been disclosed by Mr. Patel in his affidavits. He had previously been a franchisee for approximately four years with a company called First Class Capital. He had been a shareholder and director of a number of companies which carried on businesses with varied success. One business concerned the reselling of furniture; another concerned the importation of medical equipment; and another was for the renting of water coolers. Mr. Patel was also a mentor in the "Small Business Mentoring Service". This is a Victorian government not-for-profit organisation designed to assist small business people. Mr. Patel, as required, prepared a member profile of himself. Amongst other things, it states: [Mr. Patel] is a seasoned executive with expertise in enhancing profitability through business development and financial management. His strengths include business planning and strategy, financial management, accounting, sales and market development, market entry, product development and change management. … [Mr. Patel] has more than 21 years' strong business acumen and expertise in business change implementation, developing and implementing profit-enhancing strategies, building 'green fields'TM business and connecting business with technology. He has a deep knowledge of dairy, consumer goods, energy, telecommunications, building products and agribusiness. I prefer the foregoing description of Mr. Patel's experience and abilities than the statements he gave about that issue in evidence before me. 34 My impression of Mr. Patel was that he is an intelligent, confident and relatively experienced businessman. He presented as someone who is capable of: analysing financial data; recognising, assessing and managing business risk; and independently considering business proposals. It is axiomatic that Mr. Patel has a real commercial interest in the outcome of this case. There is considerable enmity between him and Mr. Arcon. He, I infer, considers that he has been duped. At times, in my view, this caused Mr. Patel to exaggerate and embellish his evidence and to assert his position, at times stridently. He repeatedly used key terms, such as the word "negotiation", to describe his dealings with employees of Express Australia. This was particularly so when he gave evidence about his dealings with Ms. Mansfield. Thus in cross-examination he said: I was negotiating the duration [of the side agreement] at all times with everyone. … I was negotiating with everyone. With everyone?---At every step of the process. 35 Some of Mr. Patel's answers in cross-examination I also found to be somewhat argumentative in nature. Perhaps that is understandable given the importance of this litigation to the parties. In my view, Mr. Patel generally tried to give his evidence accurately. However, he nonetheless had a powerful motivation to present his version of what had happened in the most favourable light for the benefit of his suit. I have therefore treated his oral evidence with some caution. That is especially so in relation to his evidence about what he claims Scutts Senior (now deceased) said to him. As Isaacs J. (as his Honour then was) said in Plunkett v. Bull (1915) 19 C.L.R. 544 at 548-549: … the Court scrutinizes very carefully a claim against the estate of a deceased person. It is not that the Court looks on the plaintiff's case with suspicion and as primâ facie fraudulent, but it scrutinizes the evidence very carefully to see whether it is true or untrue.

Mr. Arcon 36 Mr. Arcon, who was a director of Express Australia and Express Victoria, was the main voice of those companies before me. He had the difficult task of both presenting his own case and giving evidence. Like Mr. Patel, he was somewhat argumentative when cross-examined. In my view, he was also prone to exaggeration and embellishment, especially in relation to his description of the success of Express Australia's business. I treated his evidence with an equal degree of scepticism. He had the same motivation to present his version of what happened in a manner that supported his defence of his conduct.

Ms. Mansfield 37 Ms. Mansfield, in my view, presented as an honest witness who did her best to answer the questions asked of her. There was a dispute about her level of responsibility within Express Australia. She deposed that she held two roles in parallel from approximately June 2015 onwards: (i) she was the personal assistant to Mr. Arcon and provided administrative support to him; and (ii) she was a development manager and acted as a "conduit" between the Express Australia sales team and prospective franchisees. In cross-examination, Ms. Mansfield described herself as a member of the "franchise development team" within Express Australia; Mr. Arcon was said to be the leader of that "team". She said that she "facilitated" the decisions made by that "team". 38 In contrast, Mr. Patel thought she was a director of Express Australia because her emails identified her as a "Non-Executive Director". He was adamant that he negotiated with her key elements of the RMF agreements, the side agreement and the Shareholders Agreement. A good deal of his evidence in cross-examination was not objective direct evidence of specific conversations but asserted characterisation of those conversations. This is an area where I think Mr. Patel, perhaps unintentionally, embellished his evidence. A consideration of the contemporaneous evidence supports a finding, which I make, that Ms. Mansfield was not a decision-maker for Express Australia; rather, she implemented the decisions made by Mr. Arcon, Scutts Senior, and Mr. Roberts. She assisted Mr. Arcon in finalising the paperwork for Cash Bazaar's investments. For that purpose, she liaised between Messrs. Arcon and Patel. I accept her evidence that she did not make changes or suggestions to the RMF and side agreements without obtaining instructions from Mr. Arcon. Indeed, whilst in cross-examination Mr. Patel maintained that Ms. Mansfield made decisions on the "spot", he conceded that he did not know whether or not Ms. Mansfield first discussed the making of changes to the draft agreements with Mr. Arcon before they were then made. He also conceded that on one occasion Ms. Mansfield expressly stated that she needed to check the pricing of his RMFs with Mr. Arcon. 39 Contemporaneous emails support the conclusions I have reached. For example, one of these shows Ms. Mansfield booking Mr. Patel's flights to Brisbane - a task which is consistent with the role of an administrator, rather than that of a company director. By way of illustration, in an email dated 3 February 2016, Ms. Mansfield wrote: Hi [Mr. Patel] Attached is your itinerary for tomorrow's travel. Looking forward to seeing you. 40 Some of Ms. Mansfield's work was more sophisticated than this but was carried out by her without the need to have recourse to Mr. Arcon. Principally, this included the selection of franchise regions and franchisees for those regions (although none were found for Mr. Patel). However, I would still characterise such work as really facilitative or administrative in nature. Although in cross-examination Mr. Patel asserted that the selection of particular regions would have affected the purchase price of an RMF, he later accepted that the sale price of each of his RMFs was the same. 41 Ms. Mansfield also processed changes to the side agreement that had been negotiated between Mr. Patel and Express Australia. Mr. Patel asserted that he was thereby negotiating the terms of that agreement with Ms. Mansfield. However, the contemporaneous emails and texts which were in evidence do not support that contention (I address this evidence and this contention in more detail below). 42 In that respect, in characterising Ms. Mansfield's role, I have not overlooked the fact that she has since become a director of a company, or that she was once interviewed in a magazine and purportedly said "[m]y business is called Express Business Group". Nor have I overlooked Mr. Dang's evidence that he recalled that, at a presentation in 2016, Ms. Mansfield introduced herself as a "non-executive director". Mr. Dang did not, however, know what this title meant and there are other aspects of his evidence which made him an unreliable witness (as to which see below). In any event, this evidence is hardly decisive. Moreover, Mr. Strutton, another holder of RMFs and SMFs, described Ms. Mansfield as being initially in a "general administration role" before becoming a "general business manager" who dealt with "payments and new franchises". He said that he negotiated his contract directly with Mr. Arcon, who he considered to be the "decision-maker". 43 In my view, Ms. Mansfield was more than just a mere personal assistant to Mr. Arcon. She was a member of the franchise development team and supported that group as a development manager in the ways set out above. I infer that she had to be Mr. Arcon's eyes and ears at the Express Australia office whilst he was travelling around Australia or overseas. His travelling would appear to have been extensive. But she was not otherwise a decision-maker, save in an administrative and supportive sense. 44 It may be the case that Mr. Patel believed that Ms. Mansfield's ostensible title was that of a director of Express Australia; I nonetheless do not accept that he sensibly perceived her to be a decision-maker for that company at any stage. I think he knew she really was Mr. Arcon's assistant, and otherwise worked for him to facilitate Mr. Arcon's decisions as a member of the franchise development team. In my view, it suited his case against Ms. Mansfield to fix her to be a decision-maker or negotiator - the description of her in her emails as "non-executive director" was used for that purpose as a basis for making this claim. But text messages sent between Messrs. Arcon and Patel at the time show the two of them - and not Ms. Mansfield - negotiating the terms of the deal. There are no equivalent messages sent between Mr. Patel and Ms. Mansfield. The following exchanges between Messrs. Patel and Arcon illustrate the point: Dec 3, 2015, 9:50 AM Hi [Mr. Arcon] Based on our discussions - after discussing all terms - we got the lawyer to prepare the documents - same was sent on 20/11. We were to wrap up the deal by end November. On Tuesday you mentioned that you would come back to me with the new entity name. Could you please update me if next steps. [Mr. Patel] - - Hi [Mr. Patel], The entity name would be Express business group Australia pty ltd Your lawyer has drafted some ridiculous clauses and has made it so there is no requirement on your behalf to do anything So we are guaranteeing you $140,400 return over 10 years for a $40,000 investment x 5 It's not the best deal for us so we are working through it … Dec 8, 2015, 11:33 AM Hi [Mr. Arcon] How are you going with the document review? [Mr. Patel] Dec 8, 2015, 7:14 PM Hi [Mr. Patel] Happy to offer you a four year minimum income of $270 a week That's a minimum return of over $56,000 per regional Also happy to offer you just one or two regionals Can be a 10 year term however - - Hi [Mr. Arcon] Thanks for your message. Happy to learn that - number of years of minimum income is the only point to be finalised. Will run through the PV calculator and come back to you in the morning - hope this is ok. (Errors in original.) 45 And later Mr. Patel sent Mr. Arcon this text: Feb 2, 2016, 3:42 PM Hi [Mr. Arcon] Have advised [Ms. Mansfield] of the minor changes - she is making the changes Looking forward to learning of the d Learning of the lower price. (Errors in original.) 46 The foregoing texts well evidence the supporting role Ms. Mansfield played. She processed "minor changes" to the agreements. In another text, Mr. Arcon told Mr. Patel that he would instruct Ms. Mansfield to "resend" his itinerary. These types of texts are consistent with Ms. Mansfield's evidence about her role. 47 The emails tendered into evidence between Ms. Mansfield and Mr. Patel, and upon which Mr. Patel relied, are consistent with her role as an administrative processor of changes to the RMF agreements, which had already been negotiated between Messrs. Arcon and Patel. I address them in more detail below. 48 Did the appearance of the title "non-executive director" in Ms. Mansfield's emails give the appearance that she was a director? Without more, the answer is "yes". But there is more. There is the totality of Mr. Patel's dealings with Ms. Mansfield as described above (and also below). Mr. Patel must have realised that she was there to assist Mr. Arcon, and was not a decision-maker. That is why he negotiated with Mr. Arcon (and Scutts Senior to a lesser extent). Moreover, Ms. Mansfield did not attend the key meeting at Loganholme described below, where Mr. Patel was introduced to Scutts Senior, and where the essence of the deal was thrashed out. If Ms. Mansfield had been a director of Express Australia, she would have attended this key meeting and have participated in it. But Mr. Patel said she was not there. In all of these circumstances, I find that Mr. Patel did not really believe that Ms. Mansfield was a decision-maker. I also find that she was never a decision-maker for Express Australia.

Scutts Junior 49 Finally, it was my impression that Scutts Junior gave honest and reliable evidence. He played a more active role in selling Express Australia products than Ms. Mansfield, which he did not deny. He did not merely support the decisions made by his father, Scutts Senior, and by Mr. Arcon; he actively sought to promote Express Australia. In the case of Mr. Patel, he was very active in introducing the MMF shareholder proposal to him (described below).

Mr. Patel's dealings with Mr. Roberts 50 The origin of Mr. Patel's investment with Express Australia is a little obscure. It would appear to have commenced with a meeting with Mr. Roberts at a café in about August 2015. Mr. Patel explained that he had been looking to invest about $300,000 in an appliance rental franchise. Mr. Roberts suggested that he purchase one or more RMFs. The parameters of Mr. Patel's investment goals were the subject of dispute before me. Mr. Patel claimed that he wanted: (a) guaranteed income; (b) capital growth so that he could sell his investment and make a capital gain; and (c) an entirely passive investment. In cross-examination, he repeatedly proclaimed that this meant "sit back and do nothing". 51 Mr. Arcon accepted that Mr. Patel wanted guaranteed income. But he denied that Mr. Patel ever said to him that he intended to sell his investment to secure a capital gain, and he said that Mr. Patel knew that to be an RMF franchisor would require him to work his franchised territory. The contemporaneous evidence in part supports Mr. Arcon's recollection, although the issue of passivity may have been the subject of a genuine misunderstanding between the parties. 52 The essence of what was initially offered to Mr. Patel is set out in an email he received from Mr. Roberts on 1 September 2015. The email (which contains some questions back from Mr. Patel in italicised text) stated as follows: I have taken the time to summarise what we have been talking about over the last week. Regional master franchise: Regional Master Franchisor's play more of a management role whereby they are responsible for the growth of franchises within their region and to develop and support their franchisees. A Regional Master Franchisor has exclusive rights to an entire region, such as South Brisbane, North Sydney or Inner Melbourne - what is the term of the exclusive right to the region? Any restrictions on resale of the region? Regional masters can now also be a passive due to the other support systems we have in place, so just sit back and receive returns, however the more you put into this businesses the faster it will grow and the more income it will bring. Express takes care of all sales regardless if the investor is active or passive, we currently have 8 full time development managers, 3 of which are based in Melbourne. Key points - 18 or so franchise areas per region - this is per category? - population of over 600,000 - not households? - guarantee of 3 franchisees to start - these would be located in the region? - $90 per week from each franchisee - up to $2,225 commission for each new franchisee - reason for up to? - minimum 35% ROI per year - cost is $39,950 + gst - there are no ongoing fees We have many investors purchase multiple regional masters and doing so they will usually receive a discount meaning the returns are even greater.- buying five categories in one region should be similar to buying 5 regions for one category- so what would be the discount? You have said [you're] looking at investing up to $200,000. Meaning you could purchase 5 regional master franchises. I would recommend having 5 different businesses, meaning diversification and a huge catchment area for new franchisees. 5 regionals would earn you $1,350 per week in royalties guaranteed, when additional franchises come on board another $90 per week in royalties is earned. There will also be lots of sales commission to collect along the way. I would expect that we could put on a further 10-15 franchisees for you within the next 12 months. I have chosen what I think is the best five masters in the best area available in Victoria for you and have attached the maps. … (Errors in original.) 53 In an email exchange on 7 September 2015, Mr. Roberts confirmed that each RMF franchisor would receive $270 per week "or until three (3) franchises are sold". He also wrote that the RMF franchisor did not need to spend money on promotional activities ("[a]s much or as little as you like. Nothing at all if you choose"). However, he also said it would be helpful to Mr. Patel to attend "shopping centre promotions and franchise expos where possible". 54 On 8 September 2015, Mr. Patel recorded in an email to Mr. Roberts his understanding of the "key points of the offer". Those points were as follows: 1. For an investment of $200,000 I would receive Regional Master territories for 5 business/franchise types 2. Minimum Start-Up Guarantee is $270 per week or until three (3) franchises are sold in and under this agreement 3. Regional Master can choose to play either a passive role or play more of a management role 4. Sales of franchises are exclusively done by the Express business development team. Regional Master is not responsible for selling/acquiring franchisees 5. Promotional expenses - Regional Master can determine the level of promotional activity and/or expenses. 6. In the event a franchisee surrenders the territory or is terminated the business development team will replace the same at the earliest 7. There are no ongoing fees (Errors in original.) 55 Mr. Roberts wrote back as follows: "Everything is spot on! Just don't forget the gst must be added on". I note that this email raised the issue of whether an RMF franchisor could "play" either a "passive role" or "more of a management role". What sort of activities these words connoted was unclear. The term "passive role" was not defined in the email as "doing nothing". However, at this stage of Mr. Patel's dealings with Express Australia, I accept that the investment being sold to Mr. Patel offered a franchisor a choice about different levels of involvement. I also accept that at this point Mr. Patel was looking to make an investment that did not oblige him to do very much. I otherwise observe that Mr. Patel's "key points" did not include the securing of a capital gain but did make it clear that he wanted guaranteed income. I also find that by this email Express Australia led Mr. Patel to believe that it would find franchisees for him. However, subsequent dealings with Mr. Arcon suggest to me that Express Australia may have intended to limit its involvement in finding franchises to the commencement phase of an RMF agreement. 56 Whatever Messrs. Roberts and Patel thought a "passive role" might have entailed, I find that it was not Express Australia's position that Mr. Patel could just "sit back and do nothing" (to use the words of Mr. Patel). And that is so, notwithstanding the language used by Mr. Roberts in his emails to Mr. Patel, including the statements "[r]egional masters … just sit back and receive returns" and "Express takes care of all sales". I accept that this was how the investment was initially "sold" to Mr. Patel. However, I find that this was not the arrangement in fact finally offered to Mr. Patel and which he accepted. In that respect, I note that Mr. Roberts was never called to give evidence by Mr. Patel. I also note that Mr. Roberts seemed to have had only a limited initial role of introducing Mr. Patel to Express Australia and to the concept of RMFs. Thereafter, he dropped out of the picture. Instead, Mr. Patel's negotiations were principally undertaken with Mr. Arcon (and Scutts Senior to a lesser extent). 57 I also note that it would appear that, in late 2015, Mr. Patel was relying on advice from his lawyers (as to which see below) and from his accountant. He gave key documents relating to the deal with Express Australia to each of these advisers. However, neither was called to corroborate Mr. Patel's evidence. In a case which was so dependent upon the making of alleged oral representations, the absence of such evidence bears some importance.

The Regional Master Franchise Opportunity Booklet 58 In my view, Express Australia's concept of an RMF franchisor was that it needed to undertake some work, but, obviously, not undertake the very active work of the underlying franchisees. That concept was set out in a "Regional Master Franchise Opportunity" booklet (the "RMF Booklet"). Mr. Arcon said he met Mr. Patel in Adelaide in the latter half of 2015 (the "Adelaide meeting") and went through the RMF Booklet in some detail and then left a copy of it with him. In his first affidavit, Mr. Patel neither refers to the Adelaide meeting nor to the RMF Booklet. In his second affidavit, in response to Mr. Arcon's evidence, he admitted that the Adelaide meeting had taken place but said that it had lasted about 10 minutes. In that affidavit, strikingly, Mr. Patel asserted that his role and obligations were not reflected in the content of the RMF Booklet. The content of the RMF agreements ultimately signed by Mr. Patel do not support that claim (see below). 59 The RMF Booklet was a professional-looking colour brochure of about 22 pages in length. It certainly contained a number of representations made by Express Australia, but none of these have been relied upon by the applicants. It described the role and function of an RMF franchisor. It made it clear that franchising required "hard work". It recorded: In a world where our population continues to expand and employment prospects narrow, franchising has become one of the safest, most viable methods of operating a successful business. Franchising is not a get rich quick scheme. It requires hard work, discipline and the dedication to effectively follow the systems of the franchisor. It does, however, return excellent rewards, both financial and personal, to anyone willing to adhere to those systems. 60 It described the general responsibilities of Express Australia in the following terms: It is important for a franchisee to know that if he or she encounters a problem, however small or large, there will always be someone available to offer advice and assistance. One of the unique benefits of the Express Business Group network is that all of our key personnel have had extensive experience in a particular franchise system. From our Managing Director down, all have reaped the benefits of hands-on experience and for that reason, can offer real and practical answers to all queries. Backup and support is provided in many ways including regular meetings, informative newsletters and memos, extensive advertising will continue as we build our network and customer liaison. Ultimately, we are all part of one team striving for collective success. Our support personnel administer the following areas: • Prospecting • Personal franchisee liaison • Customer liaison • Quality control • Customer service • Accounts and taxation • Advertising and promotions • Franchise development • Training • New products and services This kind of backup not only benefits the franchisee but also helps to establish Express Business Group's reputation as one of the best franchise networks in the world in terms of service, support and future development. 61 Express Australia's "proposal" was that each RMF franchisor would: establish franchisees; provide training to those franchisees; administer his, her or its own region; and consult with Express Australia. The "responsibilities of the RMF owner" were described in the RMF Booklet in the following terms: The RMF will be responsible for five main roles[:] 1. Primarily to establish, grant and train Express Business Group Franchisees in the area. 2. To build relations and develop clients from the community within the region. 3. To provide ongoing training, monthly meetings, newsletters (provided by Express Business Group) and all additional backup and support required by the Franchisee to build a strong and supportive team in the region. 4. To administer the region including the keeping of records and the collection and processing of royalties and advertising levies. 5. To advise and consult with Express Business Group on the most appropriate use of any advertising and promotional funds in order to generate new Express customers and franchises. 62 In contrast, the RMF Booklet described Express Australia's obligations in relation to each RMF franchisor in the following terms: a) Express Business Group will train the RMF in all aspects of training, sales, support and in the general setup and running of the Regional Master Franchise. b) Express Business Group will provide the RMF procedural and training systems and supply sales aides including PowerPoint presentations, prospectuses, agreements, disclosure documents and relevant stationery. c) Express Business Group will place and pay for advertisements on seekcommercial.com.au for the first 3 months of operation or until the first franchise is established (to a maximum of 3 months). d) Express Business Group will provide newsletters, meeting formats and guides, updates, training on new services, copies of promotions and television commercials and generally assist in all ways in the development of the RMF's business. f) Express Business Group will provide the RMF with regular meetings with the Express Business Group team. (Errors in original.) 63 Because of the responsibilities of an RMF franchisor, the RMF Booklet stressed the need for franchisors to be trained. It stated: To enable franchisees to gain the most from their business, thorough training is essential All training is conducted by qualified operators already working in the field. In this way our trainers have a thorough understanding, not only of the business but the needs of new franchisees as well. You will spend time both in-house and in the field learning on the job. You will receive instruction on all administrative procedures including: • Building your business • Accounts and basic bookkeeping • General procedures • Care and maintenance of equipment • Dress standards and the professional image • Daily and weekly planners and analysis • Insurance • Customer service • Prospecting • Quoting • Marketing • Upselling • Banking procedures • Product use • Mobile phone and answering service • Dealing with customers A complete Operations Manual is provided, which gives clear and concise instructions on all subjects from practical procedure to effective planning and bookkeeping. Ongoing training is provided on request, while periodic seminars and product demonstrations provide up to date information for all franchisees. 64 The RMF Booklet summarised the returns an RMF franchisor might earn in the following terms: 1. Granting Express Mobile Services Franchises An area may have up to 18 franchisees. The Regional Master Franchise receives 50% of the profit from the sale of each franchise; Average price of each franchise granted = $6,950 RMF receives 50% of profit from each sale = $2,250 Number of franchises granted = 18 Total profit returned to RMF = $40,500 'Please note' that these figures relate to all franchises being sold. This may take 1-5 years. These figures are based on the current average franchise price of $6,950 although it is likely that the average price will rise to $9,950 in time giving the RMF an extra $2,000 on each franchise granted. 2. On Going Royalties Paid to RMF The RMF will receive 50% of all royalties paid by all Franchisees throughout the region. Weekly royalties are currently set at $180 per week; Current Royalties paid by each franchise = $180/week RMF receives 50% of all Royalties = $90/week Number of franchises granted = 18 Total profit returned to RMF = $1,620/week 'Please note' that these figures relate to all franchises being sold and are based on absolute minimums. This may take 1-5 years. 'Please note' that this is an example only and the number of franchises may vary depending on the division. 65 The RMF Booklet also emphasised the importance of the RMF agreement that would be entered into by each RMF franchisor (referred to as the "franchisee" in the quote below) and each head franchisor. In amplification it recorded: It [(i.e. the RMF agreement)] is a legal document and you should clearly understand it before proceeding with your franchise. The Agreement states clearly the terms and conditions of the granting of a franchised area. Listed below are some of the more important points to consider: The grant: Express Business Group grant the franchisee the exclusive license to operate in the exclusive territory shown and outlined on an attached map. The terms: The term of the Agreement is 5 years with options to renew for a further 5 years with no additional cost to the franchisee. The option to renew is yours, not Express Business Group's. Supplies and products: Express Business Group has established approved suppliers and products. However, you may purchase supplies from any approved business provided that you can demonstrate to Express Business Group that the company is reputable and guarantee product insurance and quality control. Franchise fees: The Franchise Agreement shows that the current franchise fee is fixed at $180. It also shows that these fees are paid weekly and will not increase during the term of the agreement. Obligations of Express Business Group: Listed here are all the things that Express Business Group must do or help you with, such as daily management, advertising, promotions, training, record keeping, administration, new product training, marketing and general professional advice on running a profitable business. Compliance by the franchisee: The franchisee agrees to take out suitable insurance cover, abide by the current policies of Express Business Group, maintain high standards of workmanship as set out in the training period, conduct his or her business in a prudent and businesslike manner, use his or her best efforts to protect trade secrets and confidential copy-written information and to pay fees on time. Total investment: The Agreement shows the full and total investment payable to Express Business Group. Trademarks: All trademarks belong to Express Business Group. Sale of franchise: The area may be sold at any time provided that the franchisee pays any outstanding monies due, the franchisee is not in default of the Agreement and the new franchisee completes a current application form and a new Agreement. The new franchisee must be approved by Express Business Group. Termination by Express Business Group: If the franchisee becomes bankrupt, continually fails to meet quality control standards or continually fails to pay monies to Express Business Group, termination may occur. Termination by the franchisee: The franchisee may terminate the Agreement at any time by writing to Express Business Group giving 30 [days'] notice. You may also cancel the Agreement within seven days of the date of the Agreement, with a full refund of the total investment less 10% which is allotted to expenses. Restrictive trade clause: This clause is designed to protect all members of Express Business Group. It therefore states that should a franchisee leave, he or she may not operate a business that is the same or similar to any of Express Business Group systems for a period of twelve months within a 100 km radius of the franchised area. Summary: We believe that the Franchise Agreement is fair and benefits both parties. It is written, for the most part, in plain English to help avoid confusion. However, should you decide to proceed with an Express Business Group franchise, you should take the entire Agreement to your solicitor for total peace of mind. 66 In a section entitled "Summing Up", the RMF Booklet posed the following questions which it suggested should be answered by a prospective RMF franchisor: To help you assess whether our business is right for you, ask yourself the following questions. Answer them as honestly as you can: 1. Do I sufficiently understand franchising and what is involved? 2. Am I suited physically and temperamentally for self employment? 3. Will my age and health permit me to operate the business successfully? 4. Do I have the maturity to run my own business? 5. What are my natural aptitudes and skills? Does this opportunity match them? 6. Do I mix well with people? 7. Will I be able to manage Franchisees and others if I need to? 8. Do I have the ability and commitment to work hard? 9. Will my family support me in this business? 10. Can I raise sufficient finance? 11. Can I accept the disciplines of a franchise system? 12. Finally, do I possess sufficient ability to exercise initiative and to capitalise on the opportunities presented to me? 67 The content of this document is directly inconsistent with Mr. Patel's "sit back and do nothing" concept. It more properly reflects the terms and conditions of the RMF agreements that Mr. Patel signed (as to which see below). I am not satisfied that Mr. Arcon only spent two to three minutes going through this booklet at the Adelaide meeting, as Mr. Patel contended in cross-examination. That contention is inherently unlikely. The RMF Booklet would not have played such a subordinate role. Given the contents and format of the booklet, it was plainly a key document used to attract prospective RMF franchisors. More importantly, contrary to Mr. Patel's assertion that he was never given a copy of it (as he asserted in his second affidavit), I think it is far more likely that Mr. Arcon left the RMF Booklet with Mr. Patel to read (as Mr. Arcon said). That is what a salesperson would do. I also infer that Mr. Patel read it and, by reason of his qualifications and experience, understood what it was saying.

Advice obtained by Mr. Patel in relation to a draft version of the RMF agreements 68 It would appear that at some point in late 2015, Mr. Patel received from Express Australia a version of a standard RMF agreement (to be entered into between an SMF franchisor and an RMF franchisor) and gave this to his lawyers to obtain advice. In cross-examination, Mr. Patel confirmed that he had retained a copy of this draft. Mr. Callanan made a call for it to be produced. It was never provided. However, I can deduce some of its contents from the advice Mr. Patel received from his lawyers by email on 1 October 2015. That advice records that Mr. Patel had asked his lawyers to review the "franchise documents … with regard to the key issues identified by [Mr. Patel]". I find that the standard RMF agreement given to Mr. Patel contained clauses which were inconsistent both with Mr. Patel's wish to "sit back and do nothing" and with Mr. Roberts' confirmation that an RMF franchisor could choose to adopt a "passive" role. That is because the draft was found by his lawyers to be "more consistent with the typical master franchisor-sub franchisor-sub franchisee type arrangement". As a result, Mr. Patel's lawyers suggested that there was a need to make "extensive amendments" to the draft agreements as the "next step". Mr. Patel's lawyers thus wrote: We note that your intention is to have a passive investment role only, with only minor marketing and training obligations. In their email correspondence to you, [Express Australia] advised that no specific level of promotional activity was required from you and "no investment is expected, it is up to yourself if you want to advertise or promote". In addition, when you sought confirmation that sales of franchises was exclusively managed by the Express business development team (i.e. you were not responsible for selling/acquiring franchisees), Express agreed with this statement. Clause 6.4 and 6.5 of the [Regional Master Franchisor Agreements (the "RMFAs")] require you to establish a certain number of franchises beneath you during each year of the term. The RMFA does not contain any reference to assistance being provided by [Express Australia] or the Master Franchisor in this regard other than clause 5.3, under the sub-heading "Initial obligations", which simply provides that the Master Franchisor will provide advice regarding the establishment of the first franchise within the territory. In addition, clause 6 of the RMFAs imposes several management type obligations on you including, but not limited to, using your best endeavours to increase turnover of franchises within your territory and ensuring that all franchisees comply with the relevant franchise system. The current drafting of the RMFAs is more consistent with the typical master franchisor-sub franchisor-sub franchisee type arrangement where you (as Regional Master Franchisor) would be deemed to be the Franchisor of the franchisees beneath you. 69 Any redrafted RMF agreement was not before me. But I infer that it existed and was sent to Express Australia, which rejected it. That inference arises from the following text sent by Mr. Arcon to Mr. Patel on 3 December 2015: Your lawyer has drafted some ridiculous clauses and has made it so there is no requirement on your behalf to do anything 70 This text suggests that Mr. Patel was receiving legal assistance right up until December 2015. He thereafter claimed that he reviewed and negotiated the RMF agreements and side agreement without any legal assistance at all. Mr. Arcon's evidence was that Mr. Patel sent the Express Australia draft agreements to his lawyers and accountants who reviewed them. He also said that Mr. Patel phoned him several times to ask various questions in relation to the Express Australia business and the draft RMF agreements. According to Mr. Arcon, Mr. Patel would often tell him that such questions were posed at the behest of his lawyers and accountants. No explanation was given to the Court as to why, as alleged by Mr. Patel, he stopped using his legal advisers to assist him in negotiating the terms of the RMF agreements. Having regard to their earlier involvement, which included drafting an alternative agreement, it is difficult to accept that they had been excluded entirely by Mr. Patel at the crucial stage of negotiation in January 2016. Moreover, Mr. Patel failed to produce, when it was called for, the first draft of the RMF agreements which he sent to his lawyers. Based on the material before me, I infer that Mr. Patel did not fully disclose the involvement of his lawyers in advising him about his investment with Express Australia. That inference is all the more strongly drawn by Mr. Patel's failure to meet the call for the draft RMF agreements: Jones v. Dunkel (1959) 101 C.L.R. 298 at 320-321. 71 The legal advice also suggested that the guarantee as to income should be provided by Express Australia, and not the "relevant Master Franchisor". This was because the "relevant Master Franchisor" was itself "reliant on the royalties received from franchisees and Regional Master Franchisors like you". In contrast, it was said, Express Australia was "better placed to support such a guarantee" by reason of its "various sub-franchising arrangements". This, I find, is the genesis of the "side agreement" ultimately signed by Mr. Arcon for Express Australia and by Mr. Patel. 72 The advice also called for a form of due diligence to be undertaken. Mr. Patel's lawyers wrote: If [Express Australia] are agreeable, we would then require the contact details for the appropriate [Express Australia] representatives whom are authorised to negotiate the proposed amendments. As a starting point, we would also require the following documents and information which have not been provided by [Express Australia] to date: • the proposed franchise agreements which the franchisees beneath you will be expected to sign as well as the disclosure documents which will be provided to such franchisees; • the date and commercial terms of the 'verbal licence' granted to the 'Head Franchisor' in respect of the IP used in the franchise operations. For your reference we note that: • Section 7 of each of the disclosure documents provided to you states that the Head Franchisor (Express Mobile Services Australia Pty Ltd) has been granted a 'verbal licence' to use trademarks 15614026, 1551947 and 1625563 in respect of the words and image "Express Mobile Services" (Express IP) by Express Business Group Pty Ltd (formerly known as Express Mobile Services Pty Ltd); and • ASIC's records show that Express Mobile Services Australia Pty Ltd changed its name to Express Business Group Australia Pty Ltd on 9 September 2015. • a copy of the Compliance Program that [Express Australia] was required to implement within 12 months of their undertaking to the ACCC (dated 20 August 2014) as well as evidence that this has been reviewed by an Independent Reviewer (as required by the ACCC); and • financial reports for [Express Australia] in respect of each of the last 2 years (clause 20.2 of the disclosure documents references financial reports but [Express Australia] only provided a letter from their accountants dated 29 October 2014 stating that an audit of financial statements was in progress). Please note that the above list is by no means an exhaustive list and depending on the further information provided by [Express Australia] and any future discussions with [Express Australia], more information and documents may be required. We draw your attention to the above list at this initial stage. 73 It is unclear to me whether any of this particular initial due diligence took place. In Mr. Patel's second affidavit he stated that he had never received the financial accounts of Express Australia, and that only the "initial documents" were sent to his lawyers, and that he "simply proceeded on the basis of the representations made to [him]". In contrast, Mr. Arcon gave evidence that the due diligence was "extensive". I infer that some form of due diligence took place. For one thing, in an email sent by Mr. Patel to Mr. Arcon on 6 February 2017, Mr. Patel himself refers to "the due diligence (prior to purchase)". He also in fact received the financial accounts (see below), which in cross-examination Mr. Patel said his lawyers had requested. 74 I finally note that the lawyers' email did not address in any way Mr. Patel's object of seeking a capital gain. And that is so, even though the advice was expressed as covering the "key issues" identified by Mr. Patel. The legal advice simply recorded that Mr. Patel's objective was to have an ability to assign his RMF agreements to a related body corporate or as part of a change in the structure of his ownership interests "by taking on new partners". There is no legal advice, for example, about the need for a warranty about capital growth to be inserted into a draft of the RMF agreements. Indeed, I have found no contemporaneous document which evidences Mr. Patel's capital gain objective, save for one email sent about a year after Mr. Patel (on Cash Bazaar's behalf) purportedly entered into the 10 RMF agreements. 75 The contemporaneous documents before me show that the next steps included the following: (a) On 16 October 2015, Mr. Patel received a "Franchisee Update" which, amongst other things, addressed a concern raised by Mr. Patel's lawyers about an ongoing investigation into Express Australia by the Australian Competition and Consumer Commission (the "A.C.C.C."). The "Update" recorded that the A.C.C.C. had required Express Australia to appoint a "Compliance Officer" to oversee all systems, policies and procedures and to undertake a full independent review of Express Australia's compliance program. The "Update" confirmed that an initial review had at that time been completed. (b) Mr. Patel's lawyers prepared a draft "General Security Deed" to be entered into by Express Australia and Cash Bazaar. This draft required Express Australia to grant Cash Bazaar a security interest in "all of its property" including "Personal Property" (as defined) and a charge over Express Australia's "Other Property" (as defined) to secure the payment of all monies owing by Express Australia to Cash Bazaar under the RMF agreements. Both Scutts Senior and Mr. Arcon rejected this draft deed entirely. It was never entered into. (c) On or about 21 October 2015, Mr. Patel was given a copy of a letter written to Mr. Arcon by Mr. Matanovic of "Vincents", a firm of chartered accountants. The letter was provided to allay concerns held about the financial strength of Express Australia at a time when the accounts for the year ended 30 June 2015 (the "2015 accounts") had yet to be finalised. The letter simply stated that "from the information gathered to date, the company traded strongly for the year ended 30 June 2015". Critically, the "company" referred to was not Express Australia but rather Express Business, being the company that owned the Express Intellectual Property. (d) In his affidavits, Mr. Patel did not disclose the receipt by him of the 2015 accounts before he signed the RMF agreements and the side agreement. However, during his cross-examination, it was revealed that Ms. Mansfield had sent these to him by email on 6 November 2015. That email was tendered in evidence. Notwithstanding Mr. Patel's claim that he did not recall seeing the 2015 accounts and that he simply forwarded all documents to his lawyer, I infer, given Mr. Patel's qualifications and experience, that he read these accounts and understood them well. That inference is supported by the size of the investment he was about to make. His income could only practically be guaranteed to the extent of Express Australia's financial capacity to make such payments. Moreover, whilst never disclosed in his affidavits, I also infer that Mr. Patel or his accountant used a mathematical calculator of some kind to ascertain the present value of the income flows he hoped he would secure from his proposed investment. The text messages set out above record Mr. Patel referring to him running numbers through "the PV calculator". The reference to "PV" is, I infer, a reference to "present value". That Mr. Patel, or his accountant, would have used such a calculator is unsurprising given the offer of guaranteed money and given his expertise. It is also consistent with Mr. Patel's case that all he really wanted to purchase was a guaranteed income stream. In contrast, in cross-examination, it became clear that Mr. Patel never had any real interest in receiving franchise income. 76 There was some debate before me about the accuracy of the 2015 accounts. Mr. Arcon claimed that they failed to disclose greater amounts of income (said to have been subsequently uncovered in an audit undertaken by officers of the Commissioner of Taxation). Mr. Patel's Counsel, Ms. Sparke, Q.C., also claimed that they were unreliable and did not separately identify revenue earned in Victoria. I am not in a position to judge the correctness of the 2015 accounts. The material before me did not permit me to reach any conclusion about that issue. Nor was that material sufficient to overcome the effect of s. 1305 of the Corporations Act. It follows that the accounts were received in evidence as being prima facie correct. In any event, Mr. Patel received them in November 2015 and they recorded for the year ended 30 June 2015 total sales of $14,444,028 and retained earnings of $683,764. The previous year recorded total sales of $6,818,003 but a loss of $36,453. The accounts also identified Scutts Senior and Mr. Arcon as directors of Express Australia.

The meeting in Loganholme and the alleged representations as to capital growth and guaranteed income

The conflicting evidence 77 Both Messrs. Patel and Arcon gave evidence about another meeting they had in late 2015. Mr. Patel said that he attended a meeting with Scutts Senior and Messrs. Arcon and Wakefield in November 2015 (although it may have been in December) in Loganholme in Queensland (the "2015 Loganholme meeting"). This was a key meeting. What was said at it was not documented and so I must rely on the memory of Messrs. Patel and Arcon to determine what was said. Mr. Patel stated in his first affidavit that Express Australia rejected his General Security Deed at the 2015 Loganholme meeting. He deposed that the following representations were made to him: 22. [Scutts Senior] said words to the following effect 'if you invest in RMFs you will experience capital growth as the value of RMFs is growing and will grow over time' and '… you are already paying more than the price the RMFs were selling a year ago'. … 28. To resolve this concern of protecting the capital investment and guaranteed payments, [Mr. Arcon] said words to the effect that 'to resolve this issue, we will provide a side agreement from Express that will set out the guaranteed income payments being offered'. 29. [Mr. Arcon] assured me that I need not worry about the guaranteed payments and said words to the effect, 'Express will pay the guaranteed payments every month even though the RMF contract is with the State Franchisor'. 30. [Scutts Senior] nodded his head and agreed to provide the side agreement and said words to the effect, 'we always live by our payments, you can check with anyone'. 78 Mr. Arcon's recollection of this meeting was different. He deposed that he did not hear Scutts Senior make some of the statements attributed to him. As to the issue of capital value he said: [Referring to [22] of Mr. Patel's affidavit reproduced above] I did not hear that Mr Scutts' sale was attributed to him, it makes no sense that he would say those words as the value of the RMFs was subject to the number of franchisees which were operated within their [particular] territory. By way of example, if the RMF agreement was purchased for $39,950 without any franchisees in the Territory producing income for the regional Master franchise and subsequently franchisees are trading with the territory then the value (and sale Price) of the RMF would increase. In respect of the alleged statement that the RMF was more than the price of the RMF's that was selling a year ago, whilst I do not specifically recall that statement being made by [Scutts Senior], that statement was true. I say that as Express was previously selling the RMF's for initially $19,950, the price was later increased to $29,950 and increased prior to Mr Patel purchasing the regional master franchise for $39,950. (Errors in original.) 79 As to the statements said to have been made by Mr. Arcon, his affidavit evidence was as follows: [Referring to [28] of Mr. Patel's affidavit reproduced above] I deny the statements attributed to me. The clauses in respect of guaranteed income were previously in the RMFs (for other regional Master franchises sold by express), however, Mr Patel requested that a separate document be prepared that set out the terms of the agreement. [Referring to [29] of Mr. Patel's affidavit reproduced above] this statement was in the context of Mr Patel complaining to me that he did not want 10 different payments from 10 different state Master franchisors rather he wanted a single payment. I explained to Mr Patel that notwithstanding the terms of the franchise agreements, Express manage the payments from the franchisees and distributed those payments to each respective state Master franchisor and regional Master franchisor such that the First Applicant would only receive one lump sum payment of the week. (Errors in original.) 80 In cross-examination, both Messrs. Patel and Arcon maintained their respective recollections of the 2015 Loganholme meeting. None of their answers increased the likelihood of one recollection being preferred over the other. That is because each, I find, gave answers that suited their respective positions. They were advocating rather than giving evidence. No other witness, such as Mr. Wakefield, was called by either party to corroborate which version of events I should prefer. In those circumstances, I make the following findings in respect of the 2015 Loganholme meeting.

Findings in respect of the alleged representations regarding the capital value of the RMF agreements 81 I find that Mr. Patel has not proven on the balance of probabilities that a representation was made about any particular likely growth in the capital value of the RMF agreements at the 2015 Loganholme meeting. It may nonetheless be inferred that the issue of capital value was probably discussed. Unspecific or highly generalised opinions about the future prospects of an investment are commonly made when selling a product. Mr. Arcon, an able salesperson, is likely to have made such statements, especially if the issue had been raised by Mr. Patel. But it is objectively improbable that a specific and unqualified representation about capital growth would have been given by Express Australia. No contemporaneous evidence pre-dating the RMF agreements signed by Mr. Patel supports the making of such a statement (save for a change made to the RMF agreements, which I address below). In any event, the statement that Mr. Patel claimed had been made, namely that "you will experience capital growth", is so highly generalised as to have little, if any, meaning. If it had been made, I would have characterised it as puffery, or as no more than an expression of optimistic expectation. 82 I accept that a statement was made to Mr. Patel that investors in RMF agreements were already paying more than the previous year's price for RMF agreements. However, there is no evidence to suggest that it was not accurate. Moreover, in 2017, Mr. Patel conceded that his RMF agreements had grown in value in the way he expected. In an email sent to Mr. Arcon on 6 February 2017, Mr. Patel wrote: During the sales process you had mentioned that each year the value of the RMFs would increase. I am also pleased to note that the recent price of RMF confirms this (expected) growth in capital value that you had mentioned (price of RMF was confirmed to me by James Eilermann [(a director of Express Victoria)] during our meeting on September 13, 2016). (Errors in original.)

Findings in respect of the alleged representations regarding guaranteed income 83 I also think that it is probable that generalised statements, such as a claim that Express Australia "always lives by our payments", were probably made to Mr. Patel. But, again, such statements are really puffery, and no substitute for a hard examination of the results of a due diligence. I think that Mr. Patel, with his two M.B.A.s, would have shared this view. Mr. Patel, I also find, would have appreciated the risk that Express Australia might in the future default on its promise to pay guaranteed income. He initially sought to mitigate that risk by requiring Express Australia to enter into the General Security Deed, which he paid his lawyers to prepare. It is a reasonably detailed document. If it had been entered into, it would have made Mr. Patel or Cash Bazaar a secured creditor of Express Australia. However, Scutts Senior and Mr. Arcon rejected that agreement entirely. At that point, Mr. Patel could have walked away. He did not. Rather, he continued to negotiate with Express Australia. Whether Mr. Patel sought to address his exposure to risk in other ways, such as seeking a lower purchase price, I do not know. But, in this context, I do not consider that the highly generalised statements alleged by Mr. Patel to have been made were seen by him as a serious substitute for the rejected General Security Deed. 84 I find that a proposal was put to Mr. Patel at the 2015 Loganholme meeting to enter into a side agreement which would include a promise to pay guaranteed income. The proposal outlined at that meeting (and the one earlier outlined by Mr. Roberts) formed part of a longer negotiation with a view to entering into formal written agreements. They were invitations to treat and no more. In other words, a formal offer had not crystallised at that point in time. An offer to enter into a side agreement was in fact made at a later time and was ultimately accepted by Mr. Patel and Cash Bazaar (although, for the reasons given below, the side agreement was not legally efficacious). 85 In closing, Ms. Sparke, Q.C. contended that there is a distinction between, on the one hand, making a representation that guaranteed income will be paid and, on the other hand, the making of a proposal to enter into a contract which will contain a promise to pay guaranteed income. The former was said to apply here; more specifically, that Express Australia had represented to Mr. Patel - through Mr. Arcon and Scutts Senior - that it would pay guaranteed income to him. In my view, there is a world of difference between: (i) a freestanding and unqualified representation that guaranteed income will be paid; and (ii) the outlining of a proposal to enter into a written contract, made all the more attractive because it will contain a promise to pay guaranteed income. A difficulty with the drawing of this distinction in practice is that it requires one to know with great precision what was truly said and conveyed by the representor. In that respect, what was said at the 2015 Loganholme meeting is in dispute. To illustrate the difficulty, I refer to two passages of cross-examination. When Ms. Mansfield was cross-examined about the alleged contention that she had told Mr. Patel he would receive guaranteed income, she replied by referring to the side agreement (which the witnesses often called the "letter", "side letter" or "guarantee letter" in oral evidence). Thus: And in your discussions that you had with Mr Patel, you told him, did you not, there will be guaranteed income of $270 a week?---Yes, because there is a letter that states that. Well, you say that now. I'm suggesting to you that you said to Mr Patel there will be guaranteed income, $270 a week?---Yes, because it was told to me that that was part of his sale process, that there would be an income guarantee. 86 In other words, her evidence was that Express Australia had proposed to enter into a side agreement which contained a promise to pay guaranteed income. In contrast, Mr. Patel claimed that he had received separate and distinct oral representations about the payment of guaranteed income which he said he relied upon; he said he never relied upon the agreements he had signed because he relied on the word of Scutts Senior, Mr. Arcon and Ms. Mansfield. Thus, in cross-examination the following exchange occurred: And you maintain that you just had to sit back and do nothing?---That's what I was told at every conversation. I relied on the oral promises when I did this transaction. I did not - - - Clause - - -?--- - - - rely on a RMF agreement. I relied on oral promises made to me. 87 On another occasion, Mr. Patel said something very similar in relation to his conversations with Ms. Mansfield which is in stark contrast to Ms. Mansfield's evidence. Thus, during Mr. Patel's cross-examination the following exchange occurred: Okay. Thank you. When she said that she guaranteed you would be paid, I take it she was saying in accordance with the side letter that's going to be entered into?---The sentence finished at, "We guarantee you will be paid." It was never in accordance with the letter ... "You will be paid $2700 a week." 88 In light of the above, in my view, the applicants never established on the balance of probabilities that a freestanding and unqualified representation that guaranteed income would be paid was made to Mr. Patel. I have no sensible basis for preferring Mr. Patel's uncorroborated oral evidence over the uncorroborated oral evidence of the other witnesses, including Ms. Mansfield. I find it objectively improbable that Express Australia would have made a representation about the payment of future income independently of, or divorced from, its proposal to enter into the side agreement. Rather, it is more likely that any discussion about guaranteed income would have formed part of a negotiation entered into by Mr. Patel with Mr. Arcon and others. It was common ground that some prior RMF agreements had contained a form of promise to pay guaranteed income. Mr. Patel's concern was to make Express Australia liable to make that promise (rather than, for example, an SMF franchisor). His concern was addressed by the side agreement which he entered into with Express Australia in February 2016. In other words, at the 2015 Loganholme meeting held in late 2015, statements made about the payment of guaranteed income were not representations about future matters in the way contended for by Mr. Patel, but preliminary invitations to enter into a formal contract, which had yet to be executed and which depended on the parties agreeing to the terms of the RMF agreements. It follows that I find that Mr. Patel has not demonstrated that representations were made to him promising the payment of guaranteed income, which were distinct or independent from the process of negotiating the very written instrument within which the parties intended to place that promise. I shall return to this issue below.

The alleged representations made by Ms. Mansfield respecting the RMF agreements 89 Mr. Patel also alleges that Ms. Mansfield made a series of representations to him over the phone concerning guaranteed income, capital growth and the passive nature of his investment in January 2016. None of these representations may be found in any contemporaneous document. Their existence turns upon only Mr. Patel's recollection of events. In Mr. Patel's first affidavit, he deposed that Ms. Mansfield made the following representations to him: (a) that "there [were] several Regional Master Franchisors and State Master Franchisors who have been receiving guaranteed income" and "[Mr. Patel's] investment would grow in value and while [it was] growing [he would] enjoy a guaranteed minimum income of $270.00 per week for each RMF"; (b) that 10 RMFs were available and the value of those RMF would "grow over time" as there was "a focus on selling franchisees in these RMFs"; (c) that the value of the RMFs had increased each year and that "after a few years" Mr. Patel could "sell the RMF to recover your capital and enjoy capital growth"; (d) that the RMFs were, at the relevant time, offered at $39,995 each and over five years these would "more than double" in price; (e) that Mr. Patel would receive a guaranteed income of "$270 per week per RMF" and that "no participation [would] be required" from Mr. Patel; and (f) that Mr. Patel should not be worried because the side agreement could be amended to reflect that even if "franchisees were to leave the [Express Australia Group], the guaranteed monthly payments would continue to be made by [Express Australia]". 90 Ms. Mansfield denied making any of the representations attributed to her by Mr. Patel. She said that her role was limited to document preparation and other administrative tasks. She said she would not have engaged in a conversation with Mr. Patel about the capital growth of the RMFs; if asked about this, she would have referred him to Mr. Arcon. Nor would she have discussed the purchase price of RMFs. She said she was careful not to say anything that was contrary to the documents being prepared. She denied saying that no participation would be required from Mr. Patel, as this was inconsistent with her understanding of the "Express Model" which required RMF franchisors to actively support the franchisees who were performing the services on a day-to-day basis. 91 Both Mr. Patel and Ms. Mansfield maintained their recollection of events in cross-examination. Mr. Patel remained fairly argumentative. He said that Ms. Mansfield was able to respond to any changes he wanted to the RMF agreements and the side agreement promptly, without the need to consult with Mr. Arcon. I doubt that this was so. He also seemed determined to demonstrate that Ms. Mansfield had "negotiated" with him over a number of issues, including the number of RMFs he was to purchase even though this had earlier been discussed with Mr. Arcon. The following exchange in the cross-examination of Mr. Patel illustrates the point: Now, in truth, the number of RMFs had been earlier agreed between yourself and [Mr] Arcon. Do you agree with that?---It was discussed. Buying something and selling something is a process. At every step of the process, things have to be validated and confirmed. Do you agree that prior to these dealings with [Ms] Mansfield, the number of RMFs that you were purchasing had been agreed between yourself and [Mr] Arcon? Yes or no?---Cannot answer that in yes or no. The number of RMFs discussed were 10. The price wasn't determined at that stage. The last answer was, in my view, evasive. 92 In cross-examination, Mr. Patel maintained that Ms. Mansfield was a controller of the side agreement. His evidence (in which Ms. Mansfield is called "Jai") was as follows: That's what - yes, that's what I was - - -?---So Jai was a non-executive director. She had an influence in - she was controlling the agreement letter that I was going to get, not [Mr. Arcon]. The agreement letter was very critical for me. But what was - what was she controlling?---Drafting, delivery, negotiation of the agreement letter. It - - - But what - - -?---She was - she was - she was drafting the letter; she was going to give me the letter; it had the territories on it, the maps on it, which businesses on it. The only thing I'm dealing with [Mr. Arcon] is the price. So there were two or three crucial elements here with Jai and one with [Mr. Arcon], but they're both important stakeholders, board directors. So what are the three things you're negotiating with Jai?---The guarantee letter - yes, because [Mr. Arcon] wasn't issuing the guarantee letter; Jai was. 93 Mr. Patel also maintained his view that Ms. Mansfield was an "equal" of Mr. Arcon. The following exchange took place in cross-examination during which Mr. Patel expressed this view: But what were you negotiating with Ms Mansfield about the guarantee letter?---Side letter; the guarantee letter was what I was negotiating with Mansfield - - - Yes, in what respect?--- - - - because she was an equal - - - In what respect?---Allow me to complete. She was a director - - - No, no - - -?---Can I - - - - - - I'm not - - -?---Can I answer your question? No, you can't. I want - I want - - -?---I can't? Okay. - - - you to tell me what you were negotiating with her?---I'm just trying to explain that. Well, you're not; you're talking about something else?---Please allow me to reply. Well, if it's responsive to my question I will?---Exactly. I was negotiating with Ms Mansfield the terms of the side letter. Ms Mansfield was an equal stakeholder in the business. The 270 was agreed; as a non-executive director she could have always changed that. I had to make sure that stayed consistent. I had to make sure that all the three or four critical elements that I wanted were in the letter. I had to make it all go through. To give you an example: the price at that point was 380, and the income guarantee was 2700. Now - - - So can I just clarify something you've just said: your negotiation with Ms Mansfield about the guarantee letter was to make sure that it stayed consistent?---Correct. Consistent with that?---Consistent with all the discussions I've had prior - - - With?--- - - - with Express, two hundred - - - Being who?--- ..... Reece Arcon, Lloyd Roberts, two thousand seven ... dollars per week. I wanted to make sure it stays, because she is a non-executive director negotiating with me - - - Sure. Okay. So that leaves you negotiating with Mansfield, you say, about territory and what businesses?---And finalising the - and confirming, if not finalising, the 2700 a week. 2700 per week?---Correct. Yes; which was as simple as timesing - multiplying 270 by the amount of RMFs who were buying?---Confirming - confirming 270 times 10 with her. Yes?---Because she's a non-executive director; she could have changed it. She could have said, "No, that was a price of 380; now you've done a lower price with Mr. Arcon; it's no longer 270"; quite possible. 94 In the foregoing passage, Mr. Patel claimed that he "negotiated" the issue of guaranteed income with Ms. Mansfield by repeating to her what had already been agreed would be paid ($2,700 per week). He said he needed to repeat himself, lest Ms. Mansfield change the deal at the last minute. With respect, I find that very difficult to accept. Rather, the passage set out above is indicative of the often forced and argumentative nature of Mr. Patel's evidence. 95 On balance, the answers given in cross-examination by both witnesses did not take things very far. However, Ms. Mansfield was, in my view of her, more restrained when cross-examined. She said that she ran all of Mr. Patel's changes to the draft RMF agreements past Mr. Arcon and denied ever negotiating with Mr. Patel herself. She said she had never been a director of Express Australia. The change to her title in her emails to that of "non-executive director" had been made by Scutts Senior. She did not know why the change had been made. She did what she was asked to do. I accept this evidence. It accords with the contemporaneous records. 96 Ms. Mansfield otherwise had no specific recollection of having one-on-one conversations with Mr. Patel (save in one instance). In her cross-examination, Ms. Mansfield explained why she did not herself make decisions with respect to prospective franchisees, but would always seek instructions from the applicable sales manager, such as Mr. Arcon. It was because they, but not her, were rewarded by the payment of commission. She did not want to be responsible for any loss of their commission. That explanation should be accepted. It accords with common sense. 97 As earlier mentioned, Mr. Patel relied upon a series of emails sent between him and Ms. Mansfield to support his case that he was negotiating with her on the basis that he thought she was a director of Express Australia. Again, I do not think that these emails support Mr. Patel's contention. They are more consistent with Ms. Mansfield's recollection. There were about nine emails tendered in evidence. Five of these were sent by Ms. Mansfield for the purpose of attaching documents for Mr. Patel to consider. In one, Ms. Mansfield informed Mr. Patel that she was booking flights for him. She wrote: Hi [Mr. Patel] I will update the agreements and resend. I believe I am also booking your flights for tomorrow. Leaving Melbourne around 11, and return around 5. I will get back to you with the itinerary soon. 98 In another email, Ms. Mansfield wrote that she was attaching "updated agreements" and that Mr. Arcon was very happy for Mr. Patel to call him. In another email, Ms. Mansfield confirmed that Mr. Arcon was very happy to fly Mr. Patel up to Brisbane and that he had confirmed the price. This was in response to an email sent by Mr. Patel asking Ms. Mansfield to adjust the price for the RMF draft agreements "as discussed with [Mr. Arcon]". Two other emails concern Ms. Mansfield's attempts to move franchisees into Mr. Patel's territories. Here is an example of one of these: The State Master details are all available in the Disclosure documents. [Mr. Arcon] is happy for you to call him regarding them. As there are 10 regionals to look into, I will get back to you on the franchisees. Keeping in mind, you will receive all the mapping and spreadsheet documentation once you have commenced with us. 99 In contrast, in text messages and emails sent between Messrs. Patel and Arcon around January 2016 there is a record of real direct negotiation between these two individuals. Some of the texts I have already reproduced. Thus, in an email sent by Mr. Patel to Mr. Arcon on 27 January 2016, Mr. Patel wrote: Hi [Mr. Arcon], Updated documents provided by [Ms. Mansfield] look good. [Ms. Mansfield] is working towards determining the regions - a total of 10 regions. In the interim could we please determine 1. Price per region per region (for a division) - understand that the stated price is $39,950 + GST. In my previous conversations it was indicated that as I was looking at purchasing 5 regions the discount would be 10%. As I am purchasing 10 divisions what would the discount be? Appreciate if you could also consider that I have already incurred $16k towards legal fees. 2. Kick of plan - activity for the first 100 days 3. Support towards opening Express Sales office in my region Looking forward to your response. (Errors in original.) 100 Mr. Arcon replied: Hi [Mr. Patel], I'm glad we are close to finalising things :) As I'm aware of the costs of your lawyers and your idea to increase the number of regionals you purchase I'm happy to work on the price For 10 regionals the price would be $382,000 including GST The kick off plan would involve us helping to locate an office and negotiate a lease followed by an Intense marketing plan in the local area of the office Ill be back in Brisbane tomorrow and it would be great to have a chat to you about moving things forward (Errors in original.) 101 Mr. Patel responded with an email in which he sought a greater discount in price. 102 There are no emails like this between Mr. Patel and Ms. Mansfield. Nor, as already mentioned, is there any contemporaneous evidence to support the alleged representations said to have been made by Ms. Mansfield. Given the state of the evidence, and the onus of proof on Mr. Patel and Cash Bazaar, I do not think that they have satisfied me on the balance of probabilities that Ms. Mansfield made the representations he alleges she made. Many of them are simply inconsistent with the RMF Booklet I have described above. And even if she did make them, I find that she was simply passing on the information supplied to her by Mr. Arcon or other more senior officers of Express Australia. As Mr. Arcon's personal assistant and as development manager, she lacked sufficient seniority to be in a position to make the alleged representations in her own right, or to endorse their accuracy.

The contents and legal efficacy of the 10 RMF agreements 103 After further negotiation with Express Australia in January 2016, Mr. Patel ultimately signed 10 RMF agreements. They addressed the following regions and services: (a) Express Property Maintenance Inner Melbourne; (b) Express Property Maintenance Southern Melbourne; (c) Express Pick up & Delivery and Removals & Freight Inner Melbourne; (d) Express Pick up & Delivery and Removals & Freight Southern Melbourne; (e) Express Appliance Rentals Inner Melbourne; (f) Express Appliance Rentals Southern Melbourne; (g) Express Building and Pest Inspections Inner Melbourne; (h) Express Building and Pest Inspections Southern Melbourne; (i) Express Car Cleaning Inner Melbourne; and (j) Express Car Cleaning Southern Melbourne. Only eight of the 10 RMF agreements were in evidence. 104 Each RMF agreement was for a term of 10 years and purported to grant Cash Bazaar exclusive rights to use the Express Intellectual Property and branding for the regions and services set out above. Save in three respects, the RMF agreements are not consistent with Mr. Patel's contention that the deal allowed him to "sit back and do nothing". All of the RMF agreements in evidence used the same essential terms (differences between the RMF agreements appeared to be limited to the nomenclature of the home service in question). Each contained a cl. 6, which was relevantly in the following terms (as extracted from the Pick up & Delivery and Removals & Freight RMF agreement): General Obligations 6.1 The Regional Master Franchisor must prepare and keep up-to-date at all times a Disclosure Statement in relation to the Regional Master Franchise Business. .. 6.3 The Regional Master Franchisor must: - … (d) Operate the Regional Master Franchise Business: (i) properly; and (ii) using its utmost and best endeavours to maintain the highest standards in all matters connected with the Regional Master Franchise Business; (iii) strictly in accordance with Express Pickup & Delivery and the Removals & Freight System; (iv) in accordance with the Provisions of the Operations Manuals (from time to time and at the time). (e) Use its utmost and best endeavours to ensure that all Express Pickup & Delivery and Removals & Freight Franchises throughout the Territory comply with Express Pickup & Delivery and Removals & Freight Image and are operated in accordance with Express Pickup & Delivery and Removals & Freight System. … Establishment of Franchisees … 6.5 Thereafter the Regional Master Franchisor must have open for business, and maintain an operation at the expiry of each calendar year the number of Express Pickup & Delivery and Removals & Freight Franchises shown in item 13 of Schedule Three against each calendar year of the term PROVIDED THAT circumstances beyond the control of the Regional Master Franchisor do not [affect] the last month of each calendar year in relation to the number of Express Pickup & Delivery and Removals & Freight Franchises in operation at the expiry of each calendar year. 6.6 The Regional Master Franchisor is to appoint as General Manager of the Regional Master Franchise Business and of the Related Corporation such person as is reasonably acceptable to the Master Franchisor and who passes, as may be appropriate, the training courses referred to in Part 7 of this Agreement. The Regional Master Franchisor has appointed Rajesh Patel as General Manager. 6.7 The Regional Master Franchisor must use its utmost and best endeavours to establish, maintain and increase the turnover of the Regional Master Franchise Business and the turnover of each of Express Pickup & Delivery and Removals & Freight Franchises situated within the Territory during the Term. … 105 I note also cl. 7.12 which was in the following terms: The Regional Master Franchisor is to train its own employees and Franchisees in the operation of the Express Pickup & Delivery and Removals & Freight System in all respects at its own cost. 106 The term "Regional Master Franchise Business" was defined by the RMF agreement to mean "the activities and business conducted by the Regional Master Franchisor throughout the Territory in accordance with the Provisions of this Agreement and Operations Manuals". 107 The obligations purportedly created by the foregoing clauses are distinctly inconsistent with the proposition that Mr. Patel had entered into a deal which allowed him to "sit back and do nothing" (whether in his personal capacity or as the voice of Cash Bazaar). I say purportedly because, for the reasons given below, all parties accepted that Cash Bazaar never validly entered into any RMF agreement. 108 In particular, cl. 6.7 purportedly imposed upon Cash Bazaar real and ongoing obligations to grow the number of franchises within its territory. Combined with the definition of "Regional Master Franchise Business", the clauses, in essence, required Cash Bazaar to carry on a business. They did not permit Cash Bazaar to do nothing. This inconsistency was put to Mr. Patel and all he could say was that the clauses I have referred to above should, in hindsight, have been excised. He claimed that he had only relied instead on the "oral promises" he said had been made to him that he was making a "passive investment". The transcript records the following exchange: But I think the bigger question though really, Mr Patel, is if you're right in your evidence about the concept why haven't you cast a line through all of these clauses? Why weren't they deleted? Why did you sign this contract in this form?---In hindsight you're right, Mr Honour, I should have done that. Because they all create legal obligations on you, you could be sued for this?---In hindsight you're right, I should have done that. I should have done that, I didn't. I focused on the key principles and I got the key clauses amended. I should have - - - You see, from my perspective, what is the content of the contract between you and Express is what's said in this written agreement. Whatever representations and promises were made to you prior to that are neither here nor there, you signed this agreement?---Yes, I signed that agreement. You may have signed it under a subjective belief about what would happen, but that won't affect the content of the legal agreement between you and Express?---I signed the agreement under the oral promises I was made, that this was a passive investment. 109 Later on, the following exchange took place: HIS HONOUR: Did you seek legal advice about these documents?---I'm sorry. I missed that. Did you seek legal advice about the - - -?---No. I did not. - - - RMFs?---On the second set of documents? No, I - - - And why is that?---Because I was told very clearly by Mr. Scutts, Mr. Arcon, Mrs Mansfield in different conversations. He said, "Leave the contracts aside. We guarantee the payment. You are a passive investor. You focus on the return you're going to get, and we will give you a side letter to cover that." 110 I do not accept Mr. Patel's explanation for why he signed the RMF agreements which contained the clauses I have set out above. I do not think that he was entitled to leave the agreements he signed "aside". The contemporaneous evidence demonstrates that Mr. Patel carefully read the RMF agreements before he signed them. He, for example, texted Mr. Arcon on 1 February 2016 to advise that he was "reviewing the documents". He then queried the price. Mr. Arcon responded that he was waiting for Mr. Patel "to be agreeable to everything else" before he would finalise pricing. Mr. Patel replied: "OK I will get on with speed reading!!". Given Mr. Patel's qualifications as a businessman, it is most improbable that he did not know about the existence and content of the clauses I have set out above. Yet Mr. Patel signed each RMF agreement anyway. In my view, he did so knowing that Express Australia did not accept, or fully accept, his wish for complete passivity. 111 In that respect, I note that Mr. Patel gave some further answers in cross-examination in an attempt to address those aforementioned clauses in each RMF agreement. Those answers were often unsatisfactory and argumentative because of Mr. Patel's determined stance of characterising each obligation as being only "passive" in nature. I do not accept these answers as being accurate. For example, he said that the obligation to keep up-to-date disclosure statements was only a "passive" commitment because it only required an hour's work every three months. That was an unsupported assertion. He also sought to characterise the obligation in cl. 6.3(e) above as "passive" because it referred to the need to only use "best endeavours". He also said he had discussed the contracts and their interpretation with Ms. Mansfield. He said she told him that "best endeavours" meant that he was only required to "try at times". None of this evidence appeared in Mr. Patel's affidavits. Nor was this allegation put to Ms. Mansfield when she was cross-examined. I give it no weight. 112 On other occasions, when pressed about the ostensible obligations imposed upon Cash Bazaar by the RMF agreements, Mr. Patel sought to avoid their existence by claiming that they did not matter to him because he had a "personal guarantee" from Mr. Arcon, Scutts Senior and Ms. Mansfield. Thus, the transcript records the following exchange during Mr. Patel's cross-examination: Okay. Page 269 has a [clause] 6.3. This is the next RMF [agreement] that's in evidence: ... use its utmost and best endeavours to ensure that the Express Car Cleaning franchises throughout the territory comply with the Express Car Cleaning image and are operated in accordance with the Express Car Cleaning system. ?---Correct. That's a different positive obligation to the one in the RMF [agreement] we were just looking at a second ago?---It's --- Do you want me - that's ---?---It's different posit but doesn't require any effort to be one of franchises. It did require effort because you bought a number of different businesses, each requiring obligations on the same terms but to do with different kinds of businesses. This wasn't passive?---What we have to appreciate is I bought these on a personal guarantee by Mr Arcon, Mr Scutts and Mrs Mansfield. (Errors in original.) 113 The alleged "personal guarantee" did not feature in Mr. Patel's evidence in chief. I find that it never existed. 114 Mr. Patel also gave other answers in cross-examination about the alleged passivity of his investment which again concerned me. For example, Mr. Patel had requested that all of his RMF territories be located in Melbourne. If the agreement had really been that he could "sit back and do nothing", one might have thought that he would be indifferent about the location of his territories. This was put to Mr. Patel in the following exchange: Why did you want them grouped together and somewhere close to Melbourne?---Quite simple. I live in Melbourne, so if I ever had a requirement to do pest control at my own home, I had a home to go to. And if it was in my region, it's easier for me - - - It was - - -?--- - - - the same for removals. It was to make it convenient for you - - -?---Make it convenient for me, yes. - - - to deal with the franchisees to the extent that you had to, wasn't it?---Correct. If I need a removal service and - - - Which is - - -?--- - - - if the franchisee's in my area it's easy for me to obtain their service. Easy for you to what?---Obtain their service. If I need to move something - - - So what - wait up, you wanted the RMF territories to be in Melbourne so if you needed to move house you could use your own franchisee?---Absolutely. 115 With great respect, it is unlikely that Mr. Patel only wanted a removals franchise located in Melbourne to address the possibility that at some time in the future he might personally need a removal service. A similar observation may be made about the answers given about pest control. In both cases, the explanations given by Mr. Patel appeared to me to be no more than recent inventions. 116 As it happens, the real reason for wanting all of the RMF territories in Melbourne was volunteered by Mr. Patel himself when he gave his evidence in chief in the witness box. He said that his preference: … was that there are in similar or same geography location because I understand one of the requirements was to support the franchisees, so if they're in the same geography location, it makes it a bit simpler and easier for me. 117 Mr. Patel's perception of the need "to support" his franchisees is consistent with the terms of the RMF agreements, and contradicts his "sit back and do nothing" concept. 118 There were three clauses, however, in each RMF agreement which Mr. Patel said supported his case. The first was that, for the purposes of cl. 6.5, the number of franchises specified in "item 13 of Schedule Three" was expressed to be zero for each RMF agreement. Clause 6.5 purported to impose an obligation on Cash Bazaar to have open for business a certain number of franchises. Because that number was zero, Mr. Patel said that this reflected his understanding that he was under no obligation to sell franchises in his region and that this was the sole responsibility of Express Australia. No contemporaneous evidence supported that professed understanding of cl. 6.5. 119 Mr. Arcon disagreed with Mr. Patel's recollection. He asserted that Mr. Patel had said to him that he did not want a fixed sales quota for each of his regions because he did not want to be exposed to the risk of being in breach of his obligations if he had sold, for example, 15 franchises in one region but only one in another. No contemporaneous evidence supported that claim. 120 Both Messrs. Patel and Arcon were cross-examined about cl. 6.5 and each stuck to their respective explanations of that clause. Having regard to the contemporaneous evidence concerning Mr. Patel's claims about passivity, and especially having regard to the content of the RMF Booklet, I am not persuaded that Mr. Patel has demonstrated on the balance of probabilities that his explanation for cl. 6.5 should be preferred. Nor do I accept Mr. Arcon's explanation. I otherwise repeat my finding that Mr. Patel was told that Express Australia would find franchisees for his region, at least at the commencement of his business. 121 That last conclusion is plainly supported by the striking out in each RMF agreement of cl. 6.4 which was in the following terms: The Regional Master Franchisor must establish the first Express Appliance [insert applicable home service] within the period of six (6) months after the Commencement Date. 122 Mr. Patel relied upon another clause in the RMF agreements to support his contention that he wanted capital growth. Clause 16.1 permitted the assignment of "this Agreement" (which, I infer, was a reference to the rights conferred by the relevant RMF agreement) after 12 months and one week. The parties had deleted the reference to "12 months", leaving Cash Bazaar with a right of assignment exercisable after one week. I accept that the deletion of the phrase "12 months" supports a finding that Mr. Patel wanted to have the ability to assign his rights under each RMF agreement earlier than normally permitted. But it does not necessarily otherwise support the making of the capital growth representations alleged, save in the very general way to which I have earlier adverted. 123 Again, tellingly, Mr. Patel was able to strike out words in cll. 6.4 and 16.1, but not other entire clauses, such as cl. 6.7, which were directly inconsistent with his "sit back and do nothing" claims. The amendments also show Mr. Patel taking an active and detailed role in the finalisation of the RMF agreements. I infer that Mr. Patel chose not to or was unable to secure agreement to strike out these other clauses of which he was aware. That is because they formed part of the deal he had negotiated with Express Australia. 124 Following the execution of each RMF agreement, the parties before me assumed that Cash Bazaar had entered into 10 legally efficacious contracts. However, it had not. During the trial I raised with Ms. Sparke, Q.C. the fact that whilst each agreement was expressed to be one entered into between Express Australia - then called Express Mobile Services Australia Pty Ltd ("Express Mobile") - trading in five different capacities and Cash Bazaar, and whilst Mr. Patel had duly signed each agreement on behalf of Cash Bazaar, Express Mobile had not executed any of the RMF agreements, and there was no provision for it to do so. Instead, the other party which had in fact executed each RMF agreement appeared to be the applicable SMF franchisor for each particular region and service. So, for example, one was executed by MSGA Holdings Pty Ltd and another by Blue Coast International Pty Ltd. Whilst two of the 10 RMF agreements were not in evidence before me, in the absence of contrary evidence, I infer that each of these suffered from the same vice as the other eight RMF agreements. 125 In closing, each of Ms. Sparke, Q.C. and Mr. Callanan eventually accepted that each RMF agreement was a nullity and that none of those so-called agreements constituted a binding contract. I respectfully agree with that contention. In that respect, this is not a case of a mere misnomer so that I can read the reference in each agreement to Express Mobile as being a reference to the applicable SMF franchisor. Without descending into the detail, certain parts of the RMF agreements would be rendered nonsensical if the Court were to substitute all references to Express Mobile with the applicable SMF Franchisor. The upshot is that I simply have no sufficient confidence about who was Cash Bazaar's proper counterparty: Seymour Whyte Constructions Pty Ltd v. Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317 at 322-323 [6]-[10] per Leeming J.A.; Commissioner of Taxation v. The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226 at [36]. That is because it appeared to me that Mr. Patel wanted to enter into contracts with both the SMF franchisors and with Express Australia. It is also because no evidence was led about this issue. I otherwise find that the parties have acted until closing submissions under a mutual mistake of law, namely that Express Australia and Cash Bazaar believed that Cash Bazaar had entered into 10 legally binding RMF agreements when in fact it had not.

The side agreement 126 The conclusion that Cash Bazaar never entered into valid RMF agreements has consequences for the side agreement into which Cash Bazaar and Express Australia purportedly entered. The side agreement was the only source of the purported obligation on Express Australia to make the payment of $2,700 per week to Cash Bazaar. It purported to be for a term of five years. It was expressed to be an agreement between, on the one hand, Express Australia and, on the other, Cash Bazaar and Mr. Patel. But it was only executed by Express Australia and Mr. Patel, and not by Cash Bazaar, even though the purported obligation required payments of guaranteed income to be made to it. Moreover, and critically, that purported obligation was dependent upon the entry into of the RMF agreements and upon compliance with some of their terms. The side agreement thus provided as follows: Provided the Franchisor [(defined as Cash Bazaar)] has paid in full the amounts owing to [Express Australia] for the purchase of the businesses below and providing the Franchisor is not in breach of any of the agreements listed below then: [Express Australia] will pay the Franchisor an income of $2,700 per week for 5 years, starting from the 5th February, 2016 or until the gross income of $2,700 in total is generated from franchises granted and operating under the following agreements. This amount is to be calculated as one payment for all agreements and not to be calculated as individual agreements; 1. Express Property Maintenance Inner Melbourne 2. Express Property Maintenance Southern Melbourne 3. Express Pick up & Delivery and Removals & Freight Inner Melbourne 4. Express Pick up & Delivery and Removals & Freight Southern Melbourne 5. Express Appliance Rentals Inner Melbourne 6. Express Appliance Rentals Southern Melbourne 7. Express Building and Pest Inspections Inner Melbourne 8. Express Building and Pest Inspections Southern Melbourne 9. Express Car Cleaning Inner Melbourne 10. Express Car Cleaning Southern Melbourne The above Income Guarantee is subject to and conditional upon the following: a. The Regional Master Franchisor follows the Express system completely including taking part in promotional activities b. The Regional Master Franchisor endeavours to complete and submit reports weekly c. The Regional Master Franchisor does not unreasonably refuse any Franchisee entering into their territory d. The Franchisees sold in and under this agreement do not cease to operate during the payment term. The RMF will make all reasonable efforts to ensure franchisees do not cease to operate. e. The Regional Master Franchisor will make reasonable efforts to promote and advertise for prospective franchisees f. The Head Franchisor will pay the Regional Master Franchisor at the end of each calendar month and will be issued with a statement from accounts, subject to the terms of the income guarantee being satisfied 127 I note that conditions "a." to "e." above refer to purported obligations on Cash Bazaar which are again inconsistent with Mr. Patel's "sit back and do nothing" concept. Thus, there are conditions which purportedly obliged Cash Bazaar to follow the "Express system"; to take part in promotional activities; to complete and submit weekly reports; to make all reasonable efforts to ensure franchisees did not cease to operate; and to make reasonable efforts to promote and advertise for prospective franchisees. 128 In closing, Ms. Sparke, Q.C. and Mr. Callanan both agreed that the side agreement did not create any binding contractual relations between the parties. I respectfully agree with that conclusion. The legal efficacy of the side agreement turned upon the existence of valid RMF agreements. Consequently, Express Australia was never liable to make any payments to Cash Bazaar of $2,700 per week. All of the payments it in fact made were voluntary in nature. Ms. Sparke, Q.C. was of the view that this did not matter as her case against Mr. Arcon, Ms. Mansfield and Scutts Junior was not based in contract. Mr. Callanan submitted that I should treat the RMF agreements and the side agreement as evidence of the mutual intent of the parties as at the date each was signed, save for the issue as to who were the proper counterparties to the RMF agreements and save as to the legal efficacy of all of these agreements. As a factual proposition, that must be so. I shall otherwise address below the legal consequences of the mutual mistake of law the parties had made. 129 It is common ground that, following the signing of the RMF agreements and the side agreement, no franchises were sold within any of Cash Bazaar's territories. It is also common ground that none of the RMFs had any existing franchisees when the agreements were signed. As a result, all of the income paid to Cash Bazaar was paid to it by Express Australia purportedly pursuant to the side agreement. There was no evidence before me that it was impossible to sell franchises for the services purportedly acquired by Cash Bazaar in the territories in question. There was, for example, contemporaneous evidence that 63 franchises were sold in Victoria between 1 February 2016 and 30 June 2017. 130 I note that some relatively minor attempts were made to sell franchises by both Express Australia and by Mr. Patel. For example, Mr. Patel wrote to Mr. Arcon by email on 7 April 2016 requesting to swap an Appliance Rental RMF for another RMF. Mr. Arcon said he would look into it. Mr. Patel assisted in trying to find an office for Express Australia in Melbourne. He also "offered to help with the sales effort" in his email of 6 February 2017 even though he maintained he was not obliged to do so, and he said that he was never asked to write any reports to Express Australia. In cross-examination, Mr. Patel said that on one occasion he ran his "own promotion". He said that he distributed a "flyer" to all of his friends, relatives and acquaintances. He said that he took part in "promotional activities" of his own motion, even though he maintained that his investment was a "sit back and do nothing business opportunity". Nonetheless, all of this evidence appears to contradict his "sit back and do nothing" claims. In any event, no franchises were ever sold. 131 As for Express Australia, in an email sent by Ms. Mansfield to Mr. Patel on 16 February 2016, she said that Express Australia was working on moving a few franchises into his territories. In another email sent on 22 March 2016 by a Ms. Cavill Stone of Express Australia to Ms. Mansfield (and another), an advertising campaign for Mr. Patel was outlined. Ms. Stone wrote: In order to support [Mr. Patel] and bring in some new Franchisees to his area, [Mr. Arcon] has given us a budget of $10,000 to work with. I've organised a radio campaign on Melbourne's NOVA radio station. Please see the below script I've prepared and would like to have produced. Please note - this will be read by a male instead of our usual female voice as I want this ad to have a more 'blokey' feel. "Sick of slaving away day in day out, making someone else's pockets bigger? Express Business Group have franchises available from as little as $5,950+gst ranging from property maintenance to pickup and delivery. So whether you want to be a car cleaner or a building and pest inspector - we have a service to suit you and your family. Express provides all initial equipment and training and even ongoing support. So what are you waiting for! There has never been a better time to become your own boss! Call 1300 EXPRESS today. That's 1300 397 737!" 132 It is unclear whether this "radio campaign" ever took place. However, the email is consistent with Mr. Patel's understanding that Express Australia would use its expertise to find franchisees for his areas. However, I do not think that Express Australia promised to do everything, so that Mr. Patel could "sit back and do nothing" for the reasons I have already given. Mr. Arcon also exhibited to his first affidavit certain invoices from SEEK Business Pty Ltd said to be for marketing services supplied to "Express Mobile Services" in 2016. He also exhibited a spreadsheet of over 400 "leads" in Victoria in early 2016 which had been generated by advertising. I do not know whether any of this activity related to Cash Bazaar's RMFs and place no weight on it, other than to observe that Express Australia, in general terms, did take some steps to sell franchises in Victoria. 133 Mr. Arcon gave evidence that written "notices of breach" of Cash Bazaar's obligations under each RMF agreement were sent to Cash Bazaar in June and July 2017 by Express Australia. By letter dated 7 August 2017, Express Australia gave Cash Bazaar a notice that it had terminated the RMF agreement for "Express Property Maintenance Inner Melbourne" (no other termination notices were in evidence). Mr. Patel denied receiving any of these notices. For the reasons I have given, there was, in any event, nothing for Express Australia to terminate, and the notice of termination had no legal effect.

The purchase of shares in Express Victoria 134 Mr. Patel made a second investment with Express Australia when he purchased shares in Express Victoria. It is not clear when this took place, but it is likely to have been sometime in April 2016. In making this investment, Mr. Patel alleges he relied upon representations he says were made to him: (a) by Scutts Junior and Mr. Arcon in March 2016 at a meeting in Loganholme; (b) by Mr. Arcon and Ms. Mansfield on 20 March 2016 at a meeting at the Langham Hotel in Melbourne; (c) by Mr. Arcon at a café in Kew, Melbourne, which, according to him, took place "on or about 24 March 2016"; and which were otherwise contained in an Express Australia booklet describing the proposal to set up a Victorian MMF (the "Shareholder Proposal Booklet"). 135 The evidence is that Express Australia intended to set up a separate MMF for each state which would in turn hold and use exclusively the Express Intellectual Property rights for all services and products for each respective state. Each MMF sat between the SMFs and Express Australia, or would replace SMFs. It was Mr. Arcon's evidence that the plan for Victoria was to use the MMF to better resource the needs of that state's franchisees.

The meeting in Loganholme and the Shareholder Proposal Booklet 136 Mr. Patel was introduced to this new investment by Mr. Arcon and Scutts Junior in early March 2016 at a meeting held in Loganholme. He claimed that Mr. Arcon had said to him: You have an opportunity to invest in a great new business as part of the Express Group and the new entity in Victoria will pay guaranteed income and in the event that it was unable to pay, Express would make up the guaranteed payments. (Errors in original.) 137 Mr. Patel then gave evidence that Scutts Junior took him through the Shareholder Proposal Booklet and allegedly said: … if you purchase a 1.5% share in [an] MMF, for close to a $100,000 investment, you will be making a guaranteed return of $346,000 in addition to getting 2% per month guaranteed minimum payments. 138 Mr. Patel was told that there would be a meeting to discuss the proposed MMF business and that he would be invited to it. 139 Mr. Arcon did not dispute that he made the representation attributed to him, save that he denied ever saying that Express Australia would make up any guaranteed payments. As I understood it, Scutts Junior effectively admitted that he made the representation attributed to him and accepted that he had taken Mr. Patel through the Shareholder Proposal Booklet. 140 Mr. Patel at some point was then given both the Shareholder Proposal Booklet and financial projections for the Victorian MMF company (which was eventually incorporated as Express Victoria) over two years. Both documents were given to him, at the latest, at the meeting at the Langham Hotel. The financial projections forecast for the first 12 months of trading total sales income of $4,993,100, a trading profit of $2,145,475, franchise fee income of $1,229,267 and a total net profit of $2,361,252. For the second year, the financial projections forecast total sales income of $7,416,950, a trading profit of $4,131,950, franchise fee income of $2,642,725 and a total net profit of $6,960,875. However, nearly every page of these projections included the following disclaimer: Standard Disclaimer: these figures have been produced on current and past knowledge please do not rely on them solely. 141 The Shareholder Proposal Booklet outlined a proposal for a small group of investors to purchase the shares in Express Victoria and to enter into a shareholders agreement which, amongst other things, would include a promise of guaranteed income to be paid over two years, an option for Express Victoria to buy back the shares after a defined period, and a promise by each shareholder to use their best endeavours to ensure the success of Express Victoria. In more detail, the proposal was described in the Shareholder Proposal Booklet as follows: a) The Company will comprise of 100% ownership 'A' Class Shareholders to a maximum of twenty (20) Shareholders c) The company will control and profit from all of Express's activities throughout the Victoria MMF d) The group will talk (Skype etc) on a regular basis (monthly) to discuss and brainstorm ideas on the development and general direction of the group e) Each shareholder will be available to spend a minimum of two (2) hours in every month to provide brain storming and support to the company f) Shareholders will have the option to travel to Victoria to assist with growth g) A number of internal positions are available and will most likely be filled by Shareholders (Errors in original.) 142 The value of the business in Victoria was described in the following way: When Express offered shares in Express Business Australia in 2012 the company was valued by the accountants at $5,400,000 this was based on the then current turnover, profit and having only nine services. The population of a Victoria MMF is approximately 5 million, about a fifth of the Australian population. We currently have 36 divisions (compared to just 9 then) and have dramatically increased turnover since the original Australian offering. On the returns shown the valuation could well have been $10+ million. However we have placed an advised valuation of $5,000,000 on Victoria MMF's and believe this is heavily undervalued. (Errors in original.) 143 The Shareholder Proposal Booklet explained that the following three different investments were on offer: Express Business Victoria Multi Master is offering 3 investment levels. As an incentive to reduce the number of shareholders, a discount is offered on larger holdings as follows; Option 1) 0.75% Share Holding = $59,950 Option 2) 1.5% Share Holding = $99,950 (Valued at $119,900 saving of $19,950) Option 3) 3% Share Holding = $189,950 (Valued at $239,800 saving of $59,850) (Errors and emphasis in original.) 144 The Shareholder Proposal Booklet described the promise of guaranteed income in the following way: This investment comes with a guaranteed minimum income for the first 2 years designed to cover the borrowing costs. For every 1.5% Share Holding a guaranteed minimum income payment of $1,200 per month will be paid for example; 0.75% Share Holding - guaranteed minimum income of $600 per month This is a minimum 12% pa 1.5%, Share Holding - guaranteed minimum income of $l,200 per month This is a minimum 14% pa return 3% Share Holding - guaranteed minimum income of $2,500 per month This is a minimum 15% pa return (Errors and emphasis in original.) 145 In cross-examination, Mr. Arcon said that some of the purchase price payable for shares in Express Victoria was intended to fund the payment of guaranteed income to shareholders, but he could not say how much was earmarked for this use. However, he also claimed that the payment of guaranteed income was also tied to Express Victoria meeting the revenue projections set out in the Shareholder Proposal Booklet. I have no reason to doubt this evidence. 146 As already mentioned, the proposal also included a buy-back option for Express Victoria to purchase the shares at their original cost after a period of two years. This was described in the Shareholder Proposal Booklet as follows: Express will have the option to re-purchase or buy-back the shares at their original cost after a period of 24 months from the date the shares were purchased. The shareholder may either accept the buy-back of the shares, ask for the shares to be resold at a profit or continue to receive the benefit of owning the shares. 147 The benefits of the proposal were summarised in the Booklet as follows: • Increased exposure will lead to a huge demand. Shareholders will share in the overall growth and profits of Express Business Victoria Multi Master Franchise. • Shareholders will be able to contribute to the growth of the company as little or as much as they wish but have no official time commitment other than two hours per month. Visits to the Victoria regions will be available to all Shareholders. • A number of internal positions will become available including a General Manager, customer and franchise liaison and trainers, these will be offered where possible and appropriate to Shareholders. • The investment carries two unusual guarantees as a measure of the commitment and determination of the current owners: 1) A guaranteed monthly minimum return to cover any borrowing costs; and 2) A 24-month buy-back option. Whereby if, for whatever reason, you wish to move on you can offer your shares back to Express for the amount you originally paid (returning all of your original investment) or instruct Express to on-sell your shares for a profit. (Errors in original.) 148 The minimum two hour per month commitment described above is contained in the Shareholders Agreement described below. 149 Further income projections for the first and second years were summarised in the Shareholder Proposal Booklet and the "potential shareholder returns" were set out as follows: Potential Shareholder returns, including 2 year profits and sale of the business: 0.75% Shareholding investment of $59,950 - return of $173,018 = 288% 1.5% Shareholding investment of $99,950 - return of $346,036 = 346% 3% Shareholding investment of $189,950 - return of $692,073 = 364% (Emphasis in original.) 150 Again, these figures were accompanied by a disclaimer which was in the following form: Standard Disclaimer: These figures have been produced on current and past knowledge and include a return for the sale of the business after two years. This may take 2-6 years to achieve. Please do not rely on them solely when making your decision to proceed. 151 The further income projections were stated to be based on "past achievements" including, it was said, the grant of more than 850 franchises and/or RMFs and SMFs over the preceding 12 months. The projections for Express Victoria predicted the sale in the first 12 months of trading of 300 franchises in Victoria, 30 RMFs and eight "Divisional Master Franchise[s]". They also predicted the payment per week of $87.50 in royalties by each franchisee or total royalties for the first 12 months of $1,365,000. In the second 12-month period, Express Victoria was forecast to sell 500 franchises, 50 RMFs and 16 "Divisional Master Franchise[s]" and to receive royalty income totalling $2,808,000. All of these figures had been extrapolated from the more detailed financial projections (referred to earlier), which also itemised the projected costs of this business in some detail. 152 Under the heading "What to do Next" in the Shareholder Proposal Booklet, investors were encouraged not to rush into making any decision and to do their own research. The following appeared: This type of investment opportunity is rarely available and could be the move to set you up for life. If you would like to proceed and take full advantage of this opportunity, we strongly recommend you do the following: • Reserve your shareholding on the 'Expression of Interest' form enclosed whilst considering the proposal • Get your own independent advice • Pay your 100% refundable holding deposit of $2,500 within 3 days of presentation (we have very limited shares and very high demand) • Attend the first group meeting of shareholders • Read, understand and OK the paperwork • Pay the balance of your investment on or before the due date • Attend the first shareholders meeting with all Express Business Victoria Multi Master Franchise • Begin the journey of success with Express Business Victoria Please do not rush into making this decision. Although our targets are clear, if the time frame doesn't suit you or allow enough time to do your own research we would prefer that you don't proceed. (Errors in original.) 153 Ms. Sparke, Q.C. cross-examined Mr. Arcon extensively about the viability of the MMF proposal. He conceded that like the RMF agreements and the side agreement, part of the purchase price for the shares in Express Victoria funded the payment of guaranteed income back to shareholders. Other than this, Mr. Arcon unwaveringly refused to accept that the Express Victoria business was from inception uncommercial or that it was destined to run out of money and default on its promises to pay guaranteed income. Whilst accepting that the business in Victoria had not been performing well, Mr. Arcon was of the belief in March 2016 that franchise sales would meet the targets or projections set out in the Shareholder Proposal Booklet. 154 Part of the difficulty for the Court in considering the applicants' attack on the figures disclosed in the Shareholder Proposal Booklet is that during the cross-examination of Mr. Arcon, propositions were put to him without sufficient supporting objective evidence for them. The only independent financial evidence before the Court concerning the creditworthiness of Express Australia were its 2015 accounts. Answers were then give by Mr. Arcon, but again without the evidence to support them. Assertion was thus met with counter-assertion. The transcript records, as an example of this, the following exchanges concerning the projection, set out in the Shareholder Proposal Booklet, that Express Victoria would in the first 12 months of trading earn $2,361,250: Mr Arcon, I suggest to you that the figures that were available to Express as at June 2015, which show a net profit of 1.3 million across the whole of Australia, does not provide any good foundation for a suggestion that there's a projected income of 2.3 odd million dollars just for Victoria?---You're suggesting that to me? I am suggesting to that, what do you say about that?---Well, I know that the income was 15 grand a week, so times that it's about 800 grand a year in franchise fees, and I know that I could sell, myself, at least 300 franchises so why would I disagree with those figures. If I was in Victoria for a year I would sell 300, that's less than one a day. Mr Arcon, you weren't in Victoria for a year - - -?---I know, unfortunately. - - - and you weren't expecting - and you weren't expecting to be in Victoria for a year, were you?---No. The business model that you had to that point in time relied very heavily on you being the salesman?---Incorrect. Well, your affidavit talks about how many franchises you personally sell?---In 2013 and stuff, yes. Yes, and - - -?---After that we had Darryl Doherty, James Villiers, Dave Durkon, Ross Scutts - - - All right?---All those people were capable, and I can show you figures of them doing over - - - All right. So are you saying to this court, if I had been in Victoria I would have sold- - -?---Yes. It's just - it's irrelevant, isn't it?---Okay. Sorry, if Darryl Doherty had been in Victoria he would have sold 300. Yes?---If James Villiers was in Victoria he would have sold 300. Right. Mr Arcon - - -?---Yes. - - - the proposal was that there be an office set up, ultimately Mr [Eilermann] was the person in charge of that office?---Unfortunately. And that he would engage whatever sales techniques he was going to use to sell franchises in Victoria?---That was the idea; correct. And you had no foundation to say to the room that there's a proper basis for there would be income in Victoria of $2.3 million in the first 12 months?---Why not? 155 None of this really assisted the Court very much. Nonetheless, the applicants never really demonstrated that the detailed figures set out in the Shareholder Proposal Booklet were incorrect or exaggerated. For example, the Shareholder Proposal Booklet projected, as already mentioned, sales of 300 franchises in the first 12 months. Other than inferring that this never happened, the accuracy or reasonableness of this figure as at March 2016 was never demonstrated to be inaccurate or unreasonable. The same may be said about the other projections contained in the Shareholder Proposal Booklet. The Court would have been assisted by independent expert evidence concerning the adequacy and accuracy of the numbers contained in the Shareholder Proposal Booklet. But none was called. Rather, the state of the evidence before me was thus what was contained in the Shareholder Proposal Booklet, the uncorroborated claims of Messrs. Patel and Arcon, the 2015 accounts and the fact that after a year the business failed. Whether that failure was inevitable because the figures set out in the Shareholder Proposal Booklet were unreasonably optimistic was not shown, one way or the other.

The meeting at the Langham Hotel 156 Mr. Patel attended a meeting at the Langham Hotel on 20 March 2016 with other proposed investors, including Mr. Dang. He said that both Mr. Arcon and Ms. Mansfield gave presentations and that Mr. Arcon went through the proposal set out in the Shareholder Proposal Booklet (he never alleged that Scutts Senior made any representations at this meeting). He claimed in his first affidavit: (a) that Mr. Arcon told the attendees that shareholders could "surrender" their shares in the Victorian MMF entity after two years and have their monetary investment returned to them; (b) that Mr. Arcon said to the attendees that if they invested in the proposed MMF business they would "get guaranteed payments every month" and their investment would "grow significantly"; (c) that Mr. Arcon said that he and Scutts Senior had always paid the guaranteed amounts and would pay the guaranteed payments for the Victorian MMF entity as well; and (d) that Mr. Arcon and Scutts Senior were founding this business and would be the directors. 157 Mr. Arcon gave evidence that he was the only presenter and that Ms. Mansfield simply handed out copies of the Shareholder Proposal Booklet. He said that he would not have told attendees with certitude that their shares would be bought back after two years as the Shareholder Proposal Booklet expressly stated that this option was to be given to "Express". He denied that he said that the investment would grow significantly, and said he would have stuck to the figures set out in the Shareholder Proposal Booklet. He also denied that he said Express Australia would ever pay the guaranteed payments as these were to be made by Express Victoria or that he and Scutts Senior would be the directors. He said he told attendees he would help but that they as shareholders would run Express Victoria. 158 During his cross-examination, Mr. Arcon sought to dilute the absolute nature of the offers or invitations to pay guaranteed income and to buy back shares, by claiming that it was understood by investors that such promises would only ever be met "if" Express Victoria were to meet the financial projections contained in the Shareholder Proposal Booklet. As a pragmatic expression about that company's economic capacity to perform its promises, that may be so. But the Shareholder Proposal Booklet made it clear to investors that the offer to pay guaranteed income and to buy back shares would not be in any way conditional upon Express Victoria's future financial performance. I reject the attempt to dilute the legally unconditional nature of the offers or invitations contained in the Shareholder Proposal Booklet. 159 Ms. Mansfield admitted that she attended the meeting at the Langham Hotel, but denied that she had participated in the presentation given to the proposed investors. Indeed, she denied having any prior knowledge of the content of the proposed investment as described in the Shareholder Proposal Booklet. Her evidence, which emerged in cross-examination, was that she had been in Sydney the day before to attend the "Sydney Franchise Expo". The reason for her attendance at this "Expo" was to "bring down banners, balloons, set up, pack down". She was due to drive back to Brisbane with her husband at the end of the "Expo". However, she recalled that another Express Australia employee, a Ms. Stanhope, was due to attend the meeting at the Langham Hotel in Melbourne, but at the last minute could not go; Ms. Mansfield was her replacement. Her job in Melbourne, she said, was to print out and bind all the documents including, I infer, the Shareholder Proposal Booklet at a shop called "Officeworks". This took five hours. She had never seen the booklet before. 160 The only available contemporaneous evidence supports Ms. Mansfield's testimony. In an email entitled "Melbourne Share Stuff" sent by Ms. Mansfield to Ms. Stanhope on 18 March 2016, Ms. Mansfield wrote: Hey Zoe, Can you email me all the thing [Mr. Arcon] needs to have for Sunday in Melbourne. I will get them all printed. (Errors in original.) 161 Ms. Stanhope replied: Here are the projections and the cover, I'll talk you through how to bind them if you don't know. 162 Given this evidence, I accept that Ms. Mansfield attended the meeting at the last minute and had no prior knowledge of the MMF proposal. I also accept that Ms. Mansfield did not participate in the presentation and did not make the representations alleged by Mr. Patel. I also reject Mr. Dang's evidence that Ms. Mansfield "initiated" the meeting if that word was intended to convey anything more than an introductory welcome. 163 Critically, at the meeting, Mr. Patel was not yet persuaded to purchase any shares in Express Victoria. In examination in chief the following exchange took place: MS SPARKE: I will move on. The - it then goes on to say: Based on Express's previous performance and increased infrastructure, everyone in the room agreed that the projected returns could be achieved in the coming years. I will ask you firstly, did you attend this occasion on 20 March at what's described as the Langdon Hotel, but which I think is intended to be the Langham Hotel?---Yes, I did attend that presentation. Is that a correct statement of the discussion of what went on? That based on Express's previous performance and increased infrastructure, everyone in the room agreed the projected returns could be achieved?---I can't say if everyone agreed, but I wasn't convinced. HIS HONOUR: You weren't convinced, sorry?---No, I wasn't. 164 When then asked what convinced Mr. Patel to invest in Express Victoria, he gave the following answer: Guaranteed amount, duration of guaranteed payment and the percentage of shareholding. They all significantly increased.

The QPO meeting 165 The increases referred to above by Mr. Patel relate to a different deal for the purchase of shares in Express Victoria. That deal was negotiated with Mr. Arcon after the meeting at the Langham Hotel. That meeting took place on 1 April 2016 at the QPO café in Kew (the "QPO meeting"). That date is derived from the following exchange of texts between Messrs. Patel and Arcon on 31 March 2016: Mr. Arcon: Can I meet you near your house tomorrow at 2pm instead? Mr. Patel: That would be better. How about QPO at Kew junction? Mr. Arcon: OK great. What's the address 166 At the QPO meeting (or perhaps just prior to it), Mr. Patel negotiated significant amendments to the deal proposed in the Shareholder Proposal Booklet. He said he wanted a much longer period of guaranteed payments in return for an investment of $300,000. Mr. Arcon proposed 48 months, which was double the period of time proposed in the Shareholder Proposal Booklet. This was acceptable to Mr. Patel. He was also able to increase his percentage stake in Express Victoria. Initially Mr. Patel wanted a 6% stake. This was increased to 6.5% without any increase in the total price he was willing to pay. Mr. Patel finally claimed that Mr. Arcon said that Express Australia would guarantee the making of payments by Express Victoria. 167 Other than the last representation, Mr. Arcon did not directly dispute Mr. Patel's recollection of the QPO meeting. He subsequently claimed that Mr. Patel had also negotiated parts of this deal earlier with Scutts Junior. Scutts Junior denied this and Mr. Patel made no claim that this had occurred. There was also some confusion before me about the date of the QPO meeting. That is not surprising given the fallibility of the human capacity for recollection. On the balance of probabilities, I accept that Mr. Patel did not seriously negotiate with Scutts Junior following the Langham Hotel meeting. It is possible that between that meeting and the QPO meeting, Scutts Junior may have discussed elements of the deal to be struck with Mr. Patel with Mr. Arcon, who, it would appear, was overseas for part of this time. But it matters not. Mr. Arcon agreed that he had a meeting with Mr. Patel at the QPO café and it seemed to be accepted that the new deal was finalised then and there. I otherwise also note that Mr. Patel did not claim that representations about capital growth were made at the QPO meeting. 168 I do not think that Mr. Patel relied upon the representations made about guaranteed income and about the returns that would be made as set out in the Shareholder Proposal Booklet in deciding to buy shares in Express Victoria. Having regard to what he said in his examination in chief, Mr. Patel was not satisfied with these numbers. Instead, he struck a different and better deal. He did this, I infer, as a way of mitigating the risk of financial failure. This new deal was not a mere iteration or minor transformation from the proposal set out in the Shareholder Proposal Booklet. It was strikingly different in critical aspects. Mr. Patel was able to secure a 100% increase in the amount of guaranteed income he would be paid. None of the figures said to have been relied upon in the Shareholder Proposal Booklet relate to that type of return. He also bargained a different price per share when it was agreed that his stake could increase to 6.5%. I accept that the representations set out in the Shareholder Proposal Booklet were used by Mr. Patel as a basis to make his own deal with Mr. Arcon. He surmised from options 1, 2 and 3 (as described above) that if one increased one's investment, one could increase the number of shares that could be acquired. That was the "pattern" (to use his language) he could see, although it is hardly a surprising pattern. Nonetheless, he used it to "construct" (again to use his language) the proposal he put to Mr. Arcon at the QPO meeting. As he said in cross-examination: So I relied on this construct - - - To put a proposal to [Mr] Arcon at the [QPO] meeting?---Correct. Okay?---This was the starting construct. 169 The "starting construct" can be discerned from the proposal to pay $5,000 per month for 48 months, which Mr. Patel negotiated at the QPO meeting (described above). The Shareholder Proposal Booklet referred to proposals to pay $600 per month, $1,200 per month and $2,500 per month depending on the number of shares purchased. The last proposal required the acquisition of a 3% shareholding in Express Victoria. I infer that Mr. Arcon proposed to Mr. Patel a 6% stake in return for the payment of $300,000 and for that purpose doubled the amount of guaranteed income. But thereafter the nexus with the figures described in the Shareholder Proposal Booklet breaks down. Mr. Patel did not want a 6% stake, but a 6.5% stake. He also wanted four, and not two, years of guaranteed income. No change, however, was made to the $5,000 figure. 170 The answers given by Mr. Patel in his examination in chief about this issue differed from the evidence given by him in his first affidavit. Therein, he deposed that he made his investment in Express Victoria on 24 March 2016 in reliance upon the representations made to him in the Shareholder Proposal Booklet, and upon the oral representations made to him by Scutts Senior, Scutts Junior, Ms. Mansfield and Mr. Arcon. But save for the negotiations which took place during the QPO meeting, Mr. Patel's evidence before me was that he was not convinced that the "projected returns" could be achieved. Those "returns" are the ones set out in the Shareholder Proposal Booklet, as explained to Mr. Patel by Scutts Junior and Mr. Arcon. Rather, and instead, Mr. Patel relied upon the content of the deal he negotiated at the QPO meeting where he said that the "numbers" had been worked out, and upon the proposal advanced there by Mr. Arcon to double his guaranteed payments. As he said during cross-examination: And within a week, you say, in 1 April - so the QPS - QPO in Kew you say happened on about 24 March. In your affidavit you say that?---Yes. And by 1 April you had signed the shareholder's agreement?---That's correct. And your decision to do so flowed from the meeting you had with Mr Arcon at the QPO in Kew?---That's correct. (Emphasis added.) 171 By so concluding, I do not deny that Mr. Patel was introduced to the MMF proposal by the representations made to him by Scutts Junior and by Mr. Arcon at Loganholme and at the Langham Hotel, and by the contents of the Shareholder Proposal Booklet. But those representations and that content did not induce Mr. Patel to buy shares in Express Victoria. In and of themselves, they persuaded Mr. Patel not to purchase shares on the basis of any of the three proposals contained in the Shareholder Proposal Booklet. Instead, they merely inspired the very different arrangement negotiated at the QPO meeting. And that is so, even though I am prepared to accept that the Shareholders Agreement signed by Mr. Patel was probably the same (save for the promises to pay guaranteed income and the size of Cash Bazaar's stake) as those entered into by the other shareholders in Express Victoria. But that commonality of terms was not an activating cause of the decision to invest. Rather, the cause of the decision to invest in the MMF proposal was, as Mr. Patel said in cross-examination, the quantum of the guaranteed income, the period in which such income would be paid and the size of his stake in Express Victoria, each being matters that were negotiated at the QPO meeting.

The terms of the Shareholders Agreement 172 Cash Bazaar ultimately acquired 650 shares in Express Victoria for $300,000. It did this sometime after the QPO meeting. Cash Bazaar and Express Victoria also entered into the Shareholders Agreement. It contained terms that did not permit Cash Bazaar, as the shareholder, to "sit back and do nothing". The agreement included the following two recitals: … C. [Express Victoria] has the rights to all existing franchised and company run units in the region. [Express Victoria] has the right to use the Express Business Group Image and Express Business Group System in any way chooses to promote and grow the Express Business Group business including the right to grant Franchises and Master Franchises third parties to operate and conduct business utilising Express Business Group Image and Express Business Group System and the Marks around Victoria, Australia. D. The Shareholder wishes to take advantage of this intellectual property and other Express Business Group systems and tradenames and to purchase Shares in [Express Victoria]. … 173 Under the terms of the Shareholders Agreement, each shareholder agreed to use his or her best endeavours to ensure that Express Victoria successfully conducted its business; to make or approve decisions in good faith; to be just and faithful to other shareholders; and to give a minimum of two hours of each shareholder's time per month to assist in the growth and development of the company. Thus, under the heading "Commitment to the Company and Business", cl. 3 of the Shareholders Agreement relevantly provided: 3.1 Each Shareholder must: (a) co-operate and use the Shareholder's best endeavours to ensure that the Company successfully conducts the Business; … (d) make approvals or decisions that are required of the Shareholder in good faith and in the best interests of the Company and the conduct of the business as a commercial venture. … 3.7 Each shareholder or representative of each Shareholder will give [Express Victoria] a minimum of two hours of their time each month to assist in the growth and development of the Company. 174 The term relating to the buy-back of shares did not give that right to Express Victoria, perhaps contrary to the Shareholder Proposal Booklet, but rather to each shareholder. It provided that after 24 months from the date of the agreement, a shareholder could elect either to offer the shares back to Express Victoria or to have the shares sold to the other shareholders. In Cash Bazaar's case, that period was amended to 48 months. 175 The promise to pay guaranteed income was in the following form (at cl. 11.1): [Express Victoria] will guarantee a minimum payment is paid to the shareholder for the first 24 48 months of the amount stated in Item 3 of Schedule one. Such payments to commence on the last business day of the month 14 days after the date herein. 176 Item 3 of Sch. 1 identified the amount to be paid as $5,000 per month. 177 However, the promise was potentially qualified by cl. 11.2 which is in the following terms: At the end of each calendar quarter or half year, as agreed by the Shareholders, Express Business Group MMF Victoria will present a Profit and Loss statement to the Shareholders of the Company and make any further payment required being the positive difference between the guaranteed minimum repayment and the actual profit dividend determined by the Board. Any negative difference will be absorbed by Express Business Group Australia. 178 This clause, on one view, contradicted the recollection of both Messrs. Patel and Arcon. On its face, it appears to suggest that Express Australia had a secondary liability to make the guaranteed payments where Express Victoria lacked sufficient profits to meet its commitments. However, Express Australia was not a party to the Shareholders Agreement. 179 Mr. Patel gave evidence that he did 18 hours of work for Express Victoria. He said he offered to help out, but the offer was never taken up.

The ceasing of the payments under the side agreement and the Shareholders Agreement 180 As I have already mentioned, in early 2017 the payments ceased under both the side agreement and the Shareholders Agreement. It is not entirely clear why this occurred. It would appear that some franchises (unrelated to the applicants) have continued under a different trading name. Others have made losses like Cash Bazaar. As already mentioned, it is also unclear to me why no franchises were sold in any of the territories covered by the RMFs held by Cash Bazaar. Certainly, save in the very limited way described above, Mr. Patel did nothing to sell franchises. Mr. Arcon, who gave evidence that he was mostly travelling, and was often overseas trying to expand the Express business, also did very little to sell any franchises in Cash Bazaar's territories. In his view, that was a matter for Mr. Patel. 181 Express Victoria, as an MMF, did have rights to income from existing franchisees (which operated under various RMFs which, in turn, operated under various SMFs where applicable). But it remained unclear to me why Express Victoria ceased to make the payments of $5,000 per month. It raised about $900,000 from the issue of shares to investors, like Cash Bazaar. But it was unclear how much of this money was recycled, as it were, to fund the making of the guaranteed payments. I infer that the money ran out due to a range of factors, including probable mismanagement, a lack of support for Express Victoria and its franchisors and franchisees, possible undercapitalisation, the appointment of unsuitable franchisees, and unexpected failure in the Victorian market. Express Victoria, in any event, became insolvent and remains deregistered. 182 There is no contemporaneous evidence before me that Mr. Patel was concerned about the lack of sales in Cash Bazaar's RMF territories until an email he sent in February 2017 to Mr. Arcon. That email does evidence both a willingness on the part of Mr. Patel to help and the fact that over "the past few months", prior to February 2017, Mr. Patel had raised the absence of sales with Express Australia. I infer that initially he was not too concerned because he was receiving the guaranteed income. Under the side agreement, Mr. Patel was due to receive $702,000 over five years. Under the Shareholders Agreement, he was due to receive $240,000 over four years. Doubtless, Mr. Patel became very concerned when Express Australia and Express Victoria stopped making payments. 183 I turn now to consider a series of discrete factual issues.

Express Australia's alleged "practice" 184 As previously mentioned, Mr. Dang was called by the applicants to give evidence. He had acquired a Life Coaching Franchise from Express Australia. He then purchased an SMF which he said came with a promise of guaranteed income. He ultimately became a shareholder in Express Victoria. He said his role was "passive". He alleged that he was told that "the capital will grow as well" and that he would receive guaranteed income. Like Mr. Patel, he stopped receiving the guaranteed income. I was told that this evidence was not being relied upon as tendency evidence for the purposes of s. 97 of the Evidence Act 1995 (Cth.), but rather as evidence of a "practice" said to have been adopted by Express Australia. In other words, it was not being used to corroborate the existence of the representations which Mr. Patel alleged had been made. 185 As I understood it, the alleged "practice" was that Express Australia enticed individuals to purchase RMFs and SMFs with a promise of guaranteed income, which could only ever be funded from the ongoing aggregate purchase prices paid by all investors for each RMF and SMF (and perhaps also each MMF), and that there was no commercial expectation that holders of RMFs and SMFs would otherwise earn substantial money from any other source. Under this "practice", unless more buyers for RMFs and SMFs could be found, the source of funds for the payment of guaranteed income would necessarily run out. This, it was said, explained what happened to Messrs. Patel and Dang. 186 Mr. Dang also gave evidence that Express Australia failed to give him the support he needed to sell franchises to viable individuals. He said his franchisees were "churning and burning very fast". That churning and burning was said to be indicative of a business model that focused only on making sales of franchises, RMFs and SMFs and nothing else. This "practice" was said to demonstrate that Express Australia had no reasonable basis for the promises it gave to induce investment. The "practice", as submitted by Ms. Sparke, Q.C., was in substance yet another "Ponzi" scheme. 187 Mr. Strutton, called by the applicants, also gave evidence of Express Australia's "model". It will be recalled that he was the holder of RMFs and SMFs in Victoria. However, that evidence went no further than to record that Express Australia had commenced to fall behind on payments during 2016. He then gave hearsay evidence that this was because Mr. Arcon "was taking money out of the accounts". He also expressed his opinion that franchise contracts which contained promises to pay guaranteed income "were no good" because "the conditions in order to meet the payments were impossible to meet". I place no weight on Mr. Strutton's opinion; he was not called to give expert evidence and he gave no real basis for why he thought the contracts were "no good". I also place no weight on Mr. Strutton's hearsay evidence about why Express Australia ceased making payments. 188 Mr. Arcon denied the existence of this alleged "practice". He said, in general terms, that franchises on some occasions failed because the relevant franchisee was not suited to the work. Some SMFs and RMFs failed because the franchisor in question was not, in whole or in part, able to sell franchises or to support existing franchisees. In Mr. Patel's case, he said, he had failed to sell a single franchise. He also alleged that when Messrs. Patel and Dang ceased to be paid guaranteed income, they formed an alliance to attack Express Australia. I place no weight on this evidence. 189 I do not think there was sufficiently clear evidence before me to justify a finding that the "practice" alleged by the applicants ever existed. It may be accepted that part of the purchase price for an RMF economically funded some of the guaranteed income promised by Express Australia (or in a relevant case, an SMF franchisor for about the first year). I also accept, however, that in Cash Bazaar's case, it needed only to sell three franchises within each territory to earn $270 per week from royalties for each RMF. In my view, that was neither an impossible nor unreasonable burden. In such circumstances, it was never established that Express Australia's intention or object was to rely upon the purchase prices paid as the only source of income to fund the guaranteed payments. Rather, I find that Express Australia's business model relied upon both the payment of franchise fees and the purchase prices of RMFs to fund the guaranteed payments. I do not accept that under this model, the money to fund guaranteed payments necessarily had to run out at some point. Whether contracting with Express Australia was otherwise ever a sound investment at any time, I cannot say. 190 I have reached my conclusion largely because of the answers given in cross-examination by Mr. Strutton. He gave evidence that he had been a "pretty successful franchisee" and a "successful" RMF and SMF franchisor. From a "best" week, he earned $2,500 to $3,000. He agreed that the return on his investment with Express Australia had been "phenomenal". When asked why some of his underlying franchisees did not stay for very long, he said that they were not "suited to running their own business, they had no idea of running a small business". He also said that some franchisees had also been misled into understanding what sort of business they were acquiring. He agreed that Express Australia had offered a lower cost investment "relative to the other franchises that were available". He accepted that if an SMF franchisor "puts in the effort as a state master" he or she would "generally get some success". Unlike the experience of Mr. Dang, many of his underlying franchisees remained in business for far longer than six weeks. Some lasted more than six months; some around 12 months; one for 18 months; some for many years; and one was said to have lasted five years. Some of his franchisees were still "active" at the date of the trial. I have no reason to doubt the accuracy of the answers Mr. Strutton gave during his cross-examination. They were all made within his field of knowledge as a long-standing Express Australia franchisor. Unlike Messrs. Patel and Arcon, he had no interest in the outcome of the applicants' case. 191 In contrast, Mr. Dang's evidence troubled me. There was an artificial degree of similarity between the language used in his affidavits and the language used by Mr. Patel. My concern was compounded by certain answers given by Mr. Dang when he was being cross-examined about a text message he had sent to Mr. Arcon on 18 January 2018 in which he stated that he had received an offer to give evidence against Express Australia in return for the payment of money. The text was in these terms: Without Prejudice if I were to go against the agreement we had I got contacted by 2 people asking me to be witness in their case against you. One of them also offered to pay me guaranteed 500 dollars a week till case goes and 100K at settlement of the case if I roll over my shares to them I would have taken it. (Errors in original.) 192 Mr. Arcon put to Mr. Dang that Mr. Patel had offered to pay him money to give his evidence. Mr. Dang denied this. Rather, he said: At that point of time I made that up [(i.e. the suggested offer to give evidence in return for the payment of money)] because I needed to pay my medical bills and my payment had stopped. 193 Mr. Dang then agreed that his text was a "fake counter-offer". In other words, Mr. Dang was pretending to threaten to side with those complaining about Express Australia to induce Mr. Arcon to re-commence the making of payments to him. He subsequently confirmed to me that someone had offered to pay him money, but he had declined "that offer". The "offer", I infer was to give evidence against Express Australia in return for money. In these circumstances, I am not prepared to place much, if any, weight on Mr. Dang's evidence. He sent a seriously false text. I therefore find that he is not a reliable witness.

Express Australia's performance 194 I also note that Mr. Arcon led evidence about the success of the Express business and its expansion overseas and then its decline as sales slowed, especially in Victoria. He gave evidence about the rapid growth of Express Australia, which did not appear to be in dispute. He claimed that it was the fastest growing franchise business in Australia. My impression is that, like the South Sea Bubble, Express Australia's collapse was more rapid than its growth. I have not otherwise given much, if any, weight to Mr. Arcon's statements about the accomplishments of Express Australia and the reasons for its demise. They were largely not supported by contemporaneous documents and were not corroborated. I am nonetheless prepared to infer that the failure of the Express Australia business arose from a mix of factors, one of which being that it grew too fast and in a way that was not sufficiently supported by the actual cash flows of the underlying franchise businesses. I infer that Express Australia failed to give necessary support where it was needed and that too many unsuitable individuals became franchisees or SMF or RMF franchisors. In Cash Bazaar's case, its RMFs miscarried because no one was selling any franchises and there was no franchisee income being paid up at all. Payments ceased to be made in accordance with the side agreement because the income flowing up to Express Australia began to weaken increasingly. 195 Illustrative of Mr. Arcon's claims is what he said when giving his evidence in chief. Mr. Arcon, amongst other things, said: So the Express Business Group was founded on the principle of helping everyday average Australians get into business for themselves at a much lower cost than was in the marketplace. This company gave people - sorry, gave thousands of people the opportunity to run their own business and thousands of those people still are. When we had witnesses in the box yesterday, they failed to mention the vast amount of franchisees who left the business and were simply rebranded and continued to operate under their own brand name and failed to give the business the money that they were supposed to under - under contract or under agreement. We also didn't address the fact that, when people do leave the business, there's a termination fee that's applicable. So while it looks as though the franchise fees do diminish from those people, they do pay an additional seven to 12 months fees in advance for ending their contract earlier. From July 10 2010 until we opened the offices in June of 2016, we continually improved the business. We went from having a home office to having a small office in Woodridge in Queensland to renting the second property next door. We then moved to a much larger office right on the side of the Pacific Motorway. We sought to extend our staff and the support to our franchisees in the field and we then continually went through a process of hiring more qualified people to help support the franchisees within our network. Ms Sparke called my business a Ponzi scheme, which - I know she's just doing her job - which was incredibly offensive. Other franchises around the world run a very similar model, from McDonald's to the [Jim's] Group. … The direct debit statistics that have just been handed to you demonstrate that, on 17 December 2014, the company had a regular weekly income without selling a single franchise of $79,918 plus any product sales that came through the business. By 23 March 2015, we were up to $95,000 in weekly income. So, from July 10 2010 from a standing start in just four and half - sorry, three and a half years, the company had grossed $80,000 in weekly income payments. When we moved to the master franchise - sorry, the multi-master franchise system, you will note in those direct debits that the New South Wales company started on a direct debit of $13,719. And by 28 December 2016, a short six months later, had increased that amount to $21,315 a week. More than a 50 per cent increase in the guaranteed weekly payments to our business over a six-month period. In [contrast], unfortunately, Victoria started around the same amount as New South Wales and increased at only to $16,000. During the period of speaking to Mr Rajesh Patel, I was busy setting up businesses around the world and during the negotiations that took place I was overseas, which he was aware of, across New Zealand and the UK. During the period of time when he took on the business and finished training, I think, his second lot of training on 6 April, I was, again, overseas and I did not have any oversight on running the Victorian MMF for the period of time from early July 2016 until I again took up the [reins], as requested by over a hundred shareholders, in 2017, around the same time. Almost exactly a year later. 196 The "direct debit statistics" referred to by Mr. Arcon were a bundle of "Ezidebit Notifications" purporting to show the receipt of monies by "Express Mobile Services", by "Express Business Group Pty Ltd" and by MMFs. It was not clear whether "Express Mobile Services" or "Express Business Group Pty Ltd" were references to the first respondent (whose name was formerly Express Business Group Australia Pty Ltd) or to other companies such as Express Business. In any event, the reliability of these "Ezidebit" documents was never satisfactorily demonstrated. I do not know whether they are or are not accurate. I place no reliance upon them. I also place no reliance upon Mr. Arcon's oral evidence set out above. 197 However, Mr. Arcon also relied upon Express Australia's 2015 accounts. I am prepared to make inferences about those accounts, notwithstanding the complaints made by the parties about their accuracy. Those complaints were never really made out (although I acknowledge that the accounts report on the overall business across Australia, and not just the business in Victoria). The accounts also permit me to infer that during the 2015 financial year, Express Australia was prospering. It had grown from the 2014 year. Current assets, for example, had increased from $194,876 to $1,486,248; and franchise fees had increased from $4,505,909 to $10,989,412. Net assets had increased from -$36,353 in the 2014 year to $683,873. 198 I can also draw inferences, with some caution, from Express Australia's conduct following the purported entry into of its agreements with Mr. Patel: Auswest Timbers Pty Ltd v. Secretary to the Department of Sustainability & Environment [2010] VSC 389 at [48] per Croft J. Express Australia paid $2,700 per week purportedly pursuant to the side agreement from 5 February 2016 until 2 April 2017. A total of $164,700 was paid. Monthly payments of $5,000 were also paid to Cash Bazaar by Express Victoria pursuant to the Shareholders Agreement from April 2016 until 1 January 2017 (in total about $45,000). These payments are evidence that each of Express Australia and Express Victoria had some capacity to make payments to Cash Bazaar. I shall return to this issue.

The alleged "sit back and do nothing" concept 199 I should say something more about the contention that Mr. Patel was told that he could "sit back and do nothing". In cross-examination, Mr. Patel steadfastly refused to agree that any passive role might have been confined to him not being required to establish or sell any franchises within his various RMF territories. In his view, he was not required to undertake any activity at all. There are further contemporaneous documents and events which I have not addressed already and which are not consistent with that contention. In that respect: (a) Mr. Patel attended a training session for holders of RMFs at the offices of Express Australia in Queensland in early March 2016; training would not have been needed, and would not have been attended, if Mr. Patel proposed to "sit back and do nothing"; (b) in an email sent by Mr. Patel to Mr. Arcon on 27 January 2016, Mr. Patel enquired about the following: Kick [off] plan - activity for the first 100 days Support towards opening an Express Sales office in the Melbourne region (c) in an email sent by Mr. Patel to Ms. Mansfield on 3 February 2016, Mr. Patel said that he wanted to speak with his state franchisors and asked to be given their mobile phone numbers; (d) Mr. Patel inspected a number of properties in early 2016 as possible offices for Express Australia in Melbourne; and (e) Mr. Patel offered to help with the sales effort in his region, but, it would appear, Express Australia did nothing in response. 200 In my view, Express Australia marketed RMF, and to a lesser extent MMF, products which gave the investor a degree of choice about their level of engagement. In the case of Mr. Patel, this included Express Australia moving or selling franchises into his territory. A more active franchisor would have a greater chance of "phenomenal" returns if they intended to be as busy as Mr. Strutton was. A less active franchisor might make far more modest returns, but might instead prefer to rely on a promise of guaranteed income. However, the RMF agreements Mr. Patel signed did require a franchisor to undertake some activities; they are the ones prescribed by the terms of each RMF agreement. Those agreements did not permit Mr. Patel to "sit back and do nothing". 201 As previously mentioned, the issue of passivity was pleaded as a misrepresentation once only at [17] of the applicants' further amended statement of claim (this claim did not form part of the three principal defined misrepresentations as described earlier), but that particular ground was never really pressed before me. In any event, it should be rejected on the basis that the applicants contended that passivity meant "sit back and do nothing", and because I have rejected the proposition that such a statement was ever made to Mr. Patel by Mr. Arcon, Scutts Senior or Ms. Mansfield. Nonetheless, I otherwise accept that Mr. Patel was not really interested in being an RMF franchisor. What he really intended to purchase were two promises to be paid money over time. Thus, in the case of the RMFs, he outlaid $372,000 to be paid $702,000 over five years. Even taking into account the time value of money, Mr. Patel was no doubt destined to make a handsome profit. But that destiny depended upon the continued financial viability of Express Australia which was never guaranteed.

Relevant legal principles 202 Whilst conduct which is misleading or deceptive need not always involve the making of a misrepresentation (see Butcher v. Lachlan Elder Realty Pty Ltd (2004) 218 C.L.R. 592), the applicants' case was nonetheless so confined. In particular, the applicants' case against the respondents essentially relied on s. 4 of the A.C.L. It is therefore useful to commence with a high level summary of some applicable basal principles respecting its operation: (a) section 4 will only operate if there has been a representation as to a "future matter". In that respect, as Nicholas J. observed in Samsung Electronics Australia Pty Limited v. LG Electronics Australia Pty Limited [2015] FCA 227; (2015) 113 I.P.R. 11 at [84]: … A "representation with respect to any future matter" for the purposes of s 4 of the ACL and, before it, s 51A of the TPA, is a representation which expressly or by implication makes a prediction, forecast or projection, or otherwise conveys something about what may (or may not) happen in the future. (b) a representation is a statement made by a representor to a representee and relating by way of affirmation, denial, description or otherwise to a matter of fact. The statement may be oral or in writing, or arise by implication from words or conduct: Given v. Pryor (1979) 24 A.L.R. 442 at 446 per Franki J.; Aqua-Marine Marketing Pty Ltd v. Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [78] per Collier J.; (c) whether a representation is with respect to a future matter depends on its proper characterisation in the context in which it is made: Miba Pty Ltd v. Nescor Industries Group Pty Ltd (1996) 141 A.L.R. 525 at 536 per Merkel J.; Sykes v. Reserve Bank of Australia (1998) 88 F.C.R. 511 at 521 per Sundberg J.; and (d) section 4 is an evidentiary provision that does not itself impose any separate liability on the respondent. The operation of s. 4 was helpfully outlined in Australian Competition and Consumer Commission v. ACM Group Limited (No 2) [2018] FCA 1115 by Griffiths J. at [173]: … The effect of s 4(1) of the ACL is that if a person makes a representation with respect to any future matter and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. Furthermore, the effect of s 4(2) of the ACL is that, for the purposes of applying s 4(1), the person is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary. Whether or not there are reasonable grounds for making a representation is a question of fact to be determined as at the date of the making of the representation (see Sykes v Reserve Bank of Australia [(1998)] 88 FCR 511). It is insufficient that the person making the representation had a genuinely held view that the representation was not misleading or deceptive (see Cummings v Lewis (1993) 41 FCR 559).

General observation 203 Before turning to the specific claims against the respondents, I wish to make an observation about the applicants' case. My general impression of the framework of that case was that Cash Bazaar had entered into contracts or purported contracts with two companies, one of which no longer exists, whilst the other, inferentially, has little or no assets to pay any award of damages. Hence, the law of contract was of limited assistance to the applicants in obtaining any remedy. The case against the officers and employees of Express Australia was therefore, in substance, an attempt to use the A.C.L. to pierce the corporate veil of Express Australia and Express Victoria, thereby permitting an attack directly on those officers and employees. By such means, the case based on personal liability became a design to avoid the consequences of limited liability and the confines of the winding up process. In my view, a Court should be slow to permit consumer laws to be used for this purpose. In Concrete Constructions Group Ltd v. Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 F.L.R. 290, Mason P. made the following observations regarding the interplay between contract law and the statutory scheme prohibiting misleading or deceptive conduct (at [167]-[169]) (the references are to former s. 52 of the Trade Practices Act 1974 (Cth.)): I readily accept that it will be comparatively easy to establish that a contracting party is implicitly representing a present intention to perform it according to its tenor. If the other party can establish causation and loss then damages should ensue, although there is usually little point in addressing such a claim because the law of contract will compensate the innocent party for the consequences of non-performance without even having to prove misleading intent from the inception. But when one turns to an alleged implicit representation as to capacity to perform things are not so simple, nor should they be. There are policy reasons for restraint. The law arms the parties to a contract with rights to damages and other forms of relief if breach occurs or is threatened. A complex set of common law, equitable and statutory rights are superimposed on the terms of the bargain chosen by the parties. That bargain may have the simplicity as a contract to sell a loaf of bread or the complexity of a building agreement such as the one in question in this case. Why should the parties be found or presumed to have intended more by what they expressly represented and understood? Of course, s 52 goes beyond intentionally misleading or deceptive conduct, but it does not follow that the innocent party understood or relied upon anything more than the express representations and the usually adequate consequences stemming from breach of them stemming from the law touching the mutually chosen regime, ie contract. 204 At [173], his Honour said: I said earlier that there are policy reasons for restraint in inferring the making of or reliance upon a representation as to capacity to perform express contractual promises. Were it the law that every express contractual promise to pay money carried a present representation as to capacity to perform that thereby engaged s 51A, an entire corpus of law relating to insolvency and insolvent corporate trading could be sidestepped by rendering the agents involved in contractual negotiation and performance personally liable through the combined operation of ss 52, 51A and 82 of the Trade Practices Act. Corporations (and, more importantly, their officers) would, like the present defendants, be liable unless they proved that adequate provision was set aside at the outset to meet all liabilities capable of arising in the due performance of the contract. 205 I respectfully agree with Mason P.'s observations.

Summary of principal observations and conclusions 206 I make the following principal observations and conclusions: (a) first, ordinarily it is erroneous to isolate and mechanically translate contractual promises into equivalent pre-contractual representations so as to ground a misleading or deceptive conduct claim; (b) secondly, an invitation to treat made in the context of pre-contractual negotiations is unlikely, in the usual case, to be a representation as to a future matter. Rather, it is likely to constitute a present invitation; (c) thirdly, there is a sharp distinction between a freestanding and unconditional promise to perform X and a proposal to enter into a contract which, inter alia, contains a promise to perform X. The distinction arises because, in the latter case, the promise to perform X is not unqualified; it is qualified by the other terms of the contract yet to be executed. Such other terms may, for example, impose reciprocal burdens and obligations on the promisee; (d) fourthly, where parties have entered into a written contract which, inter alia, contains a promise to perform X, it is inherently unlikely that the promisor would have made a separate and distinct pre-contractual representation that she, he or it would unconditionally perform X; and (e) fifthly, in a case alleging the making of a promissory representation and where reliance is placed on the operation of s. 4 of the A.C.L., the non-fulfilment of the promissory representation in and of itself is not sufficient to evidence that the representor lacked reasonable grounds as at the date of making the representation.

The claims against Express Australia and Express Victoria 207 In her closing submissions, Ms. Sparke, Q.C. submitted that I should make declarations against Express Australia and Express Victoria that each had engaged in misleading or deceptive conduct for the purposes of the A.C.L. She otherwise contended that "the proceedings against [Express Australia] ought to be dismissed without adjudication on the merits". Hardly any time at all was spent in both oral and written submissions concerning the position of either of these respondents. That was probably because the real battle before me concerned Mr. Arcon, Ms. Mansfield and Scutts Junior. 208 With great respect, I decline to make the declarations sought. I cannot do so in the case of Express Victoria as the company is currently deregistered and thus has ceased to exist: s. 601AD(1) of the Corporations Act. 209 I cannot do so in the case of Express Australia for the reasons expressed below. In my view, the applicants have not on the balance of probabilities persuaded me that Express Australia engaged in misleading or deceptive conduct on the case as pleaded in so far as it turns upon alleged representations made by Mr. Arcon, Scutts Senior, Ms. Mansfield and Scutts Junior. 210 Moreover, and in any event, no submission was made about the utility of making declarations against Express Australia. No evidence was led about why the declaration sought could be of any use to the applicants, or have any effect on the course of the liquidation of Express Australia. No evidence was led about the current state of the liquidation, whether all of its funds had already been distributed to creditors or shareholders or otherwise about the current financial state of the company. Nor, in the end, was a formal application made for summary judgment in default of appearance. 211 Express Australia was also sued for breach of contract. Had the side agreement given rise to a legally enforceable contract, prima facie there would have been a case that Express Australia was in breach of that agreement when it ceased to make the guaranteed payments. However, for the reasons already given, there was no such contract. In my view, Cash Bazaar paid Express Australia $372,000 for the 10 RMF agreements under a mutual mistake of law. Whether Cash Bazaar has rights against Express Australia for the recovery of that payment, and whether Express Australia has rights against Cash Bazaar to recover the payments it has made, are not matters upon which the Court can, or should, resolve on the pleadings. 212 If it matters, I also observe that Express Australia is in liquidation and the evidence is that Express Australia was wound up voluntarily. Accordingly, s. 500(2) of the Corporations Act is engaged. It provides as follows: After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 213 At no stage did the applicants make any application for leave to proceed against that company. 214 It would also appear to be likely that Express Victoria was in breach of the Shareholders Agreement when it failed to make the guaranteed monthly payments. However, nothing turns on this as the company remains deregistered. 215 For the foregoing reasons, the claims against the first and second respondents should be dismissed. As neither was represented before me, there will be no order for costs.

The claims against Mr. Arcon 216 The applicants pleaded that Mr. Arcon (together with the other relevant individual respondents) had engaged in misleading or deceptive conduct, undertaken both individually and on behalf of Express Australia, by reason of making: (a) the Guaranteed Income Representation and the Capital Gain Representation with respect to the RMFs; and (b) the Minimum Payments Representations and the Individual Respondent Minimum Payments Representation with respect to the investment in Express Victoria. 217 Parenthetically, I note that in the applicants' closing written submissions an additional Minimum Payments Representation was added to those which appeared in the further amended statement of claim (set out at [23] above), which had been filed with the Court on the final day of the trial. The new representation was said to be as follows: a 6.5% shareholding would generate $5000 per month for four years. 218 No application to further amend the statement of claim to include this alleged representation was ever made. With respect, it was accordingly not open to the applicants to make this contention. In any event, for the reasons given below, no such alleged representation was ever expressed to be made as a statement about a future matter. Rather, Messrs. Patel and Arcon negotiated at the QPO meeting and made mutual invitations to treat, which resulted in the agreed terms of the Shareholders Agreement that Mr. Patel signed on behalf of Cash Bazaar. It is unclear when this agreement was entered into, but it would have been shortly after the QPO meeting.

The pleaded particulars of Mr. Arcon's conduct 219 In the case of each of the pleaded representations, it has sometimes been difficult to match them to the pleaded particulars of Mr. Arcon's conduct. 220 In relation to the Guaranteed Income Representation, the applicants pleaded that Mr. Arcon made that representation by reason of the following alleged conduct: (a) in a telephone call on or about 1 October 2015, Mr. Arcon said to Mr. Patel that he would receive the guaranteed income if he invested with Express Australia and that he would organise a letter from Vincents, the chartered accountants, to provide comfort; (b) in October 2015, Mr. Arcon forwarded the letter from Vincents, which I have described above, and which the applicants claim contained a representation that Express Australia would be capable of making the guaranteed income payments; and (c) at the 2015 Loganholme meeting held in late 2015 with Scutts Senior, Mr. Wakefield and Mr. Arcon, Mr. Arcon said that Express Australia would enter into a side agreement to "set out the guaranteed income payments" that were being offered, and that Mr. Patel need not worry about receiving the payments as Express Australia would guarantee he would be paid even though each RMF agreement would be entered into with an applicable individual SMF franchisor. 221 In relation to the Capital Gain Representation, the applicants pleaded that at the 2015 Loganholme meeting, Mr. Arcon agreed with and adopted Scutts Senior's alleged representation that the value of the RMFs would grow over time and that Mr. Patel would pay more than the price for which the RMFs were selling a year prior. Mr. Arcon did this "by not saying or doing anything to contradict" what Scutts Senior had allegedly said. 222 In relation to the Minimum Payments Representations, the applicants pleaded that Mr. Arcon made those representations by reason of the following alleged conduct: (a) on or about 8 March 2016, Mr. Arcon said to Mr. Patel that he had an opportunity to invest in a great new business and that a new entity would pay guaranteed income or, if it was unable to do so, Express Australia would make the guaranteed income payments. It was also alleged that Mr. Arcon adopted Scutts Junior's act of taking Mr. Patel through the Shareholder Proposal Booklet for Express Victoria (described above) and said that Mr. Patel would make a return of 364%. The adoption took the form of "physically" indicating that he agreed with what Scutts Junior was saying; (b) on or about 20 March 2016 at the Langham Hotel in Melbourne, Mr. Arcon went through the Shareholder Proposal Booklet which included spending "about one hour" on the financial projections (described above) and stating that the price of the RMFs at that time was $44,950. The applicants alleged that Mr. Arcon presented and explained the content of the Shareholders Agreement and said: (i) that investors would be paid guaranteed income every month: (ii) that their investment "would grow significantly"; and (iii) that he and Scutts Senior always paid guaranteed amounts. It was also alleged that Mr. Arcon said that investment in the MMF was flexible and that the more one invested the higher the return would be; (c) Mr. Arcon placed his electronic signature on the Shareholder Proposal Booklet and authorised it to be provided to prospective investors (I assume this was pleaded to show that Mr. Arcon had adopted its contents); and (d) on or about 24 March 2016 at the QPO meeting, Mr. Arcon offered to Mr. Patel 48 months of guaranteed payments which would also be guaranteed by Express Australia. He also offered to increase the offer to a 6.5% shareholding in Express Victoria in return for the payment by Mr. Patel of $300,000. 223 In relation to the Individual Respondent Minimum Payments Representations, the applicants pleaded that by reason of Mr. Arcon's conduct set out immediately above at [222], he "personally represented to [Mr. Patel] that if he invested funds in the MMF business proposal and purchased shares in Express Victoria, he would receive the Minimum Payment". The term "Minimum Payment" was defined in the further amended statement of claim to mean "a minimum payment of $5,000 per month for 4 years from 11 April 2016".

Was the Guaranteed Income Representation made by Mr. Arcon? 224 In relation to the Guaranteed Income Representation, it was not disputed that Mr. Arcon represented to Mr. Patel that if he purchased the 10 RMFs, Express Australia would enter into a side agreement which would include the promise of guaranteed income. I do not otherwise accept, with great respect, the submission of Ms. Sparke, Q.C. that Mr. Arcon, or indeed anyone else, made a distinct and separate representation that Mr. Patel or Cash Bazaar would be paid guaranteed income as distinct from saying to Mr. Patel, to use Ms. Sparke's language: "We will enter into a contract with you that there be guaranteed income" (error in original). I have already observed that it has been difficult to reach my decision about this matter because there is no contemporaneous evidence setting out what took place at the Adelaide meeting and the 2015 Loganholme meeting. Messrs. Patel and Arcon had different recollections of what took place and neither called any witness to corroborate what they contended was or was not said. The course of cross-examination of both witnesses did not assist me in determining what took place. 225 In those circumstances, and bearing in mind that the onus of proving the making of the alleged misrepresentation lay with the applicants, I have preferred to infer what is likely to have been said having regard to the available contemporaneous evidence, including the RMF Booklet given to Mr. Patel. In my view, Mr. Arcon (and Scutts Senior) at the 2015 Loganholme meeting outlined a proposal to pay guaranteed income on the terms of the 10 RMF agreements and the side letter, and Mr. Patel was amenable to that proposal. The matter did not travel beyond that. For reasons already given, that exchange did not result in any binding contract. The invitations to treat were made as part of pre-contractual negotiations on the understanding that the final agreement of the parties would be documented formally upon both parties accepting all of the terms contained in the written agreements. That only occurred after negotiations which took place in January 2016 between Messrs. Patel and Arcon. 226 In these circumstances, the observations of Smithers J. in Ransley v. Medical Benefits Fund of Australia Ltd (1980) A.T.P.R. 40-160 are relevant. In that case, it was alleged that the defendant, in promoting its scheme of hospital benefits, had represented in a brochure that it would pay contributors $96 per day should they become surgical patients in a private hospital and make a claim on the fund. It was argued that that representation was made notwithstanding that the defendant did not intend to pay $96 per day. The question which arose for consideration was whether in issuing the brochure the defendant represented not only a willingness to undertake to supply benefits in accordance with the terms of its contract with a contributor (yet to be executed), but also that it intended to pay $96 per day. His Honour reasoned that it would require strong evidence to support the proposition that a person who makes an offer to enter into a contract with specified promises also, in addition, represents an intention to perform those promises. Smithers J. said: … in this case where an offer is contained in a document advising the obligations a party is willing to assume and is introduced by phrases such as "the M.B.F. will pay to all contributors" various benefits, and "Benefits are provided up to" specified amounts, there may be some ground for the contention that an implied representation of intention to observe the provisions of the contract, if made, does arise. But I am far from satisfied that in this case there is any such representation. Basically the brochure does no more than describe the benefits which the defendant will undertake to supply and offer to undertake to supply if a person becomes a contributor. It was notifying the legal obligations which it was willing to undertake in the contract between itself and a contributor. The transaction offered and ultimately concluded between Mr. Duffy and the defendant was one containing promises on the part of the defendant to make payments in specified circumstances in consideration of contributions being made. It would have been something quite different and superfluous to introduce the notion that the defendant was saying that in addition to promising to provide the benefits it was also representing that it intended to provide them. Contractual promises not representations of intent were the subject of interest. That there is an intention on the part of parties entering into a contract to observe the obligations undertaken is no doubt normally assumed by all parties to the contract. But that a party making an offer to enter into a contract containing specified promises not only intends to accept legal responsibility in respect of his promises but also represents that he intends to perform them is not to be inferred in the absence of evidence significantly pointing to the making of such a representation and in this case the evidence would have to be strong enough to raise the inference beyond reasonable doubt. Merely to offer to conclude a bargain in legal form or to enter into a contract offered is not enough. Compare L.Grollo Darwin Management Management Pty. Ltd. v. Victor Plaster Products Pty. Ltd. [1978] FCA 17; (1978) A.T.P.R. 40-072 at p.17737. I do not accept that the contents of the brochure gives rise to an inference that as well as offering to undertake to fulfil its obligations under the contemplated contract the defendant represented that it intended so to do, or more particularly, intended to pay $96 per day in circumstances such as those of Mrs. Duffy's hospitalisation. It may be added that if some representation of intention to provide a benefit of $96 per day in circumstances such as those which arose in Mrs. Duffy's case could be spelt out from the evidence there is no evidence that it was an untrue one. On the contrary the inference is that the intention of the defendant was that it would provide that benefit. (Emphasis added.) 227 What emerges from his Honour's analysis, in my view, is the criticality of ascertaining what exactly was being represented by the representor in the pre-contractual context. To apply s. 4 without first determining precisely the true nature of the alleged representation is to miss a crucial step. Of course, the onus of demonstrating this lies on the applicable applicant. Here, I find that the evidence did not "significantly" point to the making of the separate and unqualified representations as to the payment of guaranteed income as contended for by the applicants. On that point, I respectfully agree with the observations of Allsop J. (as his Honour then was) in McGrath v. Australian Naturalcare Products Pty Ltd (2008) 165 F.C.R. 230 in respect of former s. 51A of the Trade Practices Act (in which s. 4 of the A.C.L. has its origins) at 265 [138]: … Without setting any artificial constraints on the operation of ss 51A and 52 and the balance of Div 1 of Pt V [of the Trade Practices Act 1974 (Cth)], it is appropriate to say that the divining of representations from the making of contractual promises and the entry into contracts is a task to be approached with caution and with an eye to all the facts and not by reference to implying representations mechanistically from equivalent promises: see Concrete Constructions Group v Litevale Pty Ltd (2002) 170 FLR 290 at [156]-[168] per Mason P. 228 Having said that, it is true that a contractual promise, once made, may, in a given case, include an implied representation. That representation may be that the promisor intends and has the ability to carry out that promise. As Gordon J. observed in Coles Supermarkets Australia Pty Ltd v. FKP Limited [2008] FCA 1915 at [69]: … an express contractual promise or representation will constitute an actionable implied representation under s 52 of the TPA only if the party making the promise or representation had no intention or capability of carrying it out at the time it was made (ie the promisor had no reasonable grounds for making the promise). The questions which then arise are (1) what is the contractual promise in this case and (2) did the respondents have the intention and ability to carry it out at the time it was made? 229 But the misleading conduct alleged against Mr. Arcon (and Express Australia) was not the entering into of the side agreement and the making of the promise to pay income by Express Australia. The applicants did not allege an implied representation of the kind identified by Gordon J. in Coles Supermarkets (although the making of the side agreement was relied upon as a particular to the pleaded misrepresentation). In other words, it was not pleaded that it should be implied from the terms of the side agreement that Mr. Arcon (and Scutts Senior) had represented that Express Australia had an intention and capacity to make the guaranteed income payments. Rather, the applicants' case was that a representation had been made in the pre-contractual phase that was distinct from both the purported contracts and the negotiations which led up to those agreements.

Were the representations made by Mr. Arcon as to a future matter? 230 Further, in my view, the proposals outlined by Mr. Arcon (and others) were not about a future matter for the purposes of s. 4 of the A.C.L. Express Australia's variously expressed proposals, during its negotiations with Mr. Patel, to pay guaranteed income did not involve any prediction, forecast or projection about something that might or might not take place in the future. It was a present invitation which was ultimately subsumed by the entry into of formal agreements. It did not otherwise convey something about what may happen in the future (save perhaps Express Australia's willingness to enter into a contract at a future time, but such a representation self-evidently could not be characterised as misleading or deceptive). 231 That is not to say that in every case the process of bargaining or negotiating a contract cannot involve the making of misrepresentations which may be capable of constituting misleading or deceptive conduct and thereby be causative of loss and damage. As Nettle J.A. (as his Honour then was) observed in CCP Australian Airships Ltd v. Primus Telecommunications Pty Ltd [2004] VSCA 232 at [33]: … although s.52 may not strike at the traditional secretiveness and obliquity of the bargaining process, one purpose of the section, as Burchett, J. indeed observed in Poseidon, is to ensure that the bargaining process is not seen as a licence to deceive. Hence, as his Honour said, if the bargainer has no intention of contracting on the terms discussed, his conduct in seeming to bargain may accurately be stigmatised as misleading. I add, that just as certainly, if a bargainer having no more capacity than a hope and a prayer of providing goods or services conducts negotiations in a fashion calculated to create the impression that he has the capacity to do so, and extracts payment on the faith of that assumption, his conduct is liable to be stigmatised as misleading and deceptive. 232 Here, as it happens, the applicants have not demonstrated on the evidence before the Court that Express Australia had no intention of contracting on the terms Mr. Arcon discussed with Mr. Patel, or that Express Australia's capacity to carry out its promise under the side agreement was no greater than a "hope and a prayer".

Assuming the Guaranteed Income Representation was made at the 2015 Loganholme meeting (contrary to my findings), did Mr. Arcon (or Scutts Senior) have reasonable grounds for making that representation? 233 In any event, if I am wrong, and the Guaranteed Income Representation (as pleaded or as argued) was made at the 2015 Loganholme meeting and constituted a representation with respect to a future matter, I am not satisfied that the applicants discharged their onus of proving that Mr. Arcon (or Scutts Senior) had no reasonable grounds for making the statements about guaranteed income. That onus lay with the applicants because, in my view, Mr. Arcon led, or was able to rely upon, evidence which was contrary to the contention that his statements were made without reasonable grounds. In that respect, authorities which address what type of evidence must be adduced by the representor for the purposes of former s. 51A of the Trade Practices Act appear to be applicable to s. 4 of the A.C.L.: Director of Consumer Affairs Victoria v. Gibson [2017] FCA 240 at [201] per Mortimer J.; Crowley v. WorleyParsons Limited [2017] FCA 3 at [71-[72] per Foster J. In Australian Naturalcare Products Pty Ltd, Allsop J. (as his Honour then was) explained the requirement at 283 [191]-[192] in the following terms: … the provision required evidence "to the contrary" to be adduced, that is evidence that tended to establish, or that admitted of the inference that there were, reasonable grounds for making the representation, before the deeming provision ceased to operate … If evidence is adduced by the representor that is said to be evidence to the contrary, it will be for the Court to determine whether it is to the contrary in the sense just discussed. If it is, the deeming provision will cease to operate … 234 In Ackers v. Austcorp International Ltd [2009] FCA 432, Rares J. said at [357]: The quality of the evidence adduced by the representor under s 51A(2) must be sufficient to be capable, if accepted, of amounting to providing the representor with reasonable grounds for making the representation at the time it was made. The Court must determine whether the evidence is "evidence to the contrary" so as to throw onto the representee the onus of proving that the representor did not have reasonable grounds for making the representation: Australian Naturalcare 165 FCR at 282-283 [191]-[192] per Allsop J. In the context of a trial, the representee will not need to lead evidence in chief on the issue since he, she or it can rely on the deeming in the provision which is only displaced by the representor adducing evidence to the contrary. That evidence, if adduced, will lead to a case in reply. The Court still has to decide whether the evidence relied on as being "to the contrary" adduced by the representor is capable of amounting to reasonable grounds for making the representation. Then, if it is so capable, the Court assesses whether the representee has proved, on the whole of the evidence, that the representor did not have reasonable grounds for making it. 235 Some further propositions should be stated. For the purposes of demonstrating that there is evidence to the contrary for the purposes of s. 4(2) of the A.C.L., a representor is not confined to the evidence she, he or it, may have led; a representor may rely on evidence called by an applicant: Fubilan Catering Services Limited v. Compass Group (Australia) Pty Ltd [2007] FCA 1205 at [545] per French J. (as his Honour then was). It is also well established that no persuasive burden or onus falls upon respondents to prove they had reasonable grounds. Rather, the rationale for the need for the representor to lead evidence to the contrary was explained by Mansfield, Greenwood and Barker JJ. in North East Equity Pty Ltd v. Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 A.L.R. 217 at [30] as follows: However, the question of whether a respondent had, at the time of making the representation as to the future matter, reasonable grounds for making it, is particularly illuminated by the knowledge, understanding, or reasoning of the respondent. Section 51A(2) therefore casts an evidential burden on the respondent to adduce evidence on that issue, that is, some evidence ([33], first Full Court decision) of reasonable grounds for making the representation, failing which the deeming effect of s 51A(2) is engaged thus making it unnecessary for the applicant to prove the second integer under s 51A(1) in order to establish a contravention of s 52. Once evidence is adduced by a respondent in discharge of the evidential burden, the applicant must satisfy the dispositive burden of showing that the respondent did not have reasonable grounds for making the representation. 236 It is well settled that the fact that a promise is not performed or a prediction is not fulfilled does not of itself establish that the representor lacked reasonable grounds at the time of making such promise or prediction: Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 F.C.R. 82 at 88; Bill Acceptance Corporation Ltd v. GWA Ltd (1983) 50 A.L.R. 242 at 250 per Lockhart J. In Global Sportsman, Bowen C.J., Lockhart and Fitzgerald JJ. relevantly said: The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. 237 Reasonable grounds, nonetheless, requires the existence of facts sufficient to induce that state of mind in a reasonable person. As Griffiths J. said in ACM Group Limited (No 2) at [173]: … There will not be reasonable grounds for making a representation if, at the time it was made, the person who made it did not have facts sufficient to induce in the mind of a reasonable person a basis for making the representation, which is to be assessed objectively and not by reference to the maker's subjective state of mind (see ACCC v Jones (No 5) [2011] FCA 49 at [32] per Logan J, applying George v Rockett [1990] HCA 26; (1990) 170 CLR 104). See also Prior v. Mole (2017) 261 C.L.R. 265 at 298 [98] per Gordon J. 238 In that respect, the representor is required to adduce evidence that the representor had (that is, possessed) information, facts or circumstances which, assessed objectively, gave them a reasonable basis for making the representation. Reliance on such information, facts or circumstances may be implicit or inferred: Australian Competition and Consumer Commission v. Woolworths Limited [2019] FCA 1039 at [130] per Mortimer J. Further, whilst the reasonableness of a representation must exist when it was made, and should not be evaluated with the benefit of hindsight, subsequent events may cast light on the accuracy of a statement made about a future matter. As Croft J. observed in Auswest Timbers Pty Ltd v. Secretary to the Department of Sustainability & Environment [2010] VSC 389 at [48]: In determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, it is necessary to judge the matter as at the date of representation. This does not, however, preclude the examination of evidence of later events which may cast light upon the overall probabilities, which in certain circumstances may offer the most reliable guidance. Nevertheless, the test is one of reasonableness and "[i]t remains vital to guard against hindsight illusion". (Footnotes omitted.) 239 Here, in his second affidavit, Mr. Arcon exhibited the 2015 accounts for Express Australia. A copy of these had been sent to Mr. Patel by Ms. Mansfield on 6 November 2015. I infer that they were available at the time of the 2015 Loganholme meeting and perhaps at the Adelaide meeting which took place in late 2015 (the exact time of which was not established). I also infer that Mr. Arcon, as a director of Express Australia, relied upon them as the latest information concerning the financial capacity of his company. In my view, those accounts constitute evidence "to the contrary" for the purposes of s. 4(2) of the A.C.L. 240 Whilst, as already mentioned, Ms. Sparke, Q.C. in her cross-examination of Mr. Arcon highlighted some possible difficulties with the accounts (for example they showed no line item for the expense of wages, although that criticism assumed that the company employed staff, as distinct from another group company), the essential uncontradicted picture they presented was of a growing and profitable business. There was nothing about those accounts which showed that it was likely that Express Australia would be unable to pay, for example, the first year of guaranteed payments ($129,600) when in the 2015 year the gross income of the company was $14,444,028 and there was no evidence before me that the company was not still growing and not still profitable when Mr. Arcon met with Mr. Patel in 2015: c.f. Rakic v. Johns Lyng Insurance Building Solutions (Vic) Pty Ltd (Trustee) [2016] FCA 430; (2016) 259 I.R. 47. That conclusion is supported by the fact of the subsequent payment of guaranteed income by Express Australia to Cash Bazaar over 61 weeks (a total of $164,700). Those payments render slightly more probable the proposition that the Guaranteed Income Representation was made with reasonable grounds. 241 Ms. Sparke, Q.C. submitted that no reasonable grounds existed in late 2015 for the making of the Guaranteed Income Representation for a number of reasons. The first is that the guaranteed income could not be funded from the $10,000 built into the purchase price for each RMF, and which Mr. Arcon had identified in cross-examination as being the source of funding for the first 12 months of guaranteed income. That gave, according to Mr. Arcon, 12 months to find at least three franchisees for each RMF going forward. Ms. Sparke, Q.C. also relied upon the high attrition rate of franchises. She submitted: The Court would need to be persuaded that there was reasonable grounds to believe that, given that the [cash flow] was not at that stage being met - and in fact was never met - from franchisees in the region - that there was proper basis for the promise being made for five year cash flow. The company must necessarily have drawn from other income flows, or capital, in order to make the payments. Unless the company could have reasonably produced such high sales of franchises with sustained cash flows that the cash flow would cover their operating costs, the fees payable to the RMF holders in that region AND have enough left over to meet the income guarantee, it could not have been sustainable. Whilst there is no evidence of the numbers of such contracts, there were other such guaranteed contracts, so the Court would need to be satisfied that there was proper basis for all such payments to be met. (Errors in original and footnote omitted.) 242 The difficulty with that submission is that the degree of attrition in late 2015 and early 2016 was never established. Moreover, the evidence of Messrs. Dang and Strutton, which Ms. Sparke, Q.C. relied upon did not support her submission. That is because I found Mr. Dang to be an unreliable witness and Mr. Strutton gave evidence that whilst there was significant turnover in the number of franchises, he himself, as an Express franchisor in Victoria, had made "phenomenal" returns on his investment. He also had long-term franchisees. Those franchisees who had failed, he said, had done so for a number of reasons. One was a lack of support from Express Australia. But another was the unsuitability of some of the individuals in question to be franchisees for a given home service. 243 I otherwise agree with the contention that the part of the purchase price used to fund the making of guaranteed payments could not constitute a reasonable basis for the payment of all guaranteed payments. But I have found that the relevant part of the purchase price was never intended to be the sole source of Express Australia's funding to meet the guaranteed payments. The applicants did not demonstrate that in late 2015 and early 2016, Express Australia had no reasonable basis for relying on its other sources of income going forward. The 2015 accounts did not show this. 244 I should record that I do not consider that the Vincents letter contained a separate representation that Express Business would be capable of making the guaranteed payments or that the promise to pay income "would be met". It said nothing about making guaranteed payments to Mr. Patel, or to anyone else. Indeed, it said nothing about Express Australia. Moreover, the writer of the letter would probably have been unaware of the deal which Mr. Patel was negotiating at this time with Express Australia. The letter simply said that Express Business - a different company - had "traded strongly" for the year ended 30 June 2015. 245 I also finally note that Mr. Patel described in his first affidavit the alleged telephone conversation with Mr. Arcon (said in the pleadings to have taken place on 1 October 2015) without any reference to a statement being made about guaranteed income. No doubt, however, the issue of guaranteed income was discussed, in a similar fashion to the way that issue was considered at the 2015 Loganholme meeting. 246 It follows that even if the Guaranteed Income Representation was made (as pleaded or argued without reference to the side agreement) and constituted a representation about a future matter: (a) that evidence to the contrary for the purposes of s. 4(2) of the A.C.L. was adduced before me; (b) the applicants have not established that Mr. Arcon did not have reasonable grounds to make the Guaranteed Income Representation in late 2015; and (c) it has not otherwise been established that Mr. Arcon's conduct was misleading or deceptive: Unilever Australia Ltd v. Beiersdorf Australia Ltd [2018] FCA 2076 at [407] per Wigney J.

Disposition - the Capital Gain Representation 247 I turn now to consider the Capital Gain Representation. This never descended beyond two very broad and general claims, namely that Mr. Patel would be able to make a capital gain due to capital growth, and secondly, in support of that claim, that the price of the RMFs had been increasing. It is also important initially to observe that as pleaded, it was Mr. Patel, and not Cash Bazaar, that was to make a capital gain. Although it was never explained how Mr. Patel intended to make that gain, I infer that he may have intended to sell the shares he held in Cash Bazaar to capture growth in the value of the RMFs. But the accounts of Cash Bazaar were never tendered into evidence, and I have no way of knowing whether it held other assets, or would incur other liabilities, that might offset or increase any gain made from any growth in the value of the RMFs. 248 I accept that it is likely that broad statements about long-term growth may have been made, even though Mr. Patel never mentioned that this was an objective of his in the contemporaneous documentation. But such vague protestations about the attractiveness of an investment, especially when made at an early stage of negotiations, are unlikely to constitute misleading or deceptive conduct, particularly when they are followed by due diligence and the entry into of comprehensive agreements. In, for example, Pappas v. Soulac Pty Ltd (1983) 50 A.L.R. 231, the applicants had purchased a shopping centre. A daughter of the applicants gave evidence that shortly before her parents signed one of the contracts she had asked the vendor's agent if her parents "would be getting a good return". Fisher J. made the following observation at 236 which is apposite here: It is quite out of keeping for a person of her experience and in her then state of knowledge to ask such a simplistic question, let alone place any reliance on the answer. 249 Fisher J. also made the following observations at 234-235 which are relevant to the Capital Gain Representation: It is important to appreciate that many of the statements alleged or admittedly made by Mr. Spencer were wholly or in part statements of opinion, not capable of being objectively proved to be true or false. They were also essentially the type of introductory comments, in the nature of puffery, made at the start of negotiations for the purpose of attracting the interest of a possible purchaser. As such they became irrelevant or of little if any significance when detailed information is subsequently given a fortiori, to a potential purchaser with commercial experience. To the extent that they are essentially puffery, it is proper to be reluctant to elevate them to the status of potentially misleading conduct. The comments of Holmes J. on this aspect, which he denotes as a rule of law, in Denning v Darling 20 N.E. 107 at 108-9, referred to in Donald & Heydon Trade Practices Law vol.2 p.539 are on point: "The rule of law is hardly to be regretted, when it is considered how easily and insensibly words of hope or expectation are converted by an interested memory into statements of quality and value when the expectation has been disappointed." 250 I think that this is also a case where words of hope or expectation have been converted into statements of quality and value. In my view, it is most improbable that the directors of Express Australia would have made any serious and detailed representation about capital growth without qualifying such a statement as being dependent upon the performance of the franchises sold within the territory. 251 I note the submission made by Ms. Sparke, Q.C. that the Capital Gain Representation was made with no reasonable basis because within the territories of Cash Bazaar's RMFs there were no franchisees and no obligation on any party to acquire franchisees. The first observation is clearly right. The second is perhaps less clear if one accepts that the parties believed that the RMF agreements imposed real obligations on them. The clauses I have set out above, especially cl. 6.7, suggest that Cash Bazaar had obligations of some kind to grow each RMF business. Moreover the experience of Mr. Strutton showed that with some effort this was something that could be achieved. 252 The Capital Gain Representation could not have caused Cash Bazaar any actionable loss or damages in any event. That is because, for reasons already given, the first applicant never acquired any legal rights which it could sell (presumably by way of novation). There was nothing which could grow over time. As a result, Mr. Patel would never have secured the capital growth he wanted. 253 I otherwise accept that Mr. Patel was told that the price or value of the RMFs had increased over time. In that respect, and having regard to s. 4 of the A.C.L, Mr. Arcon gave evidence about the historical growth in Express Australia's business which was largely uncontradicted. No evidence was otherwise led to suggest that increases in price or value had not been true in late 2015, or that such a statement lacked reasonable grounds. Moreover, by early 2017, Mr. Patel had acknowledged that his RMFs had in fact increased in price. This statement renders more probable the proposition that this aspect of the Capital Gain Representation was made with reasonable grounds.

Were the Minimum Payments Representations made? 254 I do not accept that the Minimum Payments Representations were made by Mr. Arcon at the Langham Hotel meeting when he took the prospective shareholders through the Shareholder Proposal Booklet. In that respect, some care must be taken in considering the way the Minimum Payments Representations were pleaded and defined. For convenience, I reproduce that pleading as follows: (a) the investment would come with a guaranteed minimum income for 4 years such that a 3% shareholding would generate a minimum income of $2,500.00 per month, being a minimum 15% per annum return; and (b) 3% shareholding investment of $189,950 would return a minimum of $692,073, namely 364% after a period of 2 years; and (ba) any investment less or more than 3% would generate a proportionate decrease or increase in the minimum income paid and the return to be expected; and (c) [Express Australia] would pay the guaranteed minimum income payments of the proposed MMF business; and (d) [Cash Bazaar] could have a passive role (the Minimum Payments Representations). 255 The first pleaded representation appears to adopt the figures set out in the Shareholder Proposal Booklet. I accept that Mr. Arcon would have made representations in accordance with those figures as mentioned in the pleading; but he would never have said that guaranteed income would be paid over four years in relation to these figures. Concordantly with the Shareholder Proposal Booklet he would have referred to two years. The four-year period was only raised with Mr. Patel after the Langham Hotel meeting and then with respect to very different figures. It follows that the first part of the Minimum Payments Representation was never made whether orally or in writing. 256 I do not accept that the second pleaded Minimum Payments Representation was made by Mr. Arcon at the Langham Hotel meeting or at any other time. Whilst the figures referred to are taken from the Shareholder Proposal Booklet, they do not include the following qualification which appeared in bold and was underlined in that booklet: "Potential Shareholder Returns" (emphasis added). In my view, it is more probable than not, that any representation made by Mr. Arcon about the return to be enjoyed from a 3% investment would have been expressed as only a "potential" return, consistently with the Shareholder Proposal Booklet. The applicants have not discharged their onus of proving that unqualified representations about future returns were made, inconsistently with the content of the Shareholder Proposal Booklet. 257 That leaves the last three pleaded Minimum Payments Representations. In my view their existence: (a) is not supported by any contemporaneous evidence; (b) is not corroborated by any other witness; and (c) is inconsistent with the terms of the Shareholder Agreement subsequently entered into by Cash Bazaar. I have earlier identified those inconsistencies in my reasons for decision above. 258 In my view, the applicants have not proven, on the balance of probabilities, that these three foregoing representations were ever made whether orally or in writing. 259 In amplification, the third alleged representation about proportionate increases was never made and is directly contradicted by Mr. Patel's own evidence. In cross-examination, he said that he perceived that the relationship between the three investment options described in the Shareholder Proposal Booklet was not "proportionate". Thus, the transcript records the following: MR CALLANAN: But there's no relationship between what you negotiated and these figures - - -?---There - - - - - - because if you add option 2 and 3, for example, to get to almost your investment which would be $290,000, that equals a four and a half per cent shareholding for a $3700 monthly return. So, what you actually negotiated was there's no relationship to the figures contained on page 514?---I was just completing the parts on the paper, on this page that I relied on, and there were more than one. But let me answer your current question, the option 1, 2 and 3 clearly indicate that the increase in percentage of shareholding is not proportionate to the increase in the amount of dollars you have to provide. In other words, 175 becomes one and a half but the amount invested doesn't become double, so it shows me that there is a scale wherein the percentage shareholding goes up while the amount to invest goes down. So I relied on this construct - - - (Emphasis added.) 260 I otherwise accept that Mr. Patel was told that if he invested more money in Express Victoria, generally speaking, his overall returns would be greater. There was nothing misleading about that statement. 261 As to the fourth alleged representation about who would be responsible for the payment of guaranteed income, Messrs. Patel and Arcon gave sharply different accounts about what was said. Mr. Patel persistently claimed that Mr. Arcon had told him that Express Australia would pay the guaranteed income; Mr. Arcon disagreed and said that he had always made it clear that this obligation was only ever owed by Express Victoria. There are no contemporaneous documents that support Mr. Patel's contention. In contrast, both the Shareholder Proposal Booklet and the express terms of the Shareholders Agreement make it abundantly clear that the primary liability lay with Express Victoria. As mentioned previously, the possibility of some form of secondary contingent liability arising in relation to Express Australia may be seen from cl. 11.2 of the Shareholders Agreement. But Express Australia was never a party to that agreement. It follows that I find that the applicants have not established that the alleged pleaded representation was ever made. 262 As to the last representation concerning "passivity", the term was never defined in the pleadings. If it meant that Mr. Patel could "sit back and do nothing", then there are no contemporaneous documents to support it, and it is contradicted by the minimum two hours per month obligation imposed by the Shareholders Agreement. In those circumstances, I find that no such representation was ever made. If the term "passive role" was intended to mean that an investor could play a more limited role, then I accept that a representation of that kind was probably made by Mr. Arcon at the Langham Hotel. That is because a statement of this kind may be found in the Shareholder Proposal Booklet. That statement is in these terms: "shareholders will be able to contribute to the growth of the company as little or as much as they wish". This representation reflects the contents of the Shareholders Agreement and the two hour per month minimum contribution. However, it was neither misleading nor deceptive when made.

Assuming the Minimum Payments Representations (as defined) were made (contrary to my findings), did Mr. Patel rely on them? 263 In any event, even if the Minimum Payments Representations as defined in the pleading had been made (contrary to my findings), I have found that Mr. Patel did not rely upon them when deciding to buy shares in Express Victoria; they did not induce him to purchase those shares. Rather, Mr. Patel negotiated a separate arrangement with Mr. Arcon at the QPO meeting. He used the representations in the Shareholder Proposal Booklet about guaranteed income and the expected returns as no more than a "starting construct" to put a proposal to Mr. Arcon. That proposal was materially different to the three investment options described in the Shareholder Proposal Booklet. In that respect, I do not think that any necessary connection existed between the figures disclosed in that booklet and those bargained for by Mr. Patel. For example, the increase in the size of Cash Bazaar's proposed stake in Express Victoria from 6% to 6.5% had about it a degree of arbitrary or hard bargaining and did not appear to me to be the product of any necessary logic flowing from the Shareholder Proposal Booklet. The same can be said about the increase in both the quantum of guaranteed income payable and the years in which such income would be payable. These attributes of Mr. Patel's deal were seen by him as sufficiently attractive to overcome the concerns he had with the proposals contained in the Shareholder Proposal Booklet. To repeat his language, the amount and duration of the guaranteed payments and percentage of shareholding had "all significantly increased" and this induced him to buy shares in Express Victoria. 264 In so concluding I do not characterise the representations set out in the Shareholder Proposal Booklet, and the statements made by Scutts Junior and Mr. Arcon to Mr. Patel before the QPO meeting, as irrelevant to Mr. Patel's decision to purchase the shares in Express Victoria and sign the Shareholders Agreement. No doubt they contributed to that decision. Nor do I find that what happened at the QPO meeting was the sole explanation for the purchase of the shares. In Como Investments Pty Ltd (In liq) v. Yenald Nominees Pty Ltd (1997) 19 A.T.P.R. 41-550, Burchett, Ryan and R.D. Nicholson JJ. relevantly said at 43,619: The law does not consider cause and effect in mathematical or in philosophical terms. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect. As Brennan J. said in San Sebastian Proprietary Limited v Minister administering the Environmental Planning and Assessment Act 1979 [1986] HCA 68; (1986) 162 CLR 340 at 366: "The representation must be a real inducement or one of the real inducements to engage in the conduct which occasions the loss." 265 In Henville v. Walker (2001) 206 C.L.R. 459, Gaudron J. said at 482 [66]: It was held in Marks v GIO Australia Holdings [(1998) 196 C.L.R. 494] that the relief available under s 82(1) of the Act is not to be confined by analogy either with actions in contract or in tort. Rather, the task under that sub-section is to ascertain the loss suffered by the contravening conduct and to assess the amount necessary to compensate for that loss. Once that is accepted, it follows, in my view, that considerations of foreseeability and contributory negligence are irrelevant to the exercise required by s 82(1). However, that does not mean that, where the loss is the result of two or more acts or events, causation is irrelevant to the task of identifying the loss or the amount of the loss recoverable. To treat causation as irrelevant would be to ignore the requirement in s 82(1) that a person suffer loss or injury by contravening conduct. (Footnote omitted.) 266 To similar effect, McHugh J. said at 493-494 [106]-[109]: If the defendant's breach has "materially contributed" to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional. Of particular importance to the present case is the long-standing recognition of the possibility that two or more causes may jointly influence a person to undertake a course of conduct. In separate judgments in Gould v Vaggelas, Wilson and Brennan JJ emphasised that a representation need not be the sole inducement in sustaining the loss. If "it plays some part even if only a minor part", in contributing to the course of action taken - in that case the formation of a contract - a causal connection will exist. This principle has been applied in cases where a complicating factor is the intervention of some act or decision of the plaintiff or a third party that allegedly constitutes a more immediate cause of the loss or damage. Thus, in Medlin v State Government Insurance Commission Deane, Dawson, Toohey and Gaudron JJ said: "The ultimate question must, however, always be whether, notwithstanding the intervention of the subsequent decision, the defendant's wrongful act or omission is, as between the plaintiff and the defendant and as a matter of commonsense and experience, properly to be seen as having caused the relevant loss or damage. Indeed, in some cases, it may be potentially misleading to pose the question of causation in terms of whether an intervening act or decision has interrupted or broken a chain of causation which would otherwise have existed. An example of such a case is where the negligent act or omission was itself a direct or indirect contributing cause of the intervening act or decision." (Emphasis added) Similarly, in respect of claims under s 82, courts have accepted that loss or damage is causally connected to a contravention of the Act if a misrepresentation was one of the causes of the loss or damage sustained by the claimant. As the Full Federal Court pointed out in Como Investments Pty Ltd (In Liq) v Yenald Nominees Pty Ltd: "The law does not consider cause and effect in mathematical or in philosophical terms. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect." (Footnotes omitted.) 267 I do not consider that the content of the Shareholder Proposal Booklet, or the representations made by Scutts Junior and Mr. Arcon before the QPO meeting materially contributed to the decision to purchase the shares in Express Victoria. That is precisely because Mr. Patel was not satisfied with those representations. They did not at that point induce or cause him to purchase those shares. It was only after the intervention of the dramatically different deal negotiated at the QPO meeting that Mr. Patel was willing to sign up to the MMF deal. It follows, "as a matter of commonsense and experience", that the pre-QPO representations were not a cause of Mr. Patel's loss. Their effect on Mr. Patel was only negligible. 268 It also follows that I need not address the contention that the representations in the Shareholder Proposal Booklet relevantly were not made on reasonable grounds. Mr. Patel did not rely upon them in making his acquisition of shares in Express Victoria.

Discrepancy between the Minimum Payments Representations (as defined) and the pleaded particulars of Mr. Arcon's conduct 269 Also, and critically, no part of the Minimum Payments Representations included a contention that the promise to pay 48 months of guaranteed income of $5,000 per month and to increase Cash Bazaar's stake to 6.5% in Express Victoria constituted misleading or deceptive conduct. In that respect, Mr. Patel's evidence about the QPO meeting as described in his first affidavit was as follows: On or about 24 March 2016, I met [Mr. Arcon] at QPO, a coffee shop in Kew. I told [Mr. Arcon] that I was willing to invest $300,000 but I needed the guaranteed payments for a longer duration. [Mr. Arcon] said words to the effect 'I can offer 48 months of guaranteed payments' and made the change. [Mr. Arcon] showed me the Shareholders Agreement and we went through the terms. [Mr. Arcon] highlighted again that [Express Australia] would pay the guaranteed payments every month and said words to the effect "Express is guaranteeing the monthly payments". I asked [Mr. Arcon] that if I invested $300,000 what percentage of shareholding will I get and he responded by saying 6%. I told [Mr. Arcon] that I was not happy with that. [Mr. Arcon] then said words to the effect "I will increase the offer to 6.5% shareholding for the $300,000 investment" and he increased my shareholding. 270 Taking that evidence at its highest, it did not disclose conduct which was misleading or deceptive nor indeed conduct which the applicants ever contended in its pleading was misleading or deceptive. For example, the applicants never pleaded that a representation was made about guaranteeing four years of income of $5,000 per month (as distinct from negotiating an agreement which included such a promise). 271 Like the Guaranteed Income Representation, I am also not persuaded that Mr. Arcon made representations about future matters at the QPO meeting, for similar reasons given in respect of the Guaranteed Income Representation. The evidence about that meeting, which was thin, does not support that conclusion. Rather, I find that either Mr. Arcon or Mr. Patel proposed to enter into a written Shareholders Agreement which included a guarantee to pay income over four years. In neither case did Mr. Arcon make a representation about any future fact. Rather, he or Mr. Patel made an invitation to treat. Like the Guaranteed Income Representation, any such invitation was made in the context that a promise to pay guaranteed income would be documented on agreed terms. 272 I finally observe that the applicants also pleaded that Mr. Arcon's execution of the Shareholders Agreement on behalf of Express Victoria was also conduct which constituted the making of the Minimum Payments Representations. As that agreement contained terms about the payment of guaranteed income which are different from those in the alleged Minimum Payments Representations, that claim is rejected.

Disposition - the Individual Respondent Minimum Payments Representations 273 I am not persuaded on the balance of probabilities that the Individual Respondent Minimum Payments Representations were made by Mr. Arcon or anyone else. The first and only meeting at which the offer to pay $5,000 on a monthly basis was discussed was the one held at the QPO café. Scutts Senior, Scutts Junior and Ms. Mansfield did not attend that meeting; they could thus never have made the alleged representation. Mr. Arcon did attend that meeting. For reasons I have already given, I do not accept that Mr. Arcon ever made a representation to pay $5,000 per month for four years that was distinct and independent from the negotiation of the Shareholders Agreement. Any offer made by Mr. Arcon to enter into an agreement that contained such a promise was not a representation about a future matter as contended for by the applicants. Following the meeting, the Shareholders Agreement was entered into. It contained that promise. No misleading or deceptive conduct can be discerned from this sequence of events. 274 The case against Mr. Arcon should be dismissed. I deal below with the claim against him for accessorial liability.

The claims against Ms. Mansfield 275 The applicants pleaded that Ms. Mansfield engaged in misleading or deceptive conduct when she allegedly made the Guaranteed Income Representation, the Capital Gain Representation the Minimum Payments Representations and the Individual Respondent Minimum Payments Representation. 276 In amplification, in relation to the Guaranteed Income Representation the following was pleaded: (a) that during telephone calls between Ms. Mansfield and Mr. Patel in January 2016, Ms. Mansfield represented that several RMF franchisors and SMF franchisors had been receiving guaranteed income and that Mr. Patel could be assured that his investment would grow in value. It was further alleged that Ms. Mansfield said that whilst Mr. Patel's investment was growing he would receive the guaranteed income of $270 per week for each RMF and this would not require any participation from Mr. Patel; (b) that on or about 25 January 2016, during a telephone conversation between Ms. Mansfield and Mr. Patel, Ms. Mansfield represented that she had identified 10 RMFs which would grow over time because there was a focus on selling franchisees in those RMFs. It was further alleged that she again represented that there would be guaranteed income of $270 per week for each RMF and that after a few years the RMFs could be sold whilst making a profit. It was also alleged that Ms. Mansfield said that if Mr. Patel were to purchase 10 RMFs he might secure a better purchase price; (c) that on or about 2 February 2016, during another telephone conversation between Mr. Patel and Ms. Mansfield, Mr. Patel asked what would happen if his franchisees in each RMF were to leave and not be replaced. It was alleged that Ms. Mansfield responded by saying that he was not to worry because amendments could be made to the side agreement to ensure that the guaranteed income payments would continue to be made; and (d) that in emails sent to Mr. Patel by Ms. Mansfield on behalf of Express Australia in February 2016, Ms. Mansfield made the Guaranteed Income Representation by providing drafts of the side agreement. 277 Again, in amplification, in relation to the Capital Growth Representation, it was pleaded that during a telephone conversation between Ms. Mansfield and Mr. Patel in January 2016, Ms. Mansfield said that the value of the RMFs had increased each year and that after a few years Mr. Patel could sell the RMFs to recover his capital and enjoy capital growth. It was also alleged that Ms. Mansfield said that over five years the RMFs would more than double in value. 278 The applicants have not persuaded me on the balance of probabilities that the Guaranteed Income Representation or the Capital Gain Representation were made by Ms. Mansfield. There are no contemporaneous documents to support the proposition that such representations were ever made by her. If Ms. Mansfield had ever discussed the topics of guaranteed income or capital value with Mr. Patel, I find that she would have limited her statements to what Mr. Arcon was telling Mr. Patel about these matters. I otherwise reject the contention that Ms. Mansfield made the Guaranteed Income Representation simply by sending drafts of the side agreement to Mr. Patel. 279 I have also decided that if Ms. Mansfield had made the Guaranteed Income Representation and/or the Capital Growth Representation, she did so in her capacity as an employee who was passing on information supplied to her by Mr. Arcon, or by other more senior Express Australia officers. In that respect, Mr. Callanan drew to the Court's attention the decision of Palmer J. in R.T. & Y.E. Falls Investments Pty Ltd v. The State of New South Wales [2001] NSWSC 1027. In that case a district veterinarian (a Dr Salmon) had made certain representations to a cattle farmer on behalf of the New South Wales Department of Agriculture. The Department subsequently resiled from those statements thereby causing the farmer loss and damage. Amongst other things, the farmer sued the Department for misleading or deceptive conduct arising from the representations made by the veterinarian. Palmer J. found that the Department did not have reasonable grounds for the representations made on its behalf for the purpose of s. 41(2) of the Fair Trading Act 1987 (N.S.W.). In contrast, his Honour found that the veterinarian did have reasonable grounds. This was because, in effect, he had acted on instructions from the Department. Palmer J. said at [116]: Clearly enough, Dr Salmon himself had reasonable grounds for making the representations as at 28 August. The evidence is uncontradicted that he made those representations honestly and on the basis of what he had been told by his superior, Mr Roe. Mr Roe was the person properly authorised to convey to Dr Salmon the Department's attitude to the Plaintiff's proposal. 280 The foregoing passage is apposite to the position of Ms. Mansfield. If she did make the representations alleged against her, she did so based on what she had been told to say by Mr. Arcon or by other senior officers of Express Australia. 281 In relation to the Minimum Payments Representations, it was alleged that Ms. Mansfield had made a joint presentation concerning the proposed Victorian MMF business at the Langham Hotel meeting. It was further alleged that Ms. Mansfield highlighted key points. For the reasons already given, I am satisfied that Ms. Mansfield did not make any of these alleged representations at the Langham Hotel. I otherwise, for the reasons already given, reject the proposition that Ms. Mansfield made the Individual Respondent Minimum Payments Representation. 282 The case against Ms. Mansfield should be dismissed. Again, the issue of her accessorial liability is addressed below.

The claims against Scutts Junior 283 The applicants pleaded that Scutts Junior made the Minimum Payments Representations and the Individual Respondent Minimum Payments Representation. They specifically allege that Scutts Junior in early March 2016 took Mr. Patel through the Shareholder Proposal Booklet, drawing to his attention in particular pages 11, 12 and 15 and stating that if one were to purchase a 1.5% share for close to a $100,000 investment, the purchaser would make a return of $346,000, in addition to getting a 2% per month guaranteed minimum payment. Scutts Junior did not deny that he had made this representation to Mr. Patel. 284 However, for the reasons given in relation to Mr. Arcon, I am not satisfied that Mr. Patel relevantly relied upon statements made by Scutts Junior. That is because he was not persuaded by them. Rather, Mr. Patel negotiated a different deal at the QPO café. 285 I otherwise, for reasons already given, reject the proposition that Scutts Junior made the Individual Respondent Minimum Payments Representation. 286 The case against Scutts Junior should be dismissed. I shall deal with his accessorial liability below.

The claims against Scutts Senior 287 The applicants pleaded that Scutts Senior engaged in misleading or deceptive conduct when he allegedly made the Guaranteed Income Representation, the Capital Gain Representation, the Minimum Payments Representations and the Individual Respondent Minimum Payments Representation. This claim was pressed against Mr. Rhys Scutts in his capacity as executor of the estate of Scutts Senior. 288 The first two representations were alleged to have been made by Scutts Senior at the 2015 Loganholme meeting or by his adoption of what Mr. Arcon had allegedly said at that meeting. I otherwise have already described what Scutts Senior is alleged to have said at that meeting. Scutt Senior's involvement in the Minimum Payments Representations would appear to be limited to the placement of his electronic signature in the Shareholder Proposal Booklet and the authorisation of its provision to Mr. Patel. 289 The reasons I have given in rejecting the claims against Mr. Arcon are equally applicable to Scutts Senior. In relation to the claims made about what was said at the 2015 Loganholme meeting, I am not satisfied that the applicants have discharged their onus of proof concerning what they allege Scutts Senior said in circumstances where Scutts Senior is not able to contradict them. I am otherwise satisfied that Scutts Senior, together with Mr. Arcon, offered to address Mr. Patel's concerns about the risk of not being paid in the future by franchisees within his territories by offering to enter into the side agreement with a promise from Express Australia to pay guaranteed income. As for Scutt Senior's participation in authorising the Shareholders Proposal Booklet to be disseminated, for reasons already given, the representations made in that booklet did not induce Mr. Patel to purchase shares in Express Victoria. 290 I otherwise, for reasons already given, reject the proposition that Scutts Senior made the Individual Respondent Minimum Payments Representation. 291 The case against Scutts Senior (and thereby his estate) should be rejected. I shall deal with his accessorial liability below.

The case against Mr. Roberts 292 On 19 March 2019, I granted default judgment against Mr. Roberts as the sixth respondent: Cash Bazaar Pty Ltd v. RAA Consults Pty Ltd [2019] FCA 450. That was because of the failure of Mr. Roberts to participate in any way in the proceedings. I directed that damages be assessed by a Registrar of this Court. That has not yet taken place as it required the Court to make certain findings and assessments. 293 The judgment entered against Mr. Roberts was interlocutory in nature. I have the power to set it aside. Rule 39.05 of the Federal Court Rules 2011 (Cth.) relevantly provides: The Court may vary or set aside a judgment or order after it has been entered if: … (c) it is interlocutory; … 294 As Besanko J. observed in Keynes v. Rural Directions Pty Ltd (No 4) [2011] FCA 304, in considering an application to set aside a judgment made pursuant to s. 31A of the Federal Court of Australia Act 1976 (Cth.), the finality of litigation is important. It means that the jurisdiction to set aside an interlocutory judgment should be "exercised with great caution". Besanko J. referred to the following passage from the judgment of Toohey, Gaudron, McHugh, Gummow and Kirby JJ. in De L v. Director-General, NSW Department of Community Services [No 2] (1997) 190 C.L.R. 207 at 215: The power of this Court to reopen its judgments or orders is not in doubt. The Court may do so if it is convinced that, in its earlier consideration of the point, it has proceeded 'on a misapprehension as to the facts or the law', where 'there is some matter calling for review' or where 'the interests of justice so require'. It has been said repeatedly that a heavy burden is cast upon the applicant for reopening to show that such an exceptional course is required 'without fault on his part', ie without the attribution of neglect or default to the party seeking reopening. By such expressions of the power to reopen final orders, courts seek to recognise competing objectives of the law. On the one hand, there is the principle of finality of litigation which reinforces the respect that should be shown to orders, final on their face, addressed to the world at large and upon which conduct may be ordered reliant upon their binding authority. On the other hand, courts recognise that accidents and oversights can sometimes occur which, unrepaired, will occasion an injustice. In the case of a final court of appeal, such as this Court, that injustice may be irremediable, unless the Court itself, acting promptly, is persuaded to reopen its orders so as to afford relief in the exceptional circumstances of the case. 295 The issue is whether it is appropriate for the interlocutory judgment to stand now that I have heard all of the evidence and legal argument and made findings about the involvement of Mr. Roberts. I have made a number of findings of fact and law which potentially undermine the integrity of that judgment. For example, the applicants pleaded that Mr. Roberts made the Capital Gain Representation. However, since the giving of the default judgment, I have found that no RMF agreements were ever validly entered into. As a result, Cash Bazaar never held an asset whose value could ever grow. I have also in this judgment placed no reliance on the evidence of Mr. Dang because of the text message he sent (described above). I did not know about that text message at the time of giving default judgment. Nor was I then aware of the inconsistencies between the earlier emails sent by Mr. Roberts and the subsequent RMF Booklet and the terms of the 10 purported RMF agreements signed by Mr. Patel. 296 No attention was paid to this issue at trial. It was of no interest to the other respondents. And the applicants presumably paid no attention to it because they had their judgment. In these circumstances, I think that procedural fairness requires that I give the parties 21 days to file written submissions about what findings should be made about the position of Mr. Roberts having regard to the findings of fact I have made. My order will be permissive. That is because the other respondents may not have any interest in making submissions about Mr. Roberts.

Accessorial Liability 297 The applicants also claimed that Mr. Arcon, Scutts Senior, Ms. Mansfield and Scutts Junior were "involved" in Express Australia's and Express Victoria's alleged contraventions of s. 18 of the A.C.L. for the purposes of s. 236 of the A.C.L. The fact that I have declined to order any relief against Express Australia, and the fact that Express Victoria has ceased to exist, are no bars to an order for damages against the remaining individuals if they are found to be accessorily liable for contraventions committed by either company. The applicable authorities were summarised as follows by Spender J. in Australian Competition and Consumer Commission v. Black on White Pty Ltd (2001) 110 F.C.R. 1 at 14 [49]-[51]: In Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681, a claim for damages was made against a corporate respondent and against individuals by way of accessorial liability under ss 75B and 82 of the Act. The corporate applicant had been dissolved by the date of trial, and the action did not proceed against the corporate applicant. Burchett J said (at 683): "... At the hearing, it was accepted by all other parties that the first respondent had been dissolved and the case proceeded against the second and third respondents only. It was not disputed that an action may be maintained against individuals alleged to have been involved in a contravention of s 52, within the meaning of s 75B, although proceedings are not pursued against the corporation which is the principal party to the contravention: Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6 at 8-9; Cooper and Dysart Pty Ltd v Sargon [1991] 5 WAR 472 at 487-488; (1991) 4 ACSR 649 at 664, per Walsh J (with whom Pidgeon J agreed) ..." In Matheson Engineers Pty Ltd v El Raghy [(1992) 37 FCR 6], French J held that it was open to an applicant in proceedings for contravention of s 52 of the Trade Practices Act 1974 to sue only the natural person said to be involved in the relevant contravention, without joining the primary corporate contravenor. It was submitted on behalf of the fourth respondent that both Richardson [&] Wrench and Matheson could be distinguished. True it is that in Matheson the primary corporate contravenor was still in existence, and in Richardson [&] Wrench the claim was a claim for damages pursuant to s 82 for contravention of s 52 of the Act; but there is no reason in principle why the fact that a principal offender or contravenor ceases to exist, extinguishes the liability of a party that was, until that event, liable as a s 75B accessory. If a person aids, abets or is knowingly concerned in the commission by a natural person of a crime, the accessorial liability of that person does not cease on the death of the principal offender. 298 I have found that Mr. Arcon, Scutts Senior, Ms. Mansfield and Scutts Junior did not engage in misleading or deceptive conduct whether in their own right or on behalf of Express Australia. It follows that Express Australia did not engage in any misleading or deceptive conduct in respect of which any of these individuals were involved. As such, those individuals cannot be said to have been involved in the misleading or deceptive conduct of Express Australia. 299 I have also found that Mr. Arcon, Scutts Senior, Ms. Mansfield, and Scutts Junior did not engage in misleading or deceptive conduct whether in their own right or on behalf of Express Victoria. It follows that Express Victoria did not engage in any misleading or deceptive conduct in respect of which any of these individuals were involved. As such, those individuals cannot be said to have been involved in the misleading or deceptive conduct of Express Victoria. 300 The foregoing conclusions in respect of accessorial liability are not affected by the possible findings that may be made about the position of Mr. Roberts. That is because none of the aforementioned individual respondents were said to have been involved in the requisite sense in the representations made by Mr. Roberts to Mr. Patel.

CONCLUSION 301 It follows, for the foregoing reasons, that the claims against Mr. Arcon, the estate of Scutts Senior, Ms. Mansfield and Scutts Junior should be dismissed. Ms. Mansfield and Scutts Junior are also entitled to an award of costs in their favour. Leave to make submissions concerning Mr. Roberts should be given. I certify that the preceding three hundred and one (301) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.

SCHEDULE OF PARTIES VID 1348 of 2017 Respondents Fourth Respondent: RHYS SCUTTS IN HIS CAPACITY AS THE EXECUTOR OF THE ESTATE OF MR. PETER SCUTTS Sixth Respondent: LLOYD ROBERTS Seventh Respondent: JAI MANSFIELD Eighth Respondent: ROSS SCUTTS