De Costi Seafoods (Franchises) Pty Limited and Anor v Wachtenheim and Anor

Index Heading Page number I. Introduction 5 II. Factual background 6 III. The alleged representations 8 A. General matters 9 (a) Oral representations 9 (b) Form of pleaded representations 11 (c) Credit of Mr Wachtenheim 12 (i) Mr Wachtenheim's memory 12 (ii) Mr Wachtenheim's dishonesty 15 B. Specific representations 23 (a) First Theodore representation 23 (i) The particulars 24 (ii) Various amended pleadings 27 (iii) Corroborating evidence 28 (iv) Mr Wachtenheim's and Mr Theodore's loan repayments 35 (v) Other matters that render the first representation unlikely 37 (vi) Conclusion 39 (b) Second Theodore Representation 39 (c) Third Theodore Representation 41 (d) Fourth Theodore Representation 43 (e) Fifth Theodore Representation 44 (f) Sixth Theodore Representation 45 (g) Seventh Theodore Representation 47 (h) First Costi Representation 47 (i) Second Costi Representation 48 (j) Third Costi Representation 49 (k) Further representations 50 C. Conclusion 51 IV. Misleading conduct 51 V. Reliance 64 VI. Damages 77 VII. The section 84 point 85 VIII. Unconscionable conduct 89 IX. Breach of contract 94 (a) Implication of term 94 (b) Breach 97 (c) One final term 102 X. Conclusion 103

I. Introduction 1In November 2004 Mr Serge Wachtenheim purchased a seafood retail business. At the same time he became a franchisee by entering a franchise agreement with De Costi Seafoods (Franchises) Pty Limited ("Franchises"). Mr Wachtenheim claims that he entered those transactions as a result of representations by Franchises and related companies and persons (together "De Costi"). Those representations were said to constitute misleading and unconscionable conduct. Apart from one insignificant exception, I am not satisfied that any of the representations were made. 2Mr Wachtenheim also claims that certain alleged terms of the franchise agreement were breached, but that claim is also rejected.

II. Factual background 3In about July 2003, Mr Wachtenheim became interested in the possibility of becoming a De Costi franchisee. An opportunity arose to obtain a franchise at Camden. He visited a vacant, undeveloped shop at Camden where he met Mr George Costi, an owner of De Costi Seafoods (Holdings) Pty Limited ("Holdings") and Franchises (together "De Costi Seafoods"). He visited De Costi Seafoods headquarters at Lidcombe and also sought some advice from his brother-in-law, a business consultant named Barry David Shnider ("David Shnider"). Mr Wachtenheim decided not to proceed with the franchise at Camden. 4In about June 2004, Mr Wachtenheim was told that a De Costi franchise at Dee Why may be available at a price of $450,000. 5The business at Dee Why was owned by a company known as "De Fish Dee Why", the shares in which were owned by Frank Theodore and Con Costi, two employees of Holdings. Mr Con Costi was the adult son of Mr George Costi and his wife, Mrs Androulla Costi. Mr Theodore was Mrs Costi's brother. 6In June 2004 Serge Wachtenheim spoke to Frank Theodore about purchasing the Dee Why business for $440,000. Mr Wachtenheim again enlisted Mr Shnider's assistance. Some financial documents were received which Mr Shnider analysed. Mr Wachtenheim asserts that the representations were made by Mr Theodore and Mr George Costi at this time. 7With Mr Shnider's assistance, Mr Wachtenheim applied for finance for the purchase. He met with a finance broker named Mr Val Lorenzelli. Documents were provided to Mr Lorenzelli. Mr Wachtenheim received by a fax dated 13 August 2004 confirmation of finance approval from Westpac. 8The Westpac approval contemplated monthly payments of $7,795 on a facility of $440,000. Mr Wachtenheim was not content with some of the terms. The loan was not accepted. 9Mr Wachtenheim sought the assistance of another finance broker, Mr Kel Smith. On 25 August 2004 Mr Wachtenheim received approval for a facility with the National Australia Bank. The letter of approval provided indicative repayments of $5,348.73 per month for the 10-year business loan of $440,000, and a further $2,704.28 per month on a refinanced home loan of $423,000. The ten-year business loan proposal was adjusted to allow interest only payments of about $2,700 per month. This loan was ultimately accepted. 10From about August until November 2004 Mr Wachtenheim spent about three months working in the Dee Why store, learning its operations. This work was undertaken under the direction of the store manager, Mr Konal Sharma. 11On 16 November 2004 Mr Wachtenheim signed the purchase agreement and the franchise agreement, and his corporate vehicle, Deist Safety Equipment Australia Pty Ltd ("Deist") paid $440,000 for the business. Mr Sharma remained employed in Mr Wachtenheim's business. 12The business seemed to perform well for Mr Wachtenheim in the initial months after the purchase. According to Mr Wachtenheim, he was ordering more fish then had been ordered when Mr Theodore and Mr Con Costi owned the business, he was selling all of the fish he ordered at the recommended price and he did not have any wastage. He met his mortgage obligations, made payments to Holdings for the fish product he ordered, and paid franchise fees to Franchises. 13However, in time Mr Wachtenheim fell into arrears with the payments to De Costi Seafoods. He was being pressed for payment and consulted a solicitor in December 2005. In August 2006, 21 months after the purchase, Holdings ceased supplying seafood to Deist by reason of the unpaid invoices. The business ceased operating. 14In August 2006, De Costi Seafoods sued Mr Wachtenheim and Deist for unpaid monies under the franchise agreement and for unpaid invoices for seafood supplied. In 2007 Mr Wachtenheim filed a defence and cross-claim alleging misleading conduct, unconscionable conduct and breach of contract. As well as Holdings and Franchises, Mr and Mrs Costi, Mr Theodore, Mr Con Costi and Mr David Shnider were also joined to the proceedings as cross-defendants. 15The claim by De Costi Seafoods against Mr Wachtenheim has been separately disposed of, see De Costi Seafoods (Franchises) Pty Limited & Anor v Wachtenheim & Anor (unreported, District Court of NSW, Johnstone J, 12 December 2011). Franchises and Holdings each obtained judgment against Mr Wachtenheim in the amounts of $68,599.26 and $50,000 respectively. The enforcement of the judgment was stayed pending the determination of the cross-claim. The cross-claim is the subject of this judgment.

III. The alleged representations 16Mr Wachtenheim and his company Deist (the cross-claimants) asserted that the transactions with Holdings and Franchises came about as a result of various representations of the cross-defendants which constituted misleading conduct. It will be necessary to analyse each of these representations separately, although there are some features common to all of them.

(a) Oral representations 17A primary difficulty faced by Mr Wachtenheim is that all the alleged representations comprise oral statements in 2003 and 2004. Proof of them depends upon acceptance of the affidavit evidence of Mr Wachtenheim. The alleged representations were not replicated in any contemporaneous written document, nor were they recorded in any form of file note. None of the alleged representations appeared in a written form until February 2007 when the first version of the cross-claim was filed, and the representations in that pleading have changed markedly in the seven subsequent iterations. No affidavit supporting the representations was filed until June 2011, and no earlier statement or documentary record of the alleged conversations forming the basis of the representations was in evidence. 18In these circumstances, the words of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315, 318-319 have particular application. To prove a case: "...it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 19Mr Wachtenheim bears the onus or proof. In respect of each representation alleged, the Court "must feel an actual persuasion of its occurrence or existence": Helton v Allen (1940) 63 CLR 691 at 712. 20As was noted in Watson v Foxman [at 319], this: "...can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration." 21In BBB Constructions v Aldi Foods [2010] NSWSC 1352 at [6]-[10] McDougall J affirmed and adopted these principles. 22The principles espoused in Watson v Foxman apply equally in this case: "There is no contemporaneous document in evidence which supports the making of any such promise or representation as is relied on and no other satisfactory corroboration." (see Watson at [319]) 23Furthermore, there is no reference to misleading representations in early documents where, if the representations occurred, they might be expected to be recorded. In January 2006, Mr Wachtenheim was consulting a solicitor concerning the demands being made by De Costi Seafoods concerning outstanding payments. Mr Wachtenheim tendered correspondence with his solicitor. The documents reveal some concerns of Mr Wachtenheim but reveal no complaints about incorrect representations or breaches as pleaded in the cross-claim. 24The Mr Wachtenheim's solicitor briefed counsel to advise. The instructions to counsel indicate a different representation from those pleaded: namely that the business generated $1,000 per week to the owners and $1,000 per week clear of tax to the manager. The documents indicate that Mr Wachtenheim sought advice "to just get out of the business" (Exhibit 1, Supplementary Material Volume (SM Vol) 1, p6252). 25Thus, not only did no documents support the alleged representations, but such documents as existed did not refer to any alleged representations and, by that omission, tended to prove that the alleged representations did not occur. 26The cross-claimants' submissions tended to confirm this problem. As an example, in a closely typed, 40-page final submission dated 17 October 2012, there was not a single specific reference to or identification of a document relied upon by the cross-claimants to support their case.

(b) Form of pleaded representations 27A second and related problem for Mr Wachtenheim is the form in which the representations are pleaded and particularised. The pleading is often turgid prose, most unlikely to record accurately the form of an oral representation. The particulars accompanying the representations sometimes gave a more readable, believable form of representation, but those particulars are in many respects different from, even inconsistent with, the pleaded representations. This disparity between the pleading and the particulars emphasizes the fallibility of the recollection of oral conversations long past and increases the difficulty of ascertaining precisely what was said, with all the "subtle nuances", so as to prove the representations pleaded. 28The particular differences between the pleadings and particulars are identified later in these reasons.

(c) Credit of Mr Wachtenheim 29As there was no written record of the representations alleged, Mr Wachtenheim's credit became a matter of critical importance. His credit was challenged in a number of respects.

(i) Mr Wachtenheim's memory 30Mr Wachtenheim was repeatedly challenged in relation to dates, the contents of conversations and the occurrence of events. On a number of occasions he referred to his faulty memory. He repeatedly conceded that he forgot things and that he was "shocking with dates". He claimed that an amended pleading resulted from a "flash of memory" (T1359/21-26). His recollection of the time his business started: "Q. December, what year? The end of December what year, sir? A. Well I started in 2000 and what, what was it, four, five, I can't remember. Q. Can't remember what time you started what year you started? A. 2005 I think it is. Q. This is your case, Mr Wachtenheim. A. Yes, I know it is my case. Q. This is a matter that you would easily recollect, I want to suggest to you, when you started working in this business that you acquired from Theodore and Con Costi, you can't even recall that? A. 2006? I thought it was late 2005, 2006, I mean--" (23/7/12, T1713/46-T1714/7) 31An inability to remember dates so long ago is unsurprising. The bigger difficulty is that Mr Wachtenheim in his affidavits deposed to a memory of events on particular identified days, when he had no such memory. His recollection was not as he had sworn it to be. These errors were not confined to dates. 32When challenged about whether a meeting was with "Tim" or "Michael", Mr Wachtenheim conceded that he "probably got confused with the two people at different dates" (T2034/19-31). Mr Wachtenheim placed Ross Cassimatis at a meeting when he could not have been present as it was prior to Mr Cassimatis commencing employment with De Costi (RC affidavit 21/3/12 at [43]). 33Another example is Mr Wachtenheim's meetings with the finance broker, Mr Val Lorenzelli. In a chronology Mr Wachtenheim created for his expert witness, Mr Gary Dent, Mr Wachtenheim refers to a meeting with Mr Lorenzelli on 1 September 2003, and another where tax returns were requested, on 28 June 2004. In his 10 June 2011 affidavit Mr Wachtenheim said that his first meeting with Mr Lorenzelli was on 6 August 2004, and (at [253]) "I don't recall what was said". In his 4 August 2011 affidavit Mr Wachtenheim purported to correct the date of this first meeting to 11 August 2004 (at [19]) and he recalled a specific request by Mr Lorenzelli for his 2003 and 2004 tax returns. The correspondence reveals that by letter dated 13 August 2004 Mr Lorenzelli had received loan approval from Westpac, a matter not possible if the first meeting was on 11 August 2004. The confusion with these matters is a matter adverse to Mr Wachtenheim's credit. 34Mr Wachtenheim sought to excuse this problem by attributing the particularity about dates, events and the contents of conversations to the help of others. The transcript (T2016/49-T2017/9) records the following exchange: "Q. So you are relying on - if it's not your diary, Nicole Dhillon's diary, is that what you're saying sir? A. Well, I'm not saying it's from a diary, but she - I've done my research with asking my wife, asking people that worked with me and most likely would've been Nicole Dhillon because she's been to all the meetings with me. Q. And did she look at her diary to help you with that date? A. I have no idea. But she's giving me information that was accurate. Q. How do you know it was accurate? A. Because we went together and she's got a very good memory, I haven't." and later (T2019/47-48) "The problem I have is that I rely on people's information to help me to remember certain dates". 35Thus, Mr Wachtenheim conceded that information and dates in his affidavits were based not (or not only) upon his own recollections, but upon reconstructions derived from more recent conversations with other persons. Contrary to Mr Wachtenheim's evidence Ms Dhillon also claimed to be hopeless with dates (eg T2802/8). Mr Wachtenheim's reliance upon information derived from others is also a matter that impacted adversely on the reliability of his evidence. 36Mr Wachtenheim's difficulties with dates is perhaps manifested most clearly by a comparison between the chronology Mr Wachtenheim prepared for Mr Dent (Ex 1, SM Vol 4, p7522-7528), forwarded to Mr Dent on 8 June 2011, and the primary affidavit of Mr Wachtenheim, sworn on 10 June 2011. Although these documents are basically contemporaneous, a comparison reveals substantial differences in the dates of events. 37The chronology also refers to a June 2004 diary. Although attempts were made to compel production of the diary, it was never produced and no satisfactory explanation of its absence was provided. 38Evidence was led by the cross-claimants that Mr Wachtenheim had been diagnosed as possibly suffering from Attention Deficit Hyperactivity Disorder ("ADHD"). It was unclear whether this condition played any role in Mr Wachtenheim's unreliable memory. I do not think that this is a question that I need to determine. A faulty memory, effectively admitted by Mr Wachtenheim on numerous occasions, must impact adversely on the reliability of his evidence, whether that faulty memory is attributable to a diagnosed medical condition or something else.

(ii) Mr Wachtenheim's dishonesty 39Mr Wachtenheim's faulty assertions of detailed recollections in his affidavits was not the only, or even the primary, basis for a challenge to his honesty. 40To proceed with the purchase of the Dee Why business in 2004 Mr Wachtenheim needed to access at least $440,000. His only option was to borrow these funds. Applications for finance required him to disclose his income. But his income in the years prior to June 2004 had been very modest, at least according to his tax returns. 41On 11 August 2004 Mr Wachtenheim provided to his accountant a handwritten document which to Mr Wachtenheim's knowledge grossly overstated his income. The purpose of the document was to enable the accountant to prepare a draft tax return, which Mr Wachtenheim could submit to a finance broker as part of an application for a loan. The accountant, Mr Birrell, prepared the draft tax return as instructed and it was submitted to the finance broker for the purpose of obtaining a loan to purchase the Dee Why fish business. 42Mr Wachtenheim admitted that he provided the false information to his accountant knowingly for this purpose. Six weeks later, Mr Birrell prepared another tax return which Mr Wachtenheim lodged with the Australian Tax Office recording an amount of income less than 10 per cent of that shown in the draft tax return. 43In his affidavit dated 4 August 2011, Mr Wachtenheim claimed that initially he had no recollection of these events. He said that when the draft tax return was shown to him he believed it to be a forgery. Then he saw his handwritten letter of instruction to his accountant. He deposed: "I took some time to try and recall how the handwritten note was sent to Mike Birrell and under what circumstances. After looking at the handwritten note for about ten minutes my memory was refreshed and I recalled the circumstances under which the document was prepared by me". 44In this affidavit Mr Wachtenheim then recounts three conversations, including a lengthy 25-paragraph conversation with Mr Shnider. In effect, the affidavit asserts that the false information was given by Mr Wachtenheim to his accountant on Mr Shnider's advice. Mr Wachtenheim asked Mr Shnider "Are you sure that I am not going to get myself into trouble?" and said that he accepted Mr Shnider's assurance. 45In submissions, Mr Wachtenheim sought to excuse this conduct on the basis that Mr Shnider told him that the overstatement "was not calculated to do any harm" and was "just to make him look better" (cross-claimants' submissions ("CCS") dated 17/10/12 at [29]), and that Mr Wachtenheim understood "the minor exaggeration of an income" did not involve "any real dishonesty" (CCS 17/10/12 at [31]). 46I do not view the conduct in this way. Far from excusing the conduct, Mr Wachtenheim's explanation showed him to be less than frank in his evidence and morally obtuse. His belief recorded in his affidavit of 4/8/11 at [88]) that "it did not matter about telling the bank...because...the bank would not be wiser or worse of [sic] for it" if the loans were serviced suggests at least the latter is true. 47The so-called "minor" exaggeration of his income involved an increase from $6,457 (which included $3,747.40 in Commonwealth social security payments) to $73,792, including no social security payments. Mr Wachtenheim believed that in order to obtain a loan of about $440,000 it was necessary that he misrepresent to the bank the level of his income. I cannot see it as anything other than fraud, a deliberate falsehood to procure a substantial loan. 48Further, the egregious nature of Mr Wachtenheim's conduct is magnified by him involving other parties - his accountant and the unwitting finance broker - in the fraud upon the bank. Whether Mr Shnider was also involved was a matter of dispute: there was no evidence apart from Mr Wachtenheim's account to link Mr Shnider to the falsehoods and Mr Shnider denied any knowledge of the matter. 49Mr Wachtenheim's conduct of misrepresenting his income to obtain financial accommodation was not limited to August 2004. There was evidence of a similar event in 2003. In an earlier application to Tonto Home Loans for a home loan of $350,000 in February 2003 Mr Wachtenheim signed a declaration that his gross income exceeded $137,680 per annum, whereas his tax return for 2003 showed a gross income of less than $6,000 and a taxable income of $3,413. There was no suggestion that Mr Shnider had any connection with that false declaration. 50This 2003 loan application indicates that Mr Wachtenheim was aware of the need to show a higher income if he was to secure a substantial loan. It casts doubt upon his claim that the exaggerated income shown in the 2004 draft return only occurred because of Mr Shnider's involvement. 51In respect of the false tax return, it was submitted that Mr Wachtenheim's "frank concession before the trial cannot be a foundation for a suggestion that Wachtenheim is predisposed to lie under oath in the witness box" (CCS 17/10/12 at [28]). I make no judgment about predisposition. However, whilst not evidence of prior false testimony, evidence of prior fraud or criminal dishonesty, particularly where it is part of the factual matrix of the litigation, is plainly relevant to a proper assessment of Mr Wachtenheim's credit. 52Furthermore, Mr Wachtenheim did not make a "frank concession" of this conduct. He made no reference to it in his first affidavit. In his second affidavit (4/8/11 at [9]) his "initial reaction" was to regard the document as a forgery by Mr Shnider even though he delivered his own handwritten instructions to Mr Birrell for the purpose of the draft tax return. When he saw his own letter upon which the return was based, he said that he "could not immediately recall when and under what circumstances I had prepared the document" (4/8/11 at [13]), even though, on his account, the circumstances involved the (ordinarily) memorable event of writing and signing a letter containing known falsehoods. Ultimately he sought to blame Mr Shnider for the handwritten instructions and the draft tax return, recording in detail a long conversation with Mr Shnider of which, on his account, he had no recollection moments earlier. This occurred at Mr Wachtenheim's solicitor's office. No other witness corroborated this account. 53Having heard Mr Wachtenheim give evidence on this matter, and reading his affidavit, I found his whole account incredible and fanciful. Rather than being a "frank concession" it was an invention in an attempt to explain his fraudulent conduct once it was discovered. 54Another matter indicating Mr Wachtenheim's dishonesty is that Mr Wachtenheim falsely maintained in an early affidavit that all of the receipts from the business were banked. In his affidavit dated 23 August 2011 at [3] Mr Wachtenheim said: The Second Cross-Claimant, Deist Safety Equipment Pty Ltd operated only one bank account whilst it operated the Dee Why De Costi fish shop. The bank account which had been operated was a National Australia Bank account being account number 082183575760500 (hereinafter "the bank account"). The bank account was a cheque account. Apart from the bank account the Second Cross-Claimant did not operate any other bank account. All of the takings from the operations of the De Costi fish shop at Dee Why were banked by me personally into the bank account which was opened at the National Australia Bank branch at Dee Why. All payments which were necessary to be made in relation to the operations of the De Costi fish shop at Dee Why were all made through the bank account, cheques were drawn on the bank account and all the operating expenses of the De Costi fish shop at Dee Why were paid by cheques drawn on the bank account including payments for the cost of produce from De Costis, wages and all other operating expenses. 55During the course of the pre-trial proceedings, this evidence was found to be false. Mr Wachtenheim conceded in oral evidence that this was a lie (T1531/3-15). He regularly took cash from the business to pay his own personal domestic expenses. Mr Wachtenheim said, "I've always paid my bills [in] cash wherever I go. That's - I'm old fashioned in that respect" (T1584/14-15). This conduct - "I paid my bills and I took $500" - was said to be in the order of $1,500 per week (T1578/21). The bills included personal expenses of rates, electricity, house mortgage, gas, food, groceries and petrol for his personal car (T1532/22-30, T1583/45, T1583/49-1584/8). The amount taken was at least $150,000 perhaps $200,000 (T1460). Mr Wachtenheim commonly received a weekly cheque for $500 wages (exhibit 11) as well as taking a wage from the till before the takings were banked (T1579/10-13). 56These amounts drawn from the business were not banked into the Deist account. Mr Wachtenheim may have been entitled to draw whatever amounts he chose from the business. But these cash drawings were not revealed to his accountant and were not brought to account for the purpose of his personal tax returns, the returns of Deist, or for calculation of royalties. It also enabled Mr Wachtenheim to present a lower gross profit in these proceedings, understating the revenue from the Dee Why store. 57Other receipts of the business were not recorded in its accounts. Mr Shnider paid $30,000 to reimburse Deist for funds wrongly taken by a member of Mr Shnider's family. Mr Wachtenheim deposed to having banked this reimbursement into the Deist account from which the funds had originally been taken (10/6/11 at [493]) but the bank records establish that the money was not deposited into the Deist account and Mr Wachtenheim conceded (T1796/20) that it may have been deposited "straight to the home loan". 58When these withdrawn amounts were discovered, Mr Wachtenheim's solicitor, Mr Muriniti, sought to enlist the accountant, Mr Birrell, and Mr Dent (two of the plaintiff's expert witnesses) in providing an explanation. Mr Murinti's emails concede the significance of this non-disclosure on Mr Wachtenheim's credit: "If the figures can now be recalculated and a fresh assessment of the business undertaken in light of the additional money which was taken out of the business and not accounted for previously and Serge ... and you are also able to re-swear an Affidavit to correct the omission, we may just be able to save Serge's credibility" (Ex 1, SM Vol 1, p6188) "After discussing the matter at length with Wachtenheim what we have been able to determine is that the $150,000 can be account by virtue of the fact that Wachtenheim was taking money out of the cash register to pay his wages and living expenses and failed to appreciate that since he was taking money out of the cash register, he needed to tell you that he had been taking money out of the cash register" (Ex 1, SM Vol 1, pp6190-6191) "We have discussed the matter with Wachtenheim and he agrees that this is the only characterisation that can be given to the money that he took from the cash register over and above his wages to pay living expenses which his wages were not adequate to meet". (Ex 1, SM Vol 1, pp6190-6191) "It is important the accounts be amended to account for the missing money as soon as possible in order to ensure that Serge's credibility is not damaged or permanently impaired ...we should be most grateful if you could give this matter your urgent attention" (Ex 1, SM Vol 1, pp6190-6191) "...we are extremely concerned about this development not least for the reason that Wachtenheim has been ordered to a mediation on 9 December 2011 and we believe that the De Costi are going to play the card of the unreported sales at the mediation to embarrass and intimidate our client and to damage his credibility permanently" (Ex 1, SM Vol 3, pp7230-7231) 59Mr Wachtenheim also withdrew substantial amounts from the Deist accounts during the concluding months of the business, including $35,000 by cheque on 20 September 2006, about three weeks after the business ceased operating. Transfers by Mr Wachtenheim from the Deist account for purposes which bore no connection to business expenses totalled almost $65,000. This amount does not include the $150,000-$200,000 taken in cash and the $30,000 repayment by Mr Shnider that was deposited in Mr Wachtenheim's personal account rather than returned to the Deist account. 60These amounts, totalling as much as $300,000, affect the veracity of the financial losses claimed by Mr Wachtenheim. But for present purposes they display the giving of false evidence by him. Although the false affidavits were corrected before trial, the solicitor's emails, quoted above, illustrate that these corrections were prompted by a recognition that the cross-defendants were aware of the false evidence, rather than because of a desire in Mr Wachtenheim to correct an innocent mistake. 61An amount of $300,000 would represent more than 16 per cent of the total turnover, over $14,000 per month over the 21 months of the business. The withdrawal of that amount must have had a substantial, adverse impact on the recorded cash flow and profitability of the business. Yet Mr Wachtenheim purported to record complaints of low revenue in his first affidavit without once referring to his substantial unrecorded drawings. 62There were other troubling examples in Mr Wachtenheim's evidence. He asserted that in respect of the cash and benefits provided to his manager, Andrew Osborne, that he had "quite recently" paid the tax (T1456/47-48) "just a few weeks ago" (T1606/32-33) and had a receipt for the payment. When a call was made for the receipt, Mr Wachtenheim retracted his answer (T1607/5-11) and eventually conceded his answer was a lie (T1610/42-T1611/22). 63Mr Wachtenheim also gave oral evidence of very poor quality product, of the need to sell inedible product at a discount and of late and non-existent deliveries, even though the franchise system gave Mr Wachtenheim the opportunity to record and return product, not only for reasons of poor quality but also for reasons of over ordering. Mr Wachtenheim availed himself of that entitlement. The records in evidence indicate that there were relatively few occasions when Mr Wachtenheim rejected poor quality product and that on a number of occasions he returned product because he had ordered too much. Apart from the few returns, the documentary record does not include a single written complaint by Mr Wachtenheim of poor product, late deliveries, missed deliveries or the need to sell out-of-date product at a discount. In these circumstances, Mr Wachtenheim's evidence on this matter manifested a lack of concern with his obligation to be accurate and truthful to the best of his ability. 64Mr Wachtenheim claimed to be commercially inept, unable to understand figures and documents. But his fax communications revealed a man comfortable in dealing with financial matters. His handwritten notes on a letter of offer dated 13 August 2004, criticizing various components of a proposed financial transaction, revealed him to be someone who had an understanding of financial transactions (ex 1, SM Vol 1, p6344). 65Mr Wachtenheim denied having and using (and even being able to use) a fax machine, a matter crucial to his attempt to blame Mr Shnider for much of the correspondence. Then he asserted that his wife had a fax machine, an assertion inconsistent with Mrs Wachtenheim's evidence. He later accepted that Mr Shnider may have given him a fax machine. Mr Wachtenheim's diary contained references to "fax" and "fax to" indicating his tasks. But he said he "may" have faxed documents from the post office. He was ultimately forced to concede that he did use a fax machine. He quoted his own fax number as a reason for denying a certain facsimile document, before recognizing that the facsimile document bore the number he had quoted. The evidence showed regular use of the facsimile machine from his home in August and September 2004. His denials concerning his use of, and ability to use, a fax machine were, in my view, knowingly false evidence. 66In other respects Mr Wachtenheim's oral evidence was unsatisfactory. He was unwilling to relinquish ownership of any terms in his affidavits and pleadings, even where it was clear he had no real understanding of their meaning. Similarly he asserted that could not meet loan repayments (T1381/19-42) but when shown that he did, asserted (for the first time and without any corroboration) that he received family help (T1382/6). This indicated his oral evidence was motivated by what would help his case, as he understood it, rather than the truth. 67For all these reasons, I formed the view that Mr Wachtenheim was entirely discredited as a witness and that his evidence could not be relied upon. This conclusion creates a substantial impediment to Mr Wachtenheim establishing the oral representations alleged.

B. Specific representations 68There are matters specific to many of the particular representations alleged by Mr Wachtenheim which mitigate against acceptance of them. These matters require that each specific representation be considered.

(a) First Theodore representation 69The first representation alleged by Mr Wachtenheim (found in subparagraph 8(a) of the sixth further amended cross-claim ("6FACC")) was that in "about June/July 2004" at Dee Why Frank Theodore represented to Mr Wachtenheim: "(a) The fish shop business conducted on an arm's length basis or as a franchise shop with [Franchises] and [Holdings] as supplier of wholesale fish would return a profit permitting [Franchises] to "take home" $1,000 per week after discharge of all business expenses and mortgage repayments of approximately $7,800 per month under circumstances that the fish shop business was under full management ("the predicted profit") and would return to [Mr Wachtenheim] more than the predicted profit if the fish shop business was not under full management in that [Mr Wachtenheim] worked in the shop (a future matter within the meaning of section 51A Trade Practices Act 1974 ("TPA") and section 41 Fair Trading Act 1987 ("FTA")("a future matter")."

(i) The particulars 70Apart from specifying the location and approximate date of this representation, the particulars following this paragraph of the cross-claim identify oral statements made by Mr Theodore to Mr Wachtenheim which, the Court must infer, are said to constitute the representation set out above. The oral statements alleged to have been made were in the following terms: "(i) The fish shop business was making profits out of which [Mr Theodore] made mortgage repayments of approximately $7,800 per month and was able thereafter to take home $500 per week and Con Costi (a co-director) took home $500 per week. (ii) [Mr Wachtenheim] would be able to make his mortgage or loan repayments from the profits of the business and still have $1,000 to take home. (iii) When [Mr Wachtenheim] acquired the business he would be able to make more money than $1,000 per week after making loan or mortgage repayments of approximately $7,800 per month if [Mr Wachtenheim] worked in the fish shop business." 71Mr Wachtenheim also asserts that the representation is also implied from: "(i) The fact that to the knowledge of the First, Second, Third, Fourth, Fifth and Seventh Cross-Defendants [Mr Wachtenheim] obtained a loan or loans in the sum of approximately $900,000 including a loan facility of $440,000 dedicated to the purchase of the franchise business ("the $900,000 loan package") from the National Australia Bank on the basis of his understanding of the profitability of the business and the silence of those Cross-Defendants in relation to that matter." 72In a number of respects the particularised oral statements do not support the representation alleged. 73First, phrases in the pleaded representation are absent from the particularised statements. The phrases in the pleaded representation "conducted on an arm's length basis" or "as a franchise shop" are not found in the statements alleged to have been made in the particulars. There is no reference to "[Franchises] and [Holdings] as supplier of wholesale fish", the words "would return" or "all business expenses" are not in the oral statements. There is no reference to "[Franchises]" being able to take home amounts, nor do the phrases "under circumstances that the fish shop business was under full management" or "if the fish shop business was not under full management" appear. 74Secondly, the first particular is of no direct assistance because it concerns the performance of the business under Mr Theodore and Mr Con Costi, not the predicted performance under Mr Wachtenheim nor, if it were intended, the take home profit of Franchises. 75Thirdly, the prediction in particular (ii) is that the business would produce profits to pay Mr Wachtenheim's mortgage or loan repayments plus $1,000 drawings. No reference is made to Mr Wachtenheim's mortgage of $7,800 per month, or indeed to any specific repayment obligation. 76The fourth particular concerning the conduct from which the representation is implied is also problematic. The knowledge of the first, third, fourth, fifth and seventh cross-defendants or their silence says nothing about the content of a representation by the second cross-defendant, Mr Theodore. As to the knowledge of Mr Theodore, it is alleged that he made the representations that Mr Wachtenheim would make from the profits of the business mortgage payments of $7,800 a month plus $1,000 a week because Mr Theodore believed that Mr Wachtenheim had obtained a loan of $900,000 on the basis of Mr Wachtenheim's understanding of the profitability of the business. This proposition cannot be correct. Knowledge of the level of debt of a person is not equivalent to a representation that the person will be able to meet loan repayments of $7,800 a month, especially in circumstances where there is no allegation that the indebted person has loan obligations (known or unknown) of $7,800 per month. Representations require conduct, not mere belief, at least in the absence of "reasonable expectations of disclosure" (a matter neither pleaded nor submitted by the cross claimant). 77This divergence between the particularised oral statements and the alleged representation impacts adversely on the ability of the Court to be satisfied that the representation was made in the form alleged. 78The substance of the alleged representation appears to be a prediction about the fish shop's likely performance under Mr Wachtenheim's ownership, namely that the fish shop business would produce a profit allowing Mr Wachtenheim to meet mortgage repayments of $7,800 per month, plus allow drawings of $1,000 per week, and more if Mr Wachtenheim saved management costs. 79Mr Wachtenheim, through his counsel, submitted (plaintiffs' submissions ("PS") 17/10/12 at [9]) that the substance of the representation is that the available cashflow was $12,000 per month. This submission may be correct in determining whether the representation was misleading in relation to Mr Theodore's business. That is, if the business was producing $12,000 a month cashflow, a statement that there were monthly mortgage repayments of $7,800 and that monthly drawings of $4,200 could be paid from the cashflow of the business is not materially misleading. Whether the funds were actually used for that purpose would not be of significance to Mr Wachtenheim. 80However, the actual words of the conversation alleged are significant in assessing whether those words were actually spoken. I do not accept the cross-claimants' submission that even if a representation about $7,800 per month mortgage seems unlikely "the substance of the representation was $12,000 per month and that is the important matter" or that the reference to $7,800 was a "small matter". The terms of the representation alleged are crucial in determining whether the Court should be persuaded that it was actually made. As appears below, it is also important to the corroboration asserted by the cross-claimants.

(ii) Various amended pleadings 81I referred earlier to the absence of documentary support for the alleged representations. One source of earlier recollections of Mr Wachtenheim is found in the pleadings. The current pleading is the sixth further amended cross-claim, the eighth filed version of the claim maintained by Mr Wachtenheim. 82The original cross-claim was filed on 5 February 2007. It makes no reference to any representation by Mr Theodore, or anyone else, about a $7,800 per month mortgage. The representation alleged by Mr Wachtenheim in that cross-claim was: "The fish shop business conducted on arm's length basis with the [Franchises] as supplier of wholesale fish would return a profit of $1,000 per week under circumstances that the fish shop business was under full management." 83The particulars of that representation identify an oral representation by Mr Theodore at Dee Why in or about August 2004 and also rely upon trading figures supplied by Mr Theodore at about the same time. 84It was not until the middle of January 2008, approximately three and a half years after the oral representations were allegedly made, that the reference to mortgage repayments of $7,800 a month finds an appearance in the amended defence and cross-claim. No evidence was led to explain this difference between the earliest statement of the representation and those appearing in later versions. 85In my view, the absence of any representation about a mortgage for $7,800 a month in the first version of the cross-claim is significant evidence against Mr Wachtenheim's version of the representation.

(iii) Corroborating evidence 86Mr Wachtenheim swore nine affidavits in the proceedings. In his 10 June 2011 affidavit (the first of nine read at trial) Mr Wachtenheim says that in his first meeting with Mr Theodore he was told a price for the shop of $440,000. Mr Wachtenheim deposes to the following conversation having occurred on 7 June 2004 (10 /6/11 at [120], [133]-[135]): "Frank Theodore: Do you have a mortgage on your house Serge? Serge Wachtenheim: Yes I do, I owe about $400,000 which is secured over my house. Frank Theodore: You wouldn't believe it, I have a $400,000.00 mortgage on my house but then I had to go and borrow $400,000.00 to set us [sic] this business so I've got a total debt now of $800,000.00 which is about the same that you will need to borrow if you are going to buy my shop and I can guarantee you, you will be able to pay an $800,000.00 mortgage from the profits generated by this business and still take $1,000.00 home. I pay $7,800.00 per month for my mortgage, the business earns enough profit to support those repayments easily. We do about $24,000.00 per week in sales or [sic] gross profit on that is about $9,600.00 per week." 87Mr Theodore denies this conversation, and denies ever telling Mr Wachtenheim that he paid $7,800 on his mortgage from the business. No other witness gives evidence of this conversation. 88I accept that Mr Theodore may have mentioned his mortgage repayments to Mr Wachtenheim. This does not assist Mr Wachtenheim, for he needs to show with precision what was said. There is an evidentiary leap by the cross-claimants' submissions, moving from Mr Theodore making reference to his own mortgage to Mr Theodore saying he pays $7,800 on his mortgage and that Mr Wachtenheim will also be able to do so. 89Mr Wachtenheim also deposes to having told his business advisor, Mr Shnider, about Mr Theodore paying $7,800 on his mortgage, not in his conversation with Mr Shnider immediately after speaking with Mr Theodore, but on a later occasion. 90Mr Shnider denied ever being told that Mr Theodore was paying a mortgage of $7,800 per month. 91Mr Wachtenheim gave oral evidence about the representations by Mr Theodore. It does not support his pleaded case. He said: "Q. Now when you gave Mr Muriniti that entry, what now can you tell us "Frank represents" means? A. Well Frank was promoting the shop. Q. Yes, what words did he use? A. I'm sorry? Q. Well you say represents do you mean representations? A. Well he represented that he was the owner of the shop with Con, he was, you know, he was saying that it was a good shop and all that sort of thing." (27/7/12, T2050/38-47) "Q. --which your memory is more accurate in terms of recollecting. Tell us now what was represented to you according to that entry in mid-June 2004? A. From memory, what I can recall is that when I met Frank and when he were representing the shop he was saying that it was a good business, that he was - that after being - that it was making money, that it was making - he was taking $1,000 a week after all his expenses and he was telling me that he also - from memory I'm pretty sure he said that, you know, he was, he had a mortgage and he was paying several things. What I do remember clearly is that, yeah, I mean he was promoting the shop to be a good shop and that he wasn't too keen on selling it but he wanted to sell it. I ask him "Why do you want to sell this shop?", he said because it was too far to travel, I mean I can't recall all the promotion that he's done on the shop but it sounded very impressive." (27/7/12, T2051/10-22) 92Mr Wachtenheim deposes to another conversation with Mr Theodore on an occasion when Nicole Dhillon accompanied him. He says (10/6/2011 at [189]) that he told Mr Theodore that he had a mortgage of $400,000 and that he would need to borrow another $400,000 and that Mr Theodore replied: "I think I told you before that I also have a $400,000.00 mortgage on the house but then I had to go and borrow $400,000.00 to set up this business so now I owe $800,000.00. You will be able to pay an $800,000.00 mortgage from the profits made by this business and still take $1,000.00 home." 93According to Mr Wachtenheim, Mr Theodore also said (10/6/2011 at [192]) "I am making repayments of about $7,800.00 a month on the loans which are secured over my home" and "My mortgage payments are about $7,800.00 per month and the business generates enough income monthly for me to make that payment comfortably." 94Nicole Dhillon in her affidavit dated 15 April 2011 deposes at [47] to the following conversation between Frank Theodore and Mr Wachtenheim (see T2768/46): "We've just had one spectacular weekend where just on that weekend alone we made thousands of dollars profit just in one weekend. I am able to service my mortgage which cost me about $8,000.00 a month from the profits we generate from the store, pay myself a wage and pay all the outgoings. I'm laughing, we're doing really well, I am paying my mortgage and I am taking home $500.00 a week out of the shop for myself and Con is taking $500.00 for himself. This is after we paid all the operating expenses and we don't have to be here every day." 95Mr Wachtenheim responded, "Can you show me some figures?" Subsequently Mr Wachtenheim expressed his concern to Ms Dhillon saying "I've been trying to get some figures from Frank Theodore but I can't seem to get any figures from him." 96It can be seen that Ms Dhillon deposes to Mr Theodore referring to a different monthly repayment from that asserted by Wachtenheim. Mr Wachtenheim's account refers also to the capital value of the loan which is not mentioned by Ms Dhillon. Nevertheless, Ms Dhillon's evidence provides some support to Mr Wachtenheim's allegation. 97Mr Wachtenheim also deposes to another conversation in which Mr Theodore referred to making mortgage repayments of $7,800 in the presence of Mrs Wachtenheim. Mrs Wachtenheim (8/6/2011 at [11]) gave evidence of a conversation that occurred in her presence in approximately late June 2004 where Mr Frank Theodore is alleged to have said: "Serge, my mortgage cost me $7,800.00 per month which I pay from the profits from this business and I take home $500.00 per week. Con takes home $500.00 a week..." 98Mrs Wachtenheim does not depose to making any relevant contribution to this conversation. 99In Mr Wachtenheim's affidavit of 18 August 2000 (at [47]) he deposes to a conversation with George Costi where Mr Wachtenheim said: "I am going to need about $8,000.00 per month to pay these loans. David [Shnider] has told me that I can service those borrowings from the earnings of the business and Frank [Theodore] has also said the same thing. He has told me that he has had to borrow about the same amount as me and has the same repayment obligations." 100Mr George Costi denies this conversation. 101Accordingly, Mrs Wachtenheim and Ms Dhillon respectively give evidence of conversations where Mr Theodore makes mention of paying his mortgage of $7,800 per month, and $8,000 per month. On the other hand, Mr Theodore, Mr George Costi and Mr Shnider deny that any reference was made to Mr Theodore paying $7,800 or $8,000 per month. 102Ms Dhillon sought to buttress her evidence in the witness box by asserting in cross-examination that she had kept notes of the conversations recorded in her affidavits. When asked about those notes she said "I didn't keep them because I gave my affidavit and I saw no more need to keep the notes as one does". (T2769/45). 103She resisted answering the size of the paper on which the notes were kept, but when pressed as to whether it was A4 paper she said "Á4 it is". She indicated that her notes were about what "George Costi had said about Camden, right that's the note that I had" (T2770/27) then clarified that she also had "notes of the other matters" because "I am a school teacher. I like to keep notes, I like to record things that happen between people". 104When asked when she last saw the notes she said "I got them before I gave my affidavit, I revised my notes and then I went to give my affidavit." She said she still had copies of the notes when she made her affidavit on 15 April 2011 (T2772/45) and "I destroyed them as teachers do, once you have given your affidavit there is no need for notes because you will have your affidavit." She could not remember when she destroyed them "probably this year [2012]" and she still had notes on 15 April 2011, the date of her first affidavit. The notes, she said, recorded the conversations not word for word. She could not say if the notes recorded the date of the conversations, although she subsequently said dates weren't recorded: "I'm not a dates person, I teach languages, for me there is no need for dates, I don't teach the history part." 105She also testified: "I didn't go with the notes when I prepared the affidavit ... I destroyed my notes in December because I didn't think that I would be called up to do an affidavit. I think I was clearing my filing cabinet and I saw the notes, no need for them, because I didn't think I'd ever be called up to give an affidavit ... since I gave the affidavit at April 11, it must've been 2010, December 2010 .... December is the time when I have my holidays so I always do a bit of a clean up and I just got rid of them". (T2800/35-50. She said the main conversations she recorded were with George Costi (T2804/33). 106Thus, Ms Dhillon contradicted herself as to when she destroyed the notes, and whether they were used in the preparation of her affidavit. Ultimately she asserted that only parts of conversations in her affidavit were drawn from her notes (see T2820/50 - 2821/22) and that she destroyed her notes well before her first affidavit, when she found them in her filing cabinet while doing an annual clean up, even though the litigation was on foot. 107Apart from Ms Dhillon's oral testimony, there is no evidence that she ever possessed any notes. She makes no mention of them in her affidavits. She did not tell Mr Muriniti or Mr Wachtenheim of their existence. 108Like other witnesses in these proceedings, she received payments in cash upon which no tax was paid. But unlike other witnesses she refused to acknowledge that it warranted disclosure. She had not declared it, and she did not intend to do so, even though she accepted it was cheating (T2823/49-T2824/14). 109Ms Dhillon was not a persuasive witness. I do not believe that she ever possessed any relevant notes. In my view this evidence was concocted in a misguided attempt to assist her friend, Mr Wachtenheim. Even if she did have notes of relevant conversations, which I reject, I cannot see how they could assist the reliability of her affidavit when she destroyed them months before its preparation. 110Mrs Wachtenheim's evidence was also difficult to accept. In the witness box she claimed to have no recollection of Mr Wachtenheim's sources of income in June 2004 (T2506/26-28), which I think unlikely. She did not recall the level of her "mortgage" in June 2004 (T2500/24-26) but attributed her detailed recollection of a conversation between her husband and Mr Theodore eight years earlier to the striking coincidence that Mr Theodore's represented mortgage repayments were identical to her and her husband's obligations. This coincidence was non-existent: she did not have the repayment obligations attributed to Mr Theodore. In June no loan to buy the business had even been sought let alone approved. Further, the coincidence she claimed in the witness box and the conversation about it (that it was repeated three times) was absent from her affidavit evidence (T2509/5). 111Mrs Wachtenheim claimed to have a "crystal clear" memory of the conversation she heard that occurred some eight years earlier between Mr Wachtenheim and Mr Theodore, as recorded in her affidavit. I think that is most unlikely given the lapse of time. In any event her account in the witness box differed significantly from her account in her affidavits. 112In these circumstances, I was not persuaded that the evidence of either Mrs Wachtenheim or Ms Dhillon was reliable. 113Attacks were made on Mr George Costi's credit. Perhaps the most cogent point was that Mr George Costi claimed to have bought the business of Stephen Vial, a witness and former franchisee, for over $300,000 (T3941/36). The evidence did not verify this purchase price, although substantial payments were made. However, I was not satisfied that payments made to Mr Vial were for reasons other than Mr Vial's legal or moral entitlement arising from the sale of his business to De Costi. 114Mr Theodore's credit was also challenged. He said in his affidavit that he paid royalties in 2003 and 2004 but ultimately admitted that he did not. Mr Con Costi's evidence was similar. It was difficult to decide whether this was an honest mistake about a business they owned more than eight years earlier, or something more sinister. It caused me to be careful about accepting their evidence. 115On occasions Mr Theodore was adamant that certain things were not said, more adamant than perhaps the passage of time would allow. He was also attacked on the basis that he received $500 per week cash from the business, cash that he refrained, initially at least, from declaring as part of his income for tax purposes. This is a matter that indicates a tolerance in himself of some personal dishonesty. 116Notwithstanding these matters I was not persuaded that I should reject Mr Theodore's evidence. In other respects his evidence was persuasive and corroborated by documents. 117In any event, Mr Wachtenheim and Deist bore the onus of proof. Mr Theodore made no admission that the representation occurred. The rejection of his evidence could not supplement the deficiency in the cross-claimants' case.

(iv) Mr Wachtenheim's and Mr Theodore's loan repayments 118Neither Mr Theodore nor Mr Wachtenheim had mortgage obligations approximating $7,800 a month at any relevant time. 119At no stage in 2004 did Mr Wachtenheim have loan repayments of $7,800 a month. Thus, a representation that Mr Wachtenheim would be able to meet loan repayments of $7,800 a month does not correlate with the circumstances that existed at the time. 120Mr Wachtenheim did not have a mortgage of $800,000 at the time. It was not until November 2004 that Mr Wachtenheim incurred loan obligations arising from the purchase of the business, some five months after the alleged representation. Nor would a purchase be expected to increase his indebtedness by $400,000, when the purchase price was $440,000. 121In about mid-August 2004, some weeks after the representation was alleged to have been made, Mr Wachtenheim did receive correspondence indicating the approval of a business loan. The monthly repayments on that loan approval were stated to be $7,795. 122This document does not assist Mr Wachtenheim. It was created more than a month after the representation was alleged to have been made. The loan referred to in the document was a business loan only and did not cover his mortgage repayments. 123Further, it was a loan that Mr Wachtenheim saw as unattractive from the outset. He did not ever propose to accept it. On the letter advising of the approved loan, he had noted unsatisfactory aspects about the loan and had indicated reasons why he would not proceed with it. 124Moreover, Mr Wachtenheim placed no reliance on this document in these proceedings. His submissions (17/10/2012 at [45]-[50]) strongly reject any connection between the alleged representation concerning $7,800 per month and a business loan approval with repayments of $7,795 per month. 125Mr Theodore did not have mortgage repayments of $7,800 per month. Both his home mortgage and his business loan to fit-out the shop were each much lower than the $400,000 loans Mr Wachtenheim alleges that Mr Theodore spoke about. Mr Theodore's home loan (jointly with his wife) and his business loan together were less than $400,000. 126The evidence is clear that Mr Theodore and his wife received a payment of $2,729.44 each month, an amount that equalled the repayment obligations of Mr Con Costi in respect of his business loan. Mr Theodore's loan obligations were somewhat less than this amount, but for reasons of equity between the partners each received the same monthly sum. 127Of course it is possible that Mr Theodore could have exaggerated the size of the mortgage being serviced by the business in order to induce Mr Wachtenheim to purchase the business. But it did not seem to me to be likely. It would involve making false statements about two matters, Mr Wachtenheim's finances and Mr Theodore's, both of which could easily be shown to be false and neither of which were crucial features in the important issue of the profitability of the business. 128Thus the financial obligations of Mr Theodore and Mr Wachtenheim at the time of the alleged representation provide no support for the representation.

(v) Other matters that render the first representation unlikely 129A statement by Mr Theodore that he drew $7,800 per month to pay his mortgage raises other issues for Mr Wachtenheim. Mr Con Costi was Mr Theodore's equal partner in the business and thus had an entitlement to drawings equal to Mr Theodore. The alleged representation would thus suggest that approximately $15,600 was being drawn from the business each month, plus a further $1,000 cash per week for Mr Con Costi and Mr Theodore. Mr Wachtenheim never asserted a representation of drawings of this magnitude. 130Mr Wachtenheim did not attempt to use the representation for his own commercial advantage, such as by offering $400,000 to purchase the business rather than $440,000 (since his debt was represented to increase by only $400,000). On the contrary, he agreed to pay $440,000 for the business. It also seems unlikely that Mr Theodore would indicate $400,000 as the debt resulting from the purchase price when at all times he was seeking (and Mr Wachtenheim had agreed to) a purchase price of $440,000. 131Furthermore, how Mr Theodore came to be informed about Mr Wachtenheim's financial position (wrongly as it appears) was never explained. 132The cross-claimants "submitted beyond doubt" (17/10/2012 at [27]) that Mr Shnider was the genesis of the figure of $7,800 per month. Mr Shnider denies this and there is no evidence to indicate otherwise. There is also no evidence as to how Mr Shnider could have arrived at such a figure, either for Mr Wachtenheim's or Mr Theodore's mortgage, or how that led to a representation by Mr Theodore that he had a mortgage with repayments of $7,800 per month. 133Any statement by Mr Theodore that he had repayment obligations of $7,800 was incorrect, whether Mr Con Costi's obligations are taken into account or whether he was speaking of his obligations alone. The magnitude of the discrepancy between his own, or his and Mr Con Costi's obligations, and $7,800 a month is substantial. It was not something that Mr Theodore would likely be honestly mistaken about. Thus, if Mr Theodore did say that he had obligations of $7,800 a month, it would, in the circumstances, have been knowingly false, in other words a fraudulent misrepresentation. The principles in Briginshaw v Briginshaw (1938) 60 CLR 336 require convincing proof before the Court would accept that such a representation occurred.

(vi) Conclusion 134I am not satisfied that the First Theodore representation occurred. I reach this view because of both the general matters of concern I have recorded - the problems of oral representations, the form of pleading, and the various reasons why I do not accept Mr Wachtenheim's evidence - as well as matters of concern specific to this representation: its disparity with earlier versions of the cross-claim, its inconsistency with the surrounding objective factual matters and the absence of any reliable corroborating evidence.

(b) Second Theodore representation 135Mr Wachtenheim alleges in his cross-claim [8(b)] that Mr Theodore represented "That the fish shop business had generated the predicted profit on the basis of a mark-up providing for a gross profit martin [sic] of 40% on cost of wholesale supplies". Mr Theodore denied the representation. 136The "predicted profit" is a defined term being: "a profit permitting the First Cross-Defendant to "take home" $1,000 per week after discharge of all business expenses and mortgage repayments of approximately $7,800 per month under circumstances that the fish shop business was under full management." 137I have already rejected any representation based on $7,800 per month mortgage repayments. It follows that this representation must also be rejected as it contains this allegation. When this representation was first included in an earlier iteration of the cross-claim, the words "predicted profit" had a different meaning. It referred to a return of $1,000 per week. This is a matter that militates against acceptance of this representation. 138In other respects this representation differs from that which was originally alleged in 2007. There are a number of changes over time but perhaps the most significant is that the words "providing for a gross profit margin" were added, so that the representation as originally pleaded suggested a 40 per cent mark-up, rather than a 40 per cent gross profit margin (which would mean a mark-up of about 67 per cent). This particular correction does not cause me to reject the representation. Indeed, the reference to the "margin" rather than "mark-up" is more consistent with other evidence in the proceedings. But this change in the wording undermines the reliability of the words claimed to have been used. 139Proof of this representation is impacted adversely by several of the matters discussed in relation to the First Representation: the lack of any contemporaneous written document recording the representation, the passage of several years before the representation was recorded in an affidavit, the earlier versions of the pleadings recording a different representation, the uncreditworthy nature of Mr Wachtenheim's evidence for the various reasons given, and, to a lesser extent, the lack of precise correlation between the representation alleged and the particulars of what was said. 140It was not in contest that the Dee Why business, both before and after its purchase by Mr Wachtenheim, operated on the basis that the standard mark-up on the cost price of the fish was such as to indicate a gross profit of 40 per cent. In other words, as an example, fish costing the business $6 would have a recommended retail price of $10. But this standard mark-up of approximately 67 per cent varied in its implementation from product to product; sometimes the mark-up was less, sometimes greater. 141Thus, it is true that the business operated on the basis of a standard mark-up which provided for a gross profit margin of 40 per cent on the wholesale cost of the product. It would also not be surprising for Mr Theodore to have so informed Mr Wachtenheim: the wholesale price lists supplied by De Costi Seafood included a recommended sale price with the standard mark-up. But this is insufficient to establish the representation pleaded because of the reference to the business having "generated the predicted profit". That expression raises all the matters that caused me to reject the First Theodore representation. 142For those same reasons, I am not satisfied that the representation alleged in [8(b)] was made by Mr Theodore.

(c) Third Theodore representation 143Mr Wachtenheim alleges that Mr Theodore also represented "that the fish shop business had traded on the basis that it achieved a gross profit margin of 40%". There is no reference to this representation in the original version of the cross-claim and it is denied by Mr Theodore. 144This representation is said to result or be implied from oral statements made by Mr Theodore at Dee Why in June 2004. The relevant particularised statement adds the phrase "and on that basis produced the predicted profit". I have already given reasons why I have rejected the allegation of a representation of the predicted profit. These same reasons justify rejection of the particularised statement. Oddly, the particularised statement which makes reference to "the predicted profit" is not relied upon in the cross-claim to support the First Theodore representation concerning the predicted profit. 145The calculation of the gross profit margin depends on the cost of the goods sold. This would include the seafood product, but might also include ancillary products, like marinades, packaging and potentially also the 5 per cent fee for royalty and advertising. If these amounts, which increase directly and proportionally to turnover, are part of the costs of goods sold, then even sales at the recommended retail price would produce a gross profit margin below 40 per cent, to the extent of the royalties, advertising, packaging and marinades. Discussions about a 40 per cent gross profit margin would, without proof of the precise words used in context, result in ambiguity as to the calculation, as to the content of the cost of goods sold, and cause difficulty in determining whether any representation made was misleading. 146Mr Wachtenheim obtains no support for this representation from Mrs Wachtenheim or Ms Dhillon. Neither gave evidence of a representation of a 40 per cent gross profit margin. 147Mr Shnider gave evidence of an oral representation to him by Mr Theodore of a 40 per cent gross profit margin. Mr Shnider said that for a time in June 2004 (until he was provided with the financial statements, which showed a lower profit margin) he believed that the business generated a 40 per cent gross profit margin as a result of what was said to him by Mr Theodore. I found Mr Shnider to be a generally reliable witness. I think that it is likely that Mr Theodore did make reference to a 40 per cent gross profit margin in a conversation with Mr Shnider. However, I am not persuaded on the balance of probabilities that Mr Theodore said that the business achieved a gross profit margin of 40 per cent. To say that the business traded on the basis of a 40 per cent gross profit margin, meaning that this is the usual margin produced by the standard mark-up on the products, is a different representation. It alone would say nothing about what was achieved over the period of the business. 148In any event, this evidence does not assist Mr Wachtenheim. Mr Shnider did not regard this representation as persisting, since he disregarded it once he saw the profit and loss documents showing a lower gross profit margin. This occurred well before the purchase. Secondly, Mr Wachtenheim rejected any case based upon Mr Shnider's reliance. And thirdly, the evidence at best concerns a representation to Mr Shnider, it does not identify what Mr Wachtenheim was told by Mr Theodore. 149A reference by Mr Theodore to a 40 per cent gross profit margin would be unsurprising, but it leaves uncertain whether any representation was made that the business "achieved" a gross profit margin of 40 per cent. In circumstances where the alleged conversation occurred many years ago, and without any documentation to confirm or support the form of the representation alleged, and with profit and loss documents obtained by Mr Wachtenheim which showed the contrary, I am not satisfied that Mr Theodore represented that a 40 per cent gross profit margin was being achieved.

(d) Fourth Theodore representation 150Mr Wachtenheim alleges that Mr Theodore also represented that the business "would generate the predicted profit on the basis of a mark-up providing for a gross profit margin of 40% on cost of wholesale supplies". Mr Theodore denied the representation. I have already given reasons why any representation which embraces the concept of the "predicted profit" should not be accepted. 151This representation differs from the Third Theodore representation in another respect, alleging that Mr Theodore represented what Mr Wachtenheim would achieve rather than what Mr Theodore had achieved in the business. 152Particulars are provided, but none of them support this representation. None of the statements alleged to constitute this representation contain any prediction by Mr Theodore, either directly or indirectly, that Mr Wachtenheim would achieve a 40 per cent gross profit margin. As indicated earlier, the absence of a statement corresponding to the representation alleged, whilst not necessarily fatal to the cross-claimants' claim, is a factor impacting adversely on the likelihood that a representation in the form alleged was made. 153Further, Mr Wachtenheim did not give evidence that Mr Theodore represented that Mr Wachtenheim would make a 40 per cent gross profit margin in the business but rather Mr Wachtenheim's evidence was of a representation that related to the past performance of Mr Theodore's business. 154For those reasons I reject the Fourth Theodore representation.

(e) Fifth Theodore representation 155Mr Wachtenheim in the cross-claim alleges a representation in the following form: (e) That the fish product supplied to the First Cross-Claimant pursuant to proposed franchise arrangements with the First Cross-Defendant and/or the Fifth Cross-Defendant would readily sell at retail prices determined by a mark-up providing for a gross profit margin of 40% and in any event the mark-up on which the de Costis franchise system was based ("the de Costis mark-up") in such quantities as reasonably to enable the generation of the predicted profit. 156The convoluted manner of expression of this alleged representation militates against its acceptance. Further, the particulars of the representation allege that Mr Theodore made a statement in June 2004 that "the profit generated by the shop was generated by reference to a gross-profit margin of 40% and that the First Cross-Claimant would make even more money when he operated the shop". The differences between the statement in the particulars and the alleged representation are clear enough, and again impact adversely on acceptance of the representation. 157The statement in the particulars is not so controversial. I am persuaded that a statement to a similar effect may well have been said in the context of Mr Wachtenheim reducing costs by not employing a manager. 158But the oral statement alleged does not support the making of the representation alleged. Nor is there evidence from Mr Wachtenheim to support the representation. Mr Theodore denies it. Further, I have already rejected the existence of any representation which embraces the concept of the "predicted profit". 159For the reasons previously given, I am not persuaded of a representation by Mr Theodore in these terms.

(f) Sixth Theodore representation 160Mr Wachtenheim alleges that Mr Theodore told him at the Sydney Fish Markets in mid-2004 that Franchises and Mr Theodore "had a practice of providing fish product to franchisees at prices which were better than could be obtained from any other supplier." 161This representation was not included in the original version of the cross-claim. The evidence to disprove the truth of it is contained principally in the affidavits of Mr Batchelor and Mr Turner, who are engaged in their own litigation against the De Costi parties. However, I am unable to determine whether this allegation first surfaced at about the time Mr Batchelor and Mr Turner became potential witnesses in these proceedings. 162Mr Wachtenheim does not supply any further particulars of this representation other than it was an oral statement at the place and time set out above. In his affidavit he deposes to Mr Theodore saying: We provide the best quality products and the best service. We are very consistent with our service, our product and quality control. We can give consistent supply and high quality throughout the year. Our prices are the best. You cannot buy produce from any other place cheaper than you can purchase from us. As our franchisee, you will be able to undercut your competitors. 163This oral statement was never said, according to Mr Theodore. 164There is a significant difference between the conversation to which Mr Wachtenheim deposes in the affidavit, and that pleaded. 165The representation in the affidavit asserts that the prices are "the best" and that there is not "any other place cheaper ". Thus, Mr Wachtenheim's affidavit evidence does not suggest that the prices are lower, or better, than any other supplier, but rather that no other supplier's prices are better than what a franchisee obtains. This is contrary to what is alleged in the pleading, which asserts that Mr Theodore said that the prices for the franchisees were "better than could be obtained from any other supplier ". 166This is not a mere technical difference. It is one thing to say that "our prices are the best, as good as anyone else's, nobody is better" when all suppliers are obtaining their produce from the same or similar sources, as the evidence in this case indicated. It is quite another thing to say that one's prices are better than anyone else's. 167I was not directed to any evidence to support the alleged representation that Mr Theodore said that franchisees were able to obtain future product "at prices which were better than could be obtained from any other supplier." 168There is some related evidence given by Nicole Dhillon in respect of this matter. In her affidavit she deposed to a conversation at a coffee shop in Dee Why where Frank Theodore said to Mr Wachtenheim: This shop is so successful because as a member of the De Costi franchise system, we get the best quality fish at the best possible price, far cheaper than any other competitor... 169This statement differs from that which is alleged in the pleading because it evidences a representation at Dee Why, not at the Sydney Fish Markets in Pyrmont. 170It is also different from Mr Wachtenheim's evidence in that whilst it refers to "best possible price", it also has the additional words that the price was "far cheaper than any other competitor". 171Thus, it appears that Ms Dhillon gives evidence of a different occasion from that alleged, and the conversation is directed at prices of (or obtained by) a retail competitor rather than prices the franchisee could obtain from an alternative supplier as is alleged in the pleadings. I am not persuaded that Ms Dhillon's evidence assists Mr Wachtenheim. Moreover, I do not accept the reliability of either Mr Wachtenheim's or Ms Dhillon's account of conversations, for reasons already given. 172For these reasons and because of the other general matters referred to earlier in this judgment, I am not satisfied that this representation occurred.

(g) Seventh Theodore representation 173Mr Wachtenheim alleges that he was told by Mr Theodore that if he became a franchisee he would obtain: [F]ish product from [Franchises] and/or [Holdings] at better prices than could be obtained from any other supplier which prices would enable Mr Wachtenheim to undercut his competitors. 174This representation, according to the particulars, was also made by Mr Theodore in mid-2004 at the Sydney Fish Markets. It was denied by Mr Theodore. Like the Sixth Theodore representation, it was not included in the initial version of the cross-claim. It suffers from the same range of problems that apply to the Sixth Theodore representation. 175For the same reasons I am not persuaded that there was a representation in the form alleged.

(h) First Costi representation 176Mr Wachtenheim also alleged three representations made by George Costi. 177Mr Wachtenheim alleges that Mr George Costi represented to Mr Shnider in about July 2004 in a telephone conversation that "the fish shop business was a profitable business and was generally 'a good business'". This representation by George Costi was admitted.

(i) Second Costi representation 178Mr Wachtenheim alleges that Mr George Costi in a telephone conversation in about July 2004 told Mr Wachtenheim "he would obtain supply of fish [sic] from De Costis...at prices that were better than could be obtained from any other supplier and that he would be able to undercut the competition". Mr George Costi denies the representation. 179The evidence that relates to this representation is found in Mr Wachtenheim's affidavit of 10 June 2011 at [230] where he attributes to George Costi the following words: "Our prices are the best you can not buy produce from any other place cheaper than you can purchase from us as our franchisee, you will be able to undercut your competitors. You will be able to grow that business once your [sic] in there and working it personally." 180Again it can be seen that the evidence does not match the allegation. The evidence indicates that Mr George Costi said that produce could not be obtained cheaper from elsewhere, whereas the representation alleged in paragraph 12(b) of the cross-claim is that the prices De Costi's charged "were better than could be obtained from any other supplier". I have already indicated reasons why I am not minded to treat evidence that prices were not cheaper elsewhere as equivalent to evidence that prices were cheaper than elsewhere. 181Also, this is not a representation that was pleaded in the initial statement of claim. Alike with other representations dealt with earlier in this judgment, it thus finds no support in the earliest document indicating representations by the cross-claimants. It is not corroborated by other evidence, but depends upon the credit of Mr Wachtenheim. 182For the reasons previously given, I am not persuaded that this representation was made.

(j) Third Costi representation 183Mr Wachtenheim alleges in paragraph 12(c) of the cross-claim that in August 2003, fifteen months before the purchase of the business, Mr George Costi at Lidcombe represented to Mr Wachtenheim that De Costi franchisees "get the best prices in the market (in that no one can undercut De Costis) and accordingly the De Costi franchisees make great profits". It is denied by Mr George Costi. 184The only evidence supporting the alleged representation is that contained in Mr Wachtenheim's affidavit. It is not corroborated. The alleged representation does not appear in the original version of the pleading but first appears in the fourth further amended cross-claim dated 24 August 2011 filed some two months after the filing of Mr Wachtenheim's primary affidavit. 185The first part of this representation is not surprising. However, this is not sufficient to persuade me to accept that the representation was made in the form asserted. The evidence of Mr Wachtenheim alone is insufficient to establish the representation. 186The alleged representation is inconsistent with the written material supplied to Mr Wachtenheim in 2003, which advised Mr Wachtenheim to rely on his own enquiries and disclaimed any representations about profits. I do not accept Mr George Costi said these words, or made a representation to this effect.

(k) Further representations 187Further representations are alleged by Mr Wachtenheim. He asserts in paragraph 16 of the cross-claim that Franchises and/or Holdings represented that he would obtain a trading advantage and would not be placed in the position of trading disadvantage by reason of the terms of supply. Particulars of this representation indicates that it is not based upon any oral or written statement of any person but by the: ...invitation to execute a franchise agreement and enter into a franchise arrangement for valuable consideration, the description by [Franchises] and/or [Holdings] of the arrangements as a franchise, the acceptance by [Franchises] from [Mr Wachtenheim] of a payment styled a franchise fee and the customary expectations associated with a franchise arrangement. 188Mr Wachtenheim was unable to identify any provision in the franchise agreement, or in any franchise documentation provided to him, which indicated or provided support for a representation of the type alleged. Nor was any authority cited to establish that, irrespective of its form, the existence of a franchise agreement which included a franchise fee necessarily carried with it a representation that the franchisee would receive a "trading advantage". Accordingly, I reject the assertion that Holdings or Franchises represented that Mr Wachtenheim would have a trading advantage in the form of advantageous terms of supply of product or that Mr Wachtenheim would not be placed in a position of trading disadvantage. 189Mr Wachtenheim also alleged that Mr Theodore and Mr George Costi engaged in conduct "conveying the representation or inducing the understanding" that Mr Wachtenheim "would not be prejudiced in purchasing the business and taking an assignment of lease with a demolition clause in it" in that they with Franchises "had put in place arrangements" for Mr Wachtenheim "to have a prime position in a new shopping development to be constructed following upon any demolition and the said parties intended for him to benefit from the arrangements for the new site and accordingly" Franchises "had an incentive to facilitate the success of Mr Wachtenheim's intended business". 190This representation is pleaded without any particulars. In submissions Mr Newell, counsel for the cross-claimants, said that this representation was not a separate misleading conduct case but was a factor to be considered in the unconscionable conduct claim. Accordingly I leave this matter to be considered in that section of these reasons.

C. Conclusion 191For the reasons given, I am not persuaded that any of the alleged representations were made save for the representation that the fish shop business was a good business and a profitable business, which was admitted by Mr George Costi as having been said to David Shnider.

IV. Misleading Conduct 192My previous findings are sufficient to dispose of the cross-claimants' case in respect of misleading conduct, apart from the admitted representation of George Costi to Mr Shnider that the business was a good business and a profitable business. 193The parties made submissions about whether the representations were misleading. The simplicity of that question belies the complexity of the issues raised, including the proper construction of s 51A of the Trade Practices Act (see eg French J, as he then was, in Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1205 at [545]; Keifel J in Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2003] FCA 1516 at [240]; McGrath, Re; Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 at [44] per Emmett J, [163]-[194] per Allsop J; Awad v Twin Creek Properties Pty Ltd [2012] NSWCA 200 at [34], [48]-[49]; North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1 and Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd [2011] NSWCA 300 at [35]), the effect of the repeal of section 51A, the application of the rule in Maxwell v Murphy (1957) 96 CLR 261 at 267, the application of section 7(2) of the Acts Interpretation Act 1901, the impact of the former section 41(2) of the Fair Trading Act 1987 with its different onus provision, and potentially whether section 109 of the Constitution is applicable. 194Whatever view is taken in relation to the issues mentioned above, the question of whether a representation is misleading is fundamentally dependent upon the form of that representation and the context in which it was made. In circumstances where alleged oral representations have been rejected there is in my view no value in the Court attempting to determine the context of rejected representations so as to determine whether (assumed but rejected) representations were misleading. 195However there are some relevant matters that I should mention. The cross-claimants asserted that "each of Shnider, Con Costis [sic] and Theodore....gave evidence that the profits, as they understood them, were approximately $12,000 per month". (CCS 28/9/2007) (see eg, T4706/147-T4707/26). That evidence did not assist the cross-claimants on the question whether the representations, in the form alleged, were made. However, it may be relevant to the question whether any representation about profit was not misleading. 196A profit level of $12,000 per month exceeded the profits indicated on the various profit and loss statements tendered by the cross-claimants. But the cross-claimants placed no reliance upon those statements, perhaps because they did not support the representations and the cross-claimants were aware of them before the business was purchased. Further, there was uncontradicted evidence that cash was removed from the business revenue (both before and after the sale to Mr Wachtenheim), so it might be doubted whether any formal accounts would accurately record profits. 197Another difficulty in assessing the accuracy of oral representations about "profit" or "available cash flow" is the uncertain meaning of these terms. It would be unclear whether those terms ignored, or took account of, depreciation and interest. 198The performance of the business immediately after Mr Wachtenheim's purchase also gives some indication of how the business was performing immediately before the purchase. As indicated earlier, Mr Wachtenheim was withdrawing substantial amounts of cash from the business and was meeting his loan and other commitments. There was no persuasive evidence that the business was not profitable during the initial period after Mr Wachtenheim purchased the business. Mr Wachtenheim's asserted complaints can be disregarded because they are uncorroborated and are inconsistent with the contemporaneous bank records and file notes of his conversations with Elliann Costi (discussed below). 199Even Mr Birrell's reports did not indicate unprofitability of Mr Wachtenheim's business in the initial period. The cross-claimants assert that Mr Birrell made a mistake and those reports should have indicated unprofitability. I accept that there were problems with Mr Birrell's evidence. As Mr Wachtenheim's long-time accountant he was not independent, he conducted no audit of the business, he relied upon information from Mr Wachtenheim and his credit was tainted by his involvement in Mr Wachtenheim's fraudulent scheme to obtain a loan by the use of a false draft tax return. I refer to Mr Birrell's credit later in these reasons. 200Mr Shnider and Mr Wachtenheim were both satisfied with the results of their enquires prior to purchase. Mr Wachtenheim was not dissuaded from buying the business after working in it for three months. 201Taking all these matters into account, I am not persuaded that the profit of the De Fish Dee Why business owned by Mr Theodore and Mr Con Costi excluding interest and depreciation was less than $12,000 per month. 202As to representations about a 40 per cent gross profit margin of the De Fish Dee Why business in 2004, I have already indicated that the standard mark-up contemplated such a gross profit margin. It is true that this margin would be reduced by 5 per cent if advertising and royalty expenses were payable and were taken into account, but no financial statements treated those items as part of the cost of goods sold. Nor did the cross-claimants assert that the gross profit margin must be less than 40 per cent for this reason alone. 203All of the financial statements covering the initial nine-month period of the De Fish Dee Why business to May 2004 indicate that the gross profit margin was less than 40 per cent over that period. But these statements were not relied upon by the cross-claimants, and in any event may not be a reliable guide as to the performance of the business at the end of that period. 204There was also evidence about the performance of other franchise stores. That performance might be described as mixed. I do not think any substantial assistance was gained in assessing the gross profit margin of the Dee Why store by evidence of oral assertions about the profitability or otherwise of other franchise stores. 205In these circumstances I was not satisfied that the true gross profit margin was less than 40 per cent. In my opinion the evidence was insufficient to allow a conclusion on that matter. As discussed later in these reasons, Mr Wachtenheim's own evidence was that he was initially selling all his fish at the recommended prices with no wastage. This tends to support a gross profit margin of 40 per cent. 206As to representations about prices, the cross-claimants sought to rely particularly on "expert evidence" of two other franchisees, Mr Turner and Mr Bachelor, who operated the North Rocks stores for a time. The evidence was based upon a lengthy table of company seafood prices. Mr Turner and Mr Bachelor calculated that the cost of products supplied by De Costis Seafood was 10-15 per cent higher than could be obtained elsewhere. 207The reliability of this evidence depended upon the independence of Mr Turner and Mr Batchelor. It involved purported random selections of items and prices by them. But Mr Turner and Mr Batchelor were not at all independent. They were involved in litigation against De Costi in relation to these same matters. Affidavits filed in their own proceedings were read and relied upon in these proceedings. In effect, the evidence was no more independent than if Mr Wachtenheim himself had created the table of purported comparable products. 208Further, I was not impressed with the oral evidence of Mr Bachelor or Mr Turner. Both took long absences from the witness box whilst under cross-examination, claiming to be indisposed. Mr Batchelor was prone to be combative in the witness box. Mr Turner claimed sickness on three separate occasions early in cross-examination whilst being asked apparently innocuous questions, although he appeared untroubled when he was subject to more rigorous cross-examination concerning his involvement with an illegal recording of a telephone conversation. These matters, although not critical, made me more cautious about accepting their evidence. Mr Turner's evidence concerning the illegal recording was also unconvincing. The illegal recording is dealt with in a separate judgment. 209The lack of independence of Mr Turner and Mr Bachelor impacted upon whether the selection of products was random and whether the compared products were fairly comparable. Other independent witnesses, including Antonio Muollo, and particularly John Susman, gave evidence to the contrary. Mr Susman's experience and expertise was impressive and was not challenged. He had over 25 years experience in the seafood industry, is the head judge at the NSW Royal Agricultural Society Aqua Culture Competition, and a judge of the National Restaurant and Catering Awards, as well as being inducted into the Australian Fairfax Food Industry Hall of Fame. 210I was also impressed with Mr Susman's evidence. It established that the table of purported comparable fish products took no account of "major factors that affect the pricing of fresh seafood" including whether the fish is wild or farmed, whether it is line or net caught, storage measures to preserve quality, handling measures, the location of supply, the brand, the quantity purchased and the regularity of purchases, terms relating to delivery and returns, and even the supplier relationship. All of these matters impact on the price of an item, and rendered any purported comparison without regard to those matters as invalid. 211There remains one representation which was established, that Mr George Costi told Mr Shnider that the business was a "good business" and a "profitable business". Mr Wachtenheim also gave evidence that Mr George Costi told him that it was a "good, little business", but this representation is not the subject of a pleaded representation. 212I do not think that saying the business is a "good business" adds anything to a representation about it being profitable. Accordingly, the assessment of whether the representation is true depends upon whether it was a profitable business. 213The alleged representation as pleaded was not, and was not asserted to be, a representation about a future matter. It was a representation about the then existing business of Mr Theodore and Mr Con Costi, not about how the business run by Mr Wachtenheim would perform. 214There was no evidence to indicate that the De Fish Dee Why business was unprofitable. Several profit and loss statements were in evidence, although the provenance of any of them was not established. Neither party contended at trial that any of the profit and loss accounts were a reliable record of the business. 215Nevertheless, they provide no evidence that the business was unprofitable. Each of them showed a profit, varying between approximately $23,000 and $47,000. They each purported to cover the period from September 2003 until May 2004 inclusive. They indicated a gross profit margin on fish product, packaging and other raw materials of between 30 and 40 per cent. 216I have referred earlier to the evidence of a profit of about $12,000 per month in the understanding of Mr Shnider, Mr Con Costi and Mr Theodore. The bank records indicated that Mr Theodore received from the business the same amount as was being paid to service and repay Mr Con Costi's business loan, an amount exceeding $2,700 per month. This amount exceeded Mr Theodore's loan commitments arising from the fit-out of the business. In addition, both Mr Con Costi and Mr Theodore were receiving $500 per week from the business. The summation of these amounts is almost $10,000 per month, if one excludes interest commitments. 217The cross-claimants' submissions assert, "the business was not operating at a profit so that there was no basis on which the business could be said to be a good business" but the submissions did not identify the evidence that established that the business was not operating at a profit. The submissions included assertions that other franchises were not trading profitably but, even if established, that would say nothing of the trading performance of the Dee Why business. 218In these circumstances, I am not persuaded that the Dee Why business purchased by Mr Wachtenheim was other than a profitable business. 219The cross-claimants also asserted that the representation was false because Mr George Costi "did not hold the opinion that the business was a good business". In other words, that the representation was false in that it conveyed that Mr George Costi held an opinion which he did not hold. 220No evidence is identified to establish this assertion. Nor does it appear to me to be open on the pleadings, as it is tantamount to an allegation of fraud which is not expressly alleged. 221The cross-claimants assert that: "Costi himself [presumably Mr George Costi] gave evidence that to be a good business the annual profits would have had to exceed $100,000, and as such there were no reasonable grounds for him to express the opinion that it was a good business." 222This submission is misconceived in a number of respects. First, the annual profit level of the De Fish Dee Why business was not established, and thus not established to be less than $100,000. 223Secondly, Mr George Costi did not give the evidence asserted. The cross-claimants' submissions did not identify the particular evidence, but on 28 August 2012 at page 3922, lines 19 to 44 of the transcript the following exchange occurred after Mr George Costi was shown a profit and loss statement: "Q. You see at the bottom line it says net profits, 23,000? A. Yes. Q. What kind of net profits would you want to see there before you would express the opinion that it was a good business? A. Probably over 100,000. Over 100,000. Q. Over 100,000 before it's a good business? A. I would think so. Q. For what period? The reason I'm - I draw to your attention that that's not a full year? A. Right. Q. So when you say 100,000 you mean for the year or for the period disclosed in the profit and loss? A. For a year. For a year I would say over 100,000 for the year. Q. To be a good business? A. To be - well, a good business and one that one could grow, yes. Q. And you've expressed the opinion that - at some stage that you didn't accept the views of Mr Mare and Mr - you formed the view that in order - a business needs 12 months to show material profits? A. I believe that a - I believe that it can take 12 months in certain circumstances and longer in others." 224I take this evidence to mean that Mr George Costi thought if he were provided with the financial statements he would want to see profits of over $100,000 per annum before he would express the opinion that the business was a good business. It says nothing about his opinion of a good business in the absence of financial statements, or his opinion in 2003, or his opinion about this particular business. The submission elides the difference between holding an opinion and expressing it, and the difference between holding an opinion and having reasonable grounds to express it. 225Thirdly, the pleaded allegation is that the representation is false, not that it was not based on reasonable grounds. It is not a representation of a future matter, nor was it alleged to be. So the question of whether the representation was based on reasonable grounds does not arise. 226A further reason why I do not accept that the representation by Mr George Costi could be relevantly misleading is that it is in the nature of "puffery", Puffery is unlikely to constitute a breach of section 52. See eg General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164, 178 per Davies and Einfield JJ; Sanders v Glev Franchises Pty Ltd [2002] FCA 1332 at [270]-[272]; Pappas v Soulac Pty Ltd (1983) 50 ALR 231, 234-235, 238; Kaytonruby Pty Ltd v Glev Franchises Pty Ltd [1998] FCA 650 (at p29). 227These authorities indicate that puffery is generally statements of opinion not capable of objectively being proved true or false, and often comprise introductory comments for the purpose of attracting interest. Examples include that the business was "a success story", "an attractive investment", "extremely successful" and "a good investment". 228The representation by Mr George Costi that the business was "good" and "profitable" was made several months before the purchase of the business by the cross-claimants. Although it occurred in response to an enquiry by Mr Shnider and, thus does not appear to me to be "introductory comments...made at the start of negotiations for the purpose of attracting the interest of a possible purchaser" (see Pappas at [234]) it bears the other indicia of puffery. It certainly "became irrelevant or of little, if any, significance when detailed information (in this case, other information that satisfied Mr Shnider, and three months onsite employment in the business by Mr Wachtenheim) is subsequently given (Pappas at [234]-[235]). 229A further reason why the oral representation of Mr George Costi is not misleading is because of its context. As was stated by the majority in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60, (2004) 218 CLR 592, 625 at [39]: "... it is important that the ... conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character. Everything relevant the [representor] did up to the time when the purchasers contracted to buy ... must be taken into account." See also McHugh J at [109]. 230One aspect of the context of the alleged misleading representation is any disclaimer accepted by Mr Wachtenheim. 231On 16 November the cross-claimants entered into a contract for the sale of business and a Franchise Agreement. Both documents referred to the other, and so together represent the agreement entered into between the parties. 232Unsurprisingly, the Franchise Agreement, executed as a deed, contained some disclaimers, including the following clauses: "10.4 No Representation by De Costi Seafoods De Costi Seafoods makes no representation or warranty as to the suitability or otherwise of the Premises at present or at any time in the future for the conduct of the Business" "34.2 Acknowledgments The Franchisee and the Guarantor (if any) each acknowledge that: (1) De Costi Seafoods gave to the Franchisee a copy of the Franchising Code of Conduct and the Disclosure Document at least fourteen (14) days before the Franchisee entered into this Agreement or made any non-refundable payment (whether of money or of other valuable consideration) to De Costi Seafoods or an associate of De Costi Seafoods (within the meaning of associate under the Franchising Code of Conduct) in connection with this Agreement; (2) the Franchisee has received, read and had a reasonable opportunity to understand the Franchising Code of Conduct and the Disclosure Document; (3) De Costi Seafoods has advised the Franchisee to obtain independent legal, accounting and business advice with respect to this Agreement and all other aspects of operating the Business before entering this Agreement and the Franchisee has had a reasonable opportunity to obtain that advice; and (4) each and every restriction in this Agreement is fair and reasonable in all the circumstances." "35. Provision of Advice and Information by De Costi Seafoods The Franchisee and the Guarantor each acknowledge and agree that: (1) all advice and information given by De Costi Seafoods to the Franchisee in connection with the Franchise and the System is given in good faith based on De Costi Seafoods' best judgment; (2) De Costi Seafoods is not liable for any claims, losses or damages as a result of relying on the advice or information; and (3) any advice and information given by De Costi Seafoods is not a representation, promise, term, condition, agreement, warranty or guarantee with respect to any of the matters referred to in the advice or information." "37. Acknowledgments by the Franchisee The Franchisee acknowledges that: (1) in deciding to execute this Agreement the Franchisee did not rely upon any statement, representation or warranty made by De Costi Seafoods other than as set out in this Agreement; (2) the success of the Business depends upon the Franchisee's own effort and the Franchisee assumes responsibility for the success or failure of the Business; and (3) De Costi Seafoods does not guarantee any return on investment or profit to the Franchisee." "40.4 Entire Understanding Subject to the provisions of any written material entered into and approved by De Costi Seafoods and to which De Costi Seafoods and the Franchisee are parties: this Agreement: (1) is the entire agreement and understanding between the parties on everything connected with the subject matter of this Agreement; and (2) supersedes any prior agreement or understanding on anything connected with that subject matter." 233Whilst a contractual clause purporting to exclude liability under section 82 may well be ineffective, these clauses must be considered as part of the context of any conduct. In my view, the clauses, particularly clause 37, reinforces my conclusion that Mr George Costi's statement that the business was "good" and "profitable" was an opinion held by him, but was not a misleading representation in the context of Mr Wachtenheim's acknowledgments. 234Related to this is Mr Wachtenheim's acknowledgment (Ex 1, p796) that he was advised by a representative of Franchises: "to seek independent legal, business and accounting advice in relation to the proposed franchise agreement and the franchise business". 235Mr Wachtenheim had access to his regular accountant, Mr Birrell. He had access to and received business assistance from his brother-in-law, Mr Shnider, and he was represented in entering the agreement by a solicitor, Mr Stephen Noss. Mr Noss was not called by the cross-claimants. The evidence included a letter from Mr Noss stating that Mr Shnider and Mr Birrell gave advice and assistance to Mr Wachtenheim. Even if Mr Wachtenheim declined to have Mr Birrell and Mr Noss carry out proper enquiries, that will be of limited assistance to him. In Ackers v Austcorp International Ltd [2009] FCA 432, Rares J observed (at [184]): "As Gibbs CJ said in Puxu 149 CLR at 199 (see also Campomar (2000) 202 CLR at 85 [102]-[103] per Gleeson CJ, Gauldron, McHugh, Gummow, Kirby, Hayne and Callinan JJ): 'The heavy burdens which [s 52] create cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all circumstances.'" 236Finally, a representation is not misleading if no one is misled by it. That is the case with Mr George Costi's statement to Mr Shnider. The cross-claimants expressly disclaimed any case based on reliance by Mr Shnider. 237For all these reasons I am not persuaded that the representation by Mr George Costi that the business was a good and profitable business constituted misleading conduct.

V. Reliance 238Strictly speaking it is unnecessary that I consider the question of reliance since none of the misleading conduct has been established. It is also difficult to determine questions of reliance and causation in the absence of identified established conduct. However, there was a strong challenge to the cross-claimants' case on causation, and it is appropriate that I make some findings about it. 239First, in 2003, Mr Wachtenheim was circumspect about becoming a De Costi franchisee. He said: "Well before I commit myself I want to go back and have another look at the shop and just think about it for a while" (SW 10/6/11 at [58]) and subsequently "I would still like to think about whether I want to buy the Camden store" (SW 10/6/11 at [84]). He attended at least two meetings, he said, without Mr Shnider, casting doubt about his vulnerability. Ultimately he decided, (SW 10/6/11 at [88]) presumably after some deliberation, not to proceed, giving reasons to Mr George Costi (see also Ex 1, SM Vol 4, p7523). 240This indicates that representations made in 2003 made no impact on Mr Wachtenheim's decision in respect of Camden. They could have had no influence in his decision to purchase a store 12 months later. Mr Wachtenheim was able to be dispassionate and objective about the possible purchase in 2003. He maintained this attitude in 2004 when he remained formally uncommitted to the purchase of the Dee Why business until November 2011, months after the time of the alleged representations and three months after he commenced work in the business. 241Secondly, the oral representations are alleged to have occurred mainly in about June of 2004, although one is alleged to have been in August 2003. Thus, the alleged representations occurred five months, and in one case about 15 months, prior to the final decision to purchase the business. This lapse of time militates against the representations having any significance in the ultimate decision. 242Thirdly, Mr Wachtenheim worked in the business for three months immediately prior to his purchase. The cross-claimants asserted that the daily employment of Mr Wachtenheim in the business would not ordinarily reveal the profitability of the business. This may be so in some businesses where there is an inability to monitor the level of trade and the amount of income being received, or where the outgoing owner isolates from the incoming purchaser important details of the business. However, this was not the position with Mr Wachtenheim. 243Whilst Mr Wachtenheim was working in the business prior to the purchase, generally neither Mr Con Costi nor Mr Theodore were present. They were not owners who were involved in the daily workings of the business. Mr Con Costi was absent overseas and Mr Frank Theodore would call in for short periods, perhaps 30 minutes, two or three times a week. 244Thus, Mr Wachtenheim was at the business full-time on a daily basis in the presence of the manager of the business, Mr Konal Sharma, who continued to work for Mr Wachtenheim after he purchased the business. Mr Wachtenheim could not but be aware of the way the business was performing from August through to November 2004. He was able to see whether the trade was increasing and, if he took an interest as surely he did, the daily takings of the business. There is no suggestion that he was denied access to all the details of how the business was performing as he worked at the shop. 245Mr Wachtenheim was readily able to see the supply terms available at the business. He identified when orders needed to be made, saw when deliveries were effected, the quality of the product delivered, the work involved in storing and selling the product, and the ability to return product because of over orders or for other reasons. 246Mr Wachtenheim must have become aware of the cost of the fish products revealed in the daily invoices and price lists . There was no suggestion that the invoices, which accompanied the delivery of the products each day, were unable to be viewed by him. He learnt of the standard mark-up to generate the 40 per cent gross profit margin, the margin which was utilized both by Mr Theodore and Mr Con Costi before the purchase, and by Mr Wachtenheim afterwards, to set prices. He could observe the turnover, and could readily ascertain the gross profit. 247Accordingly, Mr Wachtenheim's presence at the business for some three months during most of its working hours could not have left him uninformed as to how the business was performing, its daily turnover, its costs, its mark-up, the gross profit margin, whether product sold quickly, whether custom was regular, whether the business was growing, whether the business was suitable for him to own, whether he could cope with the demands of the business and whether he was attracted by the cashflow 248Having seen all these things Mr Wachtenheim must have been satisfied sufficiently with the performance of the business to decide to go forward with its purchase. 249In these circumstances, it seems to me that representations made months earlier became far less significant to Mr Wachtenheim than his own observations during his employment and training in the business with regard to whether the turnover was $24,000 per week, or whether the price of the fish was excessive, or whether the standard mark-up calculated to produce a gross profit of 40 per cent actually resulted in that amount of gross profit. These were matters that he could see for himself during the daily and weekly course of trade. 250In my view, Mr Wachtenheim's observations during his three months working at the Dee Why fish shop were important matters to him in assessing the performance of the business and whether to purchase it, far more than any representations made months earlier by a largely absent owner of the business. 251Fourthly, Mr Wachtenheim deposed to the following conversations that he had with Mr Theodore in the first few months after the purchase of the business (affidavit of 10/6/11). Mr Wachtenheim said: [388] "I'm selling the same amount of fish you were selling and in some cases I'm doing even better and the money isn't there." [390] "I'm selling more fish than you were, I'm selling it at the same price that you were selling it at but I'm not making the money you told me I would be making and I have less wastage and I'm selling all my produce that I order on a daily basis on the very day I order it." [392] "I'm following what you were doing and I'm selling all my fish." [398] "As for wastage I had no wastage...the wastage was nil." [406] "I am working six days a week, I have kept my cost down to the bone, I have no wastage and I am not making any money." [412] "...I continued to sell all my fish, as ordered every day, with very low wastage and at the recommended prices..." [416] "...I cant [sic] sell anymore fish. The shop in any event doesn't have the capacity to carry more volume." [445] "Look I have no wastage I am selling everything I get..." [449] "I cant [sic] mark it up anymore, I'm already charging more than everybody else." [465] "...I cant [sic] sell anymore fish. The shop in any event doesn't have the capacity to carry more volume." [467] "George that is useless most [of] the fish is sold by lunchtime..." 252I do not accept that these uncorroborated complaints of Mr Wachtenheim were made. However, they may give some indication of the thoughts of Mr Wachtenheim, indicating that he was able to sell all of his product at the recommended prices (and mark-up) with no wastage each day in the business, and that he could not have purchased any more product. Importantly they also indicate that Mr Wachtenheim was well familiar with the performance of the business when Mr Theodore and Mr Con Costi owned it. There was no evidence that the prices Mr Wachtenheim paid for product were materially different to that paid prior to the purchase. 253Fifthly, representations about favourable prices become irrelevant if all the product is being sold. If all the purchased product is able to be sold at the recommended price producing a gross profit margin of say 40 per cent, as Mr Wachtenheim was able to achieve during his initial trading months, and could observe during his three months of full-time work in the shop, then the pricing could not be inappropriate. Indeed, as a matter of arithmetic, the higher the costs, the greater the amount of gross profit realised upon a fixed gross profit margin. 254Sixthly, Mr Wachtenheim signed an agreement which disavowed any reliance on representations not in the agreement. This matter has been considered above in relation to whether a misrepresentation is misleading. It is also relevant to the question of reliance. Whether Mr Wachtenheim relied on any representation is a question of fact. The existence of an exclusion or qualification clause is relevant to a determination of whether the applicant has established reliance, see Poulet Frais Pty Ltd v Silver Fox Co Pty Ltd (2005) 220 ALR 211 at [102]; FCAFC 131. In that case (at [103]), as in Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) 46-048, the Full Court of the Federal Court was of the view that: "...a well-drafted disclaimer, drawn to the attention of the contracting party and acknowledged in writing to have been made, was sufficient to negate reliance." In both cases the applicant had legal advice and the appellate court reversed the finding of reliance made by the trial judge. 255As noted earlier, Mr Wachtenheim was represented by a solicitor and he had an accountant available to him who he used for the purpose of obtaining finance for the purchase. He was also favoured with the assistance of his brother-in-law Mr Shnider, a business consultant who had substantial business experience and who without fee assisted Mr Wachtenheim to determine whether the business was a wise investment. 256Mr Noss, the solicitor, was not called. In evidence was a letter from him dated 14 April 2005 which stated: "The putting in place of a bank guarantee was always part of the transaction as well you now. There has been murmurings from you that you were not so advised at the outset. Your brother in law who was present and your business adviser denies that you were not so informed and indeed the suggestion that I did not inform you both before and during the transaction is ridiculous." (CB 6468) 257This was not a case where any of those advisers were alleged to have been misled by any pleaded representation. 258No explanation was given by the cross-claimants as to why Mr Noss was not called, although the letter above might indicate a view that Mr Noss's evidence would not have assisted Mr Wachtenheim. In accordance with Jones v Dunkel (1959) 101 CLR 298, I can and do more readily infer that Mr Wachtenheim was advised and aware of the unsurprising "no reliance" clause in the agreement and the other exclusion clauses, as any reasonable solicitor would inform an intending purchaser of such terms. I must also assume that Mr Noss's evidence could not have assisted Mr Wachtenheim. In these circumstances I conclude that Mr Wachtenheim was advised by his solicitor about the terms of the contract and his likely inability to be able to rely on representations not contained within the contract. 259Mr Shnider also gave evidence about his involvement in assisting Mr Wachtenheim to purchase the business. That substantial assistance was provided by Mr Shnider without fee was not an issue, at least until late 2007 when Mr Wachtenheim decided to join Mr Shnider as a cross-defendant. Since that time the cross-claimants' case has been that Mr Shnider in 2004 was, for some unexplained reason, acting in the interests of Mr Costi. 260If Mr Wachtenheim did not also take up the opportunity to gain advice from his accountant, Mr Birrell, about whether the business was one he should enter, whether because he did not wish to disclose the cash component of turnover to his accountant, or because he did not wish to incur expense for a service which to a major extent Mr Shnider was providing free of charge, or for other reasons, that was his decision, but it does not assist him to establish reliance. The observations of Rares J in Ackers, quoted above, are applicable. Mr Wachtenheim deposed (10/6/2011 at [292]) that he also consulted his accountant for the purpose of obtaining a company through which he would conduct his business after the purchase. 261Seventhly, the particular influence of Mr Shnider, according to the evidence of Mr Wachtenheim, tends to negate reliance on matters said by Mr Theodore and Mr George Costi. At [207] of his 10 June 2011 affidavit Mr Wachtenheim, speaking of David Shnider and his advice in relation to the purchase of the business, alleged that he said: "Okay David I trust you David I depend on you, on the accounting side I'm a total mule I don't understand any of it, I'm relying on you entirely. I wouldn't be buying the business and unless you assure me that you are satisfied from the accounts that I can pay my loans and have something to live on and that the business has got potential to grow and be prosperous and profitable." 262At [221] of the same affidavit, again to Mr Shnider, Mr Wachtenheim asserts that he said: "Okay then let's go ahead, if you think that it's a good business and I can meet my obligations from it I want to go ahead and buy it. I trust you, you are the numbers man, I know nothing about figures or accounts and I am relying upon you." 263Mr Wachtenheim asserts in his 10 June 2011 affidavit that he said the following matters to his solicitor: "I don't understand these things, I rely on David he is a thorough man, he has the knowledge and expertise and he is my brother-in-law, trust me he says everything is fine and I accept that it's fine." (at [311]) "He has as far as I'm concerned my brother-in-law says he has looked at everything and is satisfied and that's good enough for me". (at [313]) 264Mr Wachtenheim also asserted the following in his affidavit (10/6/2011): "I trusted David and trusted his representations to me." (at [94]) "I trusted David Shnider and my solicitor to attend to this matter." (at [331]) "I know I should have looked at the documents but I just didn't, I relied on David Shnider. I know that I had a solicitor advising me but I relied on David to liaise with the solicitor and to advise me." (at [319]) "I trusted my brother-in-law that he would take care of things and look after me and that I could trust him to make sure everything was done properly for me." (at [320]) "I believe what David Shnider said on this occasion when and what he said reassured me and convinced me to go ahead with the purchase of the business." (at [224]) 265As if to underline their importance to his case, Mr Wachtenheim's records statements to a similar effect in his later affidavit (18/8/11) at [59], [73], [82], [88], [89], [112], [150], [152] and [153] and his oral evidence (T1518/29-34; 23/7/12, T1729/33-34). 266These statements are supplemented in Mr Wachtenheim's affidavit by Mr Shnider's alleged statements to him, encouraging reliance, repeatedly stating "Don't worry I will look after you" (eg SW 10/6/11 at [91]; 4/8/11 at [157]; 18/8/11 at [75] and [148]). 267I am not satisfied that these precise words were said to Mr Shnider or to Mr Wachtenheim's solicitor, or were said by Mr Shnider. However, the conversations alleged show the substance of Mr Wachtenheim's case that he heavily relied upon the advice of Mr Shnider. 268I have already noted that Mr Wachtenheim disavowed any case based upon Mr Shnider relying on representations by De Costi. The reasoning process of Mr Shnider in assessing the business is not altogether clear from his evidence. This may be a result of him being forced to recall eight years later about the assistance he provided. In any event, he did conclude that the purchase could work. He seemed to have concluded that the cash component in the business may have been concealed by exaggerated purchase costs, because he took the turnover of $24,000 per month as recorded, calculated 60 per cent of this to derive purchases costs, added his calculation of necessary expenses (bearing in his mind wage savings to be made by Mr Wachtenheim working in the business, and other reductions) and derived a monthly profit of $12,000 (excluding interest). On this basis, he thought an asking price of $440,000 was high but workable (T2393/16). It was upon Mr Shnider's opinion that Mr Wachtenheim claimed to rely. Although Mr Shnider adopted a gross profit margin of 40 per cent it seems to have been based on his own calculations and view of the undeclared cash component, for he had rejected Mr Theodore's reference to a 40 per cent gross profit margin once he had seen the financials indicating 31.9 per cent. To him, Mr Theodore "didn't know what he was talking about or he was inflating the business" (T3009/6-9). 269Mr Shnider's endorsement of the business was based on reduced staffing levels, a maximum of $500 per week drawings, and no full-time manager other than Mr Wachtenheim. Mr Wachtenheim conceded that Mr Shnider's advice allowed only $500 of drawings above borrowing costs (SW 10/6/11 at [214], also 18/8/11 at [58]) and Mr Wachtenheim at all times met his borrowing costs (T1542/17-18). Notwithstanding Mr Wachtenheim's understanding of these conditions of Mr Shnider's endorsement, none were adhered to by Mr Wachtenheim. Mr Shnider recorded in weekly reports to Mr Wachtenheim in the first quarter of 2005 (DS affidavit 21/2/12 [24(b)-(k)]) the excessive staffing levels, including the retention of the full-time manager, and Mr Wachtenheim acknowledged he exceeded his $500 per week drawings by taking an additional $1,500 per week in cash. 270Reliance upon Mr Shnider does not preclude reliance also upon Mr Theodore. But representations are not relied upon if they make no material contribution to the decision to purchase whether because they are known to be false, or because they bear no significance in the mind of Mr Wachtenheim. The inference of reliance on a fraudulent representation spoken of by Wilson J in Gould v Vaggelas (1995) 157 CLR 215, [238] does not assist Mr Wachtenheim who "by his words [and] conduct disavowed any reliance on the...representations." 271Mr Wachtenheim's claimed words and conduct show that he was totally reliant on Mr Shnider, whatever Mr Theodore may have said: "the only reason I considered purchasing a De Costi franchise was because of David Shnider's recommendation" (SW 18/8/11 at [83]) (see also [277] and [288]). Mr Wachtenheim told Mr George Costi (SW 10/6/11 at [228]) and Mr Theodore (SW 10/6/11 at [225]) of Mr Shnider's advice. At no stage does Mr Wachtenheim suggest he ever told anyone, in terms, that he was relying on Mr Theodore or Mr George Costi. And when his business was in difficulty in 2006, Mr Wachtenheim complained not to Mr George Costi or Mr Theodore, but to Mr Shnider. 272Mr Wachtenheim's affidavits record his reliance on Mr Shnider regarding finance (10/6/11 [222]), incorporation (10/6/11 [288]-[295]), retaining solicitors (10/6/11 [297]-[304]) and keeping the books (10/6/11 [401]). 273Eighthly, some of the representations alleged must, on Mr Wachtenheim's account, be of little significance to Mr Wachtenheim. Mr Wachtenheim asserted that he does not understand figures. If this were so, representations concerning a 40 per cent gross profit margin (the Second, Third and Fourth Theodore representations) would be of no real significance to him in attempting to assess whether he should buy the business. 274His counsel, Mr Newell, conceded as much, submitting that the significance of the representation concerning a gross profit margin was not in the content of the representation itself but that Mr Wachtenheim had been told that he would make that same gross profit margin as other franchisees. That is, the significance was not in the 40 per cent but in the idea that Mr Wachtenheim's shop would do as well as the other franchisees. 275This is not the way this matter has been pleaded. Further, there is no evidence to suggest that Mr Wachtenheim did not achieve the same gross profit margin as other franchisees. A not insignificant part of the hearing of this matter concerned a case asserted by the cross-claimants that the other franchisees performed poorly. And, it follows from this submission that, so far as Mr Wachtenheim was concerned, a representation of a gross profit margin of 30 per cent (lower than what was reflected in any of the financial statements) would not have troubled Mr Wachtenheim, so long as it was similar to the gross profit margin of other franchisees. 276Ninthly, Mr Wachtenheim's conduct in 2006 militates against a finding of reliance. In early 2006, Mr Wachtenheim was behind in his obligations to pay for product and royalties to De Costi's Seafoods. The cross-claimants received a notice of default event on 5 January 2006. On that same day Mr Shnider wrote on behalf of the cross-claimants stating: "As per our discussions in you [sic] office on January 5th 2006, I am aware of the non payment issue and as agreed I will undertake the following:

1. Recover the moneys that have been fraudulently taken from the business and send same to you. This amount is approximately $30,000.00 and I expect a result from the police and National Bank within the next fortnight.
2. Pursue the avenue of a $50,000.00 loan from the National Bank against the current facility for the home in Balgowlah.
3. Arrest the trading deficit through better management of the finance and business operation. As we agreed, whilst I am attending to these matters, Serge will be allowed to trade on normal terms however he cannot go any further into debt, and in fact he must make every endeavour to reduce the amount outstanding against purchases and royalties." (CB1530) 277Subsequently, instructions were provided to Carroll and Associates, as solicitors for Mr Wachtenheim. Mr Wachtenheim was hoping to get out of his obligations as a franchisee. He engaged in correspondence. No correspondence indicated that he had been misled by representations about the profitability of the business. None of the representations the subject of this claim were mentioned. It would be expected that Mr Wachtenheim would use this opportunity to indicate a complaint of being misled if he genuinely believed in 2006 that he relied on some fact or representation which he had found to be incorrect or misleading. 278Finally, as noted reliance is a question of fact. I have found Mr Wachtenheim to be an unreliable and dishonest witness. On matters of reliance his own evidence is important, even critical and I do not accept him as a witness of truth. 279The cross-defendants in submissions relied on the comments of Buchanan J in Astram Financial Services Pty Ltd v Bank of Queensland Ltd [2010] FCA 1010 at [285] as analogous to the present case. "[285] In my view the efforts to establish the proposition that Mr Ramsey had relied to his detriment upon misrepresentations made orally to him were entirely unsuccessful. First, it will be apparent from the findings which I have already made that no relevant representation, upon which Mr Ramsey said he relied, was both made and was untrue or was made without reasonable grounds for making it. Furthermore, Mr Ramsey had a practical obligation to make decisions based on his own enquiries and analysis. In part, that is so because of the disclaimers which were issued by the Bank at the time and its instructions that intending franchisees were to make their own inquiries. In part it is because Mr Ramsey was contemplating a major commercial venture requiring a substantial personal capital investment and it would be irresponsible not to take adequate practical steps to look after his own interests. He could not expect the Bank to do that for him. Furthermore, the evidence as a whole (including Mr Ramsey's own evidence) satisfies me that he did not, in fact, rely upon the statements he identified. He relied upon his own assessment. Perhaps his assessment was overly optimistic. Perhaps he was buoyed by a sense of enthusiasm that was not objectively justified. However, the responsibility for his decisions was his and his alone, particularly when he elected to buy the interests held by Mr and Mrs Astridge and proceed with the franchise alone and with double the financial exposure." 280Each misleading conduct case is different. Here Mr Wachtenheim was not merely becoming a franchisee but purchasing a business. And he asserts reliance not only on the franchisor's representations but those of the outgoing franchisee. But like Mr Ramsay in Astram, Mr Wachtenheim was not the recipient of misleading representations and he made his own assessment based on his experience working in the business and his discussions with Mr Shnider. In this respect my own view of Mr Wachtenheim's case is similar to that expressed in Astram. 281For all these reasons, I am not persuaded that Mr Wachtenheim relied upon any oral representations made by any of the De Costi parties.

VI. Damages 282As these proceedings concern losses arising from the purchase of a business as a result of reliance upon misleading representations, a primary component of any damages would ordinarily be the difference between the true value of the business when it was purchased and the price paid for it: Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281; (1995) 131 ALR 363 at 369-70; Bennett v Elysium Noosa Pty Ltd (in liq) [2012] FCA 211 at [261]-[261]. Mr Wachtenheim paid $440,000 for the business. If, contrary to my findings, the purchase was caused by misleading representations Mr Wachtenheim may be entitled to recover the difference between the $440,000 he paid for the business, and the value of the business he received as a component of his damages. 283The cross-claimants' case did not include any evidence of the value of the business purchased by Mr Wachtenheim. An expert report of Mr Birrell, Mr Wachtenheim's accountant, in the form of an affidavit was read to establish the profitability of the business. Mr Gary Dent relied on this evidence of profitability to give opinion evidence of the quantum of losses. Those reports purported to make various calculations of damages. However, Mr Dent conceded that he was not asked to and did not engage in the exercise of determining what the value of the business was at the time it was purchased. 284No other expert, no business valuer or otherwise, was called to establish the value of the business purchased. 285In the absence of any evidence of the value the business, I do not think I am able or entitled to make my own estimate. "In such circumstances, there are limits to the lengths to which a court may properly go in 'doing the best it can' to assess damages...": Troulis v Vamvoukakis [1998] NSWCA 237 at p3. In Troulis at p14 the Court noted examples "...where courts have declined to substitute guesswork for evidence, and have refused to award damages where no basis for a rational assessment has been laid..." and refrained from awarding damages. 286The cross-claimants initially relied on reports from Mr Birrell in an attempt to calculate their loss. Mr Birrell undertook to abide by the code of conduct for expert witnesses (MB 23/8/11 at [17]) but I do not regard his evidence as reliable for a number of reasons. 287First, Mr Birrell had been Mr Wachtenheim's accountant for about 30 years. In those circumstances, he had a natural allegiance to his client which diminished his independence as an expert. So also does his involvement in the business, paying the wages on behalf of Mr Wachtenheim. These matters operate in practical terms at least to disqualify him as an independent witness. That he was prepared to swear otherwise raises a real concern about his evidence. 288Secondly, as discussed earlier in these reasons, Mr Birrell was involved in the fraudulent conduct of Mr Wachtenheim in exaggerating his income for the purpose of obtaining finance. Mr Birrell prepared the draft tax return for Mr Wachtenheim to use for this purpose. He asserted the conduct was an innocent reliance on his client's instructions. But he knew that never in the past had Mr Wachtenheim disclosed an income of that magnitude (T1870/47). And six weeks later Mr Birrell prepared a different tax return for Mr Wachtenheim for the purpose of submission to the Australian Taxation Office. It showed an income substantially less than and wholly inconsistent with the income shown in the earlier draft return. Mr Birrell accepted that he would know that the second return was completely different to the earlier draft (T1870/10) but said he would not have raised this with Mr Wachtenheim. 289I cannot accept this Nelsonian blindness that Mr Birrell adopted in relation to the preparation of the tax returns is appropriate. At the very least, on becoming aware than one of the returns he had prepared was false, it was incumbent on him to raise the matter with Mr Wachtenheim, rather than allow himself to remain an instrument in the fraudulent purpose. 290Mr Birrell's evidence regarding this event was unsatisfactory. He was referred to a particular word "Val" and a number recorded on the handwritten letter of instructions he received from Mr Wachtenheim, and asked "Whose handwriting is that, sir". He said "I can't recall", a peculiar answer in respect of handwriting. When asked "Is it yours?" he conceded "That's my handwriting, yes". When asked, "Who is Val?" he said, "It would be short be valuation", but later stated, "I don't know who Val is" (T1858). Similarly, he said he did not at the time know Mr Wachtenheim's purpose in obtaining the draft tax return (T1856/27) but then accepted "He would have said he was obtaining a loan" and "I knew he was going in to buying a business". 291Thirdly, there were documents tendered by the cross-claimants evidencing that Mr Wachtenheim's accountant (who was presumably Mr Birrell) prepared accounts for Mr Wachtenheim's business for the period July to September 2005, showing a profit of $18,417.57 for that period. As Mr Birrell was then not informed of Mr Wachtenheim's substantial cash drawings on the business, the actual profitability must have been greater. These results are inconsistent with Mr Birrell's later expert reports. Other financial statements indicating profits were forwarded to the Sydney Business Exchange, apparently to promote the sale of the business (Ex 1, Vol 6, pp2070-2074). They also are inconsistent with Mr Birrell's reports created for these proceedings. 292Fourthly, Mr Birrell readily assisted the reconstruction of accounts on the instructions of Mr Wachtenheim's solicitor, Mr Muriniti, after Mr Muriniti became aware of the substantial cash withdrawals by Mr Wachtenheim. That correspondence (some of which is quoted earlier) suggests that Mr Birrell was willing to do as he was instructed, to ameliorate the dishonesty of his client rather than exercise independent professional judgment to assist the Court to assess the quantum of damage. 293Fifthly, his reports were disavowed by the cross-claimants after Mr Birrell was cross-examined. The cross-claimants sought leave at that stage to have Mr Birrell prepare fresh reports reallocating income between various years. As Mr Birrell had concluded his evidence, and as any further report would necessitate an adjournment so that it could be the subject of consideration and response by the cross-defendants, I refused leave. The cross-claimants unwillingness to adopt their own expert reports at the very least added to the shadow upon their reliability. 294Sixthly, Mr Birrell relied upon the bank statements for Deist to ascertain turnover, even after he knew that they were unreliable because Mr Wachtenheim had taken approximately $150,000 from the cash takings (see affidavit 23/11/2012 at [31], [32]). Similarly, when the bank statements showed significantly lower deposits in the final weeks of the business Mr Birrell accepted Mr Wachtenheim's instructions that he was only clearing frozen product during the last three weeks of trading, even though invoices showed Mr Wachtenheim continued to receive fresh and frozen seafood into the last week of the business. During the final weeks of trading, as fresh produce was being supplied, a low level of banking must have been a reflection of how much cash was being taken from the till rather than a reflection of negligible turnover. 295Seventhly, Mr Birrell's reports do not identify whether any opinion is based on his knowledge and expertise or, as in some respects appears more likely, whether he simply reduced to an accounting format the assertions of Mr Wachtenheim. What he has assumed is not clear. In these respects his reports do not satisfy the requirements of an expert report identified in Makita (Aust) Pty Ltd v Sprowles ((2001) 52 NSWLR 705 at [85]) (see also Welker v Rinehart (No 6) [2012] NSWSC 160 at [38]). Whether or not the document has been admitted formally, these matters illustrate that I should give the material little weight. 296For these reasons, I place no weight on the accounts of loss generated by Mr Birrell. 297Mr Gary Dent faced similar difficulties. He also acknowledged the Expert Witness Code of Conduct, but was the accountant of Mr Batchelor and Mr Turner, witnesses who were also engaged in litigation with De Costi and who perceived their interest in the proceedings to be similar to Mr Wachtenheim's. Mr Dent did not disclose that he was the accountant of Mr Batchelor and Mr Turner, he did not disclose the substantial involvement of his unqualified son in the preparation of the report, and he assumed that Mr Wachtenheim conducted the business in a business-like way which (given the use and drawings of cash in the business, and the lack of records) was mistaken. Perhaps most troubling was the instructions Mr Dent received from Mr Murinti, in the following terms (Ex 30): "...what we need from you Gary is, what was the dodgy stuff that David Shnider was doing with the figures and how did that translate into the dodgy information we see generally in the Broker's file and on that credit memorandum which we recently got from the NAB. I need your assistance to try and identify what the dodginess, the techniques, the sleighs [sic] of hands and so on which were employed in the manipulation of figures which assisted or could have assisted in securing loans for Serge Wachtenheim which blind Freddy would have told him, he had no chance of servicing, yet his own brother in law didn't." 298Further, Mr Dent sought to give valuation evidence although he was not a valuer; he relied on the initial reports of Mr Birrell which took no account of the takings of Mr Wachtenheim, he assumed the business ran until October 2006, some five weeks after it ceased trading, which he acknowledged would affect his report (T3386), he extrapolated and then reduced the turnover of the De Fish Dee Why business without any proper identifiable basis (9/6/11 p2 at [3]), and he sought to calculate lost profit up until June 2009, apparently on the basis of loss of bargain damages which was inappropriate to the cause of action pleaded. 299Mr Dent's reports did not satisfy the usual Makita requirements. Apart from an obvious reliance on defective information from Mr Wachtenheim, there was no identification of precisely what Mr Dent assumed and what process of reasoning and expert judgment he brought to bear on those assumptions. Large parts of the reports were rejected as inadmissible, and those parts that remained did not present any coherent explanation of how the calculations and opinions were derived. 300In final submissions, the cross-claimants asserted two components of loss comprised two components. The first was largely the acquisition cost, but included the following sums: purchase price $440,000; stamp duty on the purchase $15,920; stamp duty on the lease $721; legal costs $10,617; initial lease $8,727; and the "Chattel lease continuous loss" $30,000. I was not favoured with a reference to the evidence of these items, although the same items were listed in Mr Dent's first report (9/6/11 at p6). They were no more than the advice provided to him by Mr Wachtenheim of "the initial capital outlay" which was "completely lost due to his eviction from the business premises and consequent loss of opportunity to sell the business as a going concern". Losses resulting from the eviction, brought about by Mr Wachtenheim's breach of agreement, are not recoverable losses for any cause of action pleaded. 301No claim was identified for trading losses. The only reference to this subject in the cross-claimants' submissions was in one paragraph: "73. Significantly, any losses suffered by either Deist as a result of trading and which might be wrapped up in a claim by de Costis for arrears become a part of Wachtenheim or Deist's loss. In the premises, restitution requires that those losses be recovered by Wachtenheim or Deist depending on how they fall and always with a view to avoiding a double recovery." 302Any assessment of the damages suffered by Mr Wachtenheim and his company, Deist, must give credit for the drawings, including cash from the till, taken by Mr Wachtenheim. Yet those amounts were not at all clear. No record was kept of the cash drawings. Mr Wachtenheim conceded that he took $1,500 cash per week "from the till" for personal expenses so that there was a total amount of $150,000 to $200,000 undeclared (T1460). With other non-business expenditure shown in the accounts such as the $65,000 withdrawn in the closing weeks of the business, and the diversion of the $30,000 repayment by Mr Shnider, the personal benefit to Mr Wachtenheim may have been as much as $300,000. 303The calculation of any loss might have been assisted by reliable accounts of the business before or after the purchase but neither party asserted that such accounts existed. Such records as did exist pertaining to the business after the purchase took no account of the cash withdrawals. However, it is clear that in the early months after November 2004 Mr Wachtenheim was meeting all of the business' obligations while significant cash drawings were being made. Mr Dent said that the first year of trading was profitable (T3544/12). 304The bank statements show that almost $120,000 was banked in the month from 24 November to 24 December 2004. In the final week from 20 to 26 December 2004, $71,415.81 was banked but the evidence of the MICROS reports showed sales of $82,113.29. For this week alone apparently $11,000 cash was taken from the business. File notes of conversations between Elliann Costi and Mr Wachtenheim in this period, not challenged in cross-examination, establish that Mr Wachtenheim was "really happy" with the takings (see EC 12/4/12 at [26]-[29]). 305Mr Wachtenheim may well have been worse off financially when the business closed in late August 2006 than he was in November 2004 before he purchased the business. His level of debt was higher. But whether his financial and business practices caused that increase debt is important in determining whether the cross-defendants should bear any responsibility for that loss. By his undisclosed cash drawings that he received from the business and his failure to attend to the payment of his supplier, he was ultimately unable to continue operating the business and thus lost its capital value. I do not regard that loss as attributable to any representations. It is a function of the way in which Mr Wachtenheim conducted the business. They were a consequence of the "folly, error or misfortune" of Mr Wachtenheim himself (see Henville v Walker (2001) 75 ALJR 1410 at [28]-[29] quoting Gould v Vaggelas (1985) 157 CLR 215 at 221-2. 306That is not to say that Mr Wachtenheim was lazy or poor with customers. On the contrary, he seems to have had reasonably positive customer relations and I make no finding that he did not work sufficient hours to maximize sales. However, a failure to properly control expenses, including wages and non-business expenses which are paid from cash withdrawals from the business, must impact adversely upon the profitability and value of the business and its ultimate longevity. In regard to these matters - proper budgeting, appropriate expenditures and proper records - Mr Wachtenheim's approach to the business was delinquent. 307The cross-claimants also argued that Mr Wachtenheim should be entitled to remuneration on the basis of the average salary of a manager per hour, multiplied by the number of hours he has asserted to have worked. Reference was made to ACCC v Top Snack Goods Pty Ltd (1999) ATPR 41-708 and Cut Price Deli Pty Ltd v Jaques (1994) 126 ALR 413. These authorities recognise that it remains incumbent on the cross-claimant to prove lost remuneration that would otherwise have been achieved (see Top Snack Goods 43, 102-103 at [83]. In this case, Mr Wachtenheim's pre-purchase earnings were claimed by him to be negligible; there is no evidence to suggest that they would have been any different if the business had not been purchased. And, in any event, any "lost remuneration" must give credit for the actual remuneration Mr Wachtenheim received in the form of wages, cash removed from the till, personal expenses paid, and funds diverted for personal use. 308For these reasons I am not persuaded that any damage to Mr Wachtenheim resulted from his reliance on alleged representations by the cross-defendants. Whether any loss was suffered cannot be determined because of the substantial but unqualified level of cash withdrawals, and the wholly inadequate state of the evidence. If any loss was suffered it is in my view principally attributable to the manner in which Mr Wachtenheim conducted the business. 309This is not a case where it is clear that some damage has been suffered and I should do the best I can because of the inability of a party to prove with certainty the amount of damage. There were many steps that Mr Wachtenheim could have taken to prove the damage but that would have meant disclosing in detail the benefits that he received from business. He was not prepared to do this, at least in a detailed, specific and meaningful way. In accordance with the principles in Troulis, referred to earlier, I would decline to find any damages.

VII. The section 84 point 310Section 84 of the Trade Practices Act 1974 (Cth) provides: "Conduct by servants or agents of body corporate. 84. (1) Where, in a proceeding under this Part in respect of any conduct engaged in by a body corporate, being conduct in relation to which a provision of Part V applies, it is necessary to establish the intention of the body corporate, it is sufficient to show that a servant or agent of the body corporate by whom the conduct was engaged in had that intention. (2) Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate." 311The cross-claimants rely on section 84 for the purpose of establishing that the representations by Mr Theodore also became representations of Franchises and Holdings, as well as representations of the corporate owner of the Dee Why shop known as De Fish Dee Why. I do not understand there to be any issue that as the owner of De Fish Dee Why and by making representations about the store Mr Theodore would be making representations both on his own behalf and on behalf of the corporate owner of the business. 312The real issue is whether Mr Theodore has made any representations on behalf of Holdings and Franchises. The significance of this issue has diminished in view of my findings, as I have rejected the representations alleged to have been made by Mr Theodore. 313Insofar as Mr Theodore is a business owner making representations concerning the performance of the business, he was in no different position from any other franchisee that is making representations. Generally, representations would not create a liability in the franchisor because they could not reasonably be understood as being on behalf of the franchisor. The franchise agreement signed by Mr Wachtenheim reflected this circumstance in clause 8.9: the franchisees undertook not to make representations about the De Costi Seafood businesses and franchises. That Mr Theodore happens to be the brother of Mrs Costi who was an owner of the franchisor seems to me to be of no significance in determining whether representations made were on behalf of the franchisor. 314However, Mr Theodore did have employment with the franchisor and did visit franchisees and provide advice and instructions from time to time as part of his work. In that regard, whatever be his precise title, he was a representative of the franchisor, at least for some time, and in respect of some of his conduct. 315In my view section 84 does have application to make representations of Mr Theodore the representations of Franchises when the representations concern the business of Franchises. Where a representation concerns the particular business at Dee Why, Mr Theodore's representations could not be regarded as representations on behalf of Franchises. This approach accords with the decision of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1244]. A representation is on behalf of a company if it is intended to be so, or if it is done as part of the corporation's business. The nature of the representation is indicative. It shows who Mr Theodore was intending to act for, which role he was fulfilling, whether it was as the owner of the shop, or an employee of De Costi Seafoods (see also Bennett at [207]). 316Thus, any representations by Mr Theodore about the profit of the business at Dee Why are representations of the franchisee but are not representations on behalf of the franchisor. The same principle applies to representations about the gross profit margin of the store. But representations about the practice of De Costi Seafoods would be a representation on behalf of Franchises and Holdings, within Mr Theodore's actual or apparent authority as an employee of De Costi Seafoods with a responsibility, from time to time, to represent De Costi Seafoods. 317The cross-claimants sought to prove that representations concerning the De Fish Dee Why business were representations of Franchises, Holdings, Mr George Costi and Mrs Costi. This was based on the assertion that the true owners of De Fish Dee Why were not Mr Theodore and Mr Con Costi, but rather Franchises, or Holdings, or Mr George and Mrs Androulla Costi, or some combination thereof. There was no admissible evidence that supported this allegation. And it was inconsistent with all the relevant witnesses called by the cross-defendants. 318I accept that De Costi leased a site in Dee Why for a retail store but that is insufficient to establish ownership of the De Fish Dee Why business. The evidence of Mr Theodore, Mr Con Costi, Mr Andrew Mercer and the bank records establish the following matters. Mr Theodore was offered the opportunity to conduct a fish franchise on the site but did not want to own the business alone, and so he asked Mr Mercer if he would like to be a partner. Mr Mercer considered the matter but decided against it because of his young family. Mr Con Costi agreed to be Mr Theodore's partner, a loan was obtained from Westpac Finance for $240,000 to finance the fit-out of the store, with Mr Theodore and Mr Con Costi being guarantors. Mr Theodore and his wife gave a second mortgagee of their home as security. Mr Theodore used his existing home loan arrangements to repay $120,000 of the Westpac Finance loan because his existing mortgage offered a more favourable interest rate. The residue of the Westpac loan, Mr Con Costi's portion, was paid directly by the De Fish Dee Why business each month and an equal amount was paid by cheque to Mr and Mrs Theodore. Mr Theodore and Mr Con Costi each took $500 cash per week from the business and for the first three months after purchase Mr Con Costi worked full-time in the business getting it established. Thereafter he monitored the business via the internet and security cameras, whereas Mr Theodore would visit the shop once or twice a week. When Mr Wachtenheim offered to purchase the business Mr Theodore consulted Mr Con Costi and they decided to sell the business. The proceeds of sale paid off the existing loans and Mr Con Costi and Mr Theodore received the residue with some of the funds used on another business in Gladesville. 319I was satisfied that Mr Theodore and Mr Con Costi were the true owners of the business at Dee Why until it was sold to Mr Wachtenheim. 320In these circumstances the ownership of De Fish Dee Why did not suggest a wider application of section 84 to any representation of Mr Theodore than what I have found.

VIII. Unconscionable conduct 321The cross-claim included an allegation that the conduct of the cross-defendants was unconscionable. 322At common law, unconscionable conduct required one party to take unconscientious advantage of another party who is at a special disadvantage (Blomley v Ryan (1956) 99 CLR 362, at 415 per Kitto J). The special disadvantage may be "illness, ignorance, inexperience, impaired facilities, financial need or other circumstances affect[ing] his ability to conserve his own interests". It is necessary that the "special disability was sufficiently evident to the other party to make it prima facie unfair or 'unconscionable'" that the benefit be retained (Louth v Diprose (1992) 175 CLR 621, 637). Unconscionability requires that the will of the disadvantaged party not be independent and voluntary, or unable to make a worthwhile independent as to what's in his best interests: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461. Inequality of bargaining power is insufficient: Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [11]. A "high level of moral obloquy" or "highly unethical" conduct is required: Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at [339]. 323The foundation of the allegations of unconscionable conduct seem to be that Mr Wachtenheim was vulnerable and the cross-defendants took advantage of his vulnerability in selling the Dee Why shop to him at a gross overvalue. 324The primary basis for this vulnerability is the condition that Mr Wachtenheim was found to be suffering from at some stage after these proceedings commenced. Medical reports were in evidence and it was not contested that Mr Wachtenheim suffered some symptoms of a condition known as Attention Deficit Hyperactivity Disorder ("ADHD"). There was also some evidence that this condition is not of recent origin but may have existed throughout Mr Wachtenheim's life. 325The evidence linking this condition with any inability of Mr Wachtenheim to understand figures or to manage his commercial affairs is limited. I must accept that Mr Wachtenheim suffered some symptoms of ADHD but the real question is what, if any, impact that played in relation to the purchase and conduct of this business. The cross-claimants do not allege that Mr Wachtenheim's condition was known to the cross-defendants, nor could they, given that it was not known to anyone else, even Mr Wachtenheim's own family, until sometime after 2006 when he ceased operating the Dee Why fish shop. 326The cross-claimants asserted that the terms of the purchase of the business were so one-sided and unfavourable to Mr Wachtenheim that the cross-defendants should have known of his vulnerability and not allowed him to enter the transaction. 327This argument ignores the independent advice that Mr Wachtenheim had available and received. 328Mr Wachtenheim claimed in paragraph six of the cross-claim that he lacked business experience. I do not accept this. He ran his own small business, he was involved in real estate sales, and he was readily able to identify unsatisfactory financial proposals when he received his first letter of offer of finance for the purchase of the business on 13 August 2004. His faxes also evidence an ability to deal with commercial matters. 329Mr Wachtenheim also claimed a high degree of dependency upon Mr Shnider. In my view this dependency was exaggerated. Mr Wachtenheim made his own decision about the Camden shop, and attended meetings with Dr Costi persons without Mr Shnider. 330Even if Mr Wachtenheim's dependency on Mr Shnider were true, it does not establish any unconscionable conduct by De Costi. 331There was no financial, familial or medical circumstance compelling or pressing Mr Wachtenheim to enter the transaction. He was as free to refuse to proceed with the Dee Why purchase as he was a year earlier when he declined the Camden shop. I have already mentioned Mr Wachtenheim's dealings with Mr Shnider, Mr Birrell and Mr Stephen Noss, his business adviser, accountant and solicitor respectively. These are the people who undertook the obligation, if one existed, to protect Mr Wachtenheim from an unfavourable deal. The cross-claimants could cite no authority to establish an obligation on the vendor of a business to ensure that the purchase is likely to be beneficial for the purchaser, irrespective of the contractual terms, in circumstances where the purchaser is represented by independent professional people retained to protect his interests. 332The primary aspect of this claim, according to the cross-claimants' submissions, depended upon the cross-claimants establishing that the transaction was so improvident that no vendor could be unaware that Mr Wachtenheim was vulnerable. I have already given reasons as to the performance of this business and how proof of its unprofitability was absent. If the business is profitable it is difficult to see how it must be "manifestly improvident" to purchase it. In the absence of evidence of an unprofitable business there is nothing left to this claim other than the assertion that unbeknown to the vendors Mr Wachtenheim had a condition which impacted on his ability to make a success of the business. I did not understand the cross-claimants to press such a case, at least where the purchaser is represented by independent professional advisors. It is not enough to establish unconscionability. 333In any event, I am not persuaded that Mr Wachtenheim lacked the ability to look after his own interests. Mr Shnider's evidence did not support Mr Wachtenheim's assertion. In my view, Mr Wachtenheim was fully aware of the relevant aspects of this business. He knew that there was a significant opportunity for him to purchase a new and growing business which would produce a lot of cash revenue. This was a significant attraction to him. Had he wisely accounted for that revenue, in my view the business represented an opportunity for him to make a profit. However, it was a business that did require long hours and strict control over wages and other expenses. Mr Shnider's contemporaneous notes shortly after the purchase indicated that no proper control was kept over wages and Mr Wachtenheim's own evidence shows that there was no proper accounting of the moneys that came into the business. 334The cross-claimants challenged Mr Shnider's credit, primarily on the basis that he engaged in remunerative work for De Costi Seafoods in the months prior to the trial. This employment was not disclosed until Mr Shnider was specifically asked about it. I was not persuaded that this fact alone justified any adverse credit finding against Mr Shnider. 335Particular reliance was placed by the cross-claimants on a demolition clause in the lease over the Dee Why premises. The effect of the provision was that the landlord could terminate the lease if it wished to demolish the building to construct a new shopping centre. This might seem to be a provision significantly adverse to the interests of Mr Wachtenheim. However, there was no obligation on Mr Wachtenheim to accept such an arrangement. So far as the evidence reveals, it was open to Mr Wachtenheim to accept an assignment of the existing lease without a demolition clause rather than have a new lease with a demolition clause in it. Alternatively, Mr Wachtenheim could have refrained from entering the contract to purchase the business. 336The new lease arrangement had one significant advantage to Mr Wachtenheim: a five-year lease with a five-year option, a total of ten years compared to the existing lease which had two years remaining plus a three year option. The five-year lease plus a five-year option corresponded with the term of the franchise agreement which was for a period of five years, with a right to request a further five-year term. It also corresponded with the ten-year period of repayment of the loan for the purchase of the business. 337I would infer that generally a finance provider would want to ensure that the business' premises were secure for ten years if it was providing for the purchase of the business funds that were to be repaid over a ten-year period. A term to this effect was contained in the loan contract. 338There was no evidence that the demolition clause was ever exercised. Thus, there was at least some prospect that a ten-year lease with a demolition clause was more favourable than the existing, part-expired, three-year lease with a three-year option. In other words, the period of the lease and option essentially doubled the term of the existing lease, although there was a risk of a demolition clause. If Mr Wachtenheim were satisfied that the prospect of demolition was not great, the five plus five lease arrangement would seem preferable. Mr Wachtenheim's decision to enter that lease tends to suggest that Mr Wachtenheim preferred the five plus five term. 339There is documentary evidence that Mr Wachtenheim was advised by Mr Noss as to the demolition clause. Correspondence from Mr Noss (at CB1202) recorded that Mr Wachtenheim "has approached the lessor to give a 5x5 lease. It is intended the lease be assigned and there be a variation" is evidence of Mr Wachtenheim's preference for a longer lease. Mr Noss' letter dated 14 April 2005, referred to above, also confirms that Mr Wachtenheim was given advice by his solicitor as to the demolition clause. 340There was also some evidence in relation to a common practice applying when a demolition clause is exercised: the landlord might ordinarily give favourable treatment to the tenant in allowing an early choice of location in the new shopping centre in the event that the demolition clause was exercised. Whether or not this practice would have been adopted by Mr Wachtenheim's landlord and whether it fairly outweighs the inconvenience of having the business disrupted for a period of time is uncertain. However, I was not persuaded that the lease Mr Wachtenheim chose to enter was necessarily less favourable than an assignment of the earlier lease under which Mr Con Costi and Mr Theodore were operating. 341Paragraph 25 of the sixth further amended statement of cross-claim alleges, among other things, that De Costi Seafoods did not disclose an intention to continue arrangements with supermarkets or continue the De Costi pricing structure. Yet the contracts between the parties expressly disclose these matters (see clause 2.2 of the franchise agreement, discussed below, and clause 12.2 which refers to the De Costi Seafoods Terms of Trade). 342For these reasons I do not regard Mr Wachtenheim as being in any relevant way vulnerable nor do I regard the cross-defendants acceptance of Mr Wachtenheim offer to buy the business for $440,000 as unconscionable. 343Other allegations in the statement of cross-claim were not referred to by Mr Wachtenheim in submissions and I do not propose to deal separately with them. The hearing was conducted on the basis that those matters not referred to were not pressed.

(a) Implication of term 344The cross-claimants also asserted, in the alternative to the claim for misleading conduct and unconscionable conduct, that there was breach of an implied term of the contract providing for "timely and adequate supply of product". The term alleged is in clause 30 of the sixth further amended defence and cross-claim which states: "The Cross-Claimants [Mr Wachtenheim and Deist] say that it was an implied term of the Franchise Agreement that the First Cross-Defendant [Franchises] and/or Fifth Cross-Defendant [Holdings] would provide and/or cause the Fifth Cross-Defendant [Franchises] to provide to the Cross-Claimants [Mr Wachtenheim and Deist] timely and adequate supply of seafood product for the purposes of the Second-Cross-Claimant's business [Deist]." 345It is well known that a term of this type will only be implied if it is obvious, capable of clear expression, reasonable, necessary for business efficacy and consistent with the express terms of the contract: BP Refinery Western Port v Shire of Hastings (1977) 180 CLR 266; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. These requirements reflect the difficulty in a party having terms implied into an agreement which is recorded in a detailed, signed document. 346Clause 12.1(3) of the franchise agreement provides: "De Costi Seafoods [Franchises] must use its reasonable endeavours to procure the Company [Holdings] to supply the Franchise with its requirements of the De Costi Seafoods Products". 347This provision is inconsistent with an absolute obligation to ensure "timely and adequate supply of product". The obligation on Franchises was to "use its reasonable endeavours". 348The pleaded term alleged also seems to me to fail each of the other tests proposed in Codelfa and BP Refinery. It is neither obvious nor reasonable that a term would impose an obligation on Holdings when it is not a party to the agreement, nor is it obvious or reasonable to grant a benefit to Deist which is not a party to the agreement. 349Further, the use of the alternative conjunctive-disjunctive form "and/or" between the references to Franchises and Holdings and between Mr Wachtenheim and Deist creates ambiguity as to the precise nature of the obligation. There is a lack of clarity of expression. There is also an obvious lack of certainty in the meaning of the expression "timely and adequate". 350Further, the absence of any reference in the suggested implied term to orders by the Franchisee suggests that there should be timely and adequate supply in the absence of any order by Mr Wachtenheim. This seems positively unreasonable. 351Nor can such a term be necessary for business efficacy if the parties have agreed on a different obligation to regulate the supply of product: viz the "reasonable endeavours" clause 12.1(3) of the franchise agreement. 352The franchise agreement also includes: "Clause 12.2 The De Costi Seafoods Terms of Trade (1) The De Costi Seafoods Terms of Trade will apply to all De Costi Seafoods Franchisees but may be varied to cater for individual circumstances... (3) The Franchisees acknowledges and accepts that the company may add to, delete or otherwise modify the De Costi Seafoods Terms of Trade by giving written notice to the Franchisee of the change. (4) A change to the De Costi Seafoods Terms of Trade takes effect seven (7) days after it is notified to the Franchisee." 353There was no evidence of any change to the De Costi Seafoods Terms of Trade. Those terms are contained in Schedule C to the franchise agreement, and included such terms as: "5(2) If a delivery date is specified that date is an estimate only and the Company is not liable for any delay in delivery. (3) If the Company is unable to supply the Customer's total order these terms and conditions continue to apply to the Goods supplied." 354Further clause 12.8 of the franchise agreement: "If the Company is unable to supply any part of an order by the Franchisee for a De Costi Seafoods Product within a reasonable time after receiving that order, the Franchisee may obtain supply from an alternative supplier for that part..." 355The clauses also are inconsistent with the implied term proposed. They provide a regime for a failure to supply product which contradicts the obligations sought to be implied. 356For these reasons, I reject an implied term in the form pleaded. 357An implied term of good faith is also alleged. Whilst there is authority supporting this approach, the content of such a term does not assist the cross-claimants. It requires cooperation, honesty and reasonableness (see Cordan Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [145]). It does not overrule any of the express terms of the agreement (Cordan at [146]).

(b) Breach 358The cross-claimants allege timely and adequate supply of product was not provided by Franchises and Holdings in breach of the implied term. 359The particulars of breach of the implied term alleged were that: "from and about February 2005... (a) Supply was frequently effected outside of a 48 hour period from time of landing; (b) Supply was frequently effected after 9:00am in the morning; (c) Supply was frequently unable to be given; (d) Inferior product was frequently supplied to the Second Cross-Claimant." 360These particulars of breach manifest one of the reasons why the asserted implied terms cannot be implied: it is impossible to determine whether supply "outside of a 48 hour period from time of landing" or supply "after 9:00am in the morning" constitutes a breach of an implied terms requiring "timely supply". To impose an enforceable obligation, more words need to be implied. Further detail of the obligation or at least of the machinery for determining its ambit is needed. 361The evidence of supply indicated a usual practice. The cross-claimants ordered product on a daily basis before 8am each weekday morning and the order was delivered the next day. Sometimes but not always did this occur before 9am in the morning but it was always given the subsequent day. There was no evidence to support the allegation that "supply was frequently unable to be given". Indeed, there was no evidence that on any occasion "supply" (as distinct from occasionally a particular line of fish product) was unable to be given, let alone "frequently". 362I do not think that business efficacy, necessity or obviousness required that supply had to be given before 9am in the morning. If that was to be a term of the agreement one would expect it to have been included in the written document. The same must be true of the effecting of supply "outside of a 48 hour period from time of landing". In any event, Mr Wachtenheim did not allege that these times were implied, but that this conduct was in breach of the "timely delivery" term. 363Although Mr Wachtenheim asserted in his affidavit (21/9/11) that deliveries were always late, in oral evidence he conceded that initially timeliness of delivery "wasn't too bad at all". 364It was not disputed that on occasion product was delivered more than 48 hours after "time of landing" if this meant "arrival at the Sydney Fish Markets". Its meaning was never clarified by the cross-claimants. Plainly frozen product would offend such a term, since it may be stored for a period of weeks if not months. As for fresh product, the complaint may have been that the fresh product did not always reach the retailer, Mr Wachtenheim, within 48 hours of it being unloaded off the boat. But there was no evidence to suggest that this was the usual practice or even the preferred practice in the industry, let alone in the operation of the cross-defendants' business. On the contrary, the expert evidence of Mr Susman was to the effect that: "the average time it may take for seafood to move from the catching and growing stage...to the stage of being distributed to restaurants and retail stores...might be in the range 3 to 6 days". 365Mr Susman also gave evidence that depending on the type of fish, if properly stored whole fresh fish can remain satisfactory for two weeks or more (T5230/35). The initial manager Mr Sharma gave evidence about how oilier types of fish last longer (T4885/25-31). 366The final particular, that inferior product was frequently supplied, was another subject of contention between the parties. It was not mentioned in the original cross-claim filed on 5 February 2007. I leave aside the question of whether supply of defective product breaches a term requiring "adequate supply". 367The De Costi Seafoods Terms of Trade allowed (unsurprisingly) for the return of non-merchantable quality product. There was evidence of a practice supported by documented "return sheets" that any product could be returned by franchisees, either for quality or other reasons such as over ordering. The return sheets called for the reason for the return of the product to be recorded. 368These documents do not support the claim of regular deliveries of defective product. According to the return sheets, some product was returned from Dee Why on 15 occasions during the 21 months of trading. Of those 15 occasions only two appeared to involve the return of fresh fish on the same day or the next day for quality issues. 369It seems to me an easy thing years after the event, in an attempt to resist a claim for monies owed, to allege defective deliveries. As an example, Mr Wachtenheim deposed that his manager, Mr Sharma, described the fish product as "shit" (SW 18/8/12 at [165]). Nicole Dhillon, who worked for the first three months only, did likewise (15/8/11 at [33]). This assertion was not contained in the primary affidavits of either deponent. Mr Wachtenheim asserted that during the initial period the quality was "extremely good" and he sold all his fish, with no wastage (10/6/11 at [412]). 370Mr Sharma did not corroborate the evidence of Mr Wachtenheim and Ms Dhillon concerning Mr Sharma's description of the product. Their evidence was not put to him in cross-examination. There was no documentary support for any complaint about defective product by Mr Wachtenheim. If Mr Wachtenheim had continually received defective seafood I would expect some documentary evidence, letters or file notes. I would also not expect evidence from Mr Wachtenheim that he was selling all his fish, at the same price as Mr Theodore with no wastage, mostly by lunchtime. 371Mr Wachtenheim asserted that he returned 1-3kgs of fish, 2 to 3 times per week, of the 30 to 40kgs per day he ordered. Records indicated in fact he ordered an average of about 670kgs per week during the period mid-March to mid-August 2006 (encompassing the slower trading winter months). Of the 15 occasions when product was returned from the Dee Why store in 21 months of trading, only once was that by Mr Wachtenheim himself. 372The second store manager, Mr Osborne, also gave evidence of poor quality produce. Although seemingly a crucial witness, Mr Osborne was not consulted until more than four years after the cross-claim was filed. Mr Osborne's credit was challenged, as a large component of his income was not brought to account for tax purposes until he became involved in these proceedings. He sought to attribute this failure to Mr Wachtenheim. His evidence about bad quality produce was also general and entirely unrecorded, and was not persuasive. 373The cross-claimants read affidavits from persons connected with four other franchisee stores. The witnesses connected with three of those stores - those owned by Mr Batchelor and Mr Turner, Mr Craig Brady and Mr Geoffrey Matthews - gave evidence sympathetic to the claim of Mr Wachtenheim about the supply of poor quality fish. If there was compelling evidence of the quality of the fish they received it might be relevant and probative, perhaps sufficiently probative of Mr Wachtenheim's deliveries to satisfy the test of "significantly probative" to be admissible as tendency evidence under section 97 of the Evidence Act 1995. 374However, the evidence was not compelling. It lacked any documentary support. It was no more than an oral assertion of complaints without any corroborating material. Mr Brady and Mr Matthews manifested a similar disaffection towards De Costi as that shown by Mr Batchelor and Mr Turner. Both Mr Brady and Mr Matthews swore affidavits claiming they were forced to close their business. They failed to disclose that their businesses were sold for substantial amounts, one for $285,000, and the other for $450,000. The failure to disclose this fact manifested a lack of balance in their evidence. 375However, because I do not think the evidence these witnesses gave is probative of the issues before me, I do not propose to make credit findings in respect of them. 376The franchisee of the fourth store, Mr Stephen Vial, recanted on his evidence. He ultimately denied that there were significant quality issues. Whilst his recanting of an affidavit raises its own concerns, his evidence indicated to me the difficulty in determining issues arising in this store by reference to evidence concerning other stores.

(c) One final term 377The final allegation of breach of contract relied upon the assertion that the supermarkets were supplied product on advantageous terms. The only supermarket relevant to the Dee Why store was a neighbouring Woolworths supermarket. There was no evidence of the terms of supply to this supermarket, although the Woolworths chain did receive a rebate on invoices. There was evidence that certain features of the supply to franchisees, for example, greater variety, small amounts, free deliveries, ready acceptance of returns and more flexible delivery times were not available to supermarkets. However, the evidence did not allow me to compare the terms of supply to the Dee Why store and the terms of supply to the neighbouring Woolworths store. So far as I could conclude there was no supply of product on terms that was peculiarly disadvantageous to the franchisee. 378Supply by Holdings to supermarkets did not go unmentioned in the franchise agreement. Clause 2.2(1) and (2) provide: "2.2 Acknowledgement of Other Distribution (1) The Franchisee acknowledges that the Company and Rasin currently distribute, and intend to continue to distribute, seafood by wholesale and retail to supermarkets, wholesalers, retailers and consumers without restriction and that the Franchise is granted subject to those existing and ongoing rights. (2) The Franchisee further acknowledges that De Costi Seafoods or any Related Entity shall be entitled to supply the De Costi Seafoods Product and other products including, without limitation, boots and knives to any person or business, including supermarket chains, wherever located, including within the Territory." 379Accordingly, any term to be implied must be consistent with those rights. It would not be consistent with clause 2.2(1) to imply a term imposing a "restriction" on the sale to supermarkets. 380The alleged term advanced by the cross-claimants was that Franchises and Holdings must: "effect supply of product on terms which facilitated those outcome [enabling the franchisees to obtain the benefit of the Franchise Agreement] and/or were advantageous to [Mr Wachtenheim and Deist] in the market". 381In my view, this clause also fails the five elements of Codelfa for similar reasons as the earlier implied terms. The obligations on a non-party [Holdings], the benefit to a non-party [Deist], the ambiguity in the use of the expression "and/or", the ambiguity of the expressions "in the market" and "advantageous", and the lack of detail in the expression "facilitated those outcome [sic]" all militate against its implication. 382There was no evidence of the damage suffered by the breach of any of the alleged implied terms. 383In my view, none of the terms should be implied, nor was there a breach of them in any event.

X. Conclusion 384Accordingly, in my view the cross-claim should be dismissed with costs. Each of the causes of action pleaded by the cross-claimants fail. 385On the question of costs the cross-defendants foreshadowed a claim for recovery of costs against the legal representatives of the cross-claimants, on the basis that there were no reasonable prospects for this case to succeed, but accepted that I would give no regard to that matter in this judgment. 386In these circumstances I propose to grant liberty to either party to make any further application in respect of costs within 28 days of this judgment. 387The orders of the Court shall be:

1. Judgment in favour of the first, second, fourth, fifth and seventh cross-defendants on the cross-claim.
2. Otherwise dismiss the cross-claim.
3. Remove the stay operating on the plaintiffs' judgment.
4. Order the cross-claimants to pay the first, second, fourth, fifth and seventh cross-defendants' costs of the cross-claim.
5. Grant liberty to the parties to apply within 28 days to vary the costs order in order 4, or to seek any further order in respect of costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 May 2013