A "Participation Interest" under Paragraph (a)
46 The parties filed written submissions both at the beginning of the case, and at the end. The submissions filed on behalf of Gemtaf at the outset identify s9(a) and (b) as the basis upon which it asserted there was a "participation interest". The more recent submissions appear to concentrate on s9(b). However, I should deal with both.
47 Section 9 (and previous sections in similar terms), has been considered on a number of occasions. On each such occasion the court has acknowledged the width of the definition. It should not be read down. Helsham CJ in Eq in Corporate Affairs Commission v Australian Softwood Forests Pty Ltd (1978) 1 NSWLR 150, in the context of previous legislation in similar terms, said this: (at 154/155)
"… it seems that there must exist three elements, namely (1) a right to participate, or an interest (2) in any profits, assets or realization (3) of any financial or business undertaking or scheme."
48 In the same case in the High Court (Australian Softwood Forests Pty Ltd & Ors (supra), Mason J (with whom the Gibbs CJ and Stephen J agreed) (at 130) emphasised that a very wide meaning should be given to the word "interest". Nonetheless, the Court, in that case, carefully examined whether the scheme, which involved pine tree plantations, conferred an interest in the nature of a profit à prendre, or interest in land, or an interest in the timber on severance.
49 Here, Tradebanc operated the barter system, earning fees as specified in conditions 1 to 4. It had certain obligations under the agreement, including the provision of a directory, the co-ordination of promotion (Condition 6(c), Rules 6 and 21), and administration. Members (including Gemtaf) had no right to expect any share of its profit in managing the barter system.
50 Tradebanc, no doubt, had assets which it used to manage the system. Again members (including Gemtaf) had no interest in such assets. It could, no doubt, avail itself of Tradebanc's management services (confirming credit limits etc). In other words, it had the use of those services.
51 What is the position in respect of the barter system itself? By Rule 1, Tradebanc is expressed to have the sole interest in that system. It is the company's idea. It manages the system. In these circumstances, are the rights of members, to be characterised simply as a right to use that system? In Butterworth & Anor v Lezemo Pty Ltd & Anor (1983) 1 ACLC 1306, the Court was concerned with a franchise operation involving Chicken Spot outlets. The franchisee, upon payment of a sum of money, could use the logo and the paraphernalia of the chain. The franchisee had the right to use the services of the franchisor in advertising, marketing, advice on management, and training. Nicholson J, in that context, said this: (at 1316)
"I am unable to accept that a mere right to use industrial property without more can amount to an interest in it. Similarly, I do not think that it can be properly regarded as conferring a right to participate in it unless mere user can be equated with participation. I think that participation goes beyond a mere right of use and bears a connotation that the participant, even if he has no proprietary interest in the asset, has an eventual right or expectation of receiving something in respect of it."
52 His Honour added: (at 1316)
"In my opinion, the contractual rights conferred upon the plaintiffs by the agreement similarly do not confer upon them a right to participate or an interest in assets, for I consider that they confer a mere contractual right to use the services of the defendants for the various purposes set out in the agreement."
53 In Streeter v Pacific-Seven Pty Ltd (1985) 9 ACLR 790, the Court was concerned with another franchise, this time concerning the 7-11 chain. The franchisor provided manuals, forms, training and general institutional advertising. Against that background De Jersey J said this: (at 793)
"I still do not consider that the mere right of user accorded the plaintiffs in relation to this industrial property gave them any 'interest' or 'right to participate' in it. I agree with the reasoning in that regard of Nicholson J in Butterworth & Anor v Lezemo Pty Ltd & Anor (1983) 8 ACLR 737 at 749; 1 ACLC 1306 at 1316. I do not consider that the concept of 'participation' in the assets of an undertaking extends to mere use of them. The word participate ordinarily means to share or take part. One uses assets by employing them for some purpose or other. It is in my view inapt to describe the mere use of assets as 'taking part' of or in them, or as 'sharing' them. Participation in assets would in short, involve something more than mere use. If the legislature had intended the definition to extend to mere use, one might surely have expected it to say so, directly and simply."
54 Does the involvement of Gemtaf in the barter system extend beyond mere use? Does a member have "the right or expectation of receiving something" (to use Nicholson J's words) from the barter system? The interaction between Tradebanc and its members in the operation of the barter system is far greater than in either of the franchise cases to which I have just referred. Membership of the barter system confers three benefits. First, the system creates a market of potential users, who may otherwise give no thought to the use of the members' services. Secondly, it permits access to goods and services which may be obtained on credit. Thirdly, and most significantly, members have the right to expect that their goods and services will be advertised by Tradebanc in the barter directory (Conditiion 6(c)), and that brokers, engaged and managed by Tradebanc, will promote their product (Rules 6 and 21). Working on commission such brokers, no doubt, seek to marry the needs of members with the goods and services available through members (Rules 6 and 21). Members pay a monthly fee to Tradebanc to assist in the fulfilment of these, amongst other, purposes. Membership of the barter system, in short, confers a right to share in the continuing benefits which arise from the system. Though there is no tangible asset, and no proprietary interest in the system, I believe, nonetheless, in the context of this legislation, that it is appropriate to say that Gemtaf had a right to participate or an interest in the asset constituted by the barter system.
55 Moving to the third aspect of s9(a), the "right to participate or any interest" in "any realization of any financial or business undertaking or scheme", again it seems to me that members had that right. The bartering system was, in truth, a self-contained financial system. Members were either in credit or in debit. The system operated with trade dollars, which were recorded by Tradebanc. No money changed hands. The debit was to the system. It appears not to be an asset in Tradebanc's hands. A credit, likewise, was to the system, and not a liability in Tradebanc's hands. A member had no right to look to another specific member for reimbursement. In the event of the system ceasing to operate, a fund was to be created (Rule 27). Those with debits were obliged to pay into the fund. Those in credit could then claim from the fund.
56 In these circumstances, I believe it is appropriate to speak of a right to participate, or an interest in any realization of the business undertaking or scheme.