For most of his career, Mr Trumbull has worked in the financial services sector, with a specialty in IT. In late 2015 and early 2016 he wanted to move out of the corporate life, to suit his personal circumstances. He developed an interest in becoming a franchisee to operate one or more indoor swimming schools in the region of the Northern Beaches of Sydney, where he resided. He became interested in the franchise model of the First Defendant ("Jump").
In January and March 2016 Mr Trumbull says he received information from employees of Jump, being Mr Rice (the Third Defendant), head of the commercial section of Jump and Mr Hurry (the Fourth Defendant), the commercial leasing manager of Jump. Mr Trumbull asserts that he received a common verbal representation from both of them, at different times, substantially to the effect that H20 would have two operational Jump swim schools operating in the Northern Beaches region of Sydney by November 2016, in time for what would be the busiest season for (indoor) swimming schools. He also asserts that Mr Hurry provided him with a 'Franchise Build Handbook' ('Handbook') which conveyed the same representation. Mr Hurry was authorised to disseminate the Handbook to potential franchisees (and otherwise provide information) by Mr Campbell (the Second Defendant), and Director of Jump.
In March 2016, Mr Trumbull established his company, the plaintiff ('H2O') as the vehicle through which the franchise businesses would operate. H2O says that it entered into two franchise deeds on 16 March 2016, and expended substantial amounts of money in reliance upon the correctness of the representation made to Mr Trumbull [1] . A curious feature of the litigation is that the 'territory' in which the swim schools were to be located had not been identified; let alone the premises which the franchisor (Jump) would lease, at the point where parties entered into formal contractual relations in the middle of March 2016.
In the events that occurred, from the middle of March 2016 to January 2017, there was a delay in locating sites for where the schools could operate. There were other delays which frustrated the fulfilment of the estimate that two schools could operate by November. In the meantime, H2O outlaid substantial expenditure.
In September 2016, H2O exercised a right to terminate one of the franchise deeds. This had been (for reasons that were obscure) identified as the 'Brookvale' franchise deed. In January 2017, the other agreement, the 'Mona Vale' franchise deed was terminated by consent.
By this proceeding, H2O contends that by making the representation, Jump engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law. Specifically, it says that the representation related to a future matter and that Jump had no reasonable basis for making representations. That being so, H2O contends, it (Jump), and the persons who made (or authorised the making of) the representation is, or are, deemed to have engaged in misleading or deceptive conduct. It sues Jump, and the persons who either made or authorised the said representations, for damages pursuant to section 236 of the Australian Consumer Law ('ACL'). The amount of the damages claimed represent the company's incurring of expenditure.
For its part the defendants (who commonly put on the same defence and who were jointly represented) put in issue the content and accuracy of the pre-contract representations. Specifically, they say that officers or agents of Jump informed Mr Trumbull that based upon Jump's previous experience, the average time to have a swim School operational was between six and nine months from the date that a site for a swim school was secured. They say that if it was correct to characterise the representations made by them as amounting to representations as to future matters, then those representations were based upon reasonable grounds; citing the experience of other 'Jump' franchises. Secondly, they dispute that any misrepresentation was causative of any loss or damage on the basis that Mr Trumbull, on H2O's behalf, did not rely upon them in his decisions to enter into the franchise agreements and to incur expenditure. On the issue of damages, whilst the defendants accept the expenditure of some of the items claimed, they dispute the causal connection.
[3]
The pleading
I note, at this point, that the plaintiff ultimately abandoned another pleaded representational case of liability; which was to the effect that Jump would not operate any other franchises in the Northern Beaches area. (It also abandoned a pleaded claim that one of the two franchise deeds that H20 had entered into in March 2016 had been repudiated later in that year)
H2O pleaded representations in the following terms (see the particulars to paragraph 6 of its Amended Statement of Claim):
1. on 22 January 2016 Mr Rice said to Mr Trumbull (at the Greenwood shopping centre in North Sydney) that it would take 6 to 9 months to have two swim schools operational, that H2O would have its swim schools open and earning income in 6 to 9 months, in time for the busiest and most profitable time for swim schools (the 'First Verbal Representation');
2. in March 2016, Mr Hurry said to Mr Trumbull that suitable premises for two swim schools will be found and those premises would be operational as swim schools by November 2016, in time for the busiest and most profitable time for swim schools (the 'Second Verbal Representation');
3. Mr Hurry gave to Mr Trumbull a 'Franchise Build Handbook', which relevantly set out a series of timeframes, from the time a franchisee agreed to be a franchisee, to the opening of the swim school, which indicated a range of milestones that indicated that the swim school would be operational and earning income within approximately 8 months (the 'Third Representation').
In his written closing submissions, Counsel for the plaintiff indicated that the plaintiff's case on misleading or deceptive conduct could be distilled to the following representation:
"H2O would have 2 operational Jump Swim Schools operating in the Northern Beaches of Sydney by November 2016" (hereafter 'the impugned representation').
It may be noted that even if there is little difference in substance between the first and second representations (which were both verbal), there is some difference between the verbal representations and the third of the representations above. There was no bare statement of an aggregate period of time for completion in the Handbook to the effect identified in paragraph 10, above. At any rate, the content of the Handbook is relied upon by the Plaintiff to support its case that the verbal representations were made.
[4]
Mr Trumbull's evidence
Mr Trumbull swore two affidavits: his primary affidavit being sworn on 18 December 2018 and an affidavit sworn on 5 April 2019. The second affidavit was sworn after evidence from the defendant's witnesses had been served. This affidavit did not reply to the content of the defendants' evidence, but merely related to the claim for damages.
A feature of Mr Trumbull's primary affidavit was that it contained very little about his background, the circumstances in which he wanted to enter into a franchise to operate swim schools and what, if any, preparatory work, such as 'due diligence', he did in deciding to engage in this form of activity. This was important contextual information for assessing the statutory claim that was brought (Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 per Gleeson CJ, Hayne and Heydon JJ at [37] and [40]-[42]), yet details only emerged, haphazardly, when he gave his evidence. As indicated, it became evident that Mr Trumbull had been in the corporate world for a considerable period and had experience in negotiating contracts. When he was cross-examined, he supplied additional evidence to explain his motivations for seeking a new direction in his career. This was predominantly personal and family reasons which were incompatible with his continuing a corporate career travelling around the Asia-Pacific region. Specifically, for personal reasons, he developed a particular interest in assisting children with special needs to learn how to swim. He says further, that, by early 2016, he had just taken one year's unpaid paternity leave, and needed to earn some income. This last matter is something he says he told Mr Hurry (but not Mr Rice) in March 2016.
In his primary affidavit, Mr Trumbull said that on 18 January he received an initial franchise financial pack, setting out financial information concerning Jump's business. This included, amongst other things, a 'projection (profit and loss) template'.
Mr Trumbull was obviously enthused by what he read about this financial information given that, the next day, 19 January 2016, he spoke to Mr Rice on various subjects, including what Jump's franchises cost to set up; what territories were available; and the length of time it would take to get a franchise up and trading. This evidence was given in narrative form. Under cross-examination, Mr Trumbull gave more specific evidence as to what was said, notwithstanding that this was not set out in his primary affidavit over five months before.
Mr Trumbull says that on 22 January 2016 he met with Mr Rice at the Greenwood Shopping Centre in North Sydney. By this stage, he had received a financial pack a few days before. He expressed his interest to Mr Rice in an opportunity to develop a franchise, even, in more than one territory. Mr Rice indicated that there was nothing to stop two franchises starting at the same time. A salient part of the conversation to which Mr Trumbull deposed to was as follows:
"Me: Okay, I'm happy with those areas. How long does it take to get the businesses trading?
Rice: It takes 6 to 9 months from the time we sign up the franchise deed. We have been able to speed up this process recently because we have streamlined our process considerably and we have managed to open numerous sites within this 6 to 9 month timeframe recently.
Me: Great, so if we were to get the paperwork completed soon I would be up and trading later this year. I assume spring and summer are the busiest periods for the swim schools.
Rice: Yes, that's right. You will be able to catch the busy period at the end of this year."
Mr Trumbull corresponded in writing with Mr Rice until about 23 February 2016, to little effect, when he started to deal with Mr Hurry. Under cross-examination, he accepted that there was no reference to his accounts of the conversations with Mr Rice on 19 or 21 January 2016 in this email correspondence. He otherwise took no file notes of these conversations.
[5]
Mr Rice's evidence
Mr Rice affirmed an affidavit (11 February 2019) responding to Mr Trumbull's account. As at January 2016 he was the Area Manager or National Sales Manager and responsible for selling swimming school franchises to new franchisees.
Mr Rice confirmed having a telephone conversation with Mr Trumbull on 19 January 2016, however, he did not depose, in his affidavit, to the contents of that conversation. Rather he gave narrative evidence about his somewhat limited recollection of the topics that were discussed relevantly, he said he did not recall talking about the franchise starting time period but went on to say that he could not be sure of that.
In his affidavit he also confirmed meeting with Mr Trumbull at the Greenwood Shopping Centre in North Sydney on 22 January 2016. Mr Rice confirmed that Mr Trumbull had mentioned starting three sites at once to which he said that that would take a lot of effort from the beginning. He did not recall any discussion of actual franchise sites or territories with him.
Most relevantly, in his affidavit Mr Rice recalled that he had mentioned that 6 to 9 months would be a reasonable timeframe to expect the site to be operating, as long as no problems arose. He was unable to identify any specific provisos or conditions, but affirmed that he said to Mr Trumbull the starting times could take longer, if problems arose. He stated that spring and summer were the busiest periods of the year for swim schools and it could be possible to have a franchise up and running within this timeframe.
Mr Rice said in his affidavit that he had never provided Mr Trumbull with any undertaking or promise, or representation with respect to exclusivity about Jump not running or selling another franchise in the northern beaches of Sydney.
Under cross-examination, Mr Rice reaffirmed that he told Mr Trumbull on 22 January 2016 that 6 to 9 months would be a reasonable timeframe to expect a site to be operating. It was not put to him that the qualification he expressed in his affidavit (at sub-paragraph 5(c)) was not disclosed to Mr Trumbull.
Mr Rice indicated that his viewpoint was based on what was apparent in the franchise Handbook, which he said had been given to him by Mr Campbell (although he could not recall when). He said that he had 'flipped' through the Handbook multiple times and had provided it to potential franchisees.
[6]
Mr Trumbull's evidence
In late January and February 2016, Mr Trumbull was active in advancing negotiations and discussions with Jump. He had paid a deposit on 25 January 2016 and in the next month, he had sought and obtained legal advice on the terms of a proposed draft franchise deed and disclosure document that were supplied to him for his consideration. On 25 February 2016, he sent a detailed email raising specific questions arising from both of these documents, in the light of his solicitor's review. Mr Trumbull accepted, when cross-examined, that nothing was said bearing upon the First Verbal Representations.
On 2 March 2016, Mr Trumbull met with Mr Hurry at the Driftwood Café in Narrabeen. In his primary affidavit, Mr Trumbull deposed to a conversation with Mr Hurry to the following effect:
"Me: It is very important to me that the businesses can be up and trading within the 6 to 9 month time period that Rice has told me about. I have quit my job in the corporate world, I have a young family to support, and therefore I need to have an income no later than the end of this year. Will we have these businesses trading by then?
Hurry: Absolutely. We can have suitable premises for two swim schools found and operating as swim schools by November 2016, which will be in time for the busiest and most profitable time for swim schools."
Under cross-examination, Mr Trumbull accepted that there was no contemporaneous email correspondence with Mr Hurry, or any file notes he had taken, to reflect the accounts of his conversations with Mr Hurry.
[7]
Mr Hurry's evidence
Mr Hurry affirmed two affidavits. His first affidavit was affirmed on 11 February 2019. In this affidavit, Mr Hurry responded to Mr Trumbull's account of the conversation on 2 March 2016. As with Mr Rice, this took the form of a narrative response, rather than any independent attempt to recall the words that were actually used in the conversation. Indeed, Mr Hurry generally conceded that he did not recall the exact contents of his conversation.
Mr Hurry did, however, depose that at no stage did he say to Mr Trumbull that "absolutely" the swim schools could be up and running in 6 to 9 months. When he was cross-examined, it was not put to him that he had used the word 'absolutely' in conjunction with the provision of the estimate. He said in his affidavit that he knew that nine months was about the standard period of time to have the site up and running. When he gave his evidence in chief, he confirmed that this was a reference to his knowledge at the time of his meeting on 2 March 2016. The length of this estimate took into account a process which included DA approval, indoor swimming pool construction and unforeseen delays.
[8]
Mr Campbell's evidence
Mr Campbell is a director of Jump and is the second defendant. He established Jump as a franchising business in 2010 and was responsible for managing Jump, by overseeing the current operating franchisees, incoming franchisees and the development process for securing and fitting out premises for the swim schools. It was Mr Campbell who gave direction to both Mr Rice and Mr Hurry.
Mr Campbell affirmed an affidavit on 26 February 2019. Mr Campbell explained that it was not possible (for Mr Rice or Mr Hurry, or presumably anyone else) to estimate the length of time it would take for swim schools to be operational, from the date of signing the franchise deed, since securing suitable premises was a matter that was largely outside of Jump's control. He attributed this to 2 factors: first, it was dependent on the property market and what premises were available that would be suitable for (what Jump understood as H2O's requirement for) disability access. Premises with disability access were different to 'standard' properties on the market. Secondly, Mr Campbell said that Jump did not make the final decision to accept the premises. This was a matter for the franchisee.
Mr Campbell said that it was Jump's policy that no representations were to be made to potential franchisees, in relation to the timeframe setting up the swim school from the date the franchise deed was signed. He added that in 2015 he had provided training to both Mr Hurry and Mr Rice; during which he explained to them that Jump could not give potential franchisees a timeframe as to when the swim school would become operational, from the date the franchise deed was signed. Its standard timeframe was 6 to 9 months, but (due) to the nature of the approvals that had to be sought, this could vary. An approximate time frame could be given as to the time between securing the premises and the swimming school becoming operational, subject to receiving Council approval.
Mr Campbell gave evidence that related to the reasonableness of any representation made as per the alleged first and third representations. He referred to the Jump franchise at Belrose being operational approximately six months after the premises had been secured: in that case, a franchise deed was signed on or about 16 July 2014; a lease had been procured on or about 1 September 2014; and the franchise commenced operation on or about 8 March 2015.
Mr Campbell said that he did not provide Mr Rice (or Mr Hurry) with any instructions in relation to the timeframe or H2O being provided with a right of exclusively operating franchises in the Northern Beaches.
[9]
The Third Representation
In his first affidavit Mr Hurry accepted that he provided Mr Trumbull with the 'Franchise Build Handbook', at the meeting on 2 March 2016 and that he had referred Mr Trumbull to the timeframes set out in that document. Under cross-examination, Mr Hurry said he had given this Handbook to similar prospective franchisees.
This Handbook ran to 73 pages. On the opening page, the document was expressed as intended to be a "guide to what happens in JUMP! Headquarters". The document was divided into several stages from the identification of the site right through until open day and the start of trade. There was descriptions of the process in each of the stages; an indication of the frequency of communication that the prospective franchisee would receive and contact details and, most materially, timeframes given in respect to each stage. There were many glossy photos.
As part of his opening, counsel for the plaintiff supplied me with a 'Table of Build Time' which summarised the essential content of the timelines referred to in this Handbook. It is convenient to reproduce that table (excising evidentiary references), as per below.
Stage Activity Months Weeks Days
1 Securing premises 3
2 DA 1
3 DA approval 30
4 Certifier review 2
5 Contractors (3-4)
6 Build 35-50
7 Certification 2
8 Delivery of Equipment (1)
9 Open Day (3
Total 3 1 144
[10]
Counsel indicated that the time equated to 241 days, or 8 months and a day. In cross-examination, Mr Hurry said that he understood that the period from the time someone became a Jump franchisee to the period the franchise was operational was approximately 9 months.
However, the table has to be observed only as an indicative summary of the timelines referred to in the Handbook. Counsel for the plaintiff noted in his table that there may be some concurrency in the performance of some of these milestones. Closer analysis of the contents of the Handbook indicates that there were a number of significant qualifications to the timelines indicated for most of these milestones:
1. at stage I, it was said that securing a site "can" take up to 3 months, depending on location (with New South Wales taking the longest);
2. at stage 2, the Handbook recorded that the "average" duration in which the development application was put together is "approximately" one week, however "can be dependent" on responses required from third parties;
3. at stage 3, the Handbook recorded that the "average" turnaround for Council approval (of the DA) is 90 days;
4. at stage 4, the timeframe for certifier review was recorded as 48 hours "once compliant plans have been provided and no further information is required";
5. at stage 5, the timeframe for confirming building contractors, in its entirety, takes "approximately" 3-4 weeks;
6. at stage 6, the timeframe for the build was recorded as taking "approximately" 35 - 50 days, "depending on contractor and state requirements" (with WA taking the longest due to mandatory additional infrastructure);
7. at stage 7, certification would occur within 48 hours "if construction and documentation is compliant";
8. at stage 9, there would be "approximately" three weeks' notice prior to open Day.
In his evidence in chief, Mr Trumbull said he first saw the Handbook in March 2016, prior to his execution of the franchise deeds. He said he took about half an hour to read it (initially) and, indeed, had read it numerous times before signing the franchise deeds.
This evidence was curious. Mr Trumbull had not said in his affidavit that he had received the Handbook prior to signing the franchise deeds in March 2016. In the affidavit, he did say he had received the Handbook (from Mr Hurry) in October 2016. On the basis of this combined evidence, it appears as though he received the Handbook twice. Nevertheless, Mr Hurry accepted, in his first affidavit that he gave a copy of the Handbook to Mr Trumbull at the meeting on 2 March 2016 and it was not put to Mr Trumbull that he was mistaken when he gave that evidence.
Mr Hurry said, when he was cross-examined, that he told Mr Trumbull it would take approximately 9 months for a franchise to be operational; on the basis of the content of the Handbook and his training. He indicated that this estimate was supplied on the basis of his training and the content of the Handbook.
[11]
The Franchise Deeds
Mr Trumbull executed the franchise deeds, on H2O's behalf, on 16 March 2016. On the same date he paid the initial franchise fee invoices (being $25,000 for each franchise).
In the way that the issues have emerged in this proceeding, it is only necessary for me to refer to the following provisions of the two franchise deeds (which were relevantly identical), material to the parties' arguments on the statutory claim of misleading or deceptive conduct. They are:
"5.8 Delay in Leasing Premises
If the Franchisee has not entered into a binding agreement to secure occupation of the Premises within four months of the commencement date, then any Party may terminate this deed by fourteen (14) days' notice in writing to the other parties. On receipt of notice of termination under this clause, this deed shall be at an end (except for the provisions that expressly survive termination) and no compensation shall be payable to either party arising from the termination unless expressly agreed by both parties.
…
18.2 Material breach by Franchisor
if the Franchisee is in substantial compliance with this deed and the Franchisor breaches a material and fundamental term of this deed and fails to remedy the breach within 1 month after service upon it of written notice of breach or (if the breach cannot reasonably be remedied within such period) fails to initiate substantial and continuing action to remedy the breach within that period, the Franchisee may terminate this deed with such termination taking effect 1 month after service upon the franchisor of notice of termination. Any termination of this deed by the Franchisee that is not in accordance with the procedures set out in this clause shall be deemed to be a termination without proper cause and will constitute a material breach of this deed by the Franchisee. Clause 20.9 shall not apply where the Franchisee terminates this deed in accordance with the procedures set out in this clause 18.2.
…
35. Entire Agreement
This deed and the disclosure document sets forth the entire agreement and understanding between the parties and merges all prior discussions between them and none shall be bound by any conditions, warranties or representations with respect to the subject matter of this deed or the disclosure document other than as expressly provided therein or in any instrument subsequent to the date hereof in writing and signed by the party to be bound thereby. To the extent of any inconsistency between the terms of this deed and the disclosure document this deed shall prevail."
Under cross-examination, Mr Trumbull accepted that he had read both franchise deeds carefully. He also accepted that he had, with the benefit of legal advice, raised questions about earlier versions of the deeds. He accepted that the content of the franchise deeds did not make provision for a promise, warranty or undertaking of the kind which was indicated by any of the alleged Representations. Indeed, he accepted that at no stage did he seek to insert within the franchise agreements any promise, warranty or undertaking of the kind reflected in the alleged representations.
Mr Trumbull says he read the franchise deeds carefully, more than once. He was aware, in particular, about the content of cl 35. It was put to Mr Trumbull that he understood that the effect of clause 35 was that the franchise deeds (with the Disclosure Document) represented the entire agreement it. Mr Trumbull disputed this: so far as he was concerned, it could not have been complete since the territories had not been identified. In Mr Trumbull's view, this meant that the franchise deeds needed to be amended later.
Mr Trumbull had seen this type of provision in other contracts. It was put to him that if it was important that the two franchise businesses were operational within a 6 to 9 month period, that he would have sought the inclusion of that representation in the franchise deeds. Mr Trumbull said that he did not think to include this representation within the franchise deeds.
[12]
Attempts to develop the franchises at Brookvale and Mona Vale
[13]
Delays in locating suitable site ('Stage One')
After the franchise deed was signed on 16 March 2016 and through the next few months, Mr Hurry was in regular contact with Mr Trumbull to identify to sites, or territories, for the proposed franchises. This was a collaborative effort; although, for practical purposes, because he lived in the region (and because Mr Hurry was based interstate), it was Mr Trumbull who did much of the searching.
On 18 March 2016, Mr Hurry sent links to a variety of warehouses in the Northern Beaches region (Brookvale, French's Forest, Terrey Hills (two sites) and Balgowlah). At that point, Mr Trumbull's wife was against Terrey Hills as a location. In response to this email, on the same day, Mr Trumbull indicated preferences for the site that Brookvale and Balgowlah, but not French's Forest nor the two sites at Terrey Hills.
On 11 April 2016 Mr Trumbull sent a further email to Mr Hurry giving an update as to the considerable "legwork" that he and his wife had been doing to inspect properties. They had inspected 20 properties. They were particularly interested in properties that Prosperity Parade in Warriewood and Rodborough Road in French's Forest.
On 19 April 2016 Mr Hurry emailed Mr Trumbull a link to a property in Brookvale.
On 14 June 2016 Mr Trumbull emailed Mr Hurry photos of 19 Ada Avenue (presumably Brookvale; not Wahroonga).
Between 17 and 21 June 2016, Mr Trumbull and Mr Campbell corresponded with each other. A feature of this correspondence was both Mr Campbell and Mr Trumbull acknowledging the "tight", "tough", or "very challenging" market in looking for properties in Sydney.
In late June 2016, Mr Trumbull resumed his correspondence with Mr Hurry. On four July, he supplied details to Mr Hurry of a property at French's Forest.
On 25 August 2016 Mr Hurry and Mr Trumbull agreed that premises at 14 Tengah Crescent, at Mona Vale were suitable for a lease. A Heads of Agreement was sent by the landlord's agent to Mr Hurry. Features of the HOA included that: the first defendant was the prospective lessee for a lease term of six years (and an option period of six years) that was due to commence on 1 November 2016; with rent commencing from 1 December 2016 and DA approval period commencing on 1 September 2016. All of these dates, however, were to be confirmed. Personal guarantees would be required, including one from Mr Campbell; that there would be a one-month rent-free period after Council approval, commencing after Council approval for the DA had been granted. Rent was expected to be $77,000 net per annum ($6416.66 net per month).
[14]
Development application ('Stage two')
On the same day, the proprietor of the premises at Mona Vale, Gainfort's Pty Ltd, provide its written consent to the first defendant obtaining DA approval from the Council to enable the development of a swim school on the premises.
On 7 September 2016 Mr Trumbull sent an email to Mr Campbell. The main purpose was to set up a meeting between Mr Trumbull and his wife and Mr Campbell at some point during the month. As an indication of his state of mind at that point, Mr Trumbull said that "…We are slowly but hopefully surely moving in the right direction with getting a site up in Mona Vale. Depending on the council gods." In his affidavit, Mr Trumbull said that he was seeking a meeting to discuss his 'growing frustration' with Jump's conduct, but it is not apparent to me that such frustration was manifested in the content of his email on 7 September 2016. At any rate, Mr Campbell responded by email, the next day, to say that he was in Brazil on the dates that Mr Trumbull had proposed for September. Mr Campbell had offered to have Mr Hurry arrange a time to meet with the Trumbulls to explain the 'next steps in the process' in more detail.
[15]
Termination of Second Franchise Deed (Brookvale)
Very little was said, by either party, as to the Brookvale franchise deed. It appears that Mr Trumbull came to the realisation that if it was difficult to locate a suitable site in the Northern Beaches area, it was even more difficult locating two sites; and he adjusted his expectations accordingly.
So, on 8 September 2016, Mr Trumbull sent an email to Mr Hurry (copied to Mr Campbell) in which he exercised his right under clause 5.8 and terminated the franchise deed. He prefaced that indication by explaining that "we" had been trying to secure a site for the last seven months on the northern beaches of Sydney and, in that period, had unfortunately only been able to locate one suitable site. Mr Trumbull asked that, at the expiration of the 14 days' notice period, his initial franchise fee ($27,500) be refunded.
A Deed of Termination and Surrender was executed by Mr Campbell on or about 24 October 2016. It was executed by Mr Trumbull on or about 20 September 2016. The title identified Brookvale.
Mr Campbell said, without contradiction, that following the execution of this deed Jump credited H20 the franchise fee in the sum of $38,500 paid in respect to the Brookvale franchise towards the costs of the Mona Vale franchise.
In its Defences to the complaint of misleading conduct relating to the Mona Vale franchise deed, Jump (and the other defendants) invokes a release contained in the Deed of Termination and Surrender as a defence to any action against it in relation to the Mona Vale franchisee deed. The relevant clause was contained in the Deed of Termination and Surrender and is as follows:
"3. RELEASE:
3.1 Subject to the provisions hereof, in further consideration of the mutual covenants contained herein, the parties …. hereby irrevocably release and forever hold harmless each other and each other's Affiliates, from and against all actions, suits, proceedings, claims, demands, costs, expenses, and or damages, at law or in equity, pursuant to contract, tort, statute or otherwise, which but for the execution of this deed either party and/or its respective affiliates now has, or had at any time previously, or might have in the future, whatsoever or howsoever arising, directly or indirectly, against the other and/or their respective affiliates including (but not limited to) in connection with:
(a) any Claims arising out of or relating directly or indirectly to any or all of the franchise agreement, or guarantee;
(b) any claims arising out of or relating directly or indirectly to either or both of the franchise;
(c) any claim arising out of, or relating directly or in indirectly, to any other contract or arrangement that may have been entered into between the parties or their Affiliates (or any of them) in connection with or in consequence of the franchise agreement, and or guarantee;
(d) any claims relating to breach of contract, misrepresentation, negligence, defamation, emotional distress, discrimination or harassment;
(e) the parties or their respective affiliates relationship with one another;
(f) the jump swim schools franchise system generally.
3.2 The parties hereby agree that nothing in clause 3.1 shall operate so as to constitute a release:
(a) in connection with any fraudulent or dishonest conduct on the part of the franchisee and/or guarantors; or
(b) of the parties or their respective affiliates' respective rights and obligations arising out of any franchise or other agreement relating to any additional jump swim schools, the franchisee and or guarantors."
In its Reply, H20 contends that this release is of no effect as it was itself a result of the defendants misleading and deceptive conduct. No particulars of that misleading or deceptive conduct were supplied. Nor was any relief sought, in any pleading should the assertion of misleading or deceptive conduct in relation to the Deed be made out.
[16]
Termination of the First Franchise Deed (Moss Vale)
The Development Application in respect to Mona Vale was lodged on or about 11 September 2016.
On 27 September 2016, Mr Klaas Meekel, a town planner employed by the first defendant, informed Mr Trumbull that Council had required the submission of a flood risk assessment report (prepared by a qualified hydraulic engineer) before it would determine the DA. He indicated that the first defendant should have the required documentation within the next few days and returned to Council by the end of the month.
On 12 October 2016 Mr Trumbull sent an email to Mr Hurry (copied to Mr Meekel) in which he asked for an outline of the general timeline for the council submission, the building certificate, builder engagement and typical build length. Mr Trumbull indicated his appreciation that each build was different as was each site. He said that if the plaintiff was to open around May 2017, that would be 15 months, from start to finish. He reminded Mr Hurry that he had been told, at the point of recruitment, that the general time period was between 6 to 9 months to open. The experience had been "vastly different to reality". Mr Trumbull added that he was trying to manage his professional, financial, family and personal life based on no information whatsoever and guesswork.
Mr Hurry sent an email to Mr Trumbull in response, later that morning on 12 October 2016. In that email, Mr Hurry supplied a "rough" timeline as follows:
1. Council application - approximately 90 days
2. building approval - approximately 21 days
3. construction - approximately 35 - 50 days (depending on size of property and additional works required)
4. building sign off - generally 48 hours. The certifier will do an inspection on the day of handover and then issue permits within a day or two.
In the same email, Mr Hurry indicated that he understood that it was a frustrating time which he attributed to the delays in the time period to secure a suitable site and the time lost getting a flood report done.
On 24 October 2016, Mr Hurry sent to a range of undisclosed recipients, including Mr Trumbull, the franchise build handbook.
On 11 November 2016 Mr Trumbull informed Mr Hurry (by email) that the notification period as part of the DA process had passed with only one objection raised. Mr Hurry responded the following day and foreshadowed that fit out co-ordinators would contact Mr Trumbull correctly and then the architect would finalise construction drawings.
[17]
Dispute about rent
Ultimately, the plaintiff abandoned an action for breach of franchise on the basis of a wrongful demand for a licence fee. Nevertheless, the dispute that emerged largely explains the circumstances in which the Mona Vale franchise deed was terminated.
On 30 November 2016 the accounts clerk for the first defendant (Ms Jessica Arnold) sent an email to Mr Trumbull. The relevant part of it was as follows:
"Just a heads up that rent is going to commence for Mona Vale shortly. You will receive rental invoices to this email address from the owner herself."
This email prompted Mr Trumbull to send an email to Mr Hurry on 1 December 2016, stating his belief that "we agreed that Jump would be covering the cost of rent up to opening? Due to the fact that we could not get three months' rent free. Please confirm".
On 5 December 2016 Mr Hurry sent an important email to Mr Trumbull, in response to Mr Trumbull's email of 1 December 2016. The relevant parts were as follows:
"As you can understand I was able to offer payment of rent while you were taking two swim schools in the northern beaches, unfortunately it is not commercially viable for the company to pay rent for just one. This is standard through out (sic) our network.
Understandably circumstances change so there are a few options we can look into.
Apply for financial assistance with our accounts department and arrange for JUMP! to pay and you work out a payment plan
Request an extension from the agent and owner
Let the agent re-market the property and give us first right to refuse if a new prospect comes into the picture
Let me know which way you would like to go."
Mr Hurry's email prompted a sharp response from Mr Trumbull that afternoon, of 5 December 2016. In this email, Mr Trumbull requested a meeting with Mr Campbell and Mr Hurry to discuss the situation and the conversations and undertakings expressed over the last nine months. Mr Trumbull foreshadowed a 'robust' discussion on the first defendant's failure to submit the correct paperwork; its failure to adhere to the standards of communication and timeframes of communication as outlined in the Handbook "you recently provided". Mr Trumbull complained that "At no time" was the proviso made that rental costs of the Mona Vale site would only be paid by the first defendant if H20 had two sites. He asserted that the first defendant's commitment to cover the rental costs until opening was offered by the first defendant and discussed (individually with both Mr and Mrs Trumbull) at site inspection with the reasoning apparently given by the first defendant that this was consolation for the fact that it had taken so long to find a site. Mr Trumbull intimated or implied that the first defendant had not observed its obligation of good faith under the Franchising Code.
On 9 December 2016, the plaintiff received a proposed license deed in relation to the Mona Vale site; with a proposed starting date of 1 December 2016, Mr Trumbull and H20 refused to sign the deed.
In his affidavit, Mr Trumbull says that by 20 January 2017. He requested a meeting with the first defendant. In his affidavit he explained that the reasons for this were:
"… The Mona Vale site had still not been handed over to me. Jump's development application for the site had not even been approved. I had signed franchise deeds in March 2016 in reliance of (sic) Jump's representations that my businesses would be trading within 6 to 9 months, being September to December 2016. This delay, combined with Jump's repudiation of our agreement that Jump would pay the rent for Mona Vale until handover caused me to seek a meeting with Jump".
In his affidavit, Mr Campbell's version of the conversation on 20 January 2017 was that Mr Trumbull had expressed that he immediately "want(ed) out" of the Mona Vale franchise as he was "unhappy about the length of time it is taking for the development application to be approved". Mr Campbell added that Mr Trumbull threatened legal action unless he was able to pull H2O out of the franchise deed.
On that day he said he terminated the Mona Vale franchise deed. Mr Trumbull did not give evidence of any contemporaneous written communication to the first defendant (or any other defendant) terminating, or explaining his reasons for terminating, the franchise deed.
[18]
Issues
Neither party supplied to me a schedule of issues at the outset of the trial. After evidence was closed and prior to Counsel for the parties making their closing submissions, I indicated to them what I understood to be the questions arising for the Court's determination, as being:
1. Whether any of representations were made as the plaintiff had alleged?
2. Whether there was any misleading or deceptive conduct?
1. Whether s 4 of the ACL was engaged;
2. Whether there were any reasonable grounds for the representation
1. Who engaged in misleading or deceptive conduct?
2. Whether any action for misleading or deceptive conduct was released?
1. Was such action procured by misleading conduct?
2. What is the legal consequence if the action was procured by misleading conduct
1. Was a causal connection established?
2. What damages flowed from misleading or deceptive conduct?
3. What did the Mona Vale franchise deed provide for the timing for payment of the license fee?
4. Did the first defendant repudiate the franchise deed by demanding payment of the license fee (by H2O) in December 2016?
There was no disagreement as to this statement identifying the issues, however, through the course of closing arguments, some of the issues were abandoned, or at least not seriously pressed, by the parties.
[19]
Plaintiff's submissions
Counsel for the Plaintiff submitted that I should accept Mr Trumbull's account, in his affidavit, of conversations which Mr Trumbull had with Mr Rice (on 22 January 2016) and Mr Hurry (on 2 March 2016). He submitted that whatever Messrs Rice and Hurry had said about those accounts (to any contrary effect) in their respective affidavits, extracts from the cross examination did not contradict Mr Trumbull's version of what was said (on those respective occasions). Counsel submitted that the Handbook also contained the representation and, moreover, that the Defences filed by each of the defendants the defendants (relevantly in identical terms) also supported proof of the alleged representation. Counsel submits that the representation was expressed in unqualified terms.
Counsel submits that all of the individual defendants, along with Jump itself, are liable for the representation. He says that both Mr Rice and Mr Hurry made the verbal representation and, in the latter's case, he also provided a Handbook containing the same representation. In the case of Mr Campbell, it was submitted that he engaged in misleading or deceptive conduct by authorising the distribution of the build Handbook to potential franchisees, such as H2O. There was no serious dispute that the conduct was engaged in in trade or commerce.
Counsel for the plaintiff submits that all defendants engaged in misleading or deceptive conduct. This was put in two ways. First, the representation was as to a future matter and, by reason of section 4 of the ACL, it would be taken to be misleading or deceptive unless Jump adduced evidence to the contrary. The plaintiff submitted that the quality and quantity of the evidence adduced on behalf of Jump was so unsatisfactory that the deeming provision of section 4 continued to operate. Alternatively, even if the deeming provision did not operate, the defendants did not have reasonable grounds for making representation. It says that Jump did not prove the data supporting what was contained in the Handbook (and, indeed had subsequently stopped providing estimated timeframes) and did not call evidence of the experience of timeframes in relation to the opening of franchises (other than the single franchise at Belrose). It says that Jump did not put on evidence about such matters as the availability of sites or DA requirements or builders prior to the alleged impugned conduct in 2016. Indeed, it relies upon what it says was Mr Campbell's own evidence that Jump simply could not provide reliable estimates at all: logically, if it was unable to provide estimates, there must have been an absence of reasonable grounds in doing that very thing. There being an absence of reasonable grounds for the impugned verbal representation, it was said to follow inexorably that the defendants had each engaged in misleading or deceptive conduct.
The plaintiff says that a causal connection between the misleading conduct and H20 suffering loss or damage could be inferred by the circumstances that the verbal representations and the Handbook were used as "bait" for prospective franchisees, such as H2O, and was intended to induce entry into subsequent franchise agreements in circumstances where the defendants knew that the timeframes set out in the Handbook were likely to be relied upon. The circumstances that franchise agreements were subsequently entered by H2O was sufficient to make out the causation requirement. Further, to the extent that post-contractual conduct was relevant (or probative) to deciding questions of causation, on 12 October 2016, Mr Trumbull sent an email to Mr Hurry referring to his being informed about a 6 to 9 month period for operation.
The plaintiff moves on the Schedule of Damages provided on the first day of the trial for its damages claim. There was no dispute on quantum: the issue turned more upon causation (assuming the representation case was made out).
[20]
Defendants' submissions
Counsel for the defendant submitted that no representation was made in the terms alleged. Any estimate that was supplied by Mr Rice or Mr Hurry was qualified; and anything contained in the Handbook was not couched, in substance, in a form amounting to a promise or warranty. He submitted that Mr Trumbull's recollections of what was said by Messrs Rice and Hurry not only needed to be assessed by their competing versions, but also other surrounding circumstances; such as an absence of file notes; email correspondence both before and after he had entered into the two franchise agreements; his access to legal advice and assistance as to the content of those franchise agreements and his own evidence as to his understanding of material parts of those agreements.
When pressed as to what representations were made, counsel for the defendant cited the versions of the conversations contained in the affidavits of Messrs Rice and Hurry. He accepted that they could be taken to be representations as to future matters, for the purposes of section 4 of the ACL. He submitted that if I should find that Mr Trumbull's versions of those conversations were correct, then the defendants had not only "adduced evidence to the contrary" (to remove the deeming effect of section 4(1)), but, more generally, the defendants' evidence had established that there were reasonable grounds for the representation. Counsel said that Mr Campbell had relied upon details of the time to complete the franchise at Belrose; which was the best comparator; and that the experience of other franchises, in other regions, was very limited in terms of its probative value.
More generally, on the question of whether the defendants had engaged in misleading or deceptive conduct, and on the premise that the versions of Messrs Rice and Hurry should be preferred, counsel for the defendant submitted that I should take into account a range of circumstances: first, that the representations were directed to an individual (ie not a broad class); which meant that the characteristics of the individual had to be taken into account. In this case, Mr Trumbull was an intelligent businessman experienced in the negotiation of contracts. Secondly, Mr Trumbull had obtained legal advice as to the proposed two franchise deeds and, prior to executing them (on behalf of H2O), he has sought to negotiate and obtained changes to the franchise deeds (and disclosure document). Those changes did not, however, extend to any requested alteration of clause 35; of which not only was Mr Trumbull aware of but also had an understanding of; that even if as Mr Trumbull asserted, the franchise agreements were incomplete, Mr Trumbull had signed the agreements and therefore had represented that he agreed to be bound by them.
On the issue as to who was liable, ultimately counsel did not seriously dispute that if the representation was made in the terms alleged, the individual defendants would all be liable.
On the question of causation, the defendants submitted that the estimate of the timeframe conveyed in the alleged representation was not a decisive, or material consideration to H2O's decision to enter into the franchise agreements and incur expenditure. This was evidenced by Mr Trumbull's conduct before and after he had executed the franchise deeds on behalf of H2O. In particular, the defendant said that at about the point where Heads of Agreement were signed in respect to leased premises for the Mona Vale franchise deed (24 August 2016), it must have been apparent to Mr Trumbull that it was most unlikely that any earlier estimated timeframe, expressed in either January or March 2016, was likely to be honoured. Further, even by the time three months had passed after the franchise deeds had been entered into, being in June 2016, it was already obvious that the delay in securing premises was likely to have 'knock on' effects for whether the timeframes in the Handbook were likely to be completed by November 2016.
Counsel for the defendants faintly pressed a release in the deed of termination and surrender; citing the plaintiff's own pleaded assertion that the two franchise deeds amounted to a single franchise agreement. However when the context, contained in the Recitals to the Deed of Termination and Surrender were pointed out to him, counsel for the defendants did not pursue this point with any vigour.
On the matter of damages, there was no serious dispute that the amounts claimed had actually been paid by the plaintiff. The defendants' basic point was that the causal connection between the loss and the alleged representation had not been established. Specifically, the defendants contended that the opportunity presented itself to the plaintiff to recoup its expenditure prior to the time when it became committed to a lease of the premises that were found at Mona Vale honour about 25 August 2016. Prior to that date, the defendants contended, they had the opportunity not only to terminate the Mona Vale franchise deed but to claim compensation in accordance with an agreement that had been reached between H20 and Jump.
[21]
Plaintiff's submissions in reply
Counsel for the plaintiff attacked the defendants' reliance upon clause 35 of the franchise deeds (containing the 'entire agreement' clause). This was, he said, merely a boilerplate provision in an incomplete agreement (at the stage the deeds were entered, territories had not been identified and leased premises had not actually been ascertained) which H20 could not have been expected to have been mindful of when deciding to enter into the deeds. Counsel reminded me of the well-established authorities that show that entire agreement clauses do not oust the operation of protections in the ACL.
Counsel for the plaintiff also sought to diminish the significance of Mr Trumbull's exercise of the right under clause 5.8 to get out of the Brookdale franchise deed. He said (on the day before he executed them) he believed that the clause in the franchise deeds was only inserted to cover the contingency of an "unlikely situation" and did not, at any rate, amount to some sort of waiver of reliance. He said that by the operation of that provision, there was reason for Mr Trumbull to be reluctant to activate that clause in relation to the Mona Vale premises because if he did so, he would not recoup the investment which he had made by reason of his entry into the franchise agreement and the payments connected to those transactions. Counsel also said that properly construed, no compensation could be payable under clause 5.8.
In relation to post-contractual conduct, Counsel for the plaintiff submitted that no adverse inference (relating to reliance) could be drawn from H2O's persevering with the Mona Vale franchise deed as at 12 November 2016; even though it had exercised the right to terminate the Brookvale franchise. By then, he says, it was too late for H20 to invoke cl 5.8 in order to get out of the Mona Vale franchise deed. Further, he said, that at about the time that it was about to be committed to the lease in Mona Vale, on or about 25 August 2016, a reasonable franchisee in the plaintiff's position could still have reasonably expected that the particular franchise could be operational shortly after December 2016.
[22]
Cautionary observations
There was some fluidity in approach to the way that the plaintiff has advanced its case on the content of the verbal representations that were alleged to be made and were sued upon. As I noted, part of H2O's pleaded case on verbal representations, concerning the 'exclusivity of franchises', was abandoned at trial.
In this context, H20's misleading or deceptive conduct case was based upon establishing a verbal representation (allegedly made twice, separately, in January and March 2016). Where a case is based upon a verbal representation, it is pertinent to recall the well-known cautionary words of McLelland CJ (in Eq) in Watson v Foxman (2000) 49 NSWLR 315 at 318-319:
"Where the conduct is the speaking of words in the course of the conversation, 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 seemed 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 of self-interest as well is 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." (emphasis supplied)
Counsel for the plaintiff quibbled with the application of this statement to this case, but to my mind, the words are applicable and represent common sense. It has been said, in reference to the doctrine of promissory (equitable) estoppel, there is a need for the posited representation to be clear and unequivocal (Foran v Wight (1989) 168 CLR 385 at 410-11; Meagher Gummow & Lehane's Equity: Doctrines and Remedies, (5th ed) [17-265]). That observation, in my view, applies to consideration of whether pre-contractual verbal representations are misleading or deceptive for the statutory action relied upon here.
A secondary observation is that I agree with the submission of Counsel for the defendants that each of the individuals who gave evidence in this proceeding had a natural self-interest: Mr Trumbull, because he was the directing mind of the plaintiff; and also Messrs Hurry, Rice and Campbell who were all brought in by H20 as parties to the proceeding. Particularly for the individual defendants, being employees or the officer of a corporate defendant, they all had a greater than usual reason to be concerned about the implications of their evidence than they would have had if they were simply non-party witnesses; having regard to the significant prospective liabilities that the plaintiff sought to visit upon them.
Thirdly, in a case based upon loss arising from a verbal representation, the Court must be very careful to scrutinise assertions of what was said, and done, and why parties acted as they did, in what Gleeson CJ described as the "prism of hindsight" (Rosenberg v Percival (2001) 205 CLR 434 at 441 [16]). This is pertinent to both the principal issues of this case, being whether a representation was made as contended for by the plaintiff and whether or not the plaintiff relied upon it in a way that caused loss or damage.
[23]
Mr Trumbull
Mr Trumbull presented as a highly intelligent man. He was, as he acknowledged, very experienced in the financial services sector. The documentary evidence disclosed that he was very active and astute to protecting and advancing his interests. It emerged through his cross-examination (in an unsolicited fashion) that his motives for establishing the franchise businesses in early 2016 were intensely personal, relating to his family circumstances. They were also highly laudable: he was particularly focussed on facilitating the swimming development of children with special needs (specifically, children with autism). Generally, he answered questions patiently and responsively. He listened to each question carefully and, for the most part, responded succinctly.
Nevertheless, there were occasions where, for a person of his financial acumen and experience in business affairs, he gave what I regarded as implausible answers, or, alternatively, indicated a surprising lack of recollection about some matters. This was in circumstances where the plaintiff invites me to generally find that his recollections of what was said and not said should be preferred over the recollections of Messrs Rice and Harvey.
As an example of the former, Mr Trumbull was referred to email correspondence he had with Mr Klaas Meekel in September 2016, after the franchise deeds were entered into. In this, he was referred to the length of time of the DA process for the Mona Vale premises and it was put to Mr Trumbull that he must have known, by that point, that the Mona Vale swim school would not have been operational in the November, or even the 2016-17 summer. Mr Trumbull's answer was 'possibly'. I regarded that as highly implausible evidence from an intelligent person, let alone someone with the commercial nous and acumen of Mr Trumbull's standing.
An example of the latter was when he was confronted with an email from Mr Hurry sent to him on 25 August 2016; which email referred to a discussion with Mr Trumbull. Mr Trumbull had previously asserted in his evidence in chief (but had not taken the opportunity to do so in either of his two affidavits) that he had not had a conversation. The cross-examiner put to him that, in view of what was indicated in Mr Hurry's email, the evidence in chief was false. To this, Mr Trumbull said he could not recall. This represented a backtracking from his evidence in chief.
In one instance, concerning the absence from the franchise agreement of any provision (by way of promise, warranty or otherwise), Mr Trumbull became argumentative.
It is true that Mr Trumbull made concessions on such matters as to the content of the email correspondence and omissions from the franchise deeds, although, I expect that for someone like Mr Trumbull, he would have appreciated that disputing obvious propositions would not have been of assistance to him. But for the reasons I have mentioned, in the circumstances, I was not wholly convinced of his reliability on matters that may have appeared adverse to H2O's interests, and it is appropriate to scrutinise his evidence with care, in the light of other evidence.
[24]
The defendants
Mr Hurry was quite a good witness. He was cross-examined (in quite hostile fashion) as to his recollection on some insignificant matters and it did not surprise me when he indicated that his recollection was limited about those matters. That much was clear from his affidavit. He listened carefully to each question and answered each one. I accept his general reliability.
Mr Rice struck me, with no disrespect to him, as not being especially sophisticated. He interpreted the questions raised of him in cross-examination literally and was not straining to be very forthcoming. I thought he was somewhat evasive when he was probed for the basis of his understanding as to the reasonableness of the 6 - 9 month timeframe, which, he said, he understood it would reasonably take for a franchise to become operational.
Mr Campbell was prone to giving long-winded answers to questions that were capable of eliciting succinct answers. I formed the impression that he was conscious of the implications of his answers and, further, answered in a fashion intended to advance his own (and the first defendant's) interests. For example, when cross-examined on the subject of the reasonableness of the timelines referred to in the first defendant's Handbook, he was apt to, and indeed repeatedly emphasised that potential franchisees were encouraged to speak with other franchisees about time estimates. This was not a matter referred to in his affidavit and its inclusion in his evidence was, in my view, designed to bolster his, and the first defendant's, case. When I asked him if there was any suggestion in the Handbook that potential franchisees consult others to obtain a time estimate, he gave a long-winded and evasive answer.
It was also the case that his recollections were not strong. Making allowance for the intervening period, of three years, since the events in question in this proceeding, there were some matters, such as when the Handbook was published, and when the First Defendant ceased supplying time estimates to prospective franchisees, when he surprisingly indicated he had no real recollection about. It seemed to me that, in those respects, he was not making any real effort to exhaust his recollections. In this, I consider, he was concerned about the implications of his answers to his and the first defendant's positions. It follows that I approach his evidence with caution.
[25]
Was the impugned representation made in the terms alleged?
In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, McHugh J emphasised (at [102] - [108]) that for the purposes of s 52 of the former Trade Practices Act 1974 (Cth) (the predecessor provision to s 18 of the ACL), the concept of 'engaging in conduct' was much broader than simply the making of a representation [2] . Indeed, s 4(2) of the Competition and Consumer Act 2010 (Cth), to which the ACL is a schedule, defined "engaging in conduct" as including, relevantly, doing or refusing to do any act.
But the way in which the plaintiff pleaded and ultimately put its case is that the conduct was the making of what was, in substance, a single representation. To repeat, the impugned representation is in the following terms:
H2O would have 2 operational Jump swim schools operating in the Northern Beaches of Sydney by November 2016.
Two matters are immediately notable. First, the impugned representation is both absolute and unqualified. It amounts, in substance, to a promise or warranty. Secondly, the promise is free-standing; it is not, by its terms, incorporated in any agreement. Promises are different to predictions, or statements of opinion. Generally, the more tentative, or imprecise, a statement is, the less likely it will be regarded as promissory: Cheshire & Fifoot, Law of Contract (11th Aust ed) [10.25]. [3]
For the reasons that follow, I am not persuaded that in January or March 2016, Mr Rice or Mr Hurry gave a promise, to Mr Trumbull that two swim schools would be operating in the Northern Beaches of Sydney by November 2016.
As to the objective circumstances (given the stakes to the protagonists, the most reliable indicia), they do not support that such promise or warranty was given on 22 January or 2 March 2016. First, the terms of the impugned representation do not indicate when the clock would begin to run for the overall timeframe. Thus, to take the first verbal representation, made in January 2016, in the events that occurred there was a period of nearly 2 months before a franchise agreement was entered into, from which, at the earliest, Jump would begin to assume obligations. If the actual representation was made in terms that Mr Trumbull later suggested (in October 2016) that it would be complete between 6-9 months, then, if the first verbal representation was the actual representation made, then the upper limit of the represented timeframe for completion should have been October 2016 (9 months from January 2016). But H20 does not complain that the school was not operational by October 2016.
The most likely situation that time would only begin to run for a representation of this kind was from the date of entry into a franchise deed. But this gives rise to the second objective circumstance pointing against the impugned representation: that a matter of what was submitted to be of vital importance to Mr Trumbull and H20 - time for completion - would reasonably be expected to be fixed by reference to a document that would generally set out the rights and obligations of franchisee and franchisor: the franchise deeds (and perhaps also the Disclosure Document). But if that be so, one would expect that the transactional document governing relations between the parties would itself set out the temporal requirements for performance of the parties' obligations. In this case, there was no promise, or warranty, inserted in the franchise deeds that swim schools would be effectively operational within 9 months of entry into the franchise.
I do not overlook that promises, undertakings or representations, or what Counsel for the plaintiff described as 'bait', can be made to induce someone to enter into a disadvantageous transaction in which a plaintiff may be locked into. As will be observed however, the franchise deeds entered into by this franchisee were not of this kind. In this case, the argument is not that entry into the franchise arrangements was inherently disadvantageous. It is a much narrower case that the business was not operative at the time the plaintiff indicated it wanted it to be open by, and therefore did not suit the plaintiff's purposes
Thirdly, I do not consider that a person like Mr Trumbull would, if the matter was material to him, be content with a mere verbal promise that two schools could have been operational by November. I think some indication of this emerged in the period leading up to H2O's entry into the franchise deeds; at a point where it is clear that Mr Trumbull had engaged solicitors to review (and advise him about) the proposed franchise deeds in order to protect his interests. Specifically, Mr Trumbull had procured clause 5.8 of the franchise deed which conferred rights upon the franchisee to terminate the deed if there was a delay in securing occupation of leased premises (Stage One in the Handbook). But on the day before he executed this deed, it appeared that he was quite jittery as to whether that provision would confer adequate protection upon the franchisee. This signals to me that at about the point of entry into the franchise deed, Mr Trumbull was already mulling over the prospect that expected timeframes for at least one stage may not be observed. I consider that it is likely that if a verbal promise had been made as alleged, that Mr Trumbull would have sought to negotiate for its inclusion in the franchising agreement or, at the very least, he would have sought written confirmation from Mr Hurry, that a promise had been made in the terms he alleges; just as he sought written clarification of his understanding about the effect of cl 5.8. In short, for a man like Mr Trumbull, if the completion time was material to him, and if (as appears) there was doubt about the timeframe for completion of stage one, he would not likely have simply taken their (Rice and Hurry's) word for it.
Fourthly, if one uses the Handbook as a gauge of the various stages that needed to be completed in order for a swim school to be operational, it is almost immediately obvious that achievement of each stage, or milestone, was dependent upon a range of factors beyond the control of Jump, as franchisor, or H20 the franchisee. Stage One, obviously enough, would depend upon the availability of sites. Such availability was a function of what suitable properties (for a swim school) were available in the prevailing market (centred in one region of metropolitan Sydney). Other stages depended upon the time for DA approval and the time to build whatever works had been approved. With all the will in the world, Jump was in no position to assure H20 when each stage would be completed: to take Stage One, for example, delay in finding a suitable site may have been a product of the plaintiff being selective as to a suburb it chose. If Jump could not make any assurance when any single stage would be completed by, it is even less likely to be in a position to make any assurance when all of the stages would be completed by.
Fifthly, I do not agree with the submission that the Handbook makes out the impugned representation. When it came to references to timeframes for each individual stage, the content of the Handbook was replete with qualifications and tentatively-expressed contingencies for when stages would be completed by; with words or expressions such as "average", "can take", "dependent on", "time involved ... varies", activity will occur "if compliant", "provided ... no information is required", "approximately". Above all, although no disclaimer of accuracy was contained within it, the document was expressed, upfront, to be a "guide to what happens". A guide is a much weaker term than a promise. In my view, a person with the commercial acumen of Mr Trumbull could not construe the timeframes referred to as amounting to promises, or assurances that stages, individually or collectively, would be completed by dates.
Sixthly, the improbability of a representation being couched in the promissory form, as alleged, was thrown up in my exchange with counsel for the Plaintiff (T131-132), about what would happen if the schools were operational in a period slightly exceeding 9 months. Had the schools been operational in January 2017, would H2O have had such cause for complaint as to entitle it to sue for misleading or deceptive conduct? Very likely not: since the franchisor would be entitled to some 'leeway' (and it would still have been operational for 2 months of the busy summer season). But the content of the impugned representation would suggest that, logically, the franchisee could sue, since by the terms, the impugned representation H2O sues upon admits of no leeway (beyond the 9 month period) - it was a strict date for completion.
Seventhly, principally because of their consistency with the objective circumstances I have referred to, I prefer the accounts of Mr Rice (on 22 January 2016) and Mr Hurry (on 2 March 2016) to Mr Trumbull's accounts of those conversations; insofar as they deal with the issue of the estimated timeframe for schools to be operational. To reiterate, Mr Rice accepted that the '6 to 9 month timeframe' was mentioned but he immediately qualified that by indicating that this was only "possible" and that the timeframe was "reasonable", "so long as no problems arose". Mr Hurry denied giving any assurance that the 6 to 9 month timeframe would be achieved, even if he believed that this was standard: he denied using the word "absolutely" ascribed to him by Mr Trumbull.
Counsel for the plaintiff relied upon passages in the cross examination of each of Mr Hurry and Mr Rice, which, in each way, showed up a weakness in recollection as to precisely what they said to Mr Trumbull. I would have thought that, given that they were adducing evidence nearly 3 years after the subject conversations had occurred that such difficulty in precise recollection was not altogether surprising. In their affidavits, they appeared to accept mention of a '6 to 9 month timeframe' - the difference was whether they affixed any qualification to that estimate. On this aspect, I consider that they had a firm recollection: to not affix a qualification would have been contrary to their belief and what they were instructed to say to potential franchisees. Further, and to be fair to Mr Hurry and Mr Rice, the cross-examiner's questioning did not squarely put to them that each of them were wrong when they had deposed in their respective affidavits to the qualifications they attached to discussion of timeframes with Mr Trumbull in January and March 2016.
I note also that when Mr Trumbull had first complained about the making of the impugned representation, on 12 October 2016, he himself used the qualifying word "general" to describe the aggregate timeframe. My impression of Mr Trumbull was that he was a person who chose his words carefully; particularly when conveyed in writing. His recollection of what was said in January or March 2016 was better in October 2016 than it was when he gave evidence (by affidavit or testimonially) in this proceeding. I consider that this is a situation very apposite to the cautionary observations of McLelland J in Watson v Foxman, referred to earlier in these reasons (particularly the parts I have emphasised); and that, as time has worn on, and Mr Trumbull has doubtless become distressed about the expenditure he incurred in relation to these franchise arrangements, he has sincerely, albeit mistakenly, come to believe that he was the recipient of a promise which he believes has been dishonoured.
My preference for the accounts of Messrs Rice and Hurry over Mr Trumbull, to the extent that they disputed giving any assurance or promise to him, is, in my view, consistent with the series of qualifications concerning timeframes set out in the Handbook.
Eighthly, I do not overlook the theoretical possibility that, notwithstanding their training, Mr Campbell's direction about the limited nature of statements about timeframes that could be made, and their own belief as to the qualified nature of timeframes, that Mr Rice and/or Mr Hurry could, in effect, have 'gone rogue', trespassing their authority and making unreasonable, if not reckless, promises about timeframes in order to induce Mr Trumbull to enter into a franchise agreement. However I regard that possibility as far-fetched. As it was, none of the defendant witnesses were cross-examined as to why any of them would wish to exaggerate, or 'guild the lily' in providing what would, to a reasonable observer, would appear to be inherently dubious promises about timeframe estimates over which neither they, nor their employer, could guarantee.
For these reasons, the plaintiff has not established the pleaded representation. The plaintiff did not put any alternative representational case, short of the promise that it contended for. On its pleaded case, I find that the statutory claim fails.
In case I am wrong, however, it is appropriate that I address the other issues raised by the parties. The treatment of these issues is premised upon the finding that the impugned representation was made.
[26]
Misleading or deceptive conduct
For the reasons explained, I consider that what Messrs Rice and Hurry both said amounted to a prediction (Campbell v Backoffice (2009) 238 CLR 304 per French CJ at [33]); not a promise.
Under general law, where a prediction is made in trade or commerce, especially in circumstances where it is intended to be acted upon, an implied representation may arise that there is a reasonable basis for the prediction (Campbell at [33]). This is, for the reasons pointed out by Heydon J in Forrest v ASIC (2012) 247 CLR 486 at [102] (concerning the similar concept of an 'opinion'), not necessarily the case every time a prediction is made, but I adopt the view of French CJ in Campbell that in circumstances this case where employees of Jump provided an estimate, in the course of their employer's business, and in response to specific and express questioning about time from an interested prospective franchisee, an implied representation arose that such estimate as they gave was based upon reasonable grounds (also James v Australia and New Zealand Banking Group Pty Ltd (1986) 64 ALR 347 at 372). If, however, there are reasonable grounds for a prediction, the circumstance that the prediction does not come to pass will not, without more, mean that the prediction will constitute misleading or deceptive conduct.
[27]
Was the impugned representation a representation as to a 'future matter'?
But for the purposes of the present analysis, the premise is that the impugned representation was made. This was in the nature of a promise. I did not understand Counsel for the defendants to seriously dispute, on the stated premise, that the impugned representation did amount to a representation as to a future matter. Section 4(1) of the ACL is an evidentiary provision that facilitates proof that there was an absence of reasonable ground(s) for the prediction. The effect of that provision, however, is not intended to bring about a reversal of the onus of proof. By its terms, and in accordance with authority, if a representor adduces some evidence of objectively reasonable ground, or grounds existing at the time the representation is made, the deeming provision in s 4(1) no longer applies and the representee, to establish its cause of action, carries the legal onus of establishing an absence of reasonable grounds (ss 4(2) & (3); also North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [29]-[33] ).
Mr Campbell adduced evidence, in his affidavit, that would prima facie indicate that there was a reasonable ground for promising that swim schools would be operational in the Northern Beaches area by November 2016 (within 9 months, assuming the clock started to run only from the second alleged verbal representation). I agree that Belrose was a good comparator, and possibly the best comparator.
Counsel for the plaintiff says that the cross-examination of Mr Campbell exposed that evidence as being unreliable, and hence the deeming effect of s 4 of the ACL continued to apply. Whether or not that evidence was unreliable, (which is a separate point, considered further below), in my view, it is beside the point. Section 4 does not require a Court to weigh the evidence in order to form a view whether evidence has been adduced in order to override the deeming provision. No authority was put to me by Counsel for the plaintiff to suggest that it did.
I find that the evidence of Mr Campbell of the Belrose experience was some objective evidence, available at the time of the impugned representation, of reasonable grounds for the representation. That being so, the deeming effect of s 4(1) of the ACL has no application.
This being so, the question becomes whether the plaintiff has established (on the balance of probabilities) that there was no reasonable grounds for the impugned representation. This is a question to be resolved as at the date the representation was made (Sykes v Reserve Bank of Australia (1998) 88 FCR 511), although evidence of later events may throw light upon the overall probability that the representation was reasonable (Cummings v Lewis (1993) 41 FCR 559).
The question presents evidentiary difficulty for a representee (which explains why Parliament saw fit to insert a provision such as s 4(1) of the ACL). It is not to be expected that a representee ordinarily will be privy to the reasoning process underling a representor's promise. But a representee is not totally bereft of protection. First, it may seek to use compulsory court processes in order to establish what was the actual basis or bases (through discovery, subpoena, notices to produce (before and at a hearing) and possibly interrogatories). Secondly, it benefits from the general evidentiary maxim, attributed to the rule in Blatch v Archer (1774) 98 ER 969 at 970, that "all evidence is to be weighed in accordance to the proof which it was in the power of one side to produce, and in the power of the other to have contradicted." The allied, or consequential, proposition is that where a party has the burden of proving a negative, but the other party has greater means to produce evidence to contradict the negative proposition, then provided the party bearing the burden of proof has tendered some evidence from which the negative proposition may be inferred, the other party carries a tactical (evidential) burden to advance in evidence any matters which, if relevant, the first party would have to deal in the discharge of its legal burden of proof (Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp (1985) 1 NSWLR 561).
Before me, there were somewhat muffled complaints on the plaintiff's side of the Bar table that the defendants may have not yielded information sought by the plaintiff. The complaints were not articulated and, at any rate, disputes about the use and applicability of interlocutory processes to compel the provision of information can and should have been brought before the trial.
To return to my earlier point, the defendants' evidence on the point of the grounds for representations was sparse. It consisted only of the following parts of Mr Campbell's affidavit evidence, being that:
1. The information was within the range of times that previous (unidentified) Jump franchisees became operational;
2. For the Belrose franchise (being in similar market to Mona Vale and other sites in the Northern Beaches area):
1. The franchise agreement was signed on 16 July 2014;
2. The lease was procured in September 2014;
3. The franchise opened and commenced operation on or about 8 March 2015.
I do not consider the reference in (1) to be persuasive. It constitutes a bare assertion.
As to (2), if Mr Campbell's affidavit evidence was accepted in this respect, it was probative: Belrose was a suitable comparator, in terms of its location within the relevant region, and, perhaps to a lesser extent, it was within a period of 18 months prior to the events in this proceeding.
Counsel for the plaintiff vigorously challenged Mr Campbell on this aspect of his evidence on the basis of timeframes in the Handbook, but there was comparatively very little cross-examination on Mr Campbell's evidence about the Belrose experience (see T 118-119). Ultimately, counsel for the plaintiff's submission was that there was no evidence that either Mr Hurry or Mr Rice were aware of the Belrose experience when deciding what to say to Mr Trumbull. But the issue is not whether Messrs Hurry or Rice were subjectively conscious of whether there was any basis (reasonable or otherwise) to convey a completion estimate of up to 9 months. Their responsibility was to impart the information they had been directed to impart by Mr Campbell. If Mr Campbell's evidence about Belrose was correct, and there is nothing to seriously contradict it, it matters not whether Messrs Hurry or Rice knew of that.
Apart from the Belrose experience, the defendants relied upon the Handbook as providing reasonable grounds for making any (impugned) representation to Mr Trumbull, because it was based on data, the problem is that that data is simply not put before the Court. I accept that it is more likely than not, and probably very likely, that estimated timeframes referred to in the Handbook were based upon the experience of persons within the first defendant's organisation, but I cannot draw anything beyond that: which persons (within Jump)? What markets, or regional areas within Australia, did the estimates apply to (beyond Western Australia, where some specific reference was made in the Handbook)? I accept the force of the submission of Counsel for the plaintiff, in this respect, that Mr Campbell was capable of extrapolating data and putting it before the Court.
If the question of reasonable grounds for the promise was left to the contents of the Handbook alone, I would not regard its contents as providing reasonable grounds for Mr Rice or Mr Harvey to make the impugned representation.
Counsel for the plaintiff submits that not only was Mr Campbell's account of the experience at Belrose unreliable, but he (or Jump generally) had the means of providing the experience of every swim school that was opened. I do not accept this last submission, in the very broad terms in which it is expressed - it is not clear how the length of process, say, in Western Australia, would assist me to determine the process in the Northern Beaches area of Sydney; as they were different markets.
Counsel for the plaintiff submits that there was no evidence about the extent of any investigation made by Jump in early January 2016 about the availability of sites, DA requirements or Builders. But although that is true, the submission appears to be premised upon the assumption that such information was available, at that time, and referable to the market in the northern beaches of Sydney. The assumption was not proven.
Counsel for the plaintiff also relied upon concessions made by Mr Campbell, which were intended to be responsive to the issue of whether a representation was made in the alleged terms, to the effect that: Jump could not estimate how long it would take to find suitable premises; nor give potential franchisees a timeframe as to when a swim school will be operational.
This question is, to my mind finely balanced. The evidence of the Belrose experience was not seriously challenged and that the Belrose experience was a good comparator and relatively proximate to the time to when the impugned representation was made to Mr Trumbull. I am also mindful that, according to Mr Campbell's evidence (at T 119.22), there were only 4 such swim schools in Sydney at that time. However, the circumstances which show the improbability of a representation being made in the terms alleged are, partly, the same circumstances which show that if the representation was made out, there were no reasonable grounds for the making of it. That is to say, if Mr Hurry and Mr Rice, were unable, and no one else within Jump was able, to make the impugned representation then I think it must follow that if, contrary to what I had earlier found, they made the representation on those terms they had no reasonable grounds for doing so. The fact that Belrose was able to be operational within nine months would, in the circumstances, be regarded as fortuitous, but not the result of any standard or average length of process and would not itself provide sufficient basis for making the representation to Mr Trumbull.
If the representation amounted to a prediction, then it would more likely be accepted as being based on reasonable grounds. But if, on the stated premise, the impugned representation was made, there were no reasonable grounds for it. That being so, the making of the impugned representation would be conduct that was misleading or deceptive or likely to mislead or deceive.
[28]
Who is liable for misleading or deceptive conduct?
Following the decision in Houghton v Arms (2006) 225 CLR 553, if the impugned representation was made by each of them, both Mr Rice and Mr Hurry are, in addition to Jump (on whose behalf the representation was made [4] ) primarily liable for having engaged in misleading or deceptive conduct.
Although he did not personally or directly make the impugned representation, the same principle applies to Mr Campbell, in the event that the Handbook conveyed the impugned representation. In his case, Mr Campbell authorised the content of the Handbook (even if he did not authorise it). This is enough to constitute engaging in misleading conduct. One well-known illustration of misleading conduct arising from the authorisation of a document conveying misleading representations is ASIC v McDonald (No.11) (2009) 256 ALR 199 [5] . Another is the authority cited to me by Counsel for the plaintiff being Real Estate Pty Ltd v Jainran Pty Ltd (2010) 14 BPR 27,361.
[29]
The release
In closing argument, I raised with Counsel for the plaintiff my concern as to the legal consequence should I find that the release (if it was otherwise applicable) was procured by misleading or deceptive conduct. Counsel for the plaintiff submitted that the Court could restrain the defendants' reliance upon the release under section 238 of the ACL.
But as was pointed out in argument, no such relief was sought by the plaintiff in its pleadings. At any rate, I expressed my concern as to whether this Court had jurisdiction to entertain a claim for relief under section 238 (or, for that matter, ss 237 and 243) of the ACL, having regard to doubts about this Court's jurisdiction to grant such relief expressed by Parker J in The NTF Group Pty Ltd v P A Putney [2017] NSWSC 1194 (at [52]-[65]). I note that Counsel for the defendants did not take either of these points. I note also that Parker J's observations now must be considered in the light of the enactment of the Justice Legislation Amendment Act (No.3) (NSW), which has retrospective application.
As the argument developed, it appeared to me that Counsel for the Defendants accepted (T-166-167) that the exception in cl 3.2(b) of the Deed of Termination and Surrender was made out by the plaintiffs. At any rate, I find that, properly construed, in its context (including, without limitation Recital D), the provisions of the Deed of Termination and Surrender were only applicable to the Brookvale franchise deed; such that the release did not extend to rights or obligations arising out of the Mona Vale franchise deed.
Accordingly, it is unnecessary for me to determine whether: (a) any misleading or deceptive conduct procured the release; (b) any relief should be granted to the plaintiff in connection with the release or (c) the Court's jurisdiction or power to grant such relief.
[30]
Principles
Section 236(1) of the ACL (relevantly) confers an entitlement to damages upon a person who suffers (economic) loss or damage "because of" a contravention of the prohibition (in s 18) against misleading or deceptive conduct. The principles that guide me when considering this requirement are as follows.
First, this provision connotes a requirement for a claimant to establish a causal connection between the misleading or deceptive conduct and the claimant's loss or damage. It does not, by its terms, speak of 'reliance'. Nevertheless, in a context where the contravening conduct is said, as it was here, to be a misrepresentation to an individual (intended to induce a course of action), it is accurate enough, at least in practical shorthand terms, to speak of 'reliance' as being the relevant test (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525.9).
Second, there is authority, dating back to the cases involving the torts of deceit and misrepresentation, which has been applied in this statutory context, that reliance may be established on the basis that if a material representation is materially likely to induce a representee to enter into a contract and the person actually enters the contract, a fair inference arises that the representation operated as an inducement: Gould v Vaggelas (1985) 157 CLR 215. The plaintiff relies upon this inference in this case to say that it was induced to enter into franchise deeds (and otherwise incurred expenditure) on the faith of a represented timeframe estimate that was intended (by Jump) to be relied upon by H20.
However, in Campbell, the plurality (at [143]) had this to say about this inferential process of reasoning:
"First, it is a proposition expressed in relation to the law of deceit, not the operation of statutory provisions the award of damages suffered by contravention of consumer protection provisions proscribing misleading or deceptive conduct. Secondly, the proposition carries within it a number of subsidiary questions, such as what is a "material" representation, and when is a material representation "calculated" to induce entry into a contract. Thirdly, because the proposition is directed to the drawing of inferences, consideration of its application must always attend closely to all of the evidence that is adduced that bears upon the question being examined." (emphasis supplied)
Thirdly, the misrepresentation needs only to have 'materially' contributed to the loss or damage suffered, even where other factors (including the claimant's own conduct) have played a more significant role (Henville v Walker per McHugh J at [105]). Another way of expressing the same point is to say, as Gaudron J did in Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at 425-426:
"When a person claims to have taken, or refrained from taking, a particular course of action in reliance upon another's representation, the critical question, assuming the representation is one that might reasonably be relied upon, is whether, but for that representation, he or she would have taken that action. In that context, 'but for' does not signify a sine qua non or causative factor which, although necessary, is not sufficient to produce the result in question. Rather, it signifies the decisive consideration or one of the decisive considerations for taking the course of action in question." (emphasis supplied)
Fourthly, it is also well-established that, in this statutory context, it is inessential that the misleading or deceptive conduct (here a misrepresentation) be the sole cause of the person's loss or damage. Moreover, subject to a qualification, it is not even essential that it be shown that representee acted reasonably in protecting its interests, in order for the causal connection to be established (Henville v Walker (2001) 206 CLR 459). The qualification to this is that, by s 137B of the Competition and Consumer Act, reduction may be made to a person's award of damages (relevantly for a claim of economic loss) for loss suffered partly as a result of the claimant's own failure to take reasonable care. The defendants did not advert to this provision in their Defences, or seek reduction of any damages awarded to the plaintiff on this account.
Fifthly, the test for causation is subjective. In Campbell, French CJ said (at [28]):
"Determination of the causation of loss or damage may require account to be taken of subjective factors relating to a particular person's reaction to conduct found to be misleading or deceptive or likely to mislead or deceive. A misstatement of fact may be misleading or deceptive in the sense that it would have a tendency to lead anyone into error. However, it may be disbelieved by its addressee. In that event misstatement would not ordinarily be causative of any loss or damage flowing from the subsequent conduct of the addressee."
Sixthly, following on from the last point, the defendants plainly relied upon the effect of an 'entire agreement clause' in the two franchise deeds. As to the relevance of such clauses on the causation question, in Campbell, French CJ said in (at [29]-[31]):
"A person accused of engaging in misleading or deceptive conduct may claim that its effects were negated by … a subsequent disclaimer of reliance by the person allegedly affected by the conduct … A subsequent declaration of non-reliance by a person said to have been affected by the conduct is more likely to be relevant to the question of causation.
…
Where the impugned conduct comprises allegedly misleading pre-contractual representations, a contractual disclaimer of reliance will ordinarily be considered in relation to the question of causation. For if a person expressly declares in a contractual document that he or she did not rely upon pre-contractual representations, that declaration may, according to the circumstances, the evidence of non-reliance and of the want of a causal link between the impugned conduct and the loss or damage flowing from entry into the contract. In many cases, such a provision will not be taken to evidence a break in the causal link between misleading or deceptive conduct and loss. The person making the declaration may nevertheless be found to have been actuated by misrepresentations into entering the contract. The question is not one of law, but of fact." (emphasis supplied)
Seventhly, I repeat the authority of Rosenberg v Percival (endorsed later by the plurality in Campbell at [146]), raised earlier, about the weight that can be ascribed to statements of subjective understanding and intention by an injured claimant, after the event. This explains why, on causation matters in another context, statements after the event of harm as to what a claimant would have done is inadmissible; unless they constitute admissions (s 5D(3)(b) of the Civil Liability Act 2002 (NSW)). To this, I add that some of the evidence of this kind upon which Counsel for the plaintiff ultimately relied upon came out only belatedly, in re-examination.
[31]
Analysis
For the following reasons, I am not persuaded that (on the stated premise) the impugned representation caused H2O loss.
[32]
Inferential reliance
I do not accept that the inferential reasoning underlying the principle of Gould v Vaggelas is sufficient alone to establish the causation requirement. As the plurality said in Campbell, it is necessary to look at the whole of the evidence bearing on the question. I am not convinced that even if Mr Trumbull's accounts of the conversations in his primary affidavit were accepted, then what Messrs Rice and Hurry said were statements "calculated" to induce. An equally plausible view is that what they said about timeframes was in response to questions by Mr Trumbull and their intent was to provide information; however erroneous it was. The trust of their cross-examination was that their estimates were based on what was contained in the Handbook. It was not put to them that, by providing time estimates, they were setting out to induce Mr Trumbull to enter into franchise arrangements. But even if that was not so, and even if an inference of reliance arises, it may readily be displaced.
I do not regard that the provision of the Handbook can be described as "bait" intended to lure Mr Trumbull into a course of action. Nor do I characterise the Handbook as being akin to an 'advertisement' for Jump. In this regard, the circumstances in which Mr Trumbull received the Handbook were obscure. The only reference to the Handbook in Mr Trumbull's primary affidavit was his receipt of it on 24 October 2016. No reference was made to this document in Mr Trumbull's accounts of his conversations with Mr Rice (in January 2016) or Mr Hurry (in March 2016). But when Mr Hurry had the opportunity to respond to Mr Trumbull's primary affidavit, it was Mr Hurry who said he recalled providing the Handbook at the meeting on 2 March 2016. Then, perhaps noticing this discrepancy, or, more precisely the omission from Mr Trumbull's primary affidavit, Counsel for the plaintiff led evidence from Mr Trumbull, in chief, on the first day of the trial (and over three years after the meeting in question), essentially confirming Mr Hurry's evidence on that aspect. This is not an auspicious evidentiary background to submit, as the H2O did, that Jump used the Handbook as bait for Mr Trumbull.
Even if I were to accept that the Handbook was in fact provided to Mr Trumbull on 2 March 2016, Mr Trumbull himself did not elevate the importance of the handbook: he saw it as a "piece of paper supporting and providing more information and colour on what I'd been told by Mr Hurry and Mr Rice" (T 49).
The test of reliance is not overly demanding: the impugned representation does not need to be the only cause; the plaintiff might have failed to take care of its interests but still be able to say (subject to any reduction in damages) that a causal connection arose. But, to adopt Gaudron J's language, the representation needs to be a decisive consideration, of one of a number of decisive considerations, for adopting a course of action.
Notwithstanding Mr Trumbull's evidence to the contrary, I am not persuaded that the impugned representation satisfied this test. I reach that conclusion by reference to objective circumstances before and after H2O entered into the franchise deeds.
[33]
Pre-contractual conduct
As to the pre-contractual circumstances, I note, initially, that there was no contemporaneous file note, or any other writing in which Mr Trumbull recorded the circumstance of completion of the process by November 2016 as being material to his decision-making until October 2016. Put another way, there was nothing in writing, until October 2016, to corroborate Mr Trumbull's evidence that he impressed upon Jump's employees earlier in 2016, the importance to him of having two operational schools by November 2016.
By contrast, the pre-contractual correspondence generally indicates Mr Trumbull's desire to impress upon Jump the importance he ascribed to other matters. In this regard, there was very little documented correspondence of Mr Trumbull's dealings with Mr Rice. It appears that from 23 February 2016 that Mr Trumbull's dealings were virtually entirely with Mr Hurry. By 23 February 2016, Mr Trumbull had received draft franchise deeds; and he had his lawyer review them.
On 23 February 2016, 25 February 2016 and 1 March 2016, before he met him on 2 March, Mr Trumbull sent numerous (at least 4) emails to Mr Hurry. With all the other information he was providing him about his concerns and motivations, Mr Trumbull's email of 23 February 2016, and (more especially) the shorter email of 25 February 2016, were obvious opportunities for Mr Trumbull to emphasise the importance to Mr Hurry about the imperative that swim schools be operational by November, in the early part of Mr Trumbull's dealings with him; prior to meeting him. He said nothing about time for completion in either email.
Further, as noted, by 25 February, Mr Trumbull had obtained legal advice about the content of draft franchise deeds (and disclosure document) that were intended to regulate, in detail, the rights and obligations of the parties. According to his evidence, Mr Trumbull (and any lawyer he engaged) had had a period of about a month to consider this documentation. In his longer email to Mr Hurry of 25 February, Mr Trumbull set out an extensive list of concerns - whether or not they were sourced in legal advice, or his own independent concerns, is beside the point. I consider that, contrary to the submission of Counsel for the plaintiff, in the review of the draft franchise deeds, Mr Trumbull himself, and/or with legal assistance, was astute to determine whether the draft transactional documentation that he had been invited to consider would address important and material matters to him. But there was nothing in the draft franchise deeds (or disclosure document) that dealt with the subject of time for completion to operate a swim school.
I do not infer that Mr Trumbull's omission to refer, in his pre-contractual emails to Mr Hurry, to the absence of any reference in the proposed deed of a time to complete the operation of the swim school was mere oversight, or inadvertence on his part; or that he felt that he could confidently rely upon a purely verbal representation made by Mr Rice, at that point, a month before.
After Mr Trumbull's meeting with Mr Hurry on 2 March, in which the impugned representation was made, there were further email communications between the two, about the terms of the deeds, right up until the date when H2O executed the two franchise deeds, on 16 March 2016. I think it is most pertinent that on 14 March 2016, Mr Trumbull expressly raised his concern with Mr Hurry about the operation and effect of cl 5.8. On its face, the communication evinces his concern, on that date, as to what might happen if "we" (ie. H2O and Jump) were unable to locate an appropriate property. So shortly before execution of the deed, Mr Trumbull was turning his mind to the consequences for H2O's rights if there was delay in finding suitable premises (Stage 1). By then (14 March), if in fact (as he said in his evidence in chief) Mr Trumbull had received the Handbook, and read it carefully, he would have observed that more than a third of the time taken to complete all stages (approximately 8 months) was referable to stage 1, being an estimate of up to 3 months. That being so, he would have known that any substantial delay to stage 1 would probably jeopardise the fulfilment of the impugned representation given to him by Mr Rice back in January and by Mr Hurry less than one week before. I consider that if the consideration of having two schools operational by November was material to his thinking, Mr Trumbull would have emphasised that matter to Mr Hurry in his email to him of 14 March.
Until now, I have not considered the effect of the 'entire agreement clause'. Although, as French CJ acknowledged in Campbell, it is possible for such clauses to negate causation and that the issue is one of fact, I acknowledge that the cases indicate that it, typically, it is difficult for a representor to establish that such a clause ousts reliance (see Cheshire & Fifoot, Law of Contract (11th Aust ed) [11.133]). In this case, Mr Trumbull admitted his awareness of cl 35 and, in light of his previous commercial experience, understood its effect; prior to executing the deeds on H2O's behalf. Having found, at this point (14 March), that Mr Trumbull was already concerned about achieving the due completion of stage 1, his omission to seek further protections in the contract (such as express warranty) in the light of cl 35 might be looked at in different ways. On one view, he might have had a supremely confident view that cl 35 would not operate to, effectively extinguish, any complaint he had about any prior misrepresentations as to time. On another view, he was not concerned about the effect of cl 35, since there was no material representation which he might wish to rely upon after executing the franchise deeds. Having regard to my assessment of him as being intelligent and careful, his thorough review of the terms of the proposed arrangements, and his willingness not only to negotiate changes but also seek clarity (from Jump) as to Jump's intentions, I think the better view is the latter: that he was unconcerned about cl 35 because he felt that there was no omission from the transactional documentation of matters that were important to him.
The authorities are replete with suggestions as to why entire agreement clauses may be effectively ousted by and antithetical to the purpose of consumer protection provisions. But in my view this is one case which demonstrates the value and utility of entire agreement clauses: here, when prospective contracting persons share broadly comparable intelligence and commercial experience, are represented by lawyers, and anticipate that they will record their agreement in a detailed, documented form, it may be an expression of their autonomy that they commonly intend that their agreement entirely records the entire understanding and they bargain partly on the basis that, by including the provision, they remove the scope for later litigation if the transaction goes wrong. [6] The principle cannot completely apply here; not least because the agreements themselves were incomplete. But the value of an entire agreement clause is that it serves as a deterrent to one party who (even with the benefit of legal assistance or advice) has not sought to negotiate for the inclusion of a promise, but later does not like the result of a transaction it has freely entered, terminates the transaction and then seeks to attribute greater material significance to equivocal things said by the other side prior to the transaction that then was actually felt at the time they were said.
I note further that very little was proven as to what steps Mr Trumbull took in reliance upon the timeframe; as distinct from expenditure paid in anticipation or performance of the franchise deeds. It was self-servingly easy to say, in retrospect, that from March 2016, a 9 month timeframe would see a school operational in summer and that this was the most profitable season. The proposition that summer was the most profitable season for commercial activity of this kind was not contradicted by the defendants, but for an indoor (presumably heated) swimming school providing classes for children with special needs, it is not immediately obvious why that season of the year might be more profitable than others.
At any rate, what would be more cogent than assertions of materiality after the event (when harm has been suffered) are acts that sustain the assertion of reliance upon an operational start by November 2016. Counsel for the plaintiff pointed to the payment of the $4,000 deposit. However, there was no evidence that this payment was specifically referable to a promise of time completion, as distinct from its being paid because of Mr Trumbull's general interest in entering into a franchise arrangement.
Such evidence might include budgeted planning for profit and loss during the summer months and beyond; or financial accommodation (such as overdrafts) coinciding with an operational start by November. A public liability and professional indemnity insurance policy was taken out to cover the period 7 December 2016 to 7 December 2017. There was no direct evidence from Mr Trumbull as to when that had been arranged; although the date of the invoice (8 December 2016) would not support the notion that the insurance had been arranged prior to Mr Trumbull entering into the franchise deeds back in March.
At its highest, though, Mr Trumbull's case is that it was personally convenient for the schools to start by November and that he had indicated this to Mr Rice and Mr Hurry. (I will return to this last aspect when considering Mr Trumbull's email of 12 October 2016, below.) I do not regard the objective evidence of Mr Trumbull's conduct, prior to his entry the franchise deeds as supporting this (subjective) evidence, which, given as it was after he says H2O has suffered economic loss, I regard as self-serving and attracts the comments of Gleeson CJ in Rosenberg v Percival, referred to above.
[34]
Post-contractual conduct
Counsel for the plaintiff submits that not too much can be read into Mr Trumbull's conduct after he entered into the franchise deeds. It is true that often, a representee, induced to enter into a disadvantageous transaction by a misleading statement, is placed in a position of vulnerability, by virtue of its being locked in to performing certain obligations which require it to incur expenditure. But that is not this case. For reasons to follow, H2O was not locked in to performing obligations. It was freely able to, and did terminate the Brookvale deed, without needing to establish any breach of contract. Eventually, in January 2017, it also procured termination of the Mona Vale deed, without setting forth (as required by clause 18.2) the breach by Jump of provisions of the deed. Nor, notwithstanding the delays in securing a site, was there proof that the transactions were inherently disadvantageous [7] .
This means that the usual caution that might attend consideration of a representee's conduct after entry into a transaction need not be a constraint here. More pertinently, however, conduct by a representee after entry into a transaction may be probative where it amounts to an admission that the pre-contractual representation was not material to influencing its conduct.
After the franchise deeds were entered on 16 March 2016, there were multiple indications apparent to Mr Trumbull that the impugned representation was likely to be falsified. But it was not until 12 October 2016 that Mr Trumbull said anything about the impugned representation made (at the latest) over 7 months before.
The chronology of events I have recited above indicates how active Mr Trumbull was in trying to locate suitable sites since entering the franchise arrangements on 16 March 2016.
By 7 September 2016, the franchise deeds had been on foot for nearly 6 months. Still no site had been found. If one takes the Handbook as a 'guide', (where the milestone for stage 1 was identified as taking up to 3 months), it was already apparent that, other things being equal, there was approximately up to another 5 months to go to complete stages 2 - 11. It would have been obvious to Mr Trumbull, if he truly was actuated by the importance of the estimates that he read in the Handbook, that it was highly unlikely that one swim school (let alone two) would be operational by November 2016.
On 8 September 2016 H2O served notice of its intention to terminate the second (Brookvale) franchise deed. Mr Trumbull's explanation (in his email) is significant. It contained no expression of disappointment that two swim sites were not likely to be operational by November. It contained no reference to what had been said by Mr Rice (in January) or Mr Hurry (in March) or what was written in the Handbook: as to the latter, although Mr Trumbull mentioned that seven months had passed since attempts had started to locate sites, no complaint was made that this period greatly exceeded the 3 month estimate for stage 1 in the Handbook. Mr Trumbull said nothing at all bearing upon the timing for the completion of the two schools, or even the one school (at Mona Vale) which, to that point, he was persevering with. The only explanation for the notice in the email was that Mr Trumbull recognised that there had been trouble locating one site, and monies were soon payable in relation to a second site; which H2O did not wish to spend.
So, H2O exercised its right under cl 5.8 to terminate and, consistently with the terms of that provision, and Mr Hurry's confirmation (supplied on 14 March), H2O effectively was compensated by having the franchise fee incurred in relation to the Brookvale deed credited to the Mona Vale franchise deed.
I consider that even after giving notice about the Brookvale deed, as at 7 September 2016, it is quite likely that Mr Trumbull did not believe that even the one swim school for Mona Vale was likely to be operational by November. By 27 September 2016, such doubts must have been amplified. On this day, Mr Trumbull received notice that Council's consideration of the DA was held up by a need to have submitted to it a Flood Risk Assessment Report.
By 12 October 2016, Mr Trumbull was aware that DA approval had yet to be granted. He understood that it had been a month since it had been submitted. Mr Trumbull requested in his email (7:39am that day) to Mr Hurry a general time frame (making no reference to the timeframes in the Handbook) and acknowledged that there might be variations in build and site. This latter aspect tended to belie any proposition that Mr Trumbull believed in a strict 9 month timeframe (from entry into a franchise arrangement) which is the heart of his case on the content of what was the representation conveyed.
Be that as it may, his email that day indicated a consciousness of the possibility that a swim school (for Mona Vale) may not be operational by May 2017. This was, obviously enough, well beyond the 9 month estimate he had been given. What is significant, in my view, is that although this was the first time (since entry into the deeds) that Mr Trumbull outwardly drew a connection between the timeframe he says he was told about and the "reality" of the situation, and although he drew attention to the inconvenience to him and his family (in different ways) caused by the delay, he did not pinpoint anything that he had actually lost as a result of the delay. Nor did he assert that he had, to that point, been proceeding upon an expectation, or understanding, based upon the impugned representation, that the time for completion of the two schools was November - only a month away. Finally, I regard it as curious that Mr Trumbull felt the need to say that he was 'trying to manage my professional, Financial, Family and Personal life based on no information what so ever and guesswork'. If as he said in his affidavit, he had previously emphasised the importance of a November deadline to Messrs Rice and Hurry back in January and March 2016, why did he need to explain this now? Why did he not say, in this email, that he had explained the importance of the November deadline earlier in the year?
Thus although the plaintiff may draw some support for its case on causation from the fact of complaint, albeit a delayed complaint, the terms of the complaint are not probative in the plaintiff's favour on the issue of reliance (or on the issue of the content of the representation). Doubtless, by October 2016, Mr Trumbull was frustrated, and the frustration was partly referable to his expectation that the school would be operational within 9 months and that, now (if not before) that appeared most unlikely. That, however, without more, does not suffice to establish that the impugned representation was decisive for his decision to enter into the franchise arrangement in March. The correspondence indicates that it was only from about October 2016 that the effects of delay, and concerns about what that might mean, had only begun to be felt by Mr Trumbull.
Mr Hurry's email in response, on the same day (at 11:15am) provided "rough" timeframes, which were not substantially inconsistent with anything said in the Handbook. There is no indication in the evidence as to whether Mr Trumbull ever sent any follow up email, or had any subsequent conversation with Mr Hurry relating to the latter's email. He did not say, for example, that they were inconsistent with what was written in the Handbook.
It strikes me as curious that, at no stage did Mr Trumbull seek to exercise a right under cl 5.8 in relation to the Mona Vale franchise deed, as he had done for the Brookvale deed. The plaintiff's counsel submitted that I should find that this is because he was apprehensive that he may not be compensated. That however, cannot be right. H2O had been compensated when the right had been exercised in relation to the Brookvale deed and Mr Hurry had explained to Mr Trumbull that the right could be exercised with this effect. Whilst the deed subsisted, the only impediment to the exercise of the right - at least until leased premises were secured - was the procedural circumstance that 4 months had to pass since the commencement date without leased premises having been secured. Premises were secured, arguably, by 25 August 2016. If, as the Handbook indicated, the estimated timeframe for completion was up to another 5 months (ie. stages 2-12), then, by 25 August 2016, it would have been apparent that the swim school would not likely be operational until January 2017. That would still allow for some part of the summer season, but still well after the time indicated by the impugned representation. The right could have been exercised in relation to the Mona Vale deed from 16 July 2016 (4 months after the deeds were entered) 25 August 2016 (when the leased premises were secured).
I find that Mr Trumbull's conduct after entering into the deed was inconsistent with any belief, or expectation that any promise that two swim schools would be operational by November was capable of being fulfilled.
In all of the circumstances, I would not have found that the impugned representation caused the plaintiff to suffer loss or damage.
[35]
Quantum
The claim for damages, expressed in the plaintiff's schedule of damages, is as follows:
1. $4000 on 25 January 2016 for the security deposit;
2. $27,500 on 16 March 2016, for the franchise fee;
3. $56,500 on 16 March 2016 for the franchise fee and planning costs;
4. $30,250 on 27 May 2016 for the fit out fee;
5. $25,666 on 1 September 2016 for the security deposit and one month's rent;
6. $11,000 on 20 September 2016 for the remainder of the fit out fee.
Pausing here, I note that the defendants admit that the plaintiff had paid these amounts. The only basis for its dispute in respect to these items was the causal connection.
The balance of the items of damage claimed by the plaintiff in the plaintiff's pre-trial schedule are:
1. $1,430 for insurance for the premises;
2. $1,195.63 Council DA lodgement costs;
3. $5,936.55 interest on payments made to Jump;
4. $4.68 interest on payments made for insurance and Council fees;
5. $3987.19 for accountancy fees;
6. $201.62 for bank fees;
7. $389.54 travel expenses to the Gold Coast
Payment of items (i)-(iii) in the last paragraph was also proven in Mr Trumbull's second affidavit. These items of damage are disputed in their entirety. However, no cross-examination was undertaken of Mr Trumbull in respect to those payments.
By its pleading, H2O alleged that part of its loss was the "opportunity it forewent in pursuing a (sic) different franchise businesses". However, there was no evidence to value the loss of opportunity and this claim was not pursued.
Counsel for the defendant broadly made two submissions on costs. First, he submitted, the plaintiff failed to avail itself of the opportunity to recoup expenses by exercising its right under cl 5.8, between 16 July and 25 August 2016. I understood him to mean that any expenditure after 6 September 2016 were not recoverable. I do not accept this submission. For one thing, in my view, this is an argument essentially based upon a failure to mitigate, or, alternatively, an argument as to contributory fault giving rise to an entitlement to reduce a claimant's damages under s 137B of the Competition and Consumer Act. Such an argument, if it was to be put, should have been clearly pleaded. It was not.
One argument of contributory fault was pleaded (although no claim for reduction of damages was made). It is that the plaintiff failed to identify or secure premises that were suitable for him. Whether or not that was factually so, no argument was advanced as to how this demonstrated any want of care, or amounted to conduct severing a causal connection with the impugned representation.
I accept that, at least by 12 October 2016, H20 had an actual appreciation of the falsity of any impugned representation. By then, the impugned representation had ceased to be operational. At that point, it was open to H2O to assert that the franchise deed was rescinded, with its entry into it procured by a misrepresentation. Expenditure beyond then would not have been paid in reliance upon the impugned representation. In the events that have occurred, however, it does not appear that expenditure was incurred after that date.
During argument, counsel for the plaintiff also abandoned certain items of damage previously claimed. Ultimately, the following items were pressed:
1. $4000 on 25 January 2016 for the security deposit;
2. $27,500 on 16 March 2016, for the franchise fee;
3. $56,500 on 16 March 2016 for the franchise fee and planning costs;
4. $30,250 on 27 May 2016 for the fit out fee;
5. $25,666 on 1 September 2016 for the security deposit and one month's rent;
6. $11,000 on 20 September 2016 for the remainder of the fit out fee.
7. $1,430 for insurance for the premises;
8. $1,195.63 Council DA lodgement costs;
9. $5,936.55 interest on payments made to Jump;
Had I found in the plaintiff's favour on the dispositive issues of the content of the representation and causation, I would have awarded damages to H2O for the sum of $163,478.18.
[36]
THE ACTION FOR BREACH OF THE FRANCHISE DEED (MONA VALE)
During his closing submissions, Counsel for the plaintiff abandoned this action.
[37]
SUMMARY & ORDERS
In summary, I find that:
1. the plaintiff has not established its pleaded case on the impugned representation;
2. If I am wrong about my finding in (1), then I find that:
1. the representation was referable to "a future matter", for the purposes of section 4 of the ACL;
2. the deeming provision in section 4(1) does not, however, arise;
3. there were no reasonable grounds for the impugned representation, so that the Defendants engaged in misleading or deceptive conduct (or conduct likely to mislead or deceive);
4. the plaintiff has not established the causal connection required by section 236 of the ACL in order to establish an entitlement to damages;
5. (if I am also wrong about my finding regarding the absence of causal connection) I would have:
1. found that each of the Defendants had engaged in misleading or deceptive conduct, in contravention of the prohibition in s 18 of the ACL;
2. found that the plaintiff did not release the defendants from liability in the Deed of Termination and Surrender on October 2016; and
3. assessed the plaintiff's damages at $163,478.18.
[38]
Orders
For these reasons, I order:
1. Verdicts for each of the Defendants with the Plaintiff to pay the Defendants' costs; and
2. There is liberty to apply on 5 days' notice from the date of these reasons for any special costs order.
3. Any such application should be brought by sending a short outline of submissions (not exceeding 3 pages) with supporting documentation to my Associate; and the other party will have a further period of 3 days' thereafter to respond (also by way of submissions of the same length and the provision of supporting documentation to my Associate). Such application will thereafter be determined on the papers, subject to any contrary indication given by the Court.
[39]
Endnotes
A point was formally made in the Defences that, at the time Mr Rice made the alleged representation to Mr Trumbull in January 2016, H2O had not been incorporated. However, since they accepted that the representation was a continuing one (and re-affirmed, in effect, in March 2016 by Mr Hurry), the Defendants accepted that nothing turned on this point.
Approved in Campbell v Backoffice Investments Pty Ltd (2009) 2387 CLR 304 at [102]
This commentary followed a review of several cases involving pre-contractual statements by a vendor to a purchaser for the sale of goods, such as JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435, Rawson v Hobbs (1961) 107 CLR 466, Ross v Allis-Chalmers Pty Ltd (1980) 32 ALR 561.
s 139B Competition and Consumer Act 2010 (Cth).
The case was overturned on appeal, but not on this point: Morley v ASIC (2010) 274 ALR 205. The Court of Appeal's judgment was thereafter overturned by the High Court, but not on this point: ASIC v Hellicar (2012) 247 CLR 345.
See I M Jackman, 'Some judicial fallacies concerning entire agreement clauses' (2015) 89 ALJ 791
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527.6
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Decision last updated: 14 May 2019